<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC.
(Exact Name of Registrant As Specified In Its Charter)
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<TABLE>
<S> <C> <C>
DELAWARE 62-1744926 3585
(State or other Jurisdiction of (I.R.S. Employer (Primary Standard Industrial
Incorporation or Organization) Identification No.) Classification Number)
</TABLE>
SUITE 200, 501 CORPORATE CENTRE DRIVE
FRANKLIN, TENNESSEE 37067
(615) 771-0200
(Address, Including ZIP Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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INTERNATIONAL COMFORT PRODUCTS CORPORATION
(Exact Name of Registrant As Specified In Its Charter)
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<TABLE>
<S> <C> <C>
CANADA 98-0045209 3585
(State or other Jurisdiction of (I.R.S. Employer (Primary Standard Industrial
Incorporation or Organization) Identification No.) Classification Number)
</TABLE>
66TH FLOOR, 1 FIRST CANADIAN PLACE
TORONTO, ONTARIO, CANADA M5X 1B8
(416) 955-9789
(Address, Including ZIP Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
DAVID. P. CAIN, ESQ.
SUITE 200, 501 CORPORATE CENTRE DRIVE
FRANKLIN, TENNESSEE 37067
(615) 771-0216
(Name, Address, Including ZIP Code, and Telephone Number, Including Area Code,
of Agent For Service)
WITH COPIES TO:
GARY M. BROWN, ESQ.
TUKE YOPP & SWEENEY, PLC
NATIONSBANK PLAZA, SUITE 1100
414 UNION STREET
NASHVILLE, TENNESSEE 37219
TELEPHONE (615) 313-3325 FACSIMILE (615) 313-3310
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement number for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
number for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED TO BE REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
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<S> <C> <C> <C> <C>
8 5/8% Series B Notes Due 2008..... $150,000,000(1) $ (2) $ (2) $44,250.00
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Guarantee of the 8 5/8% Series B
Senior Notes Due 2008............ -- -- -- None(3)
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</TABLE>
(1) Equals the aggregate principal amount of the securities being registered.
(2) Pursuant to Rule 457(f)(2), the registration fee has been calculated using
the book value of the securities being registered.
(3) Pursuant to Rule 457(n).
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 10, 1998
PROSPECTUS
INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC.
OFFER TO EXCHANGE 8 5/8% SERIES B SENIOR NOTES DUE 2008 ISSUED BY INTERNATIONAL
COMFORT PRODUCTS HOLDINGS, INC., WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, FOR ANY AND ALL OF THE OUTSTANDING 8 5/8% SERIES A
SENIOR NOTES DUE 2008, ALSO ISSUED BY INTERNATIONAL COMFORT PRODUCTS HOLDINGS,
INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1998, UNLESS EXTENDED.
---------------------
International Comfort Products Holdings, Inc. ("Holdings" or the "Issuer")
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal" and, together with this Prospectus, the "Exchange
Offer"), to exchange $1,000 principal amount of its 8 5/8% Series B Senior Notes
due 2008 (the "New Notes"), which have been registered under the Securities Act
of 1933, as amended (the "Securities Act") pursuant to a registration statement
of which this Prospectus is a part (the "Registration Statement"), for each
$1,000 principal amount of its outstanding 8 5/8% Series A Senior Notes due 2008
(the "Old Notes"), of which $150,000,000 principal amount is outstanding as of
the date hereof. See "Purpose of The Exchange Offer" and "Terms of the Exchange
Offer." The Old Notes and the New Notes are sometimes collectively referred to
herein as the "Notes." The New Notes are senior unsecured obligations of the
Issuer and are fully and unconditionally guaranteed on a senior unsecured basis
(the "Parent Guarantee") by the Issuer's parent corporation, International
Comfort Products Corporation (the "Parent Guarantor").
The Issuer will accept for exchange any and all validly tendered Old Notes
prior to 5:00 p.m., New York City time, on , 1998, unless extended by
the Issuer (such date, as it may be extended, the "Expiration Date"). Old Notes
may be tendered only in integral multiples of $1,000. Tenders of Old Notes may
be withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Offer is not conditioned upon any minimum
principal amount of Old Notes being tendered for exchange. The Exchange Offer,
however, is subject to certain customary conditions. In the event the Issuer
terminates the Exchange Offer and does not accept for exchange any Old Notes,
the Issuer will promptly return previously tendered Old Notes to the holders
thereof. The Issuer will not receive any proceeds from the Exchange Offer. See
"Use of Proceeds -- The Exchange Offer."
A prospectus has not been and will not be filed under the securities laws
of any province or territory of Canada to qualify the sale of the New Notes in
such jurisdictions.
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THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL ARE FIRST BEING MAILED TO
HOLDERS OF OLD NOTES ON , 1998.
SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The Date of this Prospectus is , 1998
<PAGE> 3
The New Notes will be obligations of the Issuer evidencing the same debt as
the Old Notes, and will be entitled to the benefits of the same indenture (the
"Indenture"). See "Description of Notes." The form and terms of the New Notes
are generally the same as the form and terms of the Old Notes in all material
respects except that the New Notes have been registered under the Securities Act
and hence do not include certain rights to registration thereunder and do not
contain transfer restrictions or terms with respect to certain special payments
applicable to the Old Notes. See "Purpose of the Exchange Offer."
The New Notes are being offered hereunder in order to satisfy certain
obligations under the Registration Rights Agreement, dated as of May 13, 1998
(the "Registration Rights Agreement"), among the Issuer, the Parent Guarantor,
and Salomon Brothers, Inc., Credit Suisse First Boston Corporation and First
Union Capital Markets, a division of Wheat First Securities, Inc. (collectively,
the "Initial Purchasers"), a copy of which has been filed as an exhibit to the
Registration Statement. The Exchange Offer is intended to satisfy the Issuer's
obligations under the Registration Rights Agreement to register the New Notes
and exchange them for the Old Notes under the Securities Act. If and when the
Exchange Offer is consummated, the Issuer will have no further obligations to
register any of the Old Notes tendered for exchange, except pursuant to a shelf
registration statement to be filed under certain limited circumstances discussed
under the caption "Purpose of the Exchange Offer." See "Risk
Factors -- Consequences to Non-Tendering Holders of Old Notes." The Issuer has
agreed to pay the expenses of the Exchange Offer.
Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in several no-action letters issued to
third parties including Exxon Capital Holdings Corporation, SEC No-Action Letter
(available April 13, 1989) (the "Exxon Capital Letter"), Morgan Stanley & Co.
Incorporated, SEC No-Action Letter (available June 5, 1991) (the "Morgan Stanley
Letter") and Shearman & Sterling, SEC No-Action Letter (available July 2, 1993)
(the "Shearman & Sterling Letter") (collectively, the "Exchange Offer No-Action
Letters"), the Issuer believes that the New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by Holders thereof who are not affiliates of the Issuer
(other than a broker-dealer who acquired such Old Notes directly from the Issuer
for resale pursuant to Rule 144A under the Securities Act or any other available
exemption under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act; provided, however, that
the Holder is acquiring New Notes in its ordinary course of business and has no
arrangement or understanding with any person to participate in any distribution
(within the meaning of the Securities Act) of the New Notes. Persons wishing to
exchange Old Notes in the Exchange Offer must represent to the Issuer that such
conditions have been met. Nevertheless, any Holder who may be deemed an
"affiliate" (as defined under Rule 405 of the Securities Act) of the Issuer or
who tenders in the Exchange Offer with the intention to participate, or for the
purpose of participating, in a distribution of the New Notes cannot rely on the
interpretation by the staff of the Commission set forth in such no-action
letters, including, but not limited to, the Exchange Offer No-Action Letters,
and must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. See "Purpose of
The Exchange Offer." In addition, each broker-dealer that receives New Notes for
its own account pursuant to the Exchange Offer in exchange for Old Notes that
were acquired by such broker-dealer for its own account as a result of
market-making activities or other trading activities (other than acquisitions
directly from the Issuer) must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that, by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes that were acquired by such broker-dealer as a
result of market-making activities or other trading activities (other than
acquisitions directly from the Issuer). The Issuer has agreed that, for a period
of 180 days after the Exchange Offer is consummated, it will, upon reasonable
request, make this Prospectus available promptly to any broker-dealer for use in
connection with any such resale. See "Plan of Distribution." EXCEPT AS DESCRIBED
IN THIS PARAGRAPH, THIS PROSPECTUS MAY NOT BE USED FOR ANY OFFER TO RESELL,
RESALE OR OTHER TRANSFER OF NEW NOTES.
Old Notes were initially represented by a several Global Old Notes (as
defined herein) in fully registered form, registered in the name of a nominee of
The Depository Trust Company ("DTC"), as depository. The
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<PAGE> 4
New Notes exchanged for Old Notes represented by the Global Old Notes will be
represented by one or more Global New Notes (as defined herein) in fully
registered form and registered in the name of the nominee of DTC. The Global New
Notes will be exchangeable for New Notes in registered form, in denominations of
$1,000 and integral multiples thereof as described herein. The New Notes in
global form will trade in DTC's Same-Day Funds Settlement System, and secondary
market trading activity of such New Notes therefore will settle in immediately
available funds. See "Book Entry, Delivery and Form."
The New Notes will bear interest at a rate equal to 8 5/8% per annum from
the last date on which interest was paid on the Old Notes surrendered in
exchange therefor, or if no interest has been paid, from the date of original
issue of such Old Notes. Interest on the New Notes is payable semi-annually on
May 15 and November 15 of each year, commencing November 15, 1998.
The New Notes are redeemable at the option of the Issuer, in whole or in
part, on or after May 15, 2003, at the redemption prices set forth herein, plus
accrued and unpaid interest thereon and Additional Interest, if any, payable
pursuant to Section 4 of the Registration Rights Agreement with respect to the
Old Notes to the redemption date. Notwithstanding the foregoing, at any time on
or before May 15, 2001, the Issuer may redeem up to 35% of the principal amount
of the New Notes with the net proceeds contributed or otherwise made available
to it by the Parent Guarantor from a public offering of common stock of the
Parent Guarantor at the redemption prices set forth herein, plus accrued and
unpaid interest thereon, if any, to the redemption date. Upon a Change of
Control (as defined herein), the Issuer will be required to make an offer to
repurchase all outstanding Notes at 101% of the principal amount thereof plus
accrued and unpaid interest thereon to the date of repurchase.
The New Notes and the Parent Guarantee will be senior unsecured obligations
of the Issuer and Parent Guarantor, respectively, and rank pari passu in right
of payment to all existing and future unsecured and unsubordinated indebtedness
of the Issuer and the Parent Guarantor, respectively, and senior in right of
payment to all subordinated indebtedness of the Issuer and the Parent Guarantor,
respectively. The New Notes and the Parent Guarantee will be effectively
subordinated to all existing and future indebtedness of the Parent Guarantor's
subsidiaries (other than the Issuer). As of March 31, 1998, on a pro forma
basis, such subsidiaries had $182.7 million of total liabilities, including
$63.2 million of indebtedness. See "Description of Notes -- Parent Guarantee"
with respect to enforcement of civil liabilities against the Parent Guarantor
and certain of its officers and directors.
Prior to this offering, there has been no public market for the New Notes.
The Issuer does not intend to list the New Notes on a national securities
exchange or to seek approval for quotation through the NASDAQ National Market.
Because the Old Notes were issued and the New Notes are being issued primarily
to a limited number of institutions who typically hold similar securities for
investment, the Issuer does not expect that an active public market for the New
Notes will develop. In addition, resales by certain holders of the New Notes of
a substantial percentage of the aggregate principal amount of such New Notes
could constrain the ability of any market maker to develop or maintain a market
for the New Notes. To the extent that a market for the New Notes should develop,
the market value of the New Notes will depend on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition, performance and prospects of the Issuer. Such factors might cause the
New Notes to trade at a discount from face value. See "Risk Factors -- Lack of
Public Market for the New Notes."
THE ISSUER WILL NOT RECEIVE ANY PROCEEDS FROM THE EXCHANGE OFFER. THE
ISSUER HAS AGREED TO PAY THE EXPENSES OF THE EXCHANGE OFFER, OTHER THAN CERTAIN
APPLICABLE TAXES. NO UNDERWRITER IS BEING USED IN CONNECTION WITH THE EXCHANGE
OFFER.
NOTICE TO CANADIAN INVESTORS
A PROSPECTUS HAS NOT BEEN AND WILL NOT BE FILED UNDER THE SECURITIES LAWS
OF ANY PROVINCE OR TERRITORY OF CANADA TO QUALIFY THE SALE OF THE NEW NOTES IN
SUCH JURISDICTIONS. THE NEW NOTES ARE NOT BEING OFFERED AND MAY NOT BE OFFERED
OR SOLD, DIRECTLY OR INDIRECTLY, IN CANADA OR TO OR FOR THE ACCOUNT OF ANY
RESIDENT OF CANADA IN CONTRAVENTION OF THE SECURITIES LAWS OF ANY PROVINCE OR
TERRITORY THEREOF.
3
<PAGE> 5
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
UNLESS THE CONTEXT REQUIRES OTHERWISE, REFERENCES TO THE "COMPANY" MEAN
INTERNATIONAL COMFORT PRODUCTS CORPORATION AND ITS SUBSIDIARIES. THIS PROSPECTUS
CONTAINS AND INCORPORATES BY REFERENCE CERTAIN STATEMENTS THAT ARE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934 (THE "EXCHANGE ACT").
ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACT INCLUDED IN THIS
PROSPECTUS, INCLUDING WITHOUT LIMITATION, STATEMENTS REGARDING THE COMPANY'S
FUTURE FINANCIAL POSITION, BUSINESS STRATEGY, BUDGETS, MARKET POSITION, FUTURE
OPERATIONS, MARGINS, PROFITABILITY, LIQUIDITY AND CAPITAL RESOURCES ARE FORWARD
LOOKING STATEMENTS. IN ADDITION, FORWARD LOOKING STATEMENTS GENERALLY CAN BE
IDENTIFIED BY THE USE OF FORWARD LOOKING TERMINOLOGY SUCH AS "MAY," "WILL,"
"EXPECT," "INTEND," "ESTIMATE," "ANTICIPATE," "BELIEVE," OR "CONTINUE" (OR THE
NEGATIVE THEREOF) OR SIMILAR TERMINOLOGY. ALTHOUGH THE COMPANY BELIEVES THAT THE
EXPECTATIONS REFLECTED IN SUCH FORWARD LOOKING STATEMENTS ARE REASONABLE, IT CAN
GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT.
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE
COMPANY'S EXPECTATIONS ARE DISCLOSED ("CAUTIONARY STATEMENTS") UNDER "RISK
FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. ALL FORWARD LOOKING STATEMENTS OF THE
COMPANY ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 1-7955) are
hereby incorporated by reference in this Prospectus:
(i) the Parent Guarantor's Annual Report on Form 10-K for the year
ended December 31, 1997 filed with the Commission on March 31, 1998; and
(ii) the Parent Guarantor's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1998 filed with the Commission on May 15,
1998.
All reports and any definitive proxy or information statements filed by the
Parent Guarantor pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date of this Prospectus and prior to the termination of
the offering of the securities offered hereby shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated herein by reference, or contained in this Prospectus,
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE TO
ANY PERSON TO WHOM A PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST OF
SUCH PERSON, FROM INTERNATIONAL COMFORT PRODUCTS CORPORATION, 501 CORPORATE
CENTRE DRIVE, SUITE 200, FRANKLIN, TENNESSEE 37067, ATTENTION: SECRETARY,
TELEPHONE (615)771-0200. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY REQUEST SHOULD BE MADE BY , 1998.
4
<PAGE> 6
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by, and
should be read in conjunction with, the financial statements and the more
detailed information included elsewhere or incorporated by reference in this
Prospectus. Unless the context requires otherwise, references to the "Company"
mean International Comfort Products Corporation and its subsidiaries. References
herein to various information on a "pro forma basis" give effect, for the year
ended December 31, 1997, to the acquisition of United Electric Company ("United
Electric"), the issuance of the Old Notes and the application of the net
proceeds, and as at and for the three months ended March 31, 1998 to the
issuance of the Old Notes and the application of the net proceeds, all as
described in the Notes to Pro Forma Selected Financial Data contained herein.
THE COMPANY
The Company is one of the leading designers, manufacturers and marketers of
central air conditioning and heating products for residential and light
commercial use in the United States and Canada. The Company also has recently
expanded its presence in other international markets, primarily Latin America
and Europe. Its principal brand names are widely recognized in the industry and
include Heil, Tempstar, Comfortmaker, MagicAire and the recently added ICP
Commercial. Management believes that the Company and its products are known for
their quality, reliability and customer service. In 1997, the Company had, on a
pro forma basis, operating revenue of $655.7 million and EBITDA (as defined
herein) of $60.2 million. During the quarter ended March 31, 1998, the Company
had operating revenue of $132.8 million and EBITDA of $12.4 million.
The Company's products are sold primarily through a network of
approximately 400 independent heating, ventilation and air conditioning ("HVAC")
distribution companies with over 1,800 locations in the United States, Canada
and other international markets. These distributors are the Company's link to
dealers and, in turn, to consumers. In 1997, sales of cooling products accounted
for approximately 61% of operating revenue, sales of heating products accounted
for approximately 26% of operating revenue and sales of service parts and other
income accounted for approximately 13% of operating revenue. Management believes
that in 1997 the Company derived approximately 70% of its operating revenue from
the replacement, repair and renovation market and approximately 30% from the new
construction market. In 1997, the Company derived approximately 84% of its
operating revenue from sales in the United States, approximately 12% of its
operating revenue from sales in Canada, and approximately 4% of its operating
revenue from sales in other international markets.
In late 1994, the Company's new management initiated a restructuring plan
to significantly improve the Company's manufacturing operations and marketing
strategy, allowing the Company to return to profitability in 1996 after
consecutive years of losses since 1991. Implementing this plan in 1995 caused a
significant dislocation in the Company's operations and severely depressed
financial performance for that year. The restructuring plan was designed to (i)
reduce manufacturing and overhead costs, (ii) reduce lead times for processing
customer orders to better control inventory levels and improve customer
relations, (iii) improve product quality and customer service and (iv)
rationalize and expand the Company's distribution network. The Company believes
that its dramatically improved operational and financial performance in 1996 and
1997 is a direct result of its restructuring plan. The Company's efforts to
reduce manufacturing costs have improved gross margin to 20.1% in 1997 from
17.8% in 1994. Manufacturing and other improvements have allowed the Company to
meet 98% of orders for residential product in 14 days in 1997 versus the
Company's standard order lead time of 90 days in 1994, increase the Company's
operating revenue per employee by 44% to approximately $249,000 in 1997 from
approximately $173,000 in 1994 (in a stable price environment for its products),
and decrease average raw and in process inventory 63% to approximately $6.5
million during 1997 from approximately $17.7 million during 1994. As a result,
the Company has increased EBITDA to $56.6 million in 1997 from $43.2 million in
1994.
INDUSTRY OVERVIEW
Management estimates that the residential and commercial HVAC industry
(measured by sales by manufacturers of product in the United States, excluding
applied systems and chillers) totals approximately
5
<PAGE> 7
$7.0 billion per year. The production and sale of HVAC equipment by
manufacturers is highly competitive. According to industry sources, in 1997
seven manufacturers (including the Company) represented approximately 95% of
this market, with individual market shares ranging from approximately 10% to 22%
and the Company having approximately 11% of the residential and light commercial
HVAC market.
Industry sources estimate that between 1993 and 1997, the HVAC market in
the United States and Canada has grown at an average compounded annual rate of
7% per year. Management believes that the HVAC market in the United States and
Canada will grow at an annual rate of approximately 3-4% per year through the
year 2000.
The Company believes the United States and Canadian markets will continue
to experience moderate growth, but that the industry will experience the
greatest rate of growth in other international markets. Management anticipates
that climatic and economic conditions in Latin America will lead to a higher
rate of growth in that region, and therefore is concentrating on expanding in
that region.
STRATEGY
In addition to continuing the Company's implementation of its 1995
initiatives, the Company is committed to (i) growing its operating revenue in
excess of industry growth rates, (ii) improving profitability and (iii) reducing
working capital requirements. The Company seeks to achieve these goals through
the implementation of the following strategies:
Increase residential market share in the United States and Canada. The
Company intends to increase its residential market share by (i) further
strengthening its relationship with its distributors by reducing customer order
lead times, and providing superior training and marketing support, (ii)
expanding the distribution network in low market share geographic areas and
rationalizing the existing distribution network, (iii) broadening its offering
of aftermarket parts and other HVAC-related supplies to provide distributors
with the benefits of one-stop shopping and (iv) developing strategic
relationships with national accounts, including builders, distributors,
contractors and private label resellers.
Expand its commercial market product offerings and gain market share. The
Company intends to increase its commercial product sales by (i) initiating a
two-tier product strategy to provide competitive entry level commercial
products, (ii) establishing ICP Commercial distribution networks for national
distribution of the recently introduced ICP Commercial brand product, (iii)
strengthening the existing distribution network of the Company's other
commercial brands, (iv) initiating the use of independent manufacturers'
representatives to solicit sales of ICP Commercial brand product for
installation in commercial buildings, (v) expanding product offerings for
commercial applications and (vi) expanding commercial products to include those
with capacity of up to 40 tons.
Pursue international opportunities. The Company intends to continue
expansion of its operations outside the United States and Canada. In Latin
America and Europe, the Company initially establishes HVAC parts distribution
businesses, and introduces HVAC equipment after the parts business has
established cash flow and customer traffic. The Company believes this strategy
of overseas expansion creates the opportunity to generate early cash flow and a
market presence without risking a substantial amount of capital.
Augment internally generated growth by acquiring businesses with
complementary new products, technology and manufacturing resources. The Company
intends to consider acquisitions that support its growth strategy and leverage
and expand its distribution network, purchasing power and manufacturing
capabilities. The Company expects its acquisitions will be both domestic and
international.
Continue to reduce manufacturing costs and standardize components. The
Company intends to increase profitability by continuing efforts to reduce costs
through product design improvements and increased manufacturing efficiencies.
Management believes that its positive results of operations for 1996 and 1997
resulted in large part from structural cost reductions achieved between 1995 and
1997 and that further reductions will be an integral part of its continued
profitability.
6
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CORPORATE STRUCTURE
The chart below reflects the structure of the Parent Guarantor, the Issuer
and their principal operating subsidiaries.
(CORPORATE STRUCTURE CHART)
The Company's principal executive offices are located at 501 Corporate
Centre Drive, Suite 200, Franklin, Tennessee, USA 37067. The Company's telephone
number is (615) 771-0200.
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<PAGE> 9
PURPOSE AND TERMS OF THE EXCHANGE OFFER
THE EXCHANGE OFFER......... $1,000 principal amount of New Notes in exchange
for each $1,000 principal amount of Old Notes. As
of the date hereof, $150 million in aggregate
principal amount of Old Notes is outstanding. The
Issuer will issue the New Notes to tendering
holders of Old Notes on or promptly after the
Expiration Date. Based on interpretations by the
staff of the Commission set forth in several
no-action letters issued to third parties,
including, but not limited to, the Exchange Offer
No-Action Letters, the Company believes that New
Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale,
resold and otherwise transferred by holders
thereof who are not affiliates of the Issuer
(other than a broker-dealer who acquired such Old
Notes directly from the Issuer for resale
pursuant to Rule 144A under the Securities Act or
any other available exemption under the
Securities Act) without compliance with the
registration and prospectus delivery provisions
of the Securities Act; provided, however, that
the holder of Old Notes is acquiring New Notes in
its ordinary course of business and has no
arrangement or understanding with any person to
participate in any distribution (within the
meaning of the Securities Act) of the New Notes.
Persons wishing to exchange Old Notes in the
Exchange Offer must represent to the Issuer that
such conditions have been met. Nevertheless, any
holder of Old Notes who is an affiliate of the
Issuer or who tenders in the Exchange Offer with
the intention to participate, or for the purpose
of participating, in a distribution of the New
Notes cannot rely on the interpretation by the
staff of the Commission set forth in such
no-action letters, including, but not limited to,
The Exchange Offer No-Action Letters, and must
comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any resale transaction. See
"Purpose of the Exchange Offer." Each
broker-dealer that receives New Notes for its own
account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The
Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be
used by a broker-dealer in connection with
resales of New Notes received in exchange for Old
Notes that were acquired by such broker-dealer
for its own account as a result of market-making
activities or other trading activities (other
than acquisitions directly from the Issuer). The
Issuer has agreed that, for a period of 180 days
after the Exchange Offer is consummated, it will,
upon reasonable request, make this Prospectus
available promptly to any broker-dealer for use
in connection with any such resale. See "Plan of
Distribution."
EXPIRATION DATE............ 5:00 p.m., New York City time, on , 1998,
unless the Exchange Offer is extended by the
Issuer to the extent necessary to comply with
applicable laws, in which case the term
"Expiration Date" means the latest date and time
to which the Exchange Offer is extended.
8
<PAGE> 10
ACCRUED AMOUNTS ON THE NEW
NOTES.................... The New Notes will bear interest from the last date
on which interest was paid on the Old Notes
surrendered in exchange therefor or, if no
interest has been paid, from the date of original
issue of such Old Notes.
CONDITIONS TO THE EXCHANGE
OFFER.................... The Exchange Offer is subject to certain customary
conditions. The conditions are limited and relate
in general to laws or Commission policies that
might impair the ability of the Issuer to proceed
with the Exchange Offer. As of the date of this
Prospectus, none of these events had occurred,
and the Company believes their occurrence to be
unlikely. If any such conditions do exist prior
to the Expiration Date, the Issuer may (i) refuse
to accept any Old Notes and return all previously
tendered Old Notes, (ii) extend the Exchange
Offer, or (iii) waive such conditions. See "Terms
of the Exchange Offer -- Conditions."
PROCEDURES FOR TENDERING... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile,
together with such Old Notes to be exchanged and
any other required documentation to United States
Trust Company of New York, as Exchange Agent (the
"Exchange Agent"), at the address set forth
herein and therein or effect a tender of such Old
Notes pursuant to the procedures for book-entry
transfer as provided for herein and therein. By
executing the Letter of Transmittal, each holder
of Old Notes will represent to the Issuer that,
among other things, the New Notes acquired
pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person
receiving such New Notes (whether or not such
person is the holder of the tendered Old Notes),
that neither the holder of the tendered Old Notes
nor any such other person has an arrangement or
understanding with any person to participate in
the distribution of such New Notes and that
neither the holder of the tendered Old Notes nor
any such other person is an "affiliate," as
defined under Rule 405 of the Securities Act, of
the Issuer or any of its subsidiaries. Each
broker-dealer that receives New Notes for its own
account in exchange for Old Notes that were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities must acknowledge that it will deliver
a prospectus in connection with any resale of
such New Notes. See "Terms of the Exchange
Offer -- Procedures for Tendering" and "Plan of
Distribution."
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS........ Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender such Old Notes in the Exchange Offer
should contact such registered holder promptly
and instruct such registered holder to tender on
such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's
own behalf, such owner must, prior to completing
and executing the Letter of Transmittal and
delivering its Old Notes, either make appropriate
arrangements to
9
<PAGE> 11
register ownership of the Old Notes in such
owner's name or obtain a properly completed bond
power from the registered holder thereof. The
transfer of registered ownership may take
considerable time and it may not be possible to
complete a transfer initiated shortly before the
Expiration Date. See "Terms of the Exchange
Offer -- Procedures for Tendering."
GUARANTEED DELIVERY
PROCEDURES............... Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes,
the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent, or cannot complete the procedure
for book-entry transfer prior to 5:00 p.m. on the
Expiration Date, may tender their Old Notes
according to the guaranteed delivery procedures
discussed under the caption "Terms of the
Exchange Offer -- Guaranteed Delivery
Procedures."
WITHDRAWAL RIGHTS.......... Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the
Expiration Date.
ACCEPTANCE OF OLD NOTES AND
DELIVERY OF NEW NOTES.... The Issuer will accept for exchange any and all Old
Notes that are properly tendered in the Exchange
Offer prior to 5:00 p.m., New York City time, on
the Expiration Date. The New Notes issued
pursuant to the Exchange Offer will be delivered
promptly following the Expiration Date. Any Old
Notes not accepted for exchange will be returned
without expense to the tendering holder thereof
as promptly as practicable after the expiration
or termination of the Exchange Offer. See "Terms
of the Exchange Offer."
CERTAIN TAX
CONSIDERATIONS........... The exchange pursuant to the Exchange Offer should
not be a taxable event for United States or
Canadian federal income tax purposes. See
"Certain United States Federal Tax
Considerations" and "Certain Canadian Federal
Income Tax Considerations."
EXCHANGE AGENT............. United States Trust Company of New York is serving
as Exchange Agent in connection with the Exchange
Offer.
TERMS OF NEW NOTES
The Exchange Offer applies to the entire $150,000,000 aggregate principal
amount outstanding of the Old Notes. The New Notes will be obligations of the
Issuer evidencing the same debt as the Old Notes and will be entitled to the
benefits of the same Indenture. See "Description of Notes." The form and terms
of the New Notes are generally the same as the form and terms of the Old Notes
in all material respects except that the New Notes have been registered under
the Securities Act and hence do not include certain rights to registration
thereunder and do not contain transfer restrictions or terms with respect to
certain special payments applicable to the Old Notes. See "Description of
Notes."
THE NEW NOTES.............. $150,000,000 principal amount of 8 5/8% Series B
Senior Notes due 2008.
MATURITY DATE.............. May 15, 2008.
INTEREST RATE AND PAYMENT
DATES.................... The New Notes will bear interest at a rate of
8 5/8% per annum. Interest on the New Notes will
accrue from the last date on which interest was
paid on the Old Notes surrendered in exchange
therefor, or if no interest has been paid, from
the date of original issue of such Old
10
<PAGE> 12
Notes. Interest on the New Notes is payable
semi-annually in cash in arrears on May 15 and
November 15 of each year, commencing November 15,
1998.
OPTIONAL REDEMPTION........ Except as provided below, the New Notes are not
redeemable at the Issuer's option prior to May
15, 2003. Thereafter, the Issuer may redeem the
New Notes, in whole or in part, at the redemption
prices set forth herein, plus accrued and unpaid
interest thereon to the date of redemption. In
addition, prior to May 15, 2001, the Issuer may
redeem up to 35% of the principal amount of the
New Notes with the net proceeds contributed or
otherwise made available to it by the Parent
Guarantor from one or more Public Equity
Offerings at the redemption prices set forth
herein, plus accrued and unpaid interest thereon,
if any, to the redemption date. See "Description
of Notes -- Redemption."
RANKING.................... The New Notes and the Parent Guarantee will be
senior unsecured obligations of the Issuer and
the Parent Guarantor, respectively, ranking pari
passu in right of payment to all existing and
future unsecured and unsubordinated indebtedness
of the Issuer and the Parent Guarantor,
respectively, and senior in right of payment to
all subordinated indebtedness of the Issuer and
the Parent Guarantor, respectively. The New Notes
and the Parent Guarantee will be effectively
subordinated to all existing and future
indebtedness of the Parent Guarantor's
subsidiaries (other than the Issuer). The terms
of the Indenture permit the Company and its
subsidiaries to incur additional indebtedness
(including secured indebtedness), subject to
certain limitations. See "Description of Notes"
and "Description of Other Indebtedness." As of
March 31, 1998, on a pro forma basis, such
subsidiaries had $182.7 million of total
liabilities, including $63.2 million of
indebtedness.
PARENT GUARANTEE........... The New Notes are fully and unconditionally
guaranteed on a senior basis by the Parent
Guarantor, which owns all of the outstanding
capital stock of the Issuer.
CHANGE OF CONTROL.......... Upon a Change of Control (as defined herein), the
Issuer is required to make an offer to repurchase
all outstanding New Notes at 101% of the
principal amount thereof plus accrued and unpaid
interest thereon to the date of repurchase. See
"Description of Notes -- Change of Control."
ASSET SALES................ The Issuer will be required in certain
circumstances to make an offer to purchase Notes
at a price equal to 100% of the principal amount
thereof, plus accrued and unpaid interest to the
date of purchase, with the net cash proceeds of
certain asset sales. See "Description of
Notes -- Certain Covenants -- Disposition of
Proceeds of Asset Sales."
CERTAIN COVENANTS.......... The Indenture contains covenants, including, but
not limited to, covenants with respect to
limitations on the following matters: (i)
incurrence of additional indebtedness by the
Parent Guarantor and its Restricted Subsidiaries
(as defined), (ii) issuance of preferred stock by
Restricted Subsidiaries of the Parent Guarantor,
(iii) creation of liens by the Parent Guarantor,
(iv) restricted payments by the Parent Guarantor
and its Restricted Subsidiaries,
11
<PAGE> 13
(v) sales of assets and subsidiary stock by the
Parent Guarantor and its Restricted Subsidiaries,
(vi) mergers and consolidations involving the
Parent Guarantor or the Issuer, (vii) payment
restrictions affecting Restricted Subsidiaries of
the Parent Guarantor and (ix) transactions with
affiliates. See "Description of Notes -- Certain
Covenants."
For additional information regarding the Notes, see "Description of Notes."
EXCHANGE RIGHTS............ Holders of New Notes are not entitled to any
exchange rights with respect to the New Notes.
Holders of Old Notes are entitled to certain
exchange rights pursuant to the Registration
Rights Agreement. Under the Registration Rights
Agreement, the Issuer is required to offer to
exchange the Old Notes for new notes having
substantially identical terms which have been
registered under the Securities Act. This
Exchange Offer is intended to satisfy such
obligation. If and when the Exchange Offer is
consummated, neither the Parent Guarantor nor the
Issuer will have any further obligations to
register any of the Old Notes not tendered by the
Holders for exchange, except pursuant to a shelf
registration statement to be filed under certain
limited circumstances described under the caption
"Purpose of the Exchange Offer." See "Risk
Factors -- Consequences to Non-Tendering Holders
of Old Notes."
USE OF PROCEEDS............ The Company will not receive any proceeds from the
Exchange Offer.
RISK FACTORS
See "Risk Factors" for a discussion of certain considerations that should
be considered in evaluating an investment in the Notes or participation in the
Exchange Offer.
12
<PAGE> 14
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following summary historical financial data has been derived from the
Company's audited consolidated financial statements for the years ended December
31, 1994, 1995, 1996 and 1997 and from the Company's unaudited consolidated
financial statements for the three months ended March 31, 1997 and 1998. The
unaudited financial statements include all adjustments, consisting of normal
recurring adjustments, which the Company considers necessary for a fair
presentation of its financial position and results of operations for these
periods. The following summary pro forma consolidated financial data for the
year ended December 31, 1997 and the three months ended March 31, 1998 has been
derived from the Company's unaudited pro forma condensed financial data. Neither
the summary historical consolidated financial data nor the summary pro forma
consolidated financial data are necessarily indicative of either the future
results of operations or the results of operations that would have occurred if
the events described had been consummated on any date. The following summary
historical and pro forma consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and the notes thereto,
the Pro Forma Consolidated Condensed Financial Data and notes thereto and the
other information contained elsewhere or incorporated by reference (including
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") contained in the Company's reports incorporated herein by
reference) in this Prospectus. The consolidated financial statements of the
Company are prepared by management in accordance with generally accepted
accounting principles ("GAAP") in Canada, which differ in certain respects with
accounting principles in the United States. The differences between GAAP in
Canada and the United States as they affect the Company are described in note 19
of the Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------------------------------
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------- -------------------
1994 1995 1996 1997 1997 1998
------- ------- ------- ------- -------- --------
(IN MILLIONS, EXCEPT FOR RATIOS)
UNAUDITED
-------------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Operating Revenue...................... $ 635.2 $ 532.8 $ 641.9 $ 630.7 $ 136.6 $ 132.8
Cost of Sales.......................... 522.3 467.4 517.8 503.7 108.7 104.3
------- ------- ------- ------- ------- -------
Gross Margin........................... 112.9 65.4 124.1 127.0 27.9 28.5
Selling, General and Administrative
Expenses............................ 87.3 93.2 90.7 85.5 21.5 20.2
Asset Writedowns, Restructuring Costs
and Other Non-recurring Charges..... 8.0 15.5 -- -- -- --
------- ------- ------- ------- ------- -------
Operating Profit (Loss)................ 17.6 (43.3) 33.4 41.5 6.4 8.3
------- ------- ------- ------- ------- -------
Financial Expenses
Interest expense.................... 20.2 21.7 19.4 18.2 4.7 4.5
Amortization of debt issuance
costs............................. 1.7 1.3 1.8 1.3 0.3 0.3
Write-off of debt issuance costs.... 1.2 2.1 0.6 -- -- --
------- ------- ------- ------- ------- -------
23.1 25.1 21.8 19.5 5.0 4.8
------- ------- ------- ------- ------- -------
Income (Loss) Before Income Taxes...... (5.5) (68.4) 11.6 22.0 1.4 3.5
Income Taxes........................... 0.9 (12.8) -- -- -- --
------- ------- ------- ------- ------- -------
Income (Loss) From Continuing
Operations.......................... (4.6) (81.2) 11.6 22.0 1.4 3.5
Loss From Discontinued Operations...... (2.9) (12.0) (3.1) -- -- --
------- ------- ------- ------- ------- -------
Net Income (Loss)...................... $ (7.5) $ (93.2) $ 8.5 $ 22.0 $ 1.4 $ 3.5
======= ======= ======= ======= ======= =======
OTHER DATA:
EBITDA (1)............................. $ 43.2 $ (9.0) $ 49.1 $ 56.6 $ 10.3 $ 12.4
Capital Expenditures................... 11.1 24.5 11.8 8.5 0.6 3.2
Ratio of Total Debt to EBITDA (2)...... 5.62x -- 4.15x 3.28x not meaningful
Ratio of EBITDA to Interest (3)........ 2.14x -- 2.53x 3.11x 2.19x 2.76x
Ratio of Earnings to Fixed Charges
(4)................................. 0.79x (1.50)x 1.49x 2.06x 1.26x 1.68x
</TABLE>
13
<PAGE> 15
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------
AS AT DECEMBER 31, AS AT MARCH 31,
--------------------------------- ---------------
1994 1995 1996 1997 1997 1998
------ ------ ------ ------ ------ ------
UNAUDITED
---------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital.............................. $153.0 $ 60.5 $103.8 $136.6 $112.9 $117.1
Total Assets................................. 486.1 345.8 345.0 352.0 368.6 378.8
Total Debt................................... 242.8 182.7 204.0 185.5 224.3 203.2
Shareholders' Equity......................... 110.3 18.5 28.8 51.5 31.1 55.4
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
---------------------------
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1997(5) 1998(6)
------------ ------------
UNAUDITED
---------------------------
<S> <C> <C>
STATEMENT OF INCOME DATA:
Operating Revenue......................................... $ 655.7 $ 132.8
Cost of Sales............................................. 520.7 104.3
------- ----------
Gross Margin.............................................. 135.0 28.5
Selling, General and Administrative Expenses.............. 90.3 20.2
------- ----------
Operating Profit.......................................... 44.7 8.3
------- ----------
Financial Expenses
Interest expense....................................... 18.3 4.2
Amortization of debt issuance costs.................... 1.0 .2
Other.................................................. (0.1) --
------- ----------
19.2 4.4
------- ----------
Income Before Income Taxes................................ 25.5 3.9
Income Taxes.............................................. (0.4) --
------- ----------
Net Income................................................ $ 25.1 $ 3.9
======= ==========
OTHER DATA:
EBITDA(1)................................................. $ 60.2 $ 12.4
Capital Expenditures...................................... 9.6 3.2
not
Ratio of Total Debt to EBITDA(2).......................... 3.25x meaningful
Ratio of EBITDA to Interest(3)............................ 3.29x 2.95x
Ratio of Earnings to Fixed Charges(4)..................... 2.24x 1.83x
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
------------
AS AT
MARCH 31,
1998(7)
------------
UNAUDITED
------------
<S> <C> <C>
BALANCE SHEET DATA:
Working Capital........................................... $ 118.8
Total Assets.............................................. 384.1
Total Debt................................................ 213.2
Shareholders' Equity...................................... 50.7
</TABLE>
- ---------------
(1) EBITDA, as defined by the Company, represents income (loss) before income
taxes, plus interest expense, write-off of debt issuance costs, asset
writedowns, restructuring costs and other non-recurring charges, and
depreciation and amortization. EBITDA is a widely accepted financial
indicator of a company's ability to service debt. However, EBITDA should not
be construed as an alternative to
14
<PAGE> 16
operating profit, net income or cash flows from operating activities (as
determined in accordance with generally accepted accounting principles) and
should not be construed as an indication of the Company's operating
performance or as a measure of liquidity.
(2) As defined by the Company, represents the total of long-term debt (including
the current portion) and short-term borrowings divided by EBITDA.
(3) As defined by the Company, represents EBITDA divided by interest expense.
(4) For purposes of computing the ratio of earnings to fixed charges, "earnings"
consists of income (loss) before income taxes, plus fixed charges. "Fixed
charges" consist of interest expense, amortization of debt issuance costs
and one-third of rental expense (the portion deemed representative of the
interest factor).
(5) To give pro forma effect to the statement of income data for the year ended
December 31, 1997 as though the acquisition of United Electric, the offering
of the Old Notes and application of the net proceeds had occurred as of
January 1, 1997.
(6) To give pro forma effect to the statement of income data for the three
months ended March 31, 1998 as though the offering of the Old Notes and the
application of the net proceeds had occurred on January 1, 1998.
(7) To give pro forma effect to the balance sheet data as though the offering of
the Old Notes and application of the net proceeds thereof had occurred as of
March 31, 1998.
15
<PAGE> 17
RISK FACTORS
In addition to the other information in this Prospectus, prospective
investors should carefully consider the following risk factors in evaluating the
Company and its business before investing in the Notes or participating in the
Exchange Offer.
HOLDING COMPANY STRUCTURE
Each of the Parent Guarantor and the Issuer is a holding company which
conducts all of its operations through its respective subsidiaries and currently
has no significant operating assets other than its respective direct and
indirect investments in its respective operating subsidiaries. The Parent
Guarantor and the Issuer will be the only obligors on the Notes. Each of the
Parent Guarantor and the Issuer must rely on dividends and other advances and
transfers of funds from its respective subsidiaries to provide the funds
necessary to meet its respective debt service obligations, including with
respect to payments on the Parent Guarantee and the Notes, respectively. The
ability of the subsidiaries of the Parent Guarantor and the subsidiaries of the
Issuer to pay dividends or make other advances and transfers of funds will
depend on their respective operating results and will be subject to applicable
laws and restrictions contained in agreements governing indebtedness and other
obligations of such subsidiaries. Although the Indenture limits the ability of
Restricted Subsidiaries to enter into consensual restrictions on their ability
to pay dividends or make other advances and transfers of funds, such limitations
are subject to a number of significant qualifications. See "Description of
Notes -- Certain Covenants -- Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries." In addition, certain existing
credit agreements of subsidiaries of the Parent Guarantor include restrictions
on dividends and other advances and transfers of funds. See "Description of
Other Indebtedness." There can be no assurance that any agreement to which
subsidiaries of the Issuer or the Parent Guarantor are a party (or any
applicable law) will permit such subsidiaries to distribute funds to the Issuer
or the Parent Guarantor in amounts sufficient to pay the interest and principal
on the Notes.
The Notes and the Parent Guarantee will be effectively subordinated to all
existing and future claims of creditors of the Parent Guarantor's subsidiaries
(other than the Issuer). As of March 31, 1998, on a pro forma basis, such
subsidiaries had $182.7 million of total liabilities, including $63.2 million of
indebtedness. The rights of the holders of the Notes to realize upon the assets
of any such subsidiary will be subject to the prior claims of the creditors of
such subsidiary, including trade creditors. In such event, there may not be
sufficient assets remaining to pay amounts due on the Notes.
LEVERAGE
As of March 31, 1998, on a pro forma basis, the Parent Guarantor would have
had $213.2 million of consolidated indebtedness and $50.7 million of
consolidated stockholders' equity.
The Parent Guarantor's and its subsidiaries' indebtedness will have several
important consequences for the holders of the Notes, including, but not limited
to, the following: (i) a substantial portion of the Parent Guarantor's
consolidated cash flow from operations must be dedicated to debt service
requirements and will not be available for other purposes; (ii) the Parent
Guarantor's and its subsidiaries' ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions, to refinance
other indebtedness or for general corporate purposes may be impaired; (iii) the
Parent Guarantor's consolidated leverage may increase its vulnerability to
economic downturns and limit its ability to withstand competitive pressures; and
(iv) the Parent Guarantor's and its subsidiaries' ability to capitalize on
significant business opportunities may be limited.
The ability of the Issuer and the Parent Guarantor to make payments with
respect to the Notes will depend on their future operating performance, which
will be affected by prevailing economic conditions and financial, business and
other factors, certain of which are beyond the control of the Issuer and the
Parent Guarantor. The Parent Guarantor and the Issuer believe, based on current
circumstances, that the Issuer's cash flow will be sufficient to permit the
Issuer to meet its operating expenses and to service its debt requirements as
they become due. Significant assumptions underlie this belief, including, among
other things, that the Company will succeed in continuing to implement its
business strategy and there will be no material
16
<PAGE> 18
adverse developments in the business, liquidity or capital requirements of the
Issuer. If the Issuer or Parent Guarantor is unable to service its indebtedness,
the Company will be forced to adopt an alternative strategy that may include
actions such as reducing or delaying capital expenditures, selling assets,
restructuring or refinancing its indebtedness or seeking additional equity
capital. There can be no assurance that any of these strategies could be
effected on satisfactory terms, if at all.
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Indenture restricts the ability of the Parent Guarantor and its
Restricted Subsidiaries (including the Issuer) to, among other things, incur
additional indebtedness, pay dividends or make certain other restricted payments
or investments, consummate certain asset sales, enter into certain transactions
with affiliates, incur liens, or merge or consolidate with any other person or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of their assets. In addition, certain indebtedness of
subsidiaries of the Parent Guarantor and of the Issuer contain other and more
restrictive covenants, including requirements for the maintenance of specified
financial ratios and the satisfaction of certain financial tests. The ability to
meet such financial ratios and tests may be affected by events beyond the
control of the Company, and there can be no assurance that the Company will meet
such tests. A breach of any of these covenants could result in an event of
default under such indebtedness. In an event of default under such indebtedness,
the lenders thereunder could elect to declare all amounts borrowed, together
with accrued interest, to be immediately due and payable and the lenders under
the such indebtedness could terminate all commitments thereunder. If any such
indebtedness were to be accelerated, there can be no assurance that the assets
of the Parent Guarantor and the Issuer would be sufficient to repay in full such
indebtedness and the Notes. See "Description of Other Indebtedness" and
"Description of Notes -- Certain Covenants."
CONSEQUENCES OF CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the holders of the Notes would
be entitled to require the Issuer to repurchase up to all outstanding Notes of
the holders requiring such repurchase at a purchase price equal to 101% of the
principal amount of such Notes plus accrued and unpaid interest, if any, thereon
to the date of repurchase. Failure by the Issuer to make such a repurchase would
result in a default under the Indenture. In addition, certain indebtedness of
subsidiaries of the Parent Guarantor and of the Issuer currently contains, and
may contain in the future, prohibitions on the occurrence of certain events that
would constitute a Change of Control or require such indebtedness to be repaid
or repurchased upon a Change of Control. Moreover, the exercise by the holders
of the Notes of their right to require the Issuer to repurchase the Notes could
cause a default under such indebtedness due to the financial effect of such
repurchase on the Issuer or the Parent Guarantor or otherwise, even if the
Change of Control itself does not cause a default. In the event of a Change of
Control, there can be no assurance that the Issuer or the Parent Guarantor would
have sufficient funds to repurchase the Notes and to satisfy its other
obligations under the Notes and any such other indebtedness. Because the
Issuer's ability to repurchase the Notes following a Change of Control will
depend on the availability of sufficient funds and compliance with applicable
securities laws, no assurance can be given that the Issuer will repurchase Notes
following a Change of Control. See "Description of Notes -- Change of Control."
ENVIRONMENTAL REGULATION
Growing concern over potential ozone depletion has led to increased
regulation of high ozone depletion refrigerants, including the Montreal
Protocol, an international protocol limiting the use of certain ozone depleting
chemicals. On November 25, 1992, the Montreal Protocol was amended to phase-out
the production and use of hydrochlorofluorocarbons ("HCFCs"), beginning in 1996
and ending in 2030.
In the United States, the 1990 Clean Air Act Amendments implement the
Montreal Protocol by establishing a program for limiting the production and use
of ozone-depleting chemicals. Under the Clean Air Act, HCFC-22 (the only
refrigerant used in the Company's products) is designated as a "Class II
substance"; such substances are currently scheduled to be phased out under the
Clean Air Act Amendments between 2010 and 2020.
17
<PAGE> 19
As a result of the recent amendments to the Montreal Protocol, the U.S.
Environmental Protection Agency ("EPA"), which is authorized under the Clean Air
Act to accelerate the statutory phase-out schedule for any Class II substance,
is likely to promulgate regulations to implement those amendments.
Alternatively, the EPA could adopt proposals made by various groups to phase-out
Class II substances, including HCFC-22, substantially earlier than under the
schedule provided by either the Clean Air Act or the Montreal Protocol. It is
unclear which, if any, of these proposed schedules will be adopted by the EPA.
In Canada, the Ozone-depleting Substances Regulations, under the Canadian
Environmental Protection Act, regulate the consumption of HCFCs by a system of
allowances and permits and do not currently provide a statutory phase-out
schedule for HCFCs. However, it is anticipated that the Ozone-depleting
Substances Regulations will be amended in 1998 to provide for a gradual
phase-out of HCFCs between 2010 and 2020.
All cooling products manufactured by the Company contain HCFC-22. This
refrigerant is sealed inside the air conditioner and is expected to remain
within the unit throughout the operating life of the system without leakage to
the atmosphere. The Company believes that its operations comply with all current
legislation and regulations relating to refrigerants and that the Montreal
Protocol, the Clean Air Act Amendments and their implementing regulations as
currently in effect or any anticipated accelerated phase-out will not have a
material adverse impact on its operations over the next ten years. However, the
Company believes that the implementation of more severe restrictions on the use
of Class II refrigerants could have such an impact.
Prior to the phase-out of HCFC-22, the Company must identify substitute
refrigerants for use in cooling products. The Company has been working closely
with refrigerant manufacturers and others in the industry to develop new
refrigerants that are compatible with its existing cooling product lines. Such
new refrigerants may require the Company to modify the design of its cooling
products. The Company is unable to predict the precise extent of necessary
modifications or the costs associated with the use of alternative refrigerants,
but does not expect that either will have a material adverse effect on the
industry unless the phase-out is accelerated more rapidly than is currently
anticipated under the Clean Air Act, the Canadian Environmental Protection Act
or the Montreal Protocol.
The Company and its operations are subject to extensive foreign, federal,
provincial, state, municipal and local laws, codes, treaties and regulations
limiting the discharge of pollutants into the environment and establishing
requirements for the treatment, storage or disposal and remediation of releases
of solid and hazardous wastes and hazardous materials ("Environmental Laws").
The Company believes it is in substantial compliance in all material respects
with such Environmental Laws. Certain Environmental Laws impose strict, and in
some cases, joint and several liability on responsible parties to clean up, or
contribute to the cost of cleaning up, sites at which wastes or other hazardous
materials were released and for related damages to natural resources. The
Company is involved in response actions at certain facilities pursuant to these
laws.
Based upon its experience to date, the Company believes that the future
cost of compliance with existing Environmental Laws, and liability for known
environmental claims pursuant to such Laws, will not have a material adverse
effect on the Company's business, financial condition or results of operations.
However, no assurance can be given that future events, such as the cost of
complying with new or more stringent Environmental Laws, as well as any related
damage claims, newly identified sites requiring response action or new, as well
as more vigorous enforcement of existing Environmental Laws will not be
material. See "Business -- Government Regulation -- Environmental Regulation and
Proceedings."
FLUCTUATIONS IN OPERATING RESULTS
The Company's operations are subject to seasonal fluctuations.
Additionally, the Company's operations may be adversely affected by unseasonably
mild weather, which has the effect of diminishing customer demand. To reduce the
costs of exposure to short-term weather risks, the Company reduced the time it
takes to fulfill a customer's order to 14 days for most products.
Sales in the residential and commercial new construction market correlate
closely to the number of new homes and buildings that are built, which in turn
is influenced by cyclical factors such as interest rates,
18
<PAGE> 20
inflation, consumers' spending habits, employment rates, and other macroeconomic
factors. Management believes the Company derived approximately 70% of its sales
in 1997 from the repair, replacement and renovation market and approximately 30%
from the new construction market. Although macroeconomic factors, such as the
reluctance of consumers to make major purchases during recessionary periods,
also affect the replacement, repair and renovation market of the Company's
business, management believes that the replacement, repair and renovation market
is less prone to the effects of macroeconomic factors and mitigates the
Company's exposure to the effects of macroeconomic cycles.
Nevertheless, the effects of seasonality, weather fluctuations and
macroeconomic factors may adversely affect the Company's operating results and
the Company's ability to maintain revenues. Quarterly comparisons of the
Company's revenues and operating results should not be relied on as an
indication of future performance, and the results of any quarterly period may
not be indicative of a result to be expected for a full year.
COMPETITION
The production and sale of HVAC equipment by manufacturers is highly
competitive. According to industry sources, in 1997 seven manufacturers
(including the Company) represented approximately 95% of the market, with
individual market shares ranging from approximately 10% to 22% and the Company
having approximately 11% of the residential and light commercial HVAC market.
The Company's six largest competitors in this market are Carrier Corporation,
Goodman Manufacturing Corporation, Rheem Manufacturing, The Trane Company, York
International Corporation and Lennox Industries Inc. Several of the Company's
competitors have greater financial and other resources than the Company. There
can be no assurance that competitive pressures will not materially and adversely
affect the Company's business, financial condition or results of operations.
AVAILABILITY AND FLUCTUATION IN THE COST OF RAW MATERIALS
The Company's operations are dependent on the supply of various raw
materials, including steel, copper and aluminum, from domestic and foreign
suppliers. The Company does not typically enter into long-term supply contracts
relating to these raw materials. Although to date the Company has been able to
obtain sufficient quantities of steel, copper, aluminum and other raw materials
for its manufacturing processes at adequate prices, supply interruptions and/or
cost increases could adversely affect the Company's future results of
operations.
DEPENDENCIES ON CERTAIN SUPPLIERS
The Company is dependent on certain suppliers to supply parts and materials
included in the Company's finished products. The Company believes it has close
relations with the companies that provide the parts and material used in
manufacturing. If a key supplier were unable or unwilling to meet the Company's
supply requirements, the Company could experience supply interruptions and/or
cost increases which (to the extent that the Company is not able to pass these
costs onto its customers) could adversely affect the Company's future results of
operations.
LABOR RELATIONS
The Company is a party to five collective bargaining agreements with four
labor unions representing certain of the hourly employees of the Company
(approximately 1,900 in the aggregate) which are scheduled to expire between
September 1998 and May 2001. The renegotiation of these collective agreements
will occur between the years 1998 and 2001. The Company's inability to negotiate
acceptable contracts with one or more of these unions could result in a job
action by the affected workers. Any job action could disrupt the Company's
operations and result in increased operating costs as a result of higher wages
or benefits paid to union members.
19
<PAGE> 21
DEPENDENCE ON PRINCIPAL CUSTOMERS
During 1997, one customer accounted for approximately 11% of the Company's
operating revenue, and the Company's 10 largest customers accounted for
approximately 36% of the Company's operating revenue. Although the Company has
contracted with most of its distributors for a number of years, agreements with
distributors are reached annually and are subject to nonrenewal or termination
by either party. There can be no assurance that sales to principal distributors
will continue at the same levels. Furthermore, continuation of the Company's
relationships with its distributors is dependent upon the distributors' (and
ultimately with the dealers' and end users') satisfaction with the price,
quality and delivery of the Company's products. While management believes its
relationships with its distributors are good, in the event of the loss of a
significant distributor, the Company's results of operations would be adversely
effected in the event it were unable to satisfactorily replace the distributor.
PRODUCT LIABILITY
The Company's business exposes it to possible claims for property damage,
personal injury or death which may result from the use of allegedly defective
goods sold by it. The Company maintains what it believes to be adequate
liability insurance to protect it from such claims. While no material claims
have, to date, been made against the Company, no assurance can be given that
claims will not arise in the future or that such insurance coverage will be
adequate. Additionally, there can be no assurance that insurance coverages can
be maintained in the future at an acceptable cost. Any such liability not
covered by insurance could have a material adverse effect on the financial
condition of the Company.
LACK OF PUBLIC MARKET FOR THE NEW NOTES
There is no existing trading market for the New Notes, and there can be no
assurance regarding the future development of a market for the New Notes or the
ability of holders of the New Notes to sell their New Notes or the price at
which such holders may be able to sell their New Notes. If such a market were to
develop, the New Notes could trade at prices that may be higher or lower than
the initial offering price depending on many factors, including prevailing
interest rates, the Company's operating results and the market for similar
securities. The Initial Purchasers have advised the Company that they currently
intend to make a market in the New Notes. The Initial Purchasers are not
obligated to do so, however, and any market making with respect to the New Notes
may be discontinued at any time without notice. Therefore, there can be no
assurance as to the liquidity of any trading market for the New Notes or that an
active trading market for the New Notes will develop. The Issuer does not intend
to apply for listing or quotation of the New Notes on any securities exchange or
stock market.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the New Notes will not
be subject to similar disruptions. Any such disruptions may have an adverse
effect on holders of the New Notes.
CONSEQUENCES TO NON-TENDERING HOLDERS OF OLD NOTES
Upon consummation of the Exchange Offer, neither the Parent Guarantor nor
the Company will have any further obligation to register the New Notes except
pursuant to a shelf registration statement to be filed under certain limited
circumstances discussed under the caption "Purpose of the Exchange Offer."
Thereafter, subject to such exception, any Holder of Old Notes who does not
tender its Old Notes in the Exchange Offer will continue to hold restricted
securities which may not be offered, sold or otherwise transferred, pledged or
hypothecated except pursuant to Rule 144 and Rule 144A under the Securities Act
or pursuant to any other exemption from registration under the Securities Act
relating to the disposition of securities, in which case, an opinion of counsel
must be furnished to the Parent Guarantor and the Issuer that such an exemption
is available.
20
<PAGE> 22
USE OF PROCEEDS
THE EXCHANGE OFFER
The Exchange Offer is intended to satisfy certain obligations of the Issuer
and the Parent Guarantor under the Registration Rights Agreement. The Company
will not receive any cash proceeds from the issuance of the New Notes offered in
the Exchange Offer. In consideration for issuing the New Notes as contemplated
in this Prospectus, the Issuer will receive in exchange Old Notes in like
principal amount, the form and terms of which are the same in all material
respects as the form and terms of the New Notes except that the New Notes have
been registered under the Securities Act and hence do not include certain rights
to registration thereunder or contain transfer restrictions or terms with
respect to Additional Interest. The Old Notes surrendered in exchange for the
New Notes will be retired and canceled and cannot be reissued. Accordingly,
issuance of the New Notes will not result in any proceeds to the Company or
increase in the indebtedness of the Company.
THE SALE OF THE OLD NOTES
The net proceeds to the Company from the sale of the Old Notes was
approximately $144.0 million, after deducting the Initial Purchasers' discount
and other costs of the offering. The Company applied a portion of the net
proceeds from the issuance of the Old Notes to redeem the Company's 9 3/4%
Senior Secured Notes due 2000 ("the Refinanced Debentures") which were
outstanding in the principal amount of $140.0 million, by depositing
approximately $143.4 million (including 30 days of interest on the outstanding
principal amount and $2.27 million in call premium) with United States Trust
Company of New York, as trustee for the holders of the Refinanced Debentures.
The Company used the remaining net proceeds from the issuance of the Old
Notes for general corporate purposes.
21
<PAGE> 23
CAPITALIZATION
The following table sets forth the consolidated historical cash and
short-term deposits and capitalization of the Company and the consolidated pro
forma cash and short-term deposits and capitalization of the Company as of March
31, 1998, as adjusted to give effect to the sale of the Old Notes and the
application of the net proceeds therefrom. This table should be read in
conjunction with the Consolidated Financial Statements of the Company and the
Pro Forma Consolidated Financial Data and the notes thereto included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
AS AT
MARCH 31, 1998
--------------------------
HISTORICAL PRO FORMA
---------- ------------
(IN MILLIONS)
<S> <C> <C>
Cash and short-term deposits................................ $ 10.1 $ 11.8
======= =======
Debt(1):
Receivables Purchase Agreement............................ $ 25.0 $ 25.0
Canadian Revolving Credit Facility........................ 11.8 11.8
8 5/8% Senior Notes due 2008 offered hereby............... -- 150.0
9 3/4% Senior Notes due 2000.............................. 140.0 --
Term Bank Loan............................................ 25.0 25.0
Other..................................................... 1.4 1.4
------- -------
Total Debt........................................ 203.2 213.2
Shareholders' Equity(2)..................................... 55.4 50.7
------- -------
Total Capitalization.............................. $ 258.6 $ 263.9
======= =======
</TABLE>
- ---------------
(1) For a description of the Company's outstanding indebtedness, see
"Description of Other Indebtedness."
(2) See Note 9 of Notes to Consolidated Financial Statements for a discussion of
the Company's authorized shares, outstanding shares and option plan.
22
<PAGE> 24
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following selected historical financial data has been derived from the
Company's audited consolidated financial statements for the years ended December
31, 1993, 1994, 1995, 1996 and 1997 and from the Company's unaudited
consolidated financial statements for the three months ended March 31, 1997 and
1998. The unaudited financial statements include all adjustments, consisting of
normal recurring adjustments, that the Company considers necessary for a fair
presentation of its financial position and results of operations for those
periods. The following selected pro forma consolidated financial data for the
year ended December 31, 1997 and the three months ended March 31, 1998 has been
derived from the Company's unaudited pro forma condensed financial data. Neither
the selected historical consolidated financial data nor the selected pro forma
consolidated financial data are necessarily indicative of either the future
results of operations or the results of operations that would have occurred if
the events described had been consummated on any date. The following selected
historical and pro forma consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and the notes thereto,
the Pro Forma Consolidated Condensed Financial Data and notes thereto and the
other information contained elsewhere or incorporated by reference (including
MD&A contained in the Company's reports incorporated herein by reference) in
this Prospectus. The consolidated financial statements of the Company are
prepared by management in accordance with GAAP in Canada, which differ in
certain respects with accounting principles in the United States. The
differences between GAAP in Canada and the United States as they affect the
Company are described in note 19 of the Notes to Consolidated Financial
Statements.
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------------------------------------
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------- -----------------
1993 1994 1995 1996 1997 1997 1998
------- ------- ------- ------- ------- ------- -------
(IN MILLIONS, EXCEPT FOR RATIO AND PER SHARE DATA)
UNAUDITED
-----------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Operating Revenue....................... $ 598.0 $ 635.2 $ 532.8 $ 641.9 $ 630.7 $ 136.6 $ 132.8
Cost of Sales........................... 498.4 522.3 467.4 517.8 503.7 108.7 104.3
------- ------- ------- ------- ------- ------- -------
Gross Margin............................ 99.6 112.9 65.4 124.1 127.0 27.9 28.5
Selling, General and Administrative
Expenses.............................. 89.3 87.3 93.2 90.7 85.5 21.5 20.2
Asset Writedowns, Restructuring Costs
and Other Non-recurring Charges....... 14.3 8.0 15.5 -- -- -- --
------- ------- ------- ------- ------- ------- -------
Operating Profit (Loss)................. (4.0) 17.6 (43.3) 33.4 41.5 6.4 8.3
------- ------- ------- ------- ------- ------- -------
Financial Expenses
Interest expense...................... 15.4 20.2 21.7 19.4 18.2 4.7 4.5
Amortization of debt issuance costs... 1.5 1.7 1.3 1.8 1.3 0.3 0.3
Write-off of debt issuance costs...... 1.2 1.2 2.1 0.6 -- -- --
------- ------- ------- ------- ------- ------- -------
18.1 23.1 25.1 21.8 19.5 5.0 4.8
------- ------- ------- ------- ------- ------- -------
Income (Loss) Before Income Taxes....... (22.1) (5.5) (68.4) 11.6 22.0 1.4 3.5
Income Taxes............................ 4.3 0.9 (12.8) -- -- -- --
------- ------- ------- ------- ------- ------- -------
Income (Loss) From Continuing
Operations............................ (17.8) (4.6) (81.2) 11.6 22.0 1.4 3.5
Loss From Discontinued Operations....... (3.2) (2.9) (12.0) (3.1) -- -- --
------- ------- ------- ------- ------- ------- -------
Net Income (Loss)....................... $ (21.0) $ (7.5) $ (93.2) $ 8.5 $ 22.0 $ 1.4 $ 3.5
======= ======= ======= ======= ======= ======= =======
Net Income (Loss) Per Ordinary Share
From Continuing Operations............ $ (0.87) $ (0.20) $ (2.09) $ 0.30 $ 0.56 $ 0.04 $ 0.09
======= ======= ======= ======= ======= ======= =======
After Discontinued Operations......... $ (1.00) $ (0.29) $ (2.40) $ 0.22 $ 0.56 $ 0.04 $ 0.09
======= ======= ======= ======= ======= ======= =======
Weighted Average Number of Ordinary
Shares Outstanding.................... 24.745 31.832 38.828 39.161 39.664 39.359 39.856
======= ======= ======= ======= ======= ======= =======
OTHER DATA:
EBITDA (1).............................. $ 29.5 $ 43.2 $ (9.0) $ 49.1 $ 56.6 $ 10.3 $ 12.4
Capital Expenditures.................... 9.7 11.1 24.5 11.8 8.5 0.6 3.2
Ratio of Total Debt to EBITDA (2)....... 7.32x 5.62x -- 4.15x 3.28x not meaningful
Ratio of EBITDA to Interest (3)......... 1.92x 2.14x -- 2.53x 3.11x 2.19x 2.76x
Ratio of Earnings to Fixed Charges
(4)................................... (.07)x 0.79x (1.50)x 1.49x 2.06x 1.26x 1.68x
</TABLE>
23
<PAGE> 25
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------------------------------------
AS AT DECEMBER 31, AS AT MARCH 31,
----------------------------------------------- ------------------
1993 1994 1995 1996 1997 1997 1998
------- ------- ------- ------- ------- ------- -------
UNAUDITED
------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital............. $ 167.5 $ 153.0 $ 60.5 $ 103.8 $ 136.6 $ 112.9 $ 117.1
Total Assets................ 490.2 486.1 345.8 345.0 352.0 368.6 378.8
Total Debt.................. 216.0 242.8 182.7 204.0 185.5 224.3 203.2
Shareholders' Equity........ 119.5 110.3 18.5 28.8 51.5 31.1 55.4
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
------------------------------
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
1997(5) 1998(6)
------------ ---------------
UNAUDITED
------------------------------
<S> <C> <C>
STATEMENT OF INCOME DATA:
Operating Revenue......................................... $ 655.7 $ 132.8
Cost of Sales............................................. 520.7 104.3
------- --------------
Gross Margin.............................................. 135.0 28.5
Selling, General and Administrative Expenses.............. 90.3 20.2
------- --------------
Operating Profit.......................................... 44.7 8.3
------- --------------
Financial Expenses
Interest expense....................................... 18.3 4.2
Amortization of debt issuance costs.................... 1.0 .2
Other.................................................. (0.1) --
------- --------------
19.2 4.4
------- --------------
Income Before Income Taxes................................ 25.5 3.9
Income Taxes.............................................. (0.4) --
------- --------------
Net Income................................................ $ 25.1 $ 3.9
======= ==============
Net Income Per Ordinary Share............................. $ 0.63 $ 0.10
======= ==============
Weighted Average Number of Ordinary Shares Outstanding.... 39.664 39.856
======= ==============
OTHER DATA:
EBITDA(1)................................................. $ 60.2 $ 12.4
Capital Expenditures...................................... 9.6 3.2
Ratio of Total Debt to EBITDA(2).......................... 3.25x not meaningful
Ratio of EBITDA to Interest(3)............................ 3.29x 2.95x
Ratio of Earnings to Fixed Charges(4)..................... 2.24x 1.83x
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
------------
AS AT
MARCH 31,
1998(7)
------------
UNAUDITED
------------
<S> <C>
BALANCE SHEET DATA:
Working Capital........................................... $ 118.8
Total Assets.............................................. 384.1
Total Debt................................................ 213.2
Shareholders' Equity...................................... 50.7
</TABLE>
- ---------------
(1) EBITDA, as defined by the Company, represents income (loss) before income
taxes, plus interest expense, write-off of debt issuance costs, asset
writedowns, restructuring costs and other non-recurring charges, and
depreciation and amortization. EBITDA is a widely accepted financial
indicator of a company's ability to service debt. However, EBITDA should not
be construed as an alternative to operating profit, net income or cash flows
from operating activities (as determined in accordance with generally
accepted accounting principles) and should not be construed as an indication
of the Company's operating performance or as a measure of liquidity.
24
<PAGE> 26
(2) As defined by the Company, represents the total of long-term debt (including
the current portion) and short-term borrowings divided by EBITDA.
(3) As defined by the Company, represents EBITDA divided by interest expense.
(4) For purposes of computing the ratio of earnings to fixed charges, "earnings"
consists of income (loss) before income taxes, plus fixed charges. "Fixed
charges" consist of interest expense, amortization of debt issuance costs
and one-third of rental expense (the portion deemed representative of the
interest factor).
(5) To give pro forma effect to the statement of income data for the year ended
December 31, 1997 as though the acquisition of United Electric, the offering
of the Old Notes and application of the net proceeds had occurred as of
January 1, 1997.
(6) To give pro forma effect to the statement of income data for the three
months ended March 31, 1998 as though the offering of the Old Notes and the
application of the net proceeds had occurred on January 1, 1998.
(7) To give pro forma effect to the balance sheet data as though the offering of
the Old Notes and application of the net proceeds thereof had occurred as of
March 31, 1998.
25
<PAGE> 27
BUSINESS
The Company is one of the leading designers, manufacturers and marketers of
central air conditioning and heating products for residential and light
commercial use in the United States and Canada. The Company also has recently
expanded its presence in other international markets, primarily Latin America
and Europe. Its principal brand names are widely recognized in the industry and
include Heil, Tempstar, Comfortmaker, MagicAire and the recently added ICP
Commercial. Management believes that the Company and its products are known for
their quality, reliability and customer service. In 1997, the Company had, on a
pro forma basis, operating revenue of $655.7 million and EBITDA of $60.2
million. For the three months ended March 31, 1998, the Company had operating
revenue of $132.8 million and EBITDA of $12.4 million.
The Company's products are sold primarily through a network of
approximately 400 independent HVAC distribution companies with over 1,800
locations in the United States, Canada and other international markets. These
distributors are the Company's link to dealers and, in turn, to consumers. In
1997, sales of cooling products accounted for approximately 61% of operating
revenue, sales of heating products accounted for approximately 26% of operating
revenue and sales of service parts and other income accounted for approximately
13% of operating revenue. Management believes that in 1997 the Company derived
approximately 70% of its operating revenue from the replacement, repair and
renovation market and approximately 30% from the new construction market. In
1997, the Company derived approximately 84% of its operating revenue from sales
in the United States, approximately 12% of its operating revenue from sales in
Canada, and approximately 4% of its operating revenue from sales in other
international markets.
In late 1994, the Company's new management initiated a restructuring plan
to significantly improve the Company's manufacturing operations and marketing
strategy, allowing the Company to return to profitability in 1996 after
consecutive years of losses since 1991. Implementing this plan in 1995 caused a
significant dislocation in the Company's operations and severely depressed
financial performance for that year. The restructuring plan was designed to (i)
reduce manufacturing and overhead costs, (ii) reduce lead times for processing
customer orders to better control inventory levels and improve customer
relations, (iii) improve product quality and customer service and (iv)
rationalize and expand the Company's distribution network. To achieve these
goals management:
- consolidated its production at its Lewisburg, Tennessee manufacturing
facility;
- wrote off discontinued businesses and nonperforming assets;
- rationalized its management structure by removing a layer of management;
- decreased distributor credit terms from 90 days to 53 days;
- restructured its manufacturing process to improve efficiency and reduce
work-in-process;
- introduced a second tier, entry-level line of products;
- terminated underperforming distributors and added new distributors; and
- implemented effective monitoring systems to track working capital.
The Company believes that its dramatically improved operational and
financial performance in 1996 and 1997 is a direct result of its restructuring
plan. The Company's efforts to reduce manufacturing costs have improved gross
margin to 20.1% in 1997 from 17.8% in 1994. Manufacturing and other improvements
have allowed the Company to meet 98% of orders for residential product in 14
days in 1997 versus the Company's standard order lead time of 90 days in 1994,
increase the Company's operating revenue per employee by 44% to approximately
$249,000 in 1997 from approximately $173,000 in 1994 (in a stable price
environment for its products), and decrease average raw and in process inventory
63% to approximately $6.5 million during 1997 from approximately $17.7 million
during 1994. As a result, the Company has increased EBITDA to $56.6 million in
1997 from $43.2 million in 1994.
INDUSTRY OVERVIEW
Management estimates that the residential and commercial HVAC industry
(measured by sales by manufacturers of product in the United States, excluding
applied systems and chillers) totals approximately $7.0 billion per year. The
production and sale of HVAC equipment by manufacturers is highly competitive.
According to industry sources, in 1997 seven manufacturers (including the
Company) represented approxi-
26
<PAGE> 28
mately 95% of the market, with individual market shares ranging from
approximately 10% to 22% and the Company having approximately 11% of the
residential and light commercial HVAC market.
Industry sources estimate that between 1993 and 1997, the HVAC market in
the United States and Canada has grown at an average compounded annual rate of
7% per year. Management believes that the HVAC market in the United States and
Canada will grow at an annual rate of approximately 3-4% per year through the
year 2000. The Company believes current and future domestic growth will be
driven by the need to replace or upgrade older systems installed during the
1970's and early 1980's with more energy efficient and environmentally friendly
units. Industry figures have estimated that on average approximately 65% of
industry sales of residential product are for replacement, renovation and
repair. The Company believes that approximately 70% of the demand for commercial
products in the United States and Canada is replacement and renovation, and that
as much as 30% of the heating and cooling systems in commercial buildings are 12
to 15 years old and in need of replacement. Although the replacement market is
not affected by the level of new construction it is affected by weather
fluctuations, as unseasonably mild weather diminishes customer demand for HVAC
replacement or repairs.
Additionally, management believes the continued penetration of central air
conditioning in new residential construction will contribute to present and
expected future growth in the sale of residential product. According to industry
estimates, from 1971 to 1994 the percentage of new homes completed with central
air conditioning rose from approximately 36% to 79%. Many new homes also are now
installing multiple units.
The Company believes the United States and Canadian markets will continue
to experience moderate growth, but that the industry will experience the
greatest rate of growth in other international markets. Management anticipates
that climatic and economic conditions in Latin America will lead to a higher
rate of growth in that region, and therefore is concentrating on expanding in
that region.
STRATEGY
In addition to continuing the Company's implementation of its 1995
initiatives, the Company is committed to (i) growing its operating revenue in
excess of industry growth rates, (ii) improving profitability and (iii) reducing
working capital requirements. The Company seeks to achieve these goals through
the implementation of the following strategies:
Increase residential market share in the United States and Canada. The
Company intends to increase its residential market share by (i) further
strengthening its relationship with its distributors by reducing customer order
lead times, and providing superior training and marketing support, (ii)
expanding the distribution network in low market share geographic areas and
rationalizing the existing distribution network, (iii) broadening its offering
of aftermarket parts and other HVAC related supplies to provide distributors
with the benefits of one-stop shopping, and (iv) developing strategic
relationships with national accounts, including builders, distributors,
contractors and private label resellers.
The Company believes it can increase its core residential sales in the
United States and Canada by strengthening its current substantial distributor
base by requiring annual sales quota commitments, participation in the Company's
marketing and promotional programs, staff training and mutually beneficial
business practices. The Company offers extensive training courses at its
national training center in LaVergne, Tennessee and other selected locations.
The courses are designed to help improve business and technical skills and
include small business management, dealer sales, distributor sales, residential
application and design, introduction to heating and air conditioning, heat pump
service and troubleshooting, gas furnace installation and service fundamentals
and troubleshooting. The Company helps distributors to recruit technical staff
by training 5,000 installers annually, including 500 a year at the training
center in LaVergne.
The Company also intends to further reduce the lead time required for
customer orders (the time from receipt of an order to the time the order is
shipped). Further reductions in lead time will reduce inventory requirements for
the Company's distributors and make the Company a more attractive supplier of
heating and cooling products. The Company also believes that shortened lead
times will enable it and its customers to react
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to market trends and fluctuations in weather faster and with less impact than
many of its competitors. The Company currently is able to meet 98% of orders for
residential product in 14 days or less.
The Company intends to seek additional distributors in markets where sales
are below market share targets. In addition the Company continually evaluates
existing distributors and its position with existing distributors (lead or
secondary product line) and replaces under-performing distributors with new
distributors. Since April 1996 to the present, the Company terminated 29
underperforming distributors, and added 60 new distributors.
In 1997, the Company organized its aftermarket parts business as a separate
business unit and charged it with the responsibility of aggressively pursuing
additional sales through the Company's independent distribution network. With
27,000 stockkeeping units, the Company provides distributors the benefit of
one-stop shopping for compressors, coils, motors, fans, valves, fasteners and
other repair items for HVAC equipment. The Company has provided each distributor
a communications package on CD-ROM to facilitate on-line ordering, with a goal
of shipping parts within 24 hours of receipt of the order. The availability of
this purchasing program appeals to many small and medium size distributors which
may not be able to purchase directly from many manufacturers and are seeking the
convenience of purchasing parts and supplies from one source.
The Company also intends to increase its core residential sales by building
relationships with national accounts, such as dealer buying groups, distributor
consolidators and major home builders. The Company currently has agreements to
supply certain products under its brand names or private labels to Pameco,
Watsco, American Residential Services and Sears. In addition, the Company has
purchase incentive programs established for over 20 national or regional home
builders and for over 80 small home builders. These purchase incentive programs
provide significant entry into the new construction market. Sales to
non-distributor national accounts are primarily made through independent
distributors.
Expand its commercial market product offerings and gain market share. In
1997, the Company formed a business unit devoted solely to designing,
manufacturing and marketing commercial air conditioning and heating products of
up to 20 tons. This business unit intends to increase the Company's commercial
product sales by (i) initiating a two-tier product strategy to provide
competitive entry level commercial products, (ii) establishing ICP Commercial
distribution networks for national distribution of the recently introduced ICP
Commercial brand product, (iii) strengthening the existing distribution network
of the Company's other commercial brands, (iv) initiating the use of independent
manufacturers' representatives to solicit sales of ICP Commercial brand product
for installation in commercial buildings, (v) expanding product offerings for
commercial applications and (vi) expanding commercial products to include those
with capacity of up to 40 tons.
In 1998, the Company introduced its ICP Commercial brand, which will be
offered through select distributors who meet business practice expectations,
sales targets and marketing and merchandising standards. The Company is
supporting the ICP Commercial distributors by engaging independent manufacturers
representatives to encourage engineers, designers and architects to specify ICP
Commercial brand product for installation in commercial buildings. The Company's
other commercial brand products will continue to be marketed throughout its
existing distribution network.
Pursue international opportunities. The Company intends to continue
expansion of its operations outside the United States and Canada. In Latin
America and Europe, the Company initially establishes HVAC parts distribution
businesses, and introduces HVAC equipment after the parts business has
established cash flow and customer traffic. The Company believes this strategy
of overseas expansion creates the opportunity to generate early cash flow and a
market presence without risking a substantial amount of capital.
The Company intends to continue expansion of its operations outside the
United States and Canada. In 1997, the Company opened two distribution
warehouses in Miami to service Latin American markets, two distribution
warehouses in Mexico and a parts distribution store in Brazil. The Company has
begun to use the network established by these parts outlets to distribute the
Company's heating and cooling units in their respective markets. Two more
Brazilian parts stores are scheduled to be opened in Rio de Janeiro and Porto
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Alegre in 1998. Late in 1997, the Company also acquired a distribution company
in Spain and currently is pursuing other opportunities for expansion in Europe.
Augment internally generated growth by acquiring businesses with
complementary new products, technology and manufacturing resources. The Company
intends to consider acquisitions that support its growth strategy and leverage
and expand its distribution network, purchasing power and manufacturing
capabilities. The Company expects its acquisitions will be both domestic and
international. Examples of this strategy are the Company's recently completed
acquisition of United Electric and the acquisition of substantially all of the
assets and the assumption of certain liabilities of Watsco Components, Inc. and
P.E./Del Mar, Inc. (collectively "Watsco Components").
United Electric, which is located in Wichita Falls, Texas is engaged
principally in the manufacture of air conditioning components for commercial
HVAC systems. With 1997 sales of approximately $25 million, United Electric is a
profitable company that manufactures components for commercial HVAC systems.
United Electric will continue to operate as an independent company leveraging
the Company's extensive independent distribution network.
On May 31, 1998, a wholly owned subsidiary of the Company acquired Watsco
Components for 1,488,162 shares of stock of the Parent Guarantor (valued as of
the closing date at $16.5 million). Watsco Components, which is located in
Miami, Florida, is principally engaged in the manufacture of component parts for
the HVAC industry. Watsco Components had 1997 sales of approximately $23
million.
Continue to reduce manufacturing costs and standardize components. The
Company intends to increase profitability by continuing efforts to reduce costs
through product design improvements and increased manufacturing efficiencies.
Management believes that its positive results of operations for 1996 and 1997
resulted in large part from structural cost reductions achieved between 1995 and
1997 and that further reductions will be an integral part of its continued
profitability.
PRODUCTS
The Company designs, manufactures and markets heating and cooling systems
for single family homes, mobile homes and multi-family apartment buildings, as
well as light commercial properties such as schools, restaurants, small business
offices, retail stores and other industrial and commercial buildings.
Air Conditioners. The Company's air conditioners consist of split system
and packaged air conditioners, split system and packaged heat pumps, and
combination gas/electric units. The Company's residential air conditioners range
in capacity from one to five tons, while its commercial packaged and split
systems range in capacity from three to 20 tons. The Company's longer term goal
is to manufacture and market a commercial system with a capacity of up to 40
tons.
Split System and Packaged Air Conditioners. A split system air conditioner
consists of an outdoor unit, containing a compressor, heat exchanger, air-flow
system and associated controls, connected to a heat exchanger/indoor blower
system. A packaged air conditioner consists of a self-contained cooling system
in a single weatherized cabinet.
Split System and Packaged Heat Pumps. These systems are used for heating
as well as cooling systems. A split system heat pump is similar to a split
system air conditioner, but also includes a refrigerant reversing valve, special
controls and auxiliary heat (usually electric). A packaged heat pump is similar
to a packaged air conditioner and includes a reversing valve, special controls
and auxiliary heat.
Combination Gas/Electric Units. A combination gas/electric unit is a
self-contained packaged air conditioner with a gas furnace heat exchanger and
special controls in a single weatherized cabinet.
Gas, Oil and Electric Furnaces. The Company's residential furnaces range
in capacity from 50,000 to 150,000 British Thermal Units per hour ("BTU/hr"),
while its light commercial heating line features furnaces ranging in capacity up
to 290,000 BTU/hr currently and up to 355,000 BTU/hr by year end.
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Parts and Accessories Business. The Company also conducts an active parts
business under the "FAST" (Factory Authorized Service Technology) trademark in
the United States and Canada. The parts business has shifted from a primary
emphasis on serving warranty claims to being a one-stop shopping counter that a
distributor, dealer or contractor might need to service heating and cooling
systems.
Brand Names. The Company offers its various products under several brand
names -- Heil, Tempstar, Arcoaire, Comfortmaker, Airquest, KeepRite, Lincoln and
the recently added ICP Commercial. United Electric sells its products under the
MagicAire brand. The Company believes that its products are widely recognized
for their quality, customer service, reliability and price competitiveness.
SALES AND DISTRIBUTION
The Company's products are sold primarily through a network of
approximately 400 independent HVAC distribution companies with over 1,800
locations in the United States, Canada and other international markets. These
distribution companies are the Company's primary link to dealers and, in turn,
to consumers. Distributors sell the Company's products to installers in the
replacement and renovation businesses as well as building contractors in the new
housing and light commercial construction sectors. Approximately 70% of the
Company's products are used to replace existing systems, with the balance
installed in new construction projects. The Company also is focused on building
relationships with national accounts, such as dealer buying groups, distributor
consolidators and major home builders.
The Company offers distributors a variety of advantages designed to promote
maximum profitability to the Company and its distributors. A network of regional
sales managers, field sales and customer service personnel is accessible to
distributors to coordinate promotional activities and to quickly resolve any
product problems. To improve communications with distributors, the Company has a
program designed to give them computer access to the Company's inventory levels.
Such improved communications will facilitate the Company's demand flow
production system, permitting the Company to tailor its manufacturing schedule
to the specific product lines in the greatest demand. Allowing distributors
access to available inventory levels has the additional benefit of permitting
distributors to reduce their inventory levels while being assured of an adequate
and timely supply of products. The on-line program also permits distributors to
process warranty claims through a computer network linked with the Company.
The Company monitors monthly shipments and inventory levels from a
representative sampling of distributors. This sampling allows the Company to
gauge future sales demand and improves the communication between the different
functions that are involved in forecasting and scheduling production.
In Canada, the Company markets its products through four primary channels.
KeepRite, Arcoaire and Comfortmaker brand residential central heating and air
conditioning products are sold through independent air conditioning and
refrigeration wholesalers and HVAC distributors in all provinces in Canada.
KeepRite brand commercial products are sold through independent distributors and
major commercial contractors across Canada. Heil brand residential products are
sold directly to distributors and installing dealers by distribution centers
which are wholly owned by the Company in Ontario, Quebec and the western
provinces. Tempstar brand products are sold through plumbing and heating
wholesaler outlets owned by Westburne Industrial Enterprises on an exclusive
basis in all provinces in Canada. Lincoln brand oil and electric furnaces and
oil storage tanks are sold by the Company's Lincoln Barriere division in Quebec.
In 1997, the Company generated approximately $26.7 million in operating
revenue from customers outside the United States and Canada (1996 -- $8.2
million; 1995 -- $6.4 million). The Company's principal markets for these
international sales are in Latin America and Europe. In 1997, the Company opened
two distribution warehouses in Miami to service Latin American markets, two
distribution warehouses in Mexico and a parts distribution store in Brazil. The
Company has begun to use the network established by these parts outlets to
distribute the Company's heating and cooling units in their respective markets.
Two more Brazilian parts stores are scheduled to be opened in Rio de Janeiro and
Porto Alegre in 1998. Late in 1997, the Company also acquired a distribution
company in Spain and currently is pursuing other opportunities for expansion in
Europe.
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The Company also offers extensive training courses at its national training
center in LaVergne and other selected locations. The courses are designed to
help improve business and technical skills and include small business
management, dealer sales, distributor sales, residential application and design,
introduction to heating and air conditioning, heat pump service and
troubleshooting, gas furnace installation and service fundamentals and
troubleshooting.
The Company conducts advertising to enhance consumer awareness and to
position its principal brands as premier residential heating and cooling
products within their respective target markets. The advertising program is
complemented with trade advertising that focuses on dealers who install the
Company's products and who influence the sale of heating and cooling products at
the consumer level.
The Company offers a cooperative program to its distributors which
subsidizes local advertising, training and other promotional and developmental
costs. In addition, the Company enables its distributors to offer various
incentives to their dealer customers.
MANUFACTURING
Substantially all of the Company's residential cooling and heating products
are manufactured at a company-owned, 1,000,000 square foot facility located in
Lewisburg, TN. The Company focuses on lean production from its plant, supported
by the latest cost-cutting technology and a "just-in-time" production system.
This system is designed to minimize raw material and in-process inventories
through close coordination of delivery of raw materials and components from
outside suppliers at the manufacturing facility. The production process
facilitates the manufacturing of standardized products. By manufacturing
standardized products and using more adaptable equipment, the Company is able to
reduce the time necessary to set up the production line to manufacture a
particular model and to change the production line to manufacture other similar
models.
While most of the components used by the Company are purchased from outside
suppliers, the Company manufactures selected components where it is
cost-efficient. For example, the Company produces heat transfer surfaces, or
coils, for its air conditioners as well as patented heat exchangers used in its
furnaces. The Company imposes strict quality control standards through a Total
Quality Management Program covering all aspects of the manufacturing process. A
majority of the units produced are tested and key statistics from selected units
are recorded prior to shipment. In addition, several units are randomly selected
each day for a quality audit of construction and performance. In 1996, the
Company adopted the ISO 9000 standards which set quality guidelines for
manufacturers and requires an independent party to audit and document the
compliance guidelines twice a year. The Company's Lewisburg and LaVergne
facilities received the Certificate of Registration to the ISO 9001:1994 Quality
Standard on July 1, 1997.
RAW MATERIALS AND PURCHASED COMPONENTS
The Company purchases all raw materials and most components used in the
manufacturing process. Purchased materials and components include copper,
aluminum, steel, wire, paint, compressors, motors, capacitors, fasteners,
controls, valves and insulating materials. When practical, the Company
establishes multiple sources for the purchase of raw materials and components in
an attempt to ensure competitive pricing, supply flexibility and protection from
supply disruption. The Company works closely with major suppliers to ensure that
all major components meet quality and performance standards. The Company deals
with approximately 250 suppliers, of whom 65 firms represent 95% of its
purchasing expenditures. Typically, outside suppliers provide warranties on all
major purchased components. The Company believes that it has adequate sources of
raw materials and components for its manufacturing requirements.
The Company purchases many of its components from suppliers who are
certified by the Company. Certified suppliers are judged by the Company to have
quality components that can be readily introduced into the production lines
without being inspected upon receipt. The Company believes that the process of
certification identifies a small number of quality suppliers, which allows the
Company to minimize raw material inventories.
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RESEARCH AND DEVELOPMENT
The Company maintains an engineering staff of approximately 60 people who
are involved in laboratory testing and improvement of existing product lines and
in the development and testing of new products for the United States, Canadian
and international markets. These activities are conducted in the Company's
laboratory and manufacturing facilities located in LaVergne and Lewisburg, TN,
respectively. The Company is in the process of relocating its remaining
laboratory functions at its LaVergne facility to the Lewisburg plant. The
primary objective of the engineering department is to conduct research and
development to keep the Company's products competitive by improving product
cost, safety, reliability and performance and ensuring compliance with
environmental standards. The Company's goal is to respond to market needs and
the technological demands of government regulation. The engineering staff also
strives to reduce manufacturing costs through cost control programs,
standardization, size and weight reduction, the application of new technology,
and improvements in production techniques.
Close contact is maintained with marketing personnel to ensure that the
final product will meet customer needs, and with manufacturing personnel to
ensure that the product design is compatible with the Company's flexible
manufacturing process. The Company's engineers also work closely with major
component suppliers to improve manufacturing efficiencies and keep abreast of
new technological advances.
During the past three fiscal years, research and development costs
aggregated approximately $8.7 million.
PATENTS AND TRADEMARKS
The Company holds numerous patents relating to the design and use of its
products that it considers important. It is the Company's policy to obtain
patent protection for its new and developmental products and to enforce such
patent rights as appropriate. The Company owns several trademarks that it
considers important in the marketing of its products, including but not limited
to Heil, Tempstar, KeepRite, Arcoaire, Comfortmaker, Lincoln, Airquest,
MagicAire and FAST. The Company has filed an application with the U.S. Patent
and Trademark Office to register the trademark ICP Commercial. The Company
believes that its rights in these trademarks are adequately protected.
MAJOR CUSTOMERS
During 1997, one customer accounted for approximately 11% of the Company's
operating revenue, and the Company's 10 largest customers accounted for
approximately 36% of operating revenue. The loss of any one of the Company's
current customers would not have a material adverse effect on the Company's
business, although the loss of a major distributor in 1995 had a materially
adverse effect on short term operating revenue.
COMPETITION
According to industry sources, in 1997 seven manufacturers (including the
Company) represented approximately 95% of the market, with individual market
shares ranging from approximately 10% to 22% and the Company having
approximately 11% of the residential and light commercial HVAC market. The
Company's six largest competitors in this market are Carrier Corporation,
Goodman Manufacturing Corporation, Rheem Manufacturing, The Trane Company, York
International Corporation and Lennox Industries Inc. Several of the Company's
competitors have greater financial and other resources than the Company. There
can be no assurance that competitive pressures will not materially and adversely
affect the Company's business, financial condition or results of operations.
GOVERNMENT REGULATION
Environmental Regulation and Proceedings. The Company and its operations
are subject to extensive foreign, federal, provincial, municipal, state and
local environmental laws, codes, treaties and regulations, including, among
others, the Clean Air Act, the Clean Water Act, the Comprehensive Environmental,
Response, Compensation and Liability Act, the Resource Conservation and Recovery
Act, the Occupational Health and Safety Act, and the Toxic Substances Control
Act in the United States and the Canadian Environmental Protection Act, the
Fisheries Act (Canada), the Waste Management Act (British Columbia),
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the Ozone-depleting Substances Act (Manitoba), the Environmental Protection Act
(Ontario), and the Environment Quality Act (Quebec) in Canada. The Company
believes that it is in substantial compliance in all material respects with such
existing environmental laws and regulations.
Growing concern over potential ozone depletion has led to increased
regulation of high ozone depletion refrigerants, including the Montreal
Protocol. On November 25, 1992, the Montreal Protocol was amended to phase-out
the production and use of HCFCs, beginning in 1996 and ending in 2030.
In the United States, the 1990 Clean Air Act Amendments implement the
Montreal Protocol by establishing a program for limiting the production and use
of ozone-depleting chemicals. Under the Clean Air Act, HCFC-22 (the only
refrigerant used in the Company's products) is designated as a "Class II
substance"; such substances are currently scheduled to be phased-out under the
Clean Air Act Amendments between 2010 and 2020.
As a result of the recent amendments to the Montreal Protocol, the EPA,
which is authorized under the Clean Air Act to accelerate the statutory
phase-out schedule for any Class II substance, is likely to promulgate
regulations to implement those amendments. Alternatively, the EPA could adopt
proposals made by various groups to phase-out Class II substances, including
HCFC-22, substantially earlier than under the schedule provided by either the
Clean Air Act or the Montreal Protocol. It is unclear which, if any, of these
proposed schedules will be adopted by the EPA.
In Canada, the Ozone-depleting Substances Regulations under the Canadian
Environmental Protection Act regulate the consumption of HCFCs by a system of
allowances and permits. It is anticipated that the Ozone-depleting Substances
Regulations will be amended in 1998 to provide for a gradual phase-out of HCFCs
between 2010 and 2020.
All cooling products manufactured by the Company contain HCFC-22. This
refrigerant is sealed inside the air conditioner and is expected to remain
within the unit throughout the operating life of the system without leakage to
the atmosphere. The Company believes that its operations comply with all current
legislation and regulations relating to refrigerants and that the Montreal
Protocol, the Clean Air Act Amendments and their implementing regulations as
currently in effect or any anticipated accelerated phase-out will not have a
material adverse impact on its operations over the next ten years. However, the
Company believes that the implementation of more severe restrictions on the use
of Class II refrigerants could have such an impact.
Prior to the phase-out of HCFC-22, the Company must identify substitute
refrigerants for use in cooling products. The Company has been working closely
with refrigerant manufacturers and others in the industry to develop new
refrigerants that are compatible with its existing cooling product lines. Such
new refrigerants may require the Company to modify the design of its cooling
products. The Company is unable to predict the precise extent of necessary
modifications or the costs associated with the use of alternative refrigerants,
but does not expect that either will have a material adverse effect on the
industry unless the phase-out is accelerated more rapidly than is currently
anticipated under the Clean Air Act, the Canadian Environmental Protection Act
or the Montreal Protocol.
The Company and its operations are subject to extensive foreign, federal,
provincial, state, municipal and local laws, codes, treaties and regulations
that limit the discharge of pollutants into the environment and establish
requirements for the treatment, storage, disposal and remediation of solid and
hazardous wastes and hazardous materials. Certain federal, provincial and state
environmental laws and regulations impose liability on responsible parties,
including past and present owners and operators of sites, to clean up, or
contribute to the cost of cleaning up sites at which hazardous wastes or
materials were disposed or released. The Company is involved in remedial action
at its Lewisburg manufacturing facility pursuant to these laws, but, based on
information currently available, does not anticipate that such action will have
a material adverse effect on its financial condition or operations as further
described.
Pursuant to an order issued by the Tennessee Department of Environment and
Conservation, the Company is remediating soil and ground water contamination at
its Lewisburg manufacturing facility caused
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by a sudden and accidental spill of trichloroethylene in 1980 by the previous
owner of the property. At December 31, 1997, the Company had reserved
approximately $3.1 million for the cost of this project.
The Company is also contributing to the cost of addressing several off-site
locations where waste drums were sent by the former owner of the Lewisburg
facility pursuant to a cost-sharing agreement with the previous owner. This
agreement provides for each entity to bear fifty percent of covered costs at
existing sites and for the Company and the previous owner to bear costs of new
sites at a ratio of sixty percent and forty percent, respectively. The estimated
costs to cleanup the existing drum storage sites are included in the $3.1
million reserve for Lewisburg.
In December 1991, the Company and Flying J, Inc. ("Flying J") entered into
a cost-sharing agreement whereby the Company participates with Flying J in the
financing of responses to environmental contamination at various refinery sites
sold by the Company to Flying J in 1980. At the same time, the Company reached a
settlement with several of its insurance carriers whereby the insurers reimburse
the Company for a portion of its expenses at the refineries. Ongoing cleanup
activities at four refinery sites are at different regulatory stages and it is
not possible to definitively estimate the ultimate cost of remediation. At
December 31, 1997 the Company had an accrual of $11.0 million for its estimated
share of future cleanup costs. The Company has an offsetting receivable due from
insurers of $6.8 million included in its consolidated balance sheet. Based on
current information prepared by independent environmental consultants, the
Company's share of the cost of environmental cleanup, discounted at 5.5%, is
currently estimated to be approximately $7.2 million over the next 21 years. At
December 31, 1997, the expected insurance recoveries of $5.5 million are
included in the consolidated balance sheet. The expected insurance recoveries
discounted at 5.5% are currently estimated to be approximately $3.6 million over
the next 21 years.
Based upon its experience to date, the Company believes that the future
cost of compliance with existing environmental laws, and liability for known
environmental claims pursuant to such laws, will not have a material adverse
effect on the Company's business, financial condition or results of operations.
However, no assurance can be given that future events, such as the cost of
complying with new or more stringent environmental laws, as well as any related
damage claims, newly identified sites requiring response action or new, as well
as more vigorous enforcement of existing environmental laws will not be
material. See "Risk Factors -- Environmental Regulation."
Other Governmental Regulations. The Company is subject to regulations in
the United States promulgated under the 1987 National Appliance Energy
Conservation Act, as amended, and various state regulations concerning the
energy efficiency of its products. The Company has developed and continues to
develop products which will comply with these regulations, and does not believe
that such regulations will have a material adverse effect on its business. The
Company is also subject to the energy efficiency requirements contained in the
Energy Policy Act of 1992, which became effective in 1994. All of the Company's
products comply with these standards.
BACKLOG ORDERS
The backlog of orders for the heating and cooling business was
approximately $24.2 million at December 31, 1997 (1996 -- approximately $63.4
million, 1995 -- approximately $71.6 million). The decline in backlog of orders
reflects the Company's shift away from advanced orders and pre-season sales
programs due to significantly shorter lead times on customer orders over the
past three years.
EXPORT SALES
Export sales, being sales from the Company's North American operations to
foreign customers amounted to approximately $26.7 million in 1997
(1996 -- approximately $8.2 million; 1995 -- approximately $6.4 million).
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EMPLOYEES
The Company currently employs approximately 3,000 employees. The Company is
a party to five collective bargaining agreements with four labor unions
representing certain of the hourly employees of the Company (approximately 1,900
in the aggregate) which are scheduled to expire between September 1998 and May
2001. The renegotiation of these collective agreements will occur between the
years 1998 and 2001. The Company's inability to negotiate acceptable contracts
with one or more of these unions could result in strikes by the affected workers
and increasing operating costs as a result of higher wages or benefits paid to
union members. The Company considers its labor relations to be satisfactory.
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DESCRIPTION OF OTHER INDEBTEDNESS
ICP (USA) has entered into a Loan and Security Agreement dated as of July
23, 1997 (the "U.S. Credit Facility") with NationsBank, N. A., which consists of
a $15 million revolving loan and letter of credit facility, subject to an
availability calculation based on the eligible borrowing base. The eligible
borrowing base consists of certain inventories of ICP (USA). The interest rate
on the U.S. Credit Facility is, at the option of the Company, (a) prime, or (b)
LIBOR plus a margin, where the margin determination is made based upon the ratio
of the ICP (USA)'s funded indebtedness to EBITDA for the preceding fiscal
quarter (ranging from 150 to 200 basis points). At December 31, 1997, the margin
was 1.50% for LIBOR rate loans.
The U.S. Credit Facility contains certain financial covenants regarding the
financial performance of ICP (USA) and certain other covenants which restrict
the incurrence of additional debt, and provides for the suspension of the U.S.
Credit Facility and repayment of all debt in the event of a material adverse
change in the business or a change in control. In connection with the issuance
of the Notes, the U.S. Credit Facility is being amended to subordinate
intercompany loans to ICP (USA) and to permit ICP (USA) to distribute or
otherwise make available funds to the Issuer to pay interest on the Notes as
long as no default or event of default exists or would result from such
payments. Substantially all of ICP (USA)'s inventory is pledged as collateral
for amounts borrowed. The U.S. Credit Facility will terminate on July 23, 1999,
at which time all amounts outstanding under it will mature. At December 31,
1997, ICP (USA) was in compliance with all covenants of the U.S. Credit
Facility. At March 31, 1998, the outstanding balance under the U.S. Credit
Facility was $-0-.
In July 1996, ICP (USA) has entered into a receivables facility (the
"Receivables Facility"), a five year agreement to sell on a revolving basis up
to a $70 million undivided participation ownership interest in its accounts
receivable, with a United States lender. The receivables purchase agreement
requires ICP (USA) to pay fees plus certain administrative costs in connection
with this financing. At December 31, 1997, the marginal cost of borrowings under
the receivable facility was approximately 6.4%. At December 31, 1997, ICP (USA)
was in compliance with all covenants of the Receivables Facility. Substantially
all of ICP (USA)'s accounts receivable are pledged as collateral for amounts
borrowed under the Receivables Facility.
ICP (Canada) has a Cdn. $30 million revolving credit facility (the
"Canadian Revolving Credit Facility"), of which Cdn. $12.6 million was utilized
as of December 31, 1997. This credit facility is a three year facility, which
was established on December 19, 1996. The Canadian Revolving Credit Facility
accrues interest at prime plus 1% per annum or at banker's acceptance rates,
plus a stamping fee of 2%, as selected by ICP (Canada). All of the assets of ICP
(Canada) are pledged as collateral under this facility. This facility contains
restrictive covenants, including those requiring it to maintain a minimum
interest coverage and net worth. It also precludes the payment of dividends. ICP
(Canada) obtained a waiver of a covenant breach for the minimum interest
coverage ratio which existed at December 31, 1997. In connection with the
issuance of the Notes, the Canadian Revolving Credit Facility is being amended
to change the minimum interest coverage ratio and to permit ICP (Canada) to
distribute or otherwise make available to the Parent Guarantor amounts equal to
available cash flow (earnings before interest, taxes, depreciation and
amortization, less interest, capital expenditures and taxes paid) from the prior
year's operations, to the extent available cash flow from ICP (USA) is
insufficient for such purpose and so long as no default or event of default
would result from such payment, (i) to pay interest on the Notes, and (ii) to
make principal payments on the Notes if no amounts are outstanding under the
facility at the time or as a result of the payment.
ICP (USA) also has an unsecured term bank loan (the "Term Loan") in the
amount of $25 million, which matures October 15, 2001. $15 million of this
indebtedness is due in 2000, with the balance due 2001. ICP (USA) has entered
into an interest rate swap agreement that effectively sets the interest rate on
this facility at 5.97% for the remainder of the term of the facility. The loan
is a term loan accruing interest at LIBOR plus 0.25% and has been guaranteed by
a third party. The guarantor holds a subordinated security interest in ICP
(Canada) receivables and inventories as collateral for $15 million of the
indebtedness under the Term Loan. The Parent Guarantor has guaranteed all
amounts advanced by the third party. Additionally, the Parent Guarantor has
pledged the shares of ICP (Canada) in support of the guarantee of the third
party. The pledge agreement contains certain covenants, including the
requirement of ICP (Canada) to maintain a minimum level of receivables and
inventories in excess of its borrowings.
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PURPOSE OF THE EXCHANGE OFFER
The Old Notes were sold by the Issuer on May 13, 1998 (the "Closing Date")
through the Initial Purchasers to "qualified institutional buyers" (as defined
in Rule 144A under the Securities Act). In connection with the sale of the Old
Notes, the Issuer, the Parent Guarantor and the Initial Purchasers entered into
the Registration Rights Agreement pursuant to which the Company and the Parent
Guarantor agreed to cause to be filed with the Commission within 60 days after
the Closing Date, and use their best efforts to cause to become effective on or
prior to 120 days after the Closing Date, a registration statement with respect
to the Exchange Offer (the "Exchange Offer Registration Statement"). However, if
(i) the Issuer is not permitted to file the Exchange Offer Registration
Statement or to consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy or (ii) if the Issuer has not
consummated the Exchange Offer within 150 days of the Closing Date, or (iii) if
any Holder of Old Notes shall notify the Issuer on or before the Expiration Date
(A) that such Holder is prohibited by applicable law or Commission policy from
participating in the Exchange Offer, or (B) that such Holder may not resell the
New Notes to be acquired by it in the Exchange Offer to the public without
delivering a prospectus and that the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
Holder, or (C) that such Holder is a broker-dealer and holds Old Notes acquired
directly from the Issuer or one of its affiliates, then within six months of
such date, the Issuer and the Parent Guarantor shall (A) use their best efforts
to cause to become effective a shelf registration statement (the "Shelf
Registration Statement") with respect to resales of the Old Notes, and (B) keep
the Shelf Registration Statement effective for a period of at least two years
following the date on which the Shelf Registration Statement was initially
declared effective or (if sooner) the date immediately following the date that
all Transfer Restricted Securities (as defined in the Registration Rights
Agreement) covered by the Shelf Registration Statement have been sold pursuant
thereto.
If (a) the Company fails to file any of the registration statements
required by the Registration Rights Agreement on or before the date specified
for such filing, (b) any of such registration statements are not declared
effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), (c) the Issuer fails to
consummate the Exchange Offer within 20 business days of the Effectiveness
Target Date with respect to the Exchange Offer Registration Statement, or (d)
the Shelf Registration Statement or the Exchange Offer Registration Statement is
declared effective but, thereafter, subject to certain exceptions, ceases to be
effective or usable in connection with the Exchange Offer or resales of Transfer
Restricted Notes (as defined in the Registration Rights Agreement), as the case
may be, during the periods specified in the Registration Rights Agreement (each
such event referred to in clauses (a) through (d) above, a "Registration
Default"), then the interest rate on Transfer Restricted Notes will increase
("Additional Interest"), with respect to the first 90-day period immediately
following the occurrence of such Registration Default by 0.50% per annum and
will increase by an additional 0.50% per annum with respect to each subsequent
90-day period until all Registration Defaults have been cured, up to a maximum
amount of 1.50% per annum. Following the cure of all Registration Defaults, the
accrual of Additional Interest will cease and the interest rate will revert to
the original rate.
The Exchange Offer is being made by the Issuer to satisfy the obligations
of the Issuer and the Parent Guarantor pursuant to the Registration Rights
Agreement. A copy of the Registration Rights Agreement has been filed as an
exhibit to the Registration Statement. If and when the Exchange Offer is
consummated, neither the Issuer nor the Parent Guarantor will have any further
obligations to register any of the Old Notes not tendered by the Holders for
exchange, except pursuant to a Shelf Registration Statement filed under the
limited circumstances described above. Thereafter, any Holder of Old Notes who
does not tender its Old Notes in the Exchange Offer and which is not eligible to
use such a Shelf Registration Statement will continue to hold restricted
securities which may not be offered, sold or otherwise transferred, pledged or
hypothecated except pursuant to Rule 144 and Rule 144A under the Securities Act
or pursuant to any other exemption from registration under the Securities Act
relating to the disposition of securities.
Based on interpretations by the staff of the Commission set forth in
several no-action letters issued to third parties, including, but not limited
to, the Exchange Offer No-Action Letters, the Company believes that New Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold
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<PAGE> 39
and otherwise transferred by Holders thereof who are not affiliates of the
Issuer (other than a broker-dealer who acquired such Old Notes directly from the
Issuer for resale pursuant to Rule 144A under the Securities Act or any other
available exemption under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act; provided,
however, that the Holder is acquiring New Notes in its ordinary course of
business and has no arrangement or understanding with any person to participate
in any distribution (within the meaning of the Securities Act) of the New Notes.
Persons wishing to exchange Old Notes in the Exchange Offer must represent to
the Issuer that such conditions have been met. Nevertheless, any Holder who may
be deemed an "affiliate" (as defined under Rule 405 of the Securities Act) of
the Issuer or who tenders in the Exchange Offer with the intention to
participate, or for the purpose of participating, in a distribution of the New
Notes cannot rely on the interpretation by the staff of the Commission set forth
in such no-action letters, including, but not limited to, the Exchange Offer
No-Action Letters, and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction. In
addition, any such resale transaction should be covered by an effective
registration statement containing the selling security holders information
required by Item 507 of Regulation S-K of the Securities Act. Each broker-dealer
that receives New Notes for its own account pursuant to the Exchange Offer in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities (other than
acquisitions directly from the Issuer) must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received as aforesaid. The Issuer and the Parent
Guarantor have agreed that for a period of 180 days after the Exchange Offer is
consummated, it will, upon reasonable request, make this Prospectus available
promptly to such broker-dealers for use in connection with any such resale. See
"Plan of Distribution."
Except as set forth above, this Prospectus may not be used for an offer to
resell, or for a resale or other transfer of New Notes.
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<PAGE> 40
TERMS OF THE EXCHANGE OFFER
GENERAL
Upon the terms and subject to the conditions of the Exchange Offer set
forth in this Prospectus and in the Letter of Transmittal, the Issuer will
accept any and all Old Notes validly tendered and not withdrawn prior to 5:00
p.m., New York City time, on the Expiration Date. The Issuer will issue $1,000
principal amount of New Notes in exchange for each $1,000 principal amount of
outstanding Old Notes accepted in the Exchange Offer. Holders may tender some or
all of their Old Notes pursuant to the Exchange Offer. Old Notes may be
tendered, however, only in integral multiples of $1,000. As of , 1998,
there was $150 million aggregate principal amount of the Old Notes outstanding.
This Prospectus, together with the Letter of Transmittal, is being sent to all
registered Holders of Old Notes as of , 1998.
In connection with the issuance of the Old Notes, the Issuer arranged for
the Old Notes to be issued and transferable in book-entry form through the
facilities of DTC, acting as depository. The New Notes exchanged for the Old
Notes will initially be issued and transferable in book-entry form through DTC.
See "Book-Entry; Delivery and Form."
The Issuer shall be deemed to have accepted validly tendered Old Notes
when, as and if the Issuer has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering Holders
of Old Notes for the purpose of receiving the New Notes from the Issuer.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering Holder thereof as promptly as practicable
after the Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Issuer will pay the expenses, other than
certain applicable taxes, of the Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The Issuer has the right to extend the Exchange Offer, but only to the
extent necessary to comply with applicable laws or if any action or proceeding
is instituted or threatened in any court or by or before any governmental agency
with respect to the Exchange Offer which, in the reasonable judgment of the
Issuer, might impair the ability of the Issuer to proceed with the Exchange
Offer. In order to extend the Expiration Date, the Issuer will notify the
Exchange Agent and the record Holders of Old Notes of any extension by oral or
written notice, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
The Issuer reserves the right to delay accepting any Old Notes, to extend
the Exchange Offer, to amend the Exchange Offer or to terminate the Exchange
Offer and not accept Old Notes not previously accepted if the applicable
conditions set forth herein under "Conditions" shall have occurred and shall not
have been waived by the Issuer by giving oral or written notice of such delay,
extension, amendment or termination to the Exchange Agent. Any such delay in
acceptance, extension, amendment or termination will be followed as promptly as
practicable by oral or written notice thereof. If the Exchange Offer is amended
in a manner determined by the Issuer to constitute a material change, the Issuer
will promptly disclose such amendment in a manner reasonably calculated to
inform the Holders of such amendment and the Issuer will extend the Exchange
Offer as necessary to provide to such Holders a period of five to ten business
days after such amendment, depending upon the significance of the amendment and
the manner of disclosure to Holders of the Old Notes, if the Exchange Offer
would otherwise expire during such five to ten business day period.
Without limiting the manner in which the Issuer may choose to make public
announcement of any extension, amendment or termination of the Exchange Offer,
the Issuer shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
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<PAGE> 41
ACCRUED AMOUNTS OF THE NEW NOTES
The New Notes will bear interest at a rate equal to 8 5/8% per annum from
the last date on which interest was paid on the Old Notes surrendered in
exchange therefor or, if no interest has been paid, from the date of original
issue of such Old Notes. Interest on the New Notes is payable semi-annually on
May 15 and November 15 of each year, commencing on November 15, 1998.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a Holder of Old Notes must complete, sign
and date the Letter of Transmittal, or a facsimile thereof, have the signatures
thereon guaranteed if required by the instructions to the Letter of Transmittal,
and mail or otherwise deliver such Letter of Transmittal or such facsimile,
together with the Old Notes and any other required documents, so that they are
received by the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date.
Any financial institution that is a participant in DTC (the "Book-Entry
Transfer Facility") may make book-entry delivery of the Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account in accordance with the Book-Entry Transfer Facility procedure
for such transfer. Although delivery of Old Notes may be effected through
book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer
Facility, the Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, must, in any case, be
transmitted to and received or confirmed by the Exchange Agent at its address
set forth below under the caption "-- Exchange Agent" prior to 5:00 p.m., New
York City time, on the Expiration Date. DELIVERY OF DOCUMENTS TO THE COMPANY
DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The tender by a Holder of Old Notes will constitute an agreement between
such Holder and the Issuer in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal. Only a Holder of
Old Notes may tender such Old Notes in the Exchange Offer. The term "Holder"
with respect to the Exchange Offer means any person in whose name Old Notes are
registered on the books of the Issuer or any other person who has obtained a
properly completed bond power from the registered Holder. Delivery of all
documents must be made to the Exchange Agent at its address set forth below.
Holders also may request their respective brokers, dealers, commercial banks,
trust companies or nominees to effect the above transactions for such Holders.
The method of delivery of tendered Old Notes, the Letter of Transmittal and
all other required documents to the Exchange Agent is at the election and risk
of the Holder. Instead of delivery by mail, it is recommended that the Holder
use an overnight or hand delivery service. In all cases, sufficient time should
be allowed to assure timely delivery. No Letter of Transmittal or Old Notes
should be sent to the Company.
ANY BENEFICIAL HOLDER WHOSE OLD NOTES ARE REGISTERED IN THE NAME OF ITS
BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE AND WHO WISHES
TO TENDER SHOULD CONTACT SUCH REGISTERED HOLDER PROMPTLY AND INSTRUCT SUCH
REGISTERED HOLDER TO TENDER ON ITS BEHALF. IF SUCH BENEFICIAL HOLDER WISHES TO
TENDER ON ITS OWN BEHALF, SUCH BENEFICIAL HOLDER MUST, PRIOR TO COMPLETING AND
EXECUTING THE LETTER OF TRANSMITTAL AND DELIVERING ITS OLD NOTES, EITHER MAKE
APPROPRIATE ARRANGEMENTS TO REGISTER OWNERSHIP OF THE OLD NOTES IN SUCH HOLDER'S
NAME OR OBTAIN A PROPERLY COMPLETED BOND POWER FROM THE REGISTERED HOLDER. THE
TRANSFER OF RECORD OWNERSHIP MAY TAKE CONSIDERABLE TIME.
Signatures on a Letter of Transmittal (or a facsimile thereof) or a notice
of withdrawal, as the case may be, must be guaranteed by an Eligible Institution
(as defined below) unless the Old Notes tendered pursuant thereto are tendered
(i) by a registered Holder who has not completed the box entitled "Special
Payment Instructions" or "Special Delivery Instructions" on the Letter of
Transmittal or (ii) for the account of an Eligible Institution. In the event
that signatures on a Letter of Transmittal (or a facsimile thereof) or a notice
of withdrawal, as the case may be, are required to be guaranteed, such guarantee
must be by or through a
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member firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States or an institution which
falls within the definition of "Eligible Guarantor Institution" contained in
Rule 17Ad-15 promulgated by the Commission under the Exchange Act (each an
"Eligible Institution").
If the Letter of Transmittal (or facsimile thereof) is signed by a person
other than the registered Holder of the Old Notes tendered thereby, such Old
Notes must be endorsed or accompanied by appropriate bond powers signed as the
name of the registered Holder or Holders appears on the Old Notes, with the
signatures on the endorsement or bond power guaranteed by an Eligible
Institution.
If the Letter of Transmittal (or facsimile thereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Issuer, evidence satisfactory to the Issuer of their
authority to so act must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Old Notes and withdrawal of tendered Old
Notes will be determined by the Issuer in its sole discretion, which
determination will be final and binding on all parties. The Issuer reserves the
absolute right to reject any and all Old Notes not properly tendered or any Old
Notes the Issuer's acceptance of which would, in the opinion of counsel for the
Issuer, be unlawful. The Issuer also reserves the right to waive any defects,
irregularities or conditions of tender as to the Exchange Offer and/or
particular Old Notes. The Issuer's interpretation of the terms and conditions of
the Exchange Offer (including the instructions in the Letter of Transmittal)
will be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be cured within such
time as the Issuer shall determine. None of the Issuer, the Exchange Agent nor
any other person shall be under any duty to give notification of defect or
irregularities with respect to tenders of Old Notes, nor shall any of them incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which any defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering
Holder(s) of Old Notes, unless otherwise provided in the Letter of Transmittal,
as soon as practicable following the Expiration Date.
By tendering, each Holder of Old Notes will represent to the Issuer that,
among other things, the New Notes acquired pursuant to the Exchange Offer are
being acquired in the ordinary course of such Holder's business, that such
Holder has no arrangement or understanding with any person to participate in the
distribution of such New Notes, and that such Holder is not an "affiliate" (as
defined under Rule 405 of the Securities Act) of the Issuer. If the Holder is a
broker-dealer that will receive New Notes for is own account in exchange for Old
Notes that were acquired as a result of market-making activities or other
trading activities, such Holder by tendering will acknowledge that it will
deliver a Prospectus in connection with any resale of such New Notes. See "Plan
of Distribution."
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent, or cannot
complete the procedure for book-entry transfer, prior to 5:00 p.m. on the
Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder of the Old Notes and the
principal amount of Old Notes tendered, stating that the tender is being
made thereby and guaranteeing that, within three New York Stock Exchange
trading days after the date of execution of the Notice of
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Guaranteed Delivery, the Letter of Transmittal (or facsimile thereof)
together with the certificate(s) representing the Old Notes to be tendered
in proper form for transfer (or a confirmation of a book-entry transfer
into the Exchange Agent's account at the Book-Entry Transfer Facility of
Old Notes delivered electronically) and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with
the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Old Notes in proper form for transfer (or a confirmation of a book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer
Facility of Old Notes delivered electronically) and all other documents
required by the Letter of Transmittal are received by the Exchange Agent
within three New York Stock Exchange trading days after the date of
execution of the Notice of Guaranteed Delivery. Upon request to the
Exchange Agent, a Notice of Guaranteed Delivery will be sent to Holders who
wish to tender their Old Notes according to the guaranteed delivery
procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date. To
withdraw a tender of Old Notes in the Exchange Offer, a written or facsimile
transmission notice of withdrawal must be received by the Exchange Agent at its
address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including the principal amount of such
Old Notes), (iii) be signed by the Holder in the same manner as the original
signature on the Letter of Transmittal by which such Old Notes were tendered
(including any required signature guarantees) or be accompanied by documents of
transfer sufficient to have the trustee with respect to the Old Notes register
the transfer of such Old Notes into the name of the person withdrawing the
tender, and (iv) specify the name in which any such Old Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Issuer, which determination shall be final and binding on
all parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no New Notes will be issued with
respect thereto unless the Old Notes so withdrawn are validly re-tendered. Any
Old Notes that have been tendered but which are not accepted for payment will be
returned to the Holder thereof without cost to such Holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be re-tendered by following one of the
procedures discussed above under the caption "-- Procedures for Tendering" at
any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Issuer may
terminate or amend the Exchange Offer as provided herein and will not be
required to accept for exchange, or exchange New Notes for, any Old Notes not
theretofore accepted for exchange, if any of the following conditions exist:
(a) the Exchange Offer, or the making of any exchange by a Holder,
violates applicable law or any applicable policy of the Commission; or
(b) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the reasonable judgment of the Issuer, might impair the ability
of the Issuer to proceed with the Exchange Offer; or
(c) there shall have been adopted or enacted any law, statute, rule or
regulation which, in the reasonable judgment of the Issuer, might
materially impair the ability of the Issuer to proceed with the Exchange
Offer.
If any such conditions exist, the Issuer may (i) refuse to accept any Old
Notes and return all tendered Old Notes to tendering Holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the
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expiration of the Exchange Offer, subject, however, to the rights of Holders to
withdraw such Old Notes (see "-- Withdrawal of Tenders") or (iii) waive certain
of such conditions with respect to the Exchange Offer and accept all properly
tendered Old Notes which have not been withdrawn or revoked. If such waiver
constitutes a material change to the Exchange Offer, the Issuer will promptly
disclose such waiver in a manner reasonably calculated to inform Holders of Old
Notes of such waiver.
The foregoing conditions are for the sole benefit of the Issuer and the
Parent Guarantor and may be asserted by the Issuer regardless of the
circumstances giving rise to any such condition or may be waived by the Issuer
in whole or in part at any time and from time to time in its sole discretion.
The failure by the Issuer at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right and each such right shall be
deemed an ongoing right which may be asserted at any time and from time to time.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance, requests
for additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notices of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
By Facsimile:
(212) 780-0592
Attention: Customer Service
Confirm by Telephone to:
(800) 548-6565
By Mail:
United States Trust Company
of New York
P.O. Box 843 Cooper Station
New York, New York 10276
Attention: Corporate Trust Services
By Hand before 4:30 p.m.:
United States Trust Company of New York
111 Broadway
New York, New York 10006
Attention:
Lower Level
Corporate Trust Window
By Overnight Courier and By Hand after 4:30 p.m. on the expiration date only:
United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by facsimile, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith. The
Company may also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of the Prospectus and related documents to the beneficial owners of the
Old Notes, and in handling or forwarding tenders for exchange.
The cash expenses to be incurred in connection with the Exchange Offer,
together with those expenses incurred in connection with the issuance of the Old
Notes, will be paid by the Company, are estimated in the aggregate not to exceed
$500,000, and include fees and expenses of the Exchange Agent and Trustee under
the Indenture and accounting and legal fees.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the Holder of the Old Notes tendered, or
if tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any
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<PAGE> 45
reason other than the exchange of Old Notes pursuant to the Exchange Offer, then
the amount of any such transfer taxes (whether imposed on the Holder or any
other person(s)) will be payable by the tendering Holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
the Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering Holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
that is, face value less unamortized original issue discount, if any, as
reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized upon the
consummation of the Exchange Offer. The issuance costs incurred in connection
with the Exchange Offer will be capitalized and amortized over the term of the
New Notes.
A copy of the Indenture has been filed as an exhibit to the Registration
Statement.
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<PAGE> 46
DESCRIPTION OF NOTES
GENERAL
The New Notes will be issued under an indenture (the "Indenture") dated as
of May 13, 1998 by and among the Issuer, the Parent Guarantor and United States
Trust Company of New York, as Trustee (the "Trustee"). The following summary of
certain provisions of the Indenture does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the Trust
Indenture Act of 1939, as amended (the "TIA"), and to all of the provisions of
the Indenture, including the definitions of certain terms therein and those
terms made a part of the Indenture by reference to the TIA as in effect on the
date of the Indenture. The definitions of certain capitalized terms used in the
following summary are set forth below under " -- Certain Definitions." For
purposes of this section, references to the "Issuer" include only International
Comfort Products Holdings, Inc. and not its Subsidiaries, and references to the
"Parent Guarantor" include only International Comfort Products Corporation and
not its Subsidiaries.
The Notes will be senior unsecured obligations of the Issuer, ranking pari
passu in right of payment with all unsecured unsubordinated obligations of the
Issuer and senior in right of payment to all subordinated obligations of the
Issuer. The Parent Guarantee will be a senior unsecured obligation of the Parent
Guarantor, ranking pari passu in right of payment with all unsecured
unsubordinated obligations of the Parent Guarantor and senior in right of
payment to all subordinated obligations of the Parent Guarantor. The Notes and
the Parent Guarantee will be effectively subordinated to all existing and future
indebtedness of the Parent Guarantor's Subsidiaries (other than the Issuer).
The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Initially, the Trustee
will act as Paying Agent and Registrar for the Notes. The Notes may be presented
for registration or transfer and exchange at the offices of the Registrar, which
initially will be the Trustee's corporate trust office. The Issuer may change
any Paying Agent and Registrar without notice to holders of the Notes (the
"Holders"). The Issuer will pay principal (and premium, if any) on the Notes at
the Trustee's corporate office in New York, New York. At the Issuer's option,
interest may be paid at the Trustee's corporate trust office or by check mailed
to the registered address of Holders. Any Notes that remain outstanding after
the completion of the Exchange Offer, together with the Exchange Notes issued in
connection with the Exchange Offer, will be treated as a single class of
securities under the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $225.0 million, of
which up to $150.0 million may be issued pursuant to the Exchange Offer, and
will mature on May 15, 2008. Interest on the Notes will accrue at the rate of
8 5/8% per annum and will be payable semiannually in cash on each May 15 and
November 15 commencing on November 15, 1998, to the persons who are registered
Holders at the close of business on the May 1 and November 1 immediately
preceding the applicable interest payment date. Interest on the Notes will
accrue from and including the most recent date to which interest has been paid
or, if no interest has been paid, from and including the date of issuance.
The Notes will not be entitled to the benefit of any mandatory sinking
fund.
REDEMPTION
Optional Redemption. The Notes will be redeemable, at the Issuer's option,
in whole at any time or in part from time to time, on and after May 15, 2003,
upon not less than 30 nor more than 60 days' notice, at the following redemption
prices (expressed as percentages of the principal amount thereof) if redeemed
during the twelve-month period commencing on May 15 of the applicable year set
forth below, plus, in each case, accrued and unpaid interest, if any, thereon to
the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2003........................................................ 104.313%
2004........................................................ 102.875%
2005........................................................ 101.438%
2006 and thereafter......................................... 100.000%
</TABLE>
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<PAGE> 47
Optional Redemption upon Public Equity Offerings. At any time, or from
time to time, on or prior to May 15, 2001, the Issuer may, at its option, use
the net cash proceeds of one or more Public Equity Offerings (as defined below)
contributed or otherwise made available to it from the Parent Guarantor to
redeem up to 35% of the Notes issued at a redemption price equal to 108.625% of
the principal amount thereof plus accrued and unpaid interest, if any, thereon
to the date of redemption; provided that at least 65% of the principal amount of
Notes originally issued remains outstanding immediately after any such
redemption. In order to effect the foregoing redemption with the proceeds of any
Public Equity Offering, the Issuer shall make such redemption not more than 180
days after the consummation of any such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of the Parent Guarantor.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such Notes are listed or, if such Notes are not then listed on
a national securities exchange, on a pro rata basis, by lot or by such method as
the Trustee shall deem fair and appropriate; provided, however, that no Notes of
a principal amount of $1,000 or less shall be redeemed in part; provided,
further, that if a partial redemption is made with the proceeds of a Public
Equity Offering, selection of the Notes or portions thereof for redemption shall
be made by the Trustee only a pro rata basis or on as nearly a pro rata basis as
is practicable (subject to DTC procedures), unless such method is otherwise
prohibited. Notice of redemption shall be mailed by first-class mail at least 30
but not more than 60 days before the redemption date to each Holder of Notes to
be redeemed at its registered address. If any Note is to be redeemed in part
only, the notice of redemption that relates to such Note shall state the portion
of the principal amount thereof to be redeemed. A new Note in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note. On and after the redemption
date, interest will cease to accrue on Notes or portions thereof called for
redemption as long as the Issuer has deposited with the Paying Agent funds in
satisfaction of the applicable redemption price pursuant to the Indenture.
PARENT GUARANTEE
The Notes will be fully and unconditionally guaranteed, on a senior
unsecured basis, by the Parent Guarantor. The Parent Guarantor will guarantee
all of the obligations of the Issuer under the Indenture, including its
obligations to pay principal, premium, if any, and interest with respect to the
Notes.
All payments made by the Parent Guarantor with respect to the Parent
Guarantee will be made free and clear of and without withholding or deduction
for or on account of any present or future Taxes, unless the Parent Guarantor is
required to withhold or deduct Taxes by law or by the interpretation or
administration thereof. If the Parent Guarantor is required to withhold or
deduct any amount for or on account of Taxes from any payment made under or with
respect to the Parent Guarantee, the Parent Guarantor will pay such additional
amounts ("Additional Amounts") as may be necessary so that the net amount
received by each holder of Notes (including Additional Amounts) after such
withholding or deduction will not be less than the amount the Holder would have
received if such Taxes had not been withheld or deducted; provided that no
Additional Amounts will be payable with respect to a payment made to a holder of
Notes (an "Excluded Holder") (i) with which the Parent Guarantor does not deal
at arm's length (within the meaning of the Income Tax Act (Canada)) at the time
of making such payment or at the time that any such payment is deemed to be paid
or credited or (ii) which is subject to Taxes by reason of its being connected
with Canada or any province or territory thereof otherwise than by the mere
acquisition, holding or disposition of the Notes or the receipt of payments
thereunder. The Parent Guarantor will also (i) make such withholding or
deduction and (ii) remit the full amount deducted or withheld to the relevant
authority in accordance with applicable law. The Parent Guarantor will furnish
to the holders of the Notes that are outstanding on the date of any withholding
or deduction, within 30 days after the date of the payment of any Taxes due
pursuant to applicable law, certified copies of tax receipts evidencing such
payment by the Parent Guarantor.
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<PAGE> 48
The Parent Guarantor will indemnify and hold harmless each holder of Notes
(other than an Excluded Holder), and upon written request of any holder of Notes
(other than an Excluded Holder), reimburse each such Holder, for the amount of
(i) any such Taxes so levied or imposed and paid by such Holder as a result of
payments made under or with respect to the Parent Guarantee; and (ii) any Taxes
so levied or imposed with respect to any reimbursement under the foregoing
clause (i) so that the net amount received by such Holder after such
reimbursement will not be less than the net amount the Holder would have
received if Taxes on such reimbursement had not been imposed.
Since significant assets of the Parent Guarantor are outside the United
States, any judgment obtained in the United States against the Parent Guarantor,
including judgments with respect to the payment of interest, principal or
premium owing with respect to the Parent Guarantee, may not be collectible
within the United States.
The Parent Guarantor has been informed by its Canadian counsel that the
laws of the Province of Ontario and the federal laws of Canada applicable
therein permit an action to be brought in a court of competent jurisdiction in
the Province of Ontario (a "Canadian Court") on any final and conclusive
judgment in personam of any federal or state court located in the Borough of
Manhattan in The City of New York ("New York Court") that is not impeachable as
void or voidable under the internal laws of the State of New York for a sum
certain if (i) the court rendering such judgment had jurisdiction over the
judgment debtor, as recognized by a Canadian Court (and submission by the Parent
Guarantor in the Indenture to the jurisdiction of the New York Court will be
sufficient for the purpose); (ii) such judgment was not obtained by fraud or in
a manner contrary to natural justice and the enforcement thereof would not be
inconsistent with public policy, as such term is applied by a Canadian Court, or
contrary to any order made by the Attorney General of Canada under the Foreign
Extraterritorial Measures Act (Canada); (iii) the enforcement of such judgment
does not constitute, directly or indirectly, the enforcement of foreign revenue,
expropriatory or penal laws; and (iv) the action to enforce such judgment is
commenced within the applicable limitation period. The Parent Guarantor has been
informed by its Canadian counsel that such counsel knows of no reason, based
upon public policy under the laws of the Province of Ontario and the federal
laws of Canada applicable therein, for a Canadian Court to avoid recognition of
a judgment of a New York Court to enforce the Indenture or Parent Guarantee.
Pursuant to the Indenture, the Parent Guarantor has appointed Osler, Hoskin
& Harcourt as its agent for service of process in any suit, action or proceeding
with respect to the Indenture, the Parent Guarantee or the Registration Rights
Agreement and for actions brought under federal or state securities laws in any
federal or state court located in The City of New York and will submit to the
jurisdiction of such courts.
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control,
each Holder will have the right to require that the Issuer purchase all or a
portion of such Holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the principal
amount thereof plus accrued interest, if any, thereon to the date of purchase.
If a Change of Control Offer is made, there can be no assurance that the
Issuer will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders seeking to
accept the Change of Control Offer. In the event the Issuer is required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Issuer
expects that it would seek third party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can be no
assurance that the Issuer would be able to obtain such financing.
Neither the Board of Directors of the Issuer nor the Trustee may waive the
covenant relating to a Holder's right to require the purchase of Notes upon a
Change of Control. Restrictions in the Indenture described herein on the ability
of the Parent Guarantor and the Restricted Subsidiaries to incur additional
Indebtedness, to make Restricted Payments and to make Asset Sales may also make
more difficult or discourage a takeover of the Issuer, whether favored or
opposed by the management of the Issuer. Consummation of any such transaction in
certain circumstances may require the purchase of the Notes, and there can be no
assurance that the Issuer or the acquiring party will have sufficient financial
resources to effect
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<PAGE> 49
such purchase. Such restrictions and the restrictions on transactions with
Affiliates may, in certain circumstances, make more difficult or discourage any
leveraged buyout of the Issuer or any of its Subsidiaries by the management of
the Issuer. While such restrictions cover a wide variety of arrangements which
have traditionally been used to effect highly leveraged transactions, the
Indenture may not afford the Holders of Notes protection in all circumstances
from the adverse aspects of a highly leveraged transactions, reorganization,
restructuring, merger or similar transaction.
The Issuer will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with a Change of
Control Offer. To the extent that the provisions of any securities laws or
regulations conflict with the "Change of Control" provisions of the Indenture,
the Issuer shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the "Change of
Control" provisions of the Indenture by virtue thereof.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. The Parent
Guarantor will not, and will not permit any of the Restricted Subsidiaries
to, directly or indirectly, create, incur, assume, guarantee, acquire,
become liable, contingently or otherwise, with respect to, or otherwise
become responsible for payment of (collectively, "incur") any Indebtedness
(other than Permitted Indebtedness); provided, however, that if no Default
or Event of Default shall have occurred and be continuing at the time of or
as a consequence of the incurrence of any such Indebtedness, the Parent
Guarantor or any Restricted Subsidiary may incur Indebtedness (including,
without limitation, Acquired Indebtedness) if on the date of the incurrence
of such Indebtedness, after giving effect to the incurrence thereof, the
Consolidated Fixed Charge Coverage Ratio of the Parent Guarantor is greater
than (a) 2.0 to 1.0 if such incurrence occurs on or prior to May 15, 2000
or (b) 2.25 to 1.0 if such incurrence occurs after May 15, 2000.
No Indebtedness incurred pursuant to the Consolidated Fixed Charge
Coverage Ratio test of the preceding paragraph shall reduce the amount of
Indebtedness which may be incurred pursuant to any clause of the definition
of Permitted Indebtedness (including without limitation, Indebtedness
pursuant to clause (ii) of the definition of Permitted Indebtedness).
The Parent Guarantor shall not incur any Indebtedness which is
subordinated in right of payment to any other Indebtedness of the Parent
Guarantor unless such Indebtedness is subordinated in right of payment to
the Parent Guarantee at least to the same extent as such Indebtedness is
subordinated to such other Indebtedness.
Limitation on Restricted Payments. The Parent Guarantor will not, and
will not cause or permit any of the Restricted Subsidiaries to, directly or
indirectly, (a) declare or pay any dividend or make any distribution (other
than dividends or distributions, payable in Qualified Capital Stock of the
Parent Guarantor) on or in respect of shares of the Parent Guarantor's
Capital Stock to holders of such Capital Stock, (b) purchase, redeem or
otherwise acquire or retire for value any Capital Stock of the Parent
Guarantor or any warrants, rights or options to purchase or acquire shares
of any class of such Capital Stock or (c) make any Investment (other than
Permitted Investments) (each of the foregoing actions set forth in clauses
(a), (b) and (c) being referred to as a "Restricted Payment"), if at the
time of such Restricted Payment or immediately after giving effect thereto,
(i) a Default or an Event of Default shall have occurred and be continuing
or (ii) the Parent Guarantor is not able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in compliance
with the covenant described under "-- Limitation on Incurrence of
Additional Indebtedness" or (iii) the aggregate amount of Restricted
Payments (including such proposed Restricted Payment) made subsequent to
the Issue Date (the amount expended for such purpose, if other than in
cash, being the fair market value of such property as determined reasonably
and in good faith by the Board of Directors of the Parent Guarantor) shall
exceed the sum of: (w) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100% of such
loss) of the Parent Guarantor earned
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<PAGE> 50
subsequent to the Issue Date and on or prior to the date the Restricted
Payment occurs (the "Reference Date" (treating such period as a single
accounting period); plus (x) 100% of the fair market value of the aggregate
net proceeds received by the Parent Guarantor from any Person (other than a
Subsidiary of the Parent Guarantor) from the issuance and sale subsequent
to the Issue Date and on or prior to the Reference Date of Qualified
Capital Stock of the Parent Guarantor; plus (y) without duplication of any
amounts included in clause (iii)(x) above, 100% of the fair market value of
the aggregate net proceeds of any contribution to the common equity capital
of the Parent Guarantor received by the Parent Guarantor from a holder of
the Parent Guarantor's Capital Stock (excluding, in the case of clauses
(iii)(x) and (y), any net proceeds from a Public Equity Offering to the
extent used to redeem the Notes); plus (z) an amount equal to the lesser of
(A) the sum of the fair market value of the Capital Stock of an
Unrestricted Subsidiary owned by the Parent Guarantor and the Restricted
Subsidiaries and the aggregate amount of all Indebtedness of such
Unrestricted Subsidiary owed to the Parent Guarantor and the Restricted
Subsidiaries on the date of Revocation of such Unrestricted Subsidiary as
an Unrestricted Subsidiary in accordance with the covenant described under
"-- Limitation on Designations of Unrestricted Subsidiaries" or (B) the
Designation Amount with respect to such Unrestricted Subsidiary on the date
of the Designation of such Subsidiary as an Unrestricted Subsidiary in
accordance with the covenant described under "-- Limitation on Designations
of Unrestricted Subsidiaries."
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any
dividend within 60 days after the date of declaration of such dividend if
the dividend would have been permitted on the date of declaration; (2) if
no Default or Event of Default shall have occurred and be continuing, the
acquisition of any shares of Capital Stock of the Parent Guarantor, either
(i) solely in exchange for shares of Qualified Capital Stock of the Parent
Guarantor or of an Assuming Party in a Domestication Event or (ii) through
the application of net proceeds of a substantially concurrent sale for cash
(other than to a Subsidiary of the Parent Guarantor) of shares of Qualified
Capital Stock of the Parent Guarantor; (3) so long as no Default of Event
of Default shall have occurred and be continuing, repurchases of Capital
Stock of the Parent Guarantor from officers, directors, employees or
consultants pursuant to equity ownership or compensation plans not to
exceed $1.0 million in any year; and (4) so long as no Default or Event of
Default shall have occurred and be continuing, other Restricted Payments in
an aggregate amount not to exceed $10.0 million. In determining the
aggregate amount of Restricted Payments made subsequent to the Issue Date
in accordance with clause (iii) of the immediately preceding paragraph,
amounts expended pursuant to clauses (1) through (4) shall be included in
such calculation.
Limitation on Asset Sales. The Parent Guarantor will not, and will
not permit any of the Restricted Subsidiaries to, consummate an Asset Sale
unless (i) the Parent Guarantor or the applicable Restricted Subsidiary, as
the case may be, receives consideration at the time of such Asset Sale at
least equal to the fair market value of the assets sold or otherwise
disposed of (as determined in good faith by the Parent Guarantor's Board of
Directors), (ii) at least 75% of the consideration received by the Parent
Guarantor or the Restricted Subsidiary, as the case may be, from such Asset
Sale shall be in the form of cash or Cash Equivalents and is received at
the time of such disposition (with the principal amount or accreted value,
as the case may be, of Indebtedness of the Parent Guarantor and the
Restricted Subsidiaries assumed by the transferee in connection with such
Asset Sale treated as cash for purposes of this clause (ii)); and (iii)
upon the consummation of an Asset Sale, the Parent Guarantor shall apply,
or cause such Restricted Subsidiary to apply, the Net Cash Proceeds
relating to such Asset Sale within 360 days of receipt thereof either (A)
to prepay any Indebtedness of a Restricted Subsidiary or Indebtedness of
the Parent Guarantor which is not subordinated in right of payment to any
other Indebtedness of the Parent Guarantor, (B) to purchase or make an
investment in properties and assets (including inventory) that will be used
in the business of the Parent Guarantor or the Restricted Subsidiaries as
existing on the Issue Date or in businesses reasonably related thereto, or
(C) a combination of prepayment and investment permitted by the foregoing
clauses (iii)(A) and (iii)(B). On the 361st day after an Asset Sale or such
earlier date, if any, as the Board of Directors of the Parent Guarantor or
of such Restricted Subsidiary determines not to apply the Net Cash Proceeds
relating to such Asset Sale as set forth in clauses (iii)(A), (iii)(B) and
(iii)(C) of the next preceding sentence (each, a "Net Proceeds Offer
Trigger
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<PAGE> 51
Date"), such aggregate amount of Net Cash Proceeds which have not been
applied on or before such Net Proceeds Offer Trigger Date as permitted in
clauses (iii)(A), (iii)(B) and (iii)(C) of the next preceding sentence
(each a "Net Proceeds Offer Amount") shall be applied by the Issuer to make
an offer to purchase (the "Net Proceeds Offer") on a date (the "Net
Proceeds Offer Payment Date") not less than 30 nor more than 60 days
following the applicable Net Proceeds Offer Trigger Date, from all Holders
who validly accept such offer on a pro rata basis, that principal amount of
Notes equal to the Net Proceeds Offer Amount at a price equal to 100% of
the principal amount of the Notes to be purchased, plus accrued and unpaid
interest, if any, thereon to the date of purchase; provided, however, that
if at any time any non-cash consideration received by the Parent Guarantor
or any Restricted Subsidiary, as the case may be, in connection with any
Asset Sale is converted into or sold or otherwise disposed of for cash
(other than interest received with respect to any such non-cash
consideration), then such conversion or disposition shall be deemed to
constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall
be applied in accordance with this covenant. The Issuer may defer the Net
Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer
Amount equal to or in excess of $5,000,000 resulting from one or more Asset
Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and
not just the amount in excess of $5,000,000 shall be applied as required
pursuant to this paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of the Parent Guarantor and the Restricted Subsidiaries
as an entirety to a Person in a transaction permitted under "-- Merger,
Amalgamation, Consolidation and Sale of Assets," the successor corporation
shall be deemed to have sold the properties and assets of the Parent
Guarantor and the Restricted Subsidiaries not so transferred for purposes
of this covenant, and shall comply with the provisions of this covenant
with respect to such deemed sale as if it were an Asset Sale. In addition,
the fair market value of such properties and assets of the Parent Guarantor
or the Restricted Subsidiaries deemed to be sold shall be deemed to be Net
Cash Proceeds for purposes of this covenant.
Each Net Proceeds Offer will be mailed to the record Holders as shown
on the register of Holders within 30 days following the Net Proceeds Offer
Trigger Date, with a copy to the Trustee, and shall comply with the
procedures set forth in the Indenture. Upon receiving notice of the Net
Proceeds Offer, Holders may elect to tender their Notes in whole or in part
in integral multiples of $1,000 in exchange for cash. To the extent Holders
properly tender Notes in an amount exceeding the Net Proceeds Offer Amount,
Notes of tendering Holders will be purchased on a pro rata basis (based on
amounts tendered). A Net Proceeds Offer shall remain open for a period of
20 business days or such longer period as may be required by law.
The Issuer will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
"Asset Sale" provisions of the Indenture, the Issuer shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Asset Sale" provisions of the Indenture
by virtue thereof.
Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries. The Parent Guarantor will not, and will not cause
or permit any of the Restricted Subsidiaries to, directly or indirectly,
create or otherwise cause or permit to exist or become effective any
encumbrance or restriction on the ability of any Restricted Subsidiary to
(a) pay dividends or make any other distributions on or in respect of its
Capital Stock; (b) make loans or advances or to pay any Indebtedness or
other obligation owed to the Parent Guarantor or any other Restricted
Subsidiary; or (c) transfer any of its property or assets to the Parent
Guarantor or any other Restricted Subsidiary, except for such encumbrances
or restrictions existing under or by reasons of: (1) applicable law; (2)
the Indenture; (3) customary non-assignment provisions of any contract or
any lease governing a leasehold interest of any Restricted Subsidiary; (4)
any instrument governing Acquired Indebtedness, which encumbrance or
restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person or the properties or assets of the Person
so acquired; (5) agreements existing on the Issue Date to the extent and in
the manner such agreements are in effect on the Issue Date; (6) any other
agreement entered into
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<PAGE> 52
after the Issue Date which contains encumbrances and restrictions which are
no more restrictive with respect to any Restricted Subsidiary than those in
effect with respect to such Restricted Subsidiary pursuant to agreements as
in effect on the Issue Date; (7) an agreement governing Refinancing
Indebtedness incurred to Refinance the Indebtedness issued, assumed or
incurred pursuant to an agreement referred to in clause (2), (4) or (5)
above; provided, however, that the provisions relating to such encumbrance
or restriction contained in any such Refinancing Indebtedness are no more
restrictive than the provisions relating to such encumbrance or restriction
contained in agreements referred to in such clause (2), (4) or (5); and (8)
restrictions applicable only to an Accounts Receivable Subsidiary.
Limitation on Preferred Stock of Restricted Subsidiaries. The Parent
Guarantor will not permit any of the Restricted Subsidiaries to issue any
Preferred Stock (other than to the Parent Guarantor or to a Restricted
Subsidiary) or permit any Person (other than the Parent Guarantor or a
Restricted Subsidiary) to own any Preferred Stock of any Restricted
Subsidiary.
Limitation on Liens. The Parent Guarantor will not, directly or
indirectly, create, incur, assume or permit or suffer to exist any Liens of
any kind against or upon any property or assets of the Parent Guarantor,
whether owned on the Issue Date or acquired after the Issue Date, or any
proceeds therefrom, or assign or otherwise convey any right to receive
income or profits therefrom unless (i) in the case of Liens securing
Indebtedness that is expressly subordinate or junior in right of payment to
the Parent Guarantee, the Parent Guarantee is secured by a Lien on such
property, assets or proceeds that is senior in priority to such Liens and
(ii) in all other cases, the Parent Guarantee is equally and ratably
secured, except for (A) Liens securing the Parent Guarantee; (B) Liens in
favor of the Issuer or the Parent Guarantor; (C) Liens securing Refinancing
Indebtedness which is incurred to Refinance any Indebtedness which has been
secured by a Lien permitted under the Indenture and which has been incurred
in accordance with the provisions of the Indenture; provided, however, that
such Liens do not extend to or cover any property or assets of the Parent
Guarantor not securing the Indebtedness so Refinanced; and (D) Permitted
Liens.
Merger, Amalgamation, Consolidation and Sale of Assets. The Parent
Guarantor will not, in a single transaction or series of related
transactions, consolidate, amalgamate or merge with or into any Person, or
sell, assign, transfer, lease, convey or otherwise dispose of (or cause or
permit any Restricted Subsidiary to sell, assign, transfer, lease, convey
or otherwise dispose of) all or substantially all of the Parent Guarantor's
assets (determined on a consolidated basis for the Parent Guarantor and the
Restricted Subsidiaries) whether as an entirety or substantially as an
entirety to any Person unless: (a) pursuant to a Domestication Event or
(b)(i) either (1) the Parent Guarantor shall be the surviving or continuing
corporation or (2) the Person (if other than the Parent Guarantor) formed
by such amalgamation, consolidation or into which the Parent Guarantor is
merged or the Person which acquires by sale, assignment, transfer, lease,
conveyance or other disposition the properties and assets of the Parent
Guarantor and the Restricted Subsidiaries substantially as an entirety (the
"Surviving Entity") (x) shall be a corporation organized and validly
existing under the laws of (l) the United States or any State thereof or
the District of Columbia or (2) Canada or any Province thereof and (y)
shall expressly assume, by supplemental indenture (in form and substance
satisfactory to the Trustee), executed and delivered to the Trustee, all
obligations of the Parent Guarantor under the Parent Guarantee and the
performance of every covenant of the Parent Guarantor, the Indenture and
the Registration Rights Agreement on the part of the Parent Guarantor to be
performed or observed; (ii) immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including giving effect to any Indebtedness and Acquired Indebtedness
incurred or anticipated to be incurred in connection with or in respect of
such transaction), the Parent Guarantor or such Surviving Entity, as the
case may be, shall be able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the covenant
described under "-- Limitation on Incurrence of Additional Indebtedness";
(iii) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including, without limitation, giving effect to any Indebtedness and
Acquired Indebtedness incurred or anticipated to be incurred and any Lien
granted in connection with or in respect of the transaction), no Default or
Event of Default shall have occurred or be
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continuing; and (iv) the Parent Guarantor or the Surviving Entity shall
have delivered to the Trustee an officers' certificate and an opinion of
counsel, each stating that such consolidation, amalgamation, merger, sale,
assignment, transfer, lease, conveyance or other disposition and, if a
supplemental indenture is required in connection with such transaction,
such supplemental indenture comply with the applicable provisions of the
Indenture and that all conditions precedent in the Indenture relating to
such transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of
all or substantially all of the properties or assets of one or more
Restricted Subsidiaries the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Parent Guarantor
shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Parent Guarantor.
The Indenture will provide that upon any amalgamation, consolidation,
combination or merger or any transfer of all or substantially all of the
assets of the Parent Guarantor in accordance with the foregoing in which
the Parent Guarantor is not the continuing corporation, the successor
Person formed by such consolidation or amalgamation or into which the
Parent Guarantor is merged or to which such conveyance, lease or transfer
is made shall succeed to, and be substituted for, and may exercise every
right and power of, the Parent Guarantor under the Indenture and the Parent
Guarantee with the same effect as if such surviving entity had been named
as such.
The Issuer will not consolidate with or merge with or into any Person
other than the Parent Guarantor unless: (i) the entity formed by or
surviving any such consolidation or merger (if other than the Issuer) is a
corporation organized and existing under the laws of the United States or
any State thereof or the District of Columbia; (ii) such entity explicitly
assumes by supplemental indenture (in form reasonably satisfactory to the
Trustee), executed and delivered to the Trustee, the due and punctual
payment of the principal of and premium, if any, and interest on the Notes
and the performance of any covenant of the Notes, the Indenture and the
Registration Rights Agreement; (iii) immediately after giving effect to
such transaction, no Default or Event of Default shall have occurred and be
continuing; (iv) immediately after giving effect to such transaction and
the use of any net proceeds therefrom on a pro forma basis, the Parent
Guarantor could satisfy the provisions of clause (ii) of the first
paragraph of this covenant; and (v) the Issuer shall have delivered to the
Trustee an officers' certificate and Opinion of Counsel, each stating that
such consolidation or merger and, if a supplemental indenture is required
in connection with such transaction, such supplemental indenture comply
with the applicable provisions of the Indenture and that all conditions
precedent in the Indenture relating to such transaction have been
satisfied.
The Indenture will provide that upon any amalgamation, consolidation,
combination, merger, conveyance, lease or transfer of all or substantially
all of the assets of the Issuer in accordance with the foregoing, if the
Issuer is not the continuing corporation, the successor Person formed by
such consolidation or into which the Issuer is merged or to which such
amalgamation, consolidation, merger, conveyance, lease or transfer is made
shall succeed to, and be substituted for, and may exercise every right and
power of, the Issuer under the Indenture and the Notes with the same effect
as if such surviving entity had been named as such.
Limitations on Transactions with Affiliates. (a) The Parent Guarantor
will not, and will not permit any of the Restricted Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction or
series of related transactions (including, without limitation, the
purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of its Affiliates (each an
"Affiliate Transaction"), other than (x) Affiliate Transactions permitted
under paragraph (b) below and (y) Affiliate Transactions on terms that are
no less favorable than those that might reasonably have been obtained in a
comparable transaction at such time on an arm's-length basis from a Person
that is not an Affiliate of the Parent Guarantor or such Restricted
Subsidiary. All Affiliate Transactions (and each series of related
Affiliate Transactions which are similar or part of a common plan)
involving aggregate payments or other property with a fair market value in
excess of $1.0 million shall be approved
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by the Board of Directors of the Parent Guarantor or such Restricted
Subsidiary, as the case may be, such approval to be evidenced by a Broad
Resolution stating that such Board of Directors has determined that such
transaction complies with the foregoing provisions. If the Parent Guarantor
or any Restricted Subsidiary enters into an Affiliate Transaction (or
series of related Affiliate Transactions related to a common plan) that
involves an aggregate fair market value of more than $5.0 million, the
Parent Guarantor or such Restricted Subsidiary, as the case may be, shall,
prior to the consummation thereof, obtain a favorable opinion as to the
fairness of such transaction or series of related transactions to the
Parent Guarantor or the relevant Restricted Subsidiary, as the case may be,
from a financial point of view, from an Independent Financial Advisor and
file the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to (i)
employment, consulting and compensation arrangements and agreements of the
Parent Guarantor as in effect on the Issue Date; (ii) reasonable fees and
compensation paid to and indemnity provided on behalf of, officers,
directors, employees or consultants of the Parent Guarantor or any
Restricted Subsidiary as determined in good faith by the Parent Guarantor's
Board of Directors or senior management; (iii) transactions exclusively
between or among the Parent Guarantor and any of the Restricted
Subsidiaries or exclusively between or among such Restricted Subsidiaries;
(iv) Restricted Payments permitted by the Indenture; and (v) a
Domestication Event.
Conduct of Business. The Parent Guarantor and the Restricted
Subsidiaries will not engage in any businesses which are not either: (i)
the same, similar or reasonably related to the businesses in which the
Parent Guarantor or any of the Restricted Subsidiaries are engaged on the
Issue Date; (ii) Permitted Investments; or (iii) businesses acquired
through an acquisition after the Issue Date which are not material to the
Parent Guarantor and the Restricted Subsidiaries, taken as a whole.
Payments for Consent. The Parent Guarantor will not, and will not
cause or permit any of its Subsidiaries to, directly or indirectly, pay or
cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any Holder of any Notes for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of the
Indenture, the Notes or the Parent Guarantee unless such consideration is
offered to be paid to all Holders of the Notes who so consent, waive or
agree to amend in the time frame set forth in solicitation documents
relating to such consent, waiver or agreement.
Limitation on Designations of Unrestricted Subsidiaries. The Parent
Guarantor may designate any Subsidiary of the Parent Guarantor (other than
the Company or a Subsidiary of the Parent Guarantor which owns Capital
Stock of a Restricted Subsidiary) as an "Unrestricted Subsidiary" under the
Indenture (a "Designation") only if:
(a) no Default shall have occurred and be continuing at the time of
or after giving effect to such Designation; and
(b) the Parent Guarantor would be permitted under the Indenture to
make an Investment at the time of Designation (assuming the
effectiveness of such Designation) in an amount (the "Designation
Amount") equal to the sum of (i) fair market value of the Capital Stock
of such Subsidiary owned by the Parent Guarantor and the Restricted
Subsidiaries on such date and (ii) the aggregate amount of Indebtedness
of such Subsidiary owed to the Parent Guarantor and the Restricted
Subsidiaries on such date; provided that in connection with a
Domestication Event and a Designation by the Assuming Party of
International Comfort Products Corporation (the "Former Guarantor") as
an Unrestricted Subsidiary, in calculating the amount of the Investment
deemed to be made pursuant to this clause (b), Qualified Capital Stock
of the Assuming Party held by the Former Guarantor shall be excluded
from such calculation; and
(c) the Parent Guarantor would be permitted to incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to
the covenant described under "-- Limitation on Incurrence of Additional
Indebtedness" at the time of Designation (assuming the effectiveness of
such Designation); provided that in connection with a Domestication
Event and a Designation by the
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Assuming Party of the Former Guarantor as an Unrestricted Subsidiary,
the Designation need not comply with this clause (c).
In the event of any such Designation, the Parent Guarantor shall be
deemed to have made an Investment constituting a Restricted Payment in the
Designation Amount pursuant to the covenant described under "-- Limitation
on Restricted Payments" for all purposes of the Indenture. The Indenture
will further provide that the Parent Guarantor shall not, and shall not
permit any Restricted Subsidiary to, at any time (x) provide direct or
indirect credit support for or a guarantee of any Indebtedness of any
Unrestricted Subsidiary (including of any undertaking agreement or
instrument evidencing such Indebtedness), (y) be directly or indirectly
liable for any Indebtedness of any Unrestricted Subsidiary or (z) be
directly or indirectly liable for any Indebtedness which provides that the
holder thereof may (upon notice, lapse of time or both) declare a default
thereon or cause the payment thereof to be accelerated or payable prior to
its final scheduled maturity upon the occurrence of a default with respect
to any Indebtedness of any Unrestricted Subsidiary (including any right to
take enforcement action against such Unrestricted Subsidiary), except, in
the case of clause (x) or (y), to the extent permitted under the covenant
described under "-- Limitation on Restricted Payments."
The Indenture will further provide that the Parent Guarantor may
revoke any Designation of a Subsidiary as an Unrestricted Subsidiary
("Revocation"), whereupon such Subsidiary shall then constitute a
Restricted Subsidiary, if
(a) no Default shall have occurred and be continuing at the time
and after giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiaries
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of the
Indenture.
All Designations and Revocations must be evidenced by Board
Resolutions of the Parent Guarantor delivered to the Trustee certifying
compliance with the foregoing provisions.
Reports to Holders. The Indenture will provide that the Parent
Guarantor will deliver to the Trustee within 15 days after the filing of
the same with the Commission, copies of the quarterly and annual reports
and of the information, documents and other reports, if any, which the
Parent Guarantor is required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act. The Indenture further provides
that, notwithstanding that the Parent Guarantor may not be subject to the
reporting requirements of Sections 13 or 15(d) of the Exchange Act, the
Parent Guarantor will file with the Commission, to the extent permitted,
and provide the Trustee and Holders with such annual and quarterly reports
and such information, documents and other reports specified in Section 13
and 15(d) of the Exchange Act. The Parent Guarantor will also comply with
the other provisions of TIA sec. 314(a).
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default."
(i) the failure to pay interest on any Notes when the same becomes due
and payable and the default continues for a period of 30 days;
(ii) the failure to pay the principal on any Notes, when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer);
(iii) a default in the observance or performance of any other covenant
or agreement contained in the Indenture which default continues for a
period of 30 days after the Issuer receives written notice specifying the
default (and demanding that such default be remedied) from the Trustee or
the Holders of at least 25% of the outstanding principal amount of the
Notes (except in the case of a default with respect to the covenant
described under "-- Certain Covenants -- Merger, Amalgamation,
Consolidation and
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Sale of Assets," which will constitute an Event of Default with such notice
requirement but without such passage of time requirement);
(iv) a default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness of the Parent Guarantor or of any Restricted Subsidiary (or
the payment of which is guaranteed by the Parent Guarantor or any
Restricted Subsidiary), whether such Indebtedness now exists or is created
after the Issue Date, which default (a) is caused by a failure to pay
principal of such Indebtedness after any applicable grace period provided
in such Indebtedness on the date of such default (a "payment default") or
(b) results in the acceleration of such Indebtedness prior to its express
maturity (and such acceleration is not rescinded, or such Indebtedness is
not repaid, within 30 days) and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a payment default or the maturity
of which has been so accelerated (and such acceleration is not rescinded,
or such Indebtedness is not repaid, within 30 days), aggregates $5.0
million;
(v) one or more judgments in an aggregate amount in excess of $5.0
million shall have been rendered against the Parent Guarantor or any of the
Restricted Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and nonappealable;
(vi) certain events of bankruptcy affecting the Parent Guarantor or
any of its Significant Subsidiaries; or
(vii) the Parent Guarantee ceases to be in full force and effect or
the Parent Guarantee declared to be null and void and unenforceable or the
Parent Guarantee is found to be invalid or the Parent Guarantor denies its
liability under the Parent Guarantee.
If an Event of Default (other than an Event of Default specified in clause
(vi) above) shall occur and be continuing, the Trustee or the Holders of at
least 25% in principal amount of outstanding Notes may declare the principal of,
premium, if any, and accrued interest on all the Notes to be due and payable by
notice in writing to the Issuer and the Trustee specifying the respective Events
of Default and that it is a "notice of acceleration," and the same shall become
immediately due and payable. If an Event of Default specified in clause (vi)
above occurs and is continuing, then all unpaid principal of, premium, if any,
and accrued and unpaid interest on all of the outstanding Notes shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holder.
The Indenture will provide that, at any time after a declaration of
acceleration with respect to the Notes as described in the preceding paragraph,
the Holders of a majority in principal amount of the Notes may rescind and
cancel such declaration and its consequences (i) if the rescission would not
conflict with any judgment or decree, (ii) if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration, (iii) to the extent the payment
of such interest is lawful, interest on overdue installments of interest and
overdue principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) if the Issuer has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in clause (vi) of the description above
of Events of Default, the Trustee shall have received an officers' certificate
and an opinion of counsel that such Event of Default has been cured or waived.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto.
The Holders of a majority in principal amount of the Notes may waive any
existing Default or Event of Default under the Indenture, and its consequences,
except a default in the payment of the principal of or interest on any Notes.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture and under the TIA. Subject to the provisions of the
Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity. Subject to all
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provisions of the Indenture and applicable law, the Holders of a majority in
aggregate principal amount of the then outstanding Notes have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee.
Under the Indenture, the Issuer is required to provide an officers'
certificate to the Trustee promptly upon the Issuer obtaining knowledge of any
Default or Event of Default (provided that the Issuer shall provide such
certification at least annually whether or not it knows of any Default or Event
of Default) that has occurred and, if applicable, describe such Default or Event
of Default and the status thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Issuer may, at its option and at any time, elect to have its
obligations and the obligations of the Parent Guarantor discharged with respect
to the outstanding Notes ("Legal Defeasance"). Such Legal Defeasance means that
the Issuer shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding Notes, except for (i) the rights of Holders to
receive payments in respect of the principal of, premium, if any, and interest
on the Notes when such payments are due, (ii) the Issuer's obligations with
respect to the Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance of an office or
agency for payments, (iii) the rights, powers, trust, duties and immunities of
the Trustee and the Issuer's obligations in connection therewith and (iv) the
Legal Defeasance provisions of the Indenture. In addition, the Issuer may, at
its option and at any time, elect to have the obligations of the Parent
Guarantor released with respect to certain covenants that are described in the
Indenture ("Covenant Defeasance") and thereafter any omission or failure to
comply with such obligations shall not constitute a Default or Event of Default
with respect to the Notes. In the event Covenant Defeasance occurs, certain
events (not including non-payment, bankruptcy, receivership, reorganization and
insolvency events) described under "-- Event of Default" will no longer
constitute an Event of Default with respect to the Notes.
In order to exercise Legal Defeasance or Covenant Defeasance, (i) the
Issuer must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders cash in U.S. dollars, non-callable U.S. government obligations, or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the Notes on the stated date of
payment thereof or on the applicable redemption date, as the case may be; (ii)
in the case of Legal Defeasance, the Issuer shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustees
confirming that (A) the Issuer has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders will not recognize income gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred; (iii) in
the case of Covenant Defeasance, the Issuer shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders will not recognize income gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be continuing on the
date of such deposit or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance
shall not result in a breach or violation of, or constitute a default under the
Indenture or any other material agreement or instrument to which the Parent
Guarantor or any of its Subsidiaries is a party or by which the Parent Guarantor
or any of its Subsidiaries is bound; (vi) the Issuer shall have delivered to the
Trustee an officers' certificate stating that the deposit was not made by the
Issuer with the intent of preferring the Holders over any other creditors of the
Issuer or with the intent of defeating, hindering, delaying or defrauding any
other creditors of the Issuer or others; (vii) the Issuer shall have delivered
to the Trustee an officers' certificate and an opinion of counsel, each stating
that all conditions precedent provided for or relating to the Legal Defeasance
or the Covenant
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Defeasance have been complied with; (viii) the Issuer shall have delivered to
the Trustee an opinion of counsel to the effect that after the 91st day
following the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; and (ix) certain other customary conditions
precedent are satisfied.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Issuer and thereafter repaid to the Issuer
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Issuer has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
heretofore delivered to the Trustee for cancellation, for principal of, premium,
if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Issuer directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (ii)
the Issuer has paid all other sums payable under the Indenture by the Issuer;
and (iii) the Issuer has delivered to the Trustee an officers' certificate and
an opinion of counsel stating that all conditions precedent under the Indenture
relating to the satisfaction and discharge of the Indenture have been complied
with.
MODIFICATION OF THE INDENTURE
From time to time, the Issuer, the Parent Guarantor and the Trustee,
without the consent of the Holders, may amend the Indenture for certain
specified purposes, including curing ambiguities, defects or inconsistencies, so
long as such charge does not adversely affect the rights of any of the Holders
in any material respect. In formulating its opinion on such matters, the Trustee
will be entitled to rely on such evidence as it deems appropriate, including,
without limitation, solely on an opinion of counsel. Other modifications and
amendments of the Indenture may be made with the consent of the Holders of a
majority in principal amount of the then outstanding Notes issued under the
Indenture, except that, without the consent of each Holder affected thereby, no
amendment may: (i) reduce the amount of Notes whose holders must consent to an
amendment; (ii) reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any Notes; (iii)
reduce the principal of or change or have the effect of changing the fixed
maturity of any Notes, or change the date on which any Notes may be subject to
redemption or repurchase, or reduce the redemption of repurchase price therefor;
(iv) make any Notes payable in money other than that stated in the Notes; (v)
make any change in provisions of the Indenture protecting the right of each
Holder to receive payment or principal of and interest on such Notes on or after
the due date thereof or to bring suit to enforce such payment, or permitting
Holders of a majority in principal amount of Notes to waive Defaults or Events
of Default; (vi) amend, change or modify in any material respect the obligation
of the Issuer to make and consummate a Change of Control Offer after a Change of
Control shall have occurred or make and consummate a Net Proceeds Offer with
respect to any Asset Sale that has been consummated or modify any of the
provisions or definitions with respect thereto; (vii) modify or change any
provision of the Indenture or the related definitions affecting the ranking of
the Notes or the Parent Guarantee in a manner which adversely affects the
Holders; (viii) release the Parent Guarantor from any of its obligations under
the Parent Guarantee or the Indenture or (ix) make any change that would
adversely affect the rights of holders to receive Additional Amounts.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
The Parent Guarantee will be governed by the laws of Ontario, except that upon a
substitution of an Assuming Party for the Parent Guarantor in a Domestication
Event, the Parent Guarantee will be governed by the laws of New York.
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THE TRUSTEE
The Indenture will provide that, except during the continuance of an Event
of Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the Trustee
will exercise such rights and powers vested in it by the Indenture, and use the
same degree of care and skill in its exercise as a prudent man would exercise or
use under the circumstances in the conduct of his own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Issuer or the
Parent Guarantor, to obtain payments of claims in certain cases or to realize on
certain property received in respect of any such claim as security or otherwise.
Subject to the TIA, the Trustee will be permitted to engage in other
transactions; provided that if the Trustee acquires any conflicting interest as
described in the TIA, it must eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Accounts Receivable Subsidiary" means any Restricted Subsidiary that is
organized solely for the purpose of and engaged solely in (i) purchasing,
financing and collecting accounts receivable obligations of customers of the
Parent Guarantor and its Restricted Subsidiaries; (ii) the sale or financing of
such accounts receivable; and (iii) other activities incident thereto.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary or
at the time it merges or consolidates with the Parent Guarantor or any of the
Restricted Subsidiaries or assumed in connection with the acquisition of assets
from such Person and in each case not incurred by such Person in connection
with, or in anticipation or contemplation of, such Person becoming a Restricted
Subsidiary or such acquisition, merger or consolidation.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative of the foregoing.
"Affiliate Transaction" has the meaning set forth under "-- Certain
Covenants -- Limitations on Transactions with Affiliates."
"Asset Acquisition" means (a) an Investment by the Parent Guarantor or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary, or shall be merged with or into the Parent
Guarantor or any Restricted Subsidiary, or (b) the acquisition by the Parent
Guarantor or any Restricted Subsidiary of the assets of any Person (other than a
Restricted Subsidiary) which constitute all or substantially all of the assets
of such Person or comprises any division or line of business of such Person or
any other properties or assets of such Person other than in the ordinary course
of business.
"Assuming Party" means a corporation organized by the Parent Guarantor
under the laws of the United States, any State thereof, or the District of
Columbia for the purpose of succeeding to the business of the Parent Guarantor
in a Domestication Event.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Parent Guarantor or
any of the Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Parent Guarantor or a Restricted
Subsidiary of (a) any Capital Stock of any Restricted Subsidiary other than of
an Assuming Party in connection with a Domestication Event; or (b) any other
property or assets of the Parent Guarantor or any Restricted Subsidiary other
than in the ordinary course of
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business; provided, however, that Asset Sales shall not include (i) a
transaction or series of related transactions for which the Parent Guarantor or
the Restricted Subsidiaries receive aggregate consideration of less than $1.0
million, (ii) the sale, lease, conveyance, disposition or other transfer of all
or substantially all of the assets of the Parent Guarantor as permitted by the
covenant described under "-- Certain Covenants -- Merger, Amalgamation,
Consolidation and Sale of Assets;" (iii) any sale of accounts receivable or
inventories in the normal course of business (including sales by an Accounts
Receivable Subsidiary) or in connection with the sale of a distribution business
or a sale of a Restricted Subsidiary principally engaged in a distribution
business; (iv) any sale of Excluded Assets.
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and options, warrants or
other rights to acquire the same and (ii) with respect to any Person that is not
a corporation, any and all partnership or other equity interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia or
any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $250,000,000; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Parent Guarantor (other than to an Assuming Party in a Domestication Event) to
any Person or group of related Persons for purposes of Section 13(d) of the
Exchange Act (a "Group"), together with any Affiliates thereof (whether or not
otherwise in compliance with the provisions of the Indenture); (ii) the approval
by the holders of Capital Stock of the Parent Guarantor of any plan or proposal
for the liquidation or dissolution of the Parent Guarantor (whether or not
otherwise in compliance with the provisions of the Indenture) (other than in
connection with a Domestication Event if (x) such plan or proposal will not be
effected until after the Assuming Party has been substituted for the Parent
Guarantor as provided for in the Indenture and (y) after giving effect to such
Domestication Event, no Person or Group shall become the
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beneficial owner, directly or indirectly, of more than 50% of the aggregate
voting power represented by the issued and outstanding Capital Stock of the
Assuming Party); or (iii) any Person or Group shall become the beneficial owner,
directly or indirectly, of shares representing more than 50% of the aggregate
ordinary voting power represented by the issued and outstanding Capital Stock of
the Parent Guarantor, other than shares of Capital Stock of the Parent Guarantor
acquired by the Assuming Party in connection with a Domestication Event.
"Change of Control Offer" has the meaning set forth under "-- Change of
Control."
"Change of Control Payment Date" has the meaning set forth under "-- Change
of Control."
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Consolidated EBITDA" means, with respect to the Parent Guarantor, for any
period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to
the extent Consolidated Net Income has been reduced thereby, (A) all income
taxes of the Parent Guarantor and the Restricted Subsidiaries paid or accrued in
accordance with GAAP for such period (other than income taxes attributable to
extraordinary, unusual or nonrecurring gains or losses or taxes attributable to
sale or dispositions outside the ordinary course of business), (B) Consolidated
Interest Expense and (C) Consolidated Non-cash Charges, less any non-cash items
increasing Consolidated Net Income in excess of $3.0 million for such period,
all as determined on a consolidated basis for the Parent Guarantor and the
Restricted Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to the
Parent Guarantor, the ratio of Consolidated EBITDA of the Parent Guarantor
during the four full fiscal quarters (the "Four Quarter Period") ending on or
prior to the date of the transaction giving rise to the need to calculate the
Consolidated Fixed Charge Coverage Ratio (the "Transaction Date") to
Consolidated Fixed Charges of the Parent Guarantor for the Four Quarter Period.
In addition to and without limitation of the foregoing, for purposes of this
definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to (i) the incurrence or repayment of any Indebtedness of the Parent
Guarantor or any of the Restricted Subsidiaries (and the application of the
proceeds thereof) giving rise to the need to make such calculation and any
incurrence or repayment of other Indebtedness (and the application of the
proceeds thereof), other than the incurrence or repayment of Indebtedness in the
ordinary course of business for working capital purposes pursuant to working
capital facilities, occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such incurrence or repayment, as the case may be (and
the application of the proceeds thereof), occurred on the first day of the Four
Quarter Period and (ii) any asset sales or other disposition or Asset
Acquisitions (including, without limitation, any Asset Acquisition giving rise
to the need to make such calculation as a result of the Parent Guarantor or one
of the Restricted Subsidiaries (including any person who becomes a Restricted
Subsidiary as a result of the Asset Acquisition) incurring, assuming or
otherwise being liable for Acquired Indebtedness and also including any
Consolidated EBITDA (provided that such Consolidated EBITDA shall be included
only to the extent includable pursuant to the definition of "Consolidated Net
Income" attributable to the assets which are the subject of the Asset
Acquisition or asset sale or other disposition during the Four Quarter Period)
occurring during the Four Quarter Period or at any time subsequent to the last
day of the Four Quarter Period and on or prior to the Transaction Date as if
such Asset Acquisition or asset sale or other disposition (including the
incurrence, assumption or liability for any such Acquired Indebtedness) occurred
on the first day of the Four Quarter Period. If the Parent Guarantor or any of
the Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, the preceding sentence shall give effect to the incurrence of such
guaranteed Indebtedness as if the Parent Guarantor or any Restricted Subsidiary
had directly incurred or otherwise assumed such guaranteed Indebtedness.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio," (1) interest on outstanding Indebtedness determined on a
fluctuating basis as of the
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Transaction Date and which will continue to be so determined thereafter shall be
deemed to have accrued at a fixed rate per annum equal to the rate of interest
on such Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"Consolidated Fixed Charges" means, with respect to the Parent Guarantor
for any period, the sum, without duplication, of (i) Consolidated Interest
Expense, plus (ii) the product of (x) the amount of all dividend payments on any
series of Preferred Stock of the Parent Guarantor (other than dividends paid in
Qualified Capital Stock) paid, accrued or scheduled to be paid or accrued during
such period times (y) a fraction, the numerator of which is one and the
denominator of which is one minus the then current effective consolidated
foreign, federal, state, provincial and local income tax rate of the Parent
Guarantor, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to the Parent Guarantor
for any period, the sum of, without duplication: (i) the aggregate of the
interest expense (net of interest income) of the Parent Guarantor and the
Restricted Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP, including without limitation, (a) any amortization of debt
discount, (b) the net costs under Interest Swap Obligations, (c) all capitalized
interest and (d) the interest portion of any deferred payment obligation; and
(ii) the interest component of Capitalized Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by the Parent Guarantor and the
Restricted Subsidiaries during such period as determined on a consolidated basis
in accordance with GAAP.
"Consolidated Net Income" means, with respect to the Parent Guarantor, for
any period, the aggregate net income (or loss) of the Parent Guarantor and the
Restricted Subsidiaries for such period on a consolidated basis, determined in
accordance with GAAP; provided that there shall be excluded therefrom (i)
after-tax gains and losses from Asset Sales or abandonments or reserves relating
thereto, (ii) extraordinary or nonrecurring gains, (iii) the net income of any
Person acquired in a "pooling of interests" transaction accrued prior to the
date it becomes a Restricted Subsidiary or is merged or consolidated with the
Parent Guarantor or any Restricted Subsidiary, (iv) the net income (but not
loss) of any Restricted Subsidiary to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that income
is restricted by a contract, operation of law or otherwise (other than any such
restriction permitted pursuant to clauses (5), (6) and (7) of the covenant
described under "-- Certain Covenants -- Limitation on Dividend and Other
Payment Restrictions Affecting Restricted Subsidiaries"), (v) the net income of
any Person, other than a Restricted Subsidiary, except to the extent of cash
dividends or distributions paid to the Parent Guarantor or to a Restricted
Subsidiary by such person, (vi) any restoration to income of any contingency
reserve, except to the extent that provision for such reserve was made out of
Consolidated Net Income accrued at any time following the Issue Date, (vii)
income or loss attributable to discontinued operations (including, without
limitation, operations disposed of during such period whether or not such
operations were classified as discontinued) and (viii) in the case of a
successor to the Parent Guarantor by consolidation or merger or as a transferee
of the Parent Guarantor's assets, any earnings of the successor corporation
prior to such consolidation, merger or transfer of assets.
"Consolidated Non-cash Charges" means, with respect to the Parent
Guarantor, for any period, the aggregate depreciation, amortization and other
non-cash expenses of the Parent Guarantor and the Restricted Subsidiaries
reducing Consolidated Net Income of the Parent Guarantor for such period,
determined on a consolidated basis in accordance with GAAP (excluding any such
charges in excess of $3.0 million in the aggregate during such period which
require an accrual of or a reserve for cash charges for any future period).
"Covenant Defeasance" has the meaning set forth under "-- Legal Defeasance
and Covenant Defeasance."
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"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Parent Guarantor or any Restricted Subsidiary against fluctuations in currency
values.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice of both would be, an Event of Default.
"Designation" has the meaning set forth under "-- Certain
Covenants -- Limitation on Designations of Unrestricted Subsidiaries."
"Designation Amount" has the meaning set forth under "-- Certain
Covenants -- Limitation on Designations of Unrestricted Subsidiaries."
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is mandatorily exchangeable for Indebtedness, or is redeemable, or exchangeable
for Indebtedness, at the sole option of the holder thereof on or prior to the
final maturity date of the Notes, in each case other than redemptions or
exchanges in which the consideration to be received is Qualified Capital Stock.
"Domestication Event" means a transaction or series of transactions
pursuant to which an Assuming Party succeeds to the business of the Parent
Guarantor, through the direct or indirect acquisition of the Parent Guarantor or
by which the Parent Guarantor becomes a Subsidiary of the Assuming Party or the
Assuming Party otherwise acquires directly or indirectly all or substantially
all the assets of the Parent Guarantor, and in any case assumes the liabilities
of the Parent Guarantor, provided that (i) the Assuming Party concurrently
assumes the obligations of the Parent Guarantor under the Parent Guarantee and
the Indenture pursuant to a supplemental indenture (in form reasonably
satisfactory to the Trustee) executed and delivered to the Trustee, (ii)
immediately before and immediately after giving effect to such transaction and
the assumption contemplated by clause (i) above, no Default or Event of Default
shall have occurred and be continuing, and (iii) the Parent Guarantor and the
Assuming Party shall have delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel stating that the Domestication Event and the supplemental
indenture required in connection with the Domestication Event comply with the
applicable provisions of the Indenture and that all conditions precedent in the
Indenture relating to the Domestication Event have been satisfied.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"Excluded Assets" means the property and assets located at the research,
development and training center in LaVergne, Tennessee and the distribution
facility in Brantford, Ontario.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Issuer acting reasonably
and in good faith and shall be evidenced by a Board Resolution of the Board of
Directors of the Issuer delivered to the Trustee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Canadian Institute of Chartered Accountants.
"incur" has the meaning set forth under "-- Certain Covenants -- Limitation
on Incurrence on Additional Indebtedness."
"Indebtedness" means, with respect to any Person, without duplication, (i)
all Obligations of such Person for borrowed money, (ii) all Obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all Capitalized Lease Obligations of such Person, (iv) all Obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90 days or
more or are being contested in good faith
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by appropriate proceedings promptly instituted and diligently conducted), (v)
all Obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (vi) guarantees and other
contingent obligations in respect of Indebtedness referred to in clauses (i)
through (v) above and clause (viii) below, (vii) all Obligations of any other
Person of the type referred to in clauses (i) through (vi) which are secured by
any Lien on any property or asset of such Person, the amount of such Obligation
being deemed to be the lesser of the fair market value of such property or asset
or the amount of the Obligation so secured, (viii) all Obligations under
currency agreements and interest swap agreements of such Person and (ix) all
Disqualified Capital Stock issued by such Person with the amount of Indebtedness
represented by such Disqualified Capital Stock being equal to the greater of its
voluntary or involuntary liquidation preference and its maximum fixed repurchase
price, but excluding accrued dividends, if any. For purposes hereof, the
"maximum fixed repurchase price" of any Disqualified Capital Stock which does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Disqualified Capital Stock as if such Disqualified Capital Stock
were purchased on any date on which Indebtedness shall be required to be
determined pursuant to the Indenture, and if such price is based upon, or
measured by, the fair market value of such Disqualified Capital Stock, such fair
market value shall be determined reasonably and in good faith by the Board of
Directors of the issuer of such Disqualified Capital Stock. "Indebtedness,"
shall not be deemed to include customary indemnity obligations of the Parent
Guarantor or a Restricted Subsidiary incurred in connection with an Asset Sale
or warranty obligations of the Parent Guarantor or a Restricted Subsidiary
incurred in the ordinary course of business.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees and Affiliates do not, have a direct or
indirect financial interest in the Parent Guarantor or any of the Restricted
Subsidiaries and (ii) which, in the judgment of the Board of Directors of the
Parent Guarantor, is otherwise independent and qualified to perform the task for
which it is to be engaged.
"Initial Purchasers" means Salomon Brothers Inc, Credit Suisse First Boston
Corporation and First Union Capital Markets, a division of Wheat First
Securities, Inc.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"Investment" means, with respect to any Person, (i) any direct or indirect
loan or other extension of credit (including, without limitation, a guarantee)
to or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase or acquisition by such Person of any Capital
Stock, bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude extensions of trade credit by
the Parent Guarantor and the Restricted Subsidiaries on commercially reasonable
terms in accordance with normal trade practices of the Parent Guarantor or such
Restricted Subsidiary, as the case may be. If the Parent Guarantor or any
Restricted Subsidiary sells or otherwise disposes of any Capital Stock of any
Restricted Subsidiary (the "Referent Subsidiary") such that, after giving effect
to any such sale or disposition the Referent Subsidiary shall cease to be a
Restricted Subsidiary, the Parent Guarantor shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Capital Stock of the Referent Subsidiary not sold or disposed of.
"Issue Date" means the date of original issuance of the Notes.
"Legal Defeasance" has the meaning set forth under "-- Legal Defeasance and
Covenant Defeasance."
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
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"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents, including payments in respect of deferred
payment obligations, when received in the form of cash or Cash Equivalents
(other than the portion of any such deferred payment constituting interest)
received by the Parent Guarantor or any of the Restricted Subsidiaries from such
Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions), (b) taxes paid or payable after taking into
account any reduction in consolidated tax liability due to available tax credits
or deductions and any tax sharing arrangements, (c) repayments of Indebtedness
secured by the property or assets subject to such Asset Sale that is required to
be repaid in connection with such Asset Sale and (d) appropriate amounts to be
provided by the Parent Guarantor or any Restricted Subsidiary, as the case may
be, as a reserve, in accordance with GAAP, against any liabilities associated
with such Asset Sale and retained by the Parent Guarantor or any Restricted
Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale.
"Net Proceeds Offer" has the meaning set forth under "-- Certain
Covenants -- Limitation on Asset Sales."
"Net Proceeds Offer Amount" has the meaning set forth under "-- Certain
Covenants -- Limitation on Asset Sales."
"Net Proceeds Offer Payment Date" had the meaning set forth under
"-- Certain Covenants -- Limitation on Asset Sales."
"Net Proceeds Offer Trigger Date" has the meaning set forth under
"-- Certain Covenants -- Limitation on Asset Sales."
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the Notes, the Indenture and the Parent
Guarantee in an aggregate principal amount not to exceed $150.0 million;
(ii) Indebtedness in an aggregate principal amount at any time
outstanding not to exceed on the date of incurrence the greater of (x)
$100.0 million, and (y) the sum of (a) 85% of the net book value of
accounts receivable of the Parent Guarantor and the Restricted Subsidiaries
and (b) 65% of the net book value of the inventory of the Parent Guarantor
and the Restricted Subsidiaries;
(iii) Interest Swap Obligations of the Parent Guarantor and the
Restricted Subsidiaries covering Indebtedness of the Parent Guarantor or
any Restricted Subsidiary; provided, however, that such Interest Swap
Obligations are entered into to protect the Parent Guarantor and the
Restricted Subsidiaries from fluctuations in interest rates on Indebtedness
incurred in accordance with the Indenture to the extent the notional
principal amount of such Interest Swap Obligations does not exceed the
principal amount of the Indebtedness to which such Interest Swap
Obligations relates;
(iv) Indebtedness under Currency Agreements; provided that in the case
of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Parent Guarantor and the
Restricted Subsidiaries outstanding other than as a result of fluctuations
in foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(v) Indebtedness of a Restricted Subsidiary to the Parent Guarantor or
a Restricted Subsidiary for so long as such Indebtedness is held by the
Parent Guarantor or a Restricted Subsidiary, in each case subject to no
Lien held by a Person other than the Parent Guarantor or a Restricted
Subsidiary; provided that if as of any date any Person other than the
Parent Guarantor or a Restricted Subsidiary owns or holds any such
Indebtedness or holds a Lien in respect of such Indebtedness, such date
shall be deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by the issuer of such Indebtedness.
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(vi) Indebtedness of the Parent Guarantor to a Restricted Subsidiary
for so long as such Indebtedness is held by a Restricted Subsidiary, in
each case subject to no Lien; provided that (a) any Indebtedness of the
Parent Guarantor to any Restricted Subsidiary is unsecured and
subordinated, pursuant to a written agreement, to the Parent Guarantor's
obligations under the Indenture and the Parent Guarantee and (b) if as of
any date any person other than a Restricted Subsidiary owns or holds any
such Indebtedness or any Person holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the Parent Guarantor;
(vii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within five business days of incurrence;
(viii) Indebtedness of the Parent Guarantor or any of the Restricted
Subsidiaries represented by letters of credit for the account of the Parent
Guarantor or such Restricted Subsidiary, as the case may be, in order to
provide security for workers' compensation claims, payment obligations in
connection with self-insurance or similar requirements in the ordinary
course of business;
(ix) Refinancing Indebtedness;
(x) Purchase Money Indebtedness and Capitalized Lease Obligations (and
any Indebtedness incurred to Refinance such Purchase Money Indebtedness or
Capitalized Lease Obligations) not to exceed $15.0 million at any one time
outstanding; and
(xi) Indebtedness of the Parent Guarantor and the Restricted
Subsidiaries in an aggregate principal amount not to exceed $20.0 million
at any one time outstanding.
"Permitted Investments" means (i) Investments by the Parent Guarantor or
any Restricted Subsidiary in any Person that is or will become immediately after
such Investment a Restricted Subsidiary or that will merge or consolidate into
the Parent Guarantor or a Restricted Subsidiary; (ii) Investments in the Parent
Guarantor by any Restricted Subsidiary; provided that any Indebtedness
evidencing such Investment is unsecured and subordinated, pursuant to a written
agreement, to the Parent Guarantor's obligations under the Parent Guarantee and
the Indenture; (iii) Investments in cash and Cash Equivalents; (iv) loans and
advances to employees and officers of the Parent Guarantor and the Restricted
Subsidiaries in the ordinary course of business for bona fide business purposes
not in excess of $2.0 million at any time outstanding; (v) Currency Agreements
and Interest Swap Obligations entered into in the ordinary course of the Parent
Guarantor's or a Restricted Subsidiary's businesses and otherwise in compliance
with the Indenture; (vi) Investments in securities of trade creditors or
customers received pursuant to any plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such trade creditors or customers, or the
refinancing of, or a settlement of amounts due under, one or more trade accounts
extended in the normal course of business to customers of the Parent Guarantor
or a Restricted Subsidiary which are in default under their standard credit
terms; (vii) Investments made by the Parent Guarantor or the Restricted
Subsidiaries as a result of consideration received in connection with an Asset
Sale made in compliance with the covenant described under "-- Certain
Covenants -- Limitation on Asset Sales"; (viii) Investments of the Parent
Guarantor in Qualified Capital Stock of an Assuming Party and (ix) Investments
in Persons, including, without limitation, Unrestricted Subsidiaries and joint
ventures, engaged in a business similar or related to the businesses in which
the Parent Guarantor and the Restricted Subsidiaries are engaged on the Issue
Date not to exceed $15.0 million at any one time outstanding.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Parent Guarantor shall have set aside on
its books such reserves as may be required pursuant to GAAP;
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(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters of
credit issued in the ordinary course of business consistent with past
practice in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceeds which may
have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Parent
Guarantor;
(vi) purchase money Liens securing Indebtedness to finance property or
assets of the Parent Guarantor, and Liens securing Indebtedness which
Refinances any such Indebtedness; provided, however, that (A) the related
purchase money Indebtedness (or Refinancing Indebtedness) shall not exceed
the cost of such property or assets and shall not be secured by any
property or assets of the Parent Guarantor other than the property and
assets so acquired and (B) the Lien securing the purchase money
Indebtedness shall be created within 90 days of such acquisition;
(vii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(viii) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(ix) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual or warranty requirements of the
Parent Guarantor, including rights of offset and set-off;
(x) Liens securing Interest Swap Obligations which Interest Swap
Obligations related to Indebtedness that is otherwise permitted under the
Indenture;
(xi) Liens securing Indebtedness under Currency Agreements; and
(xii) Liens securing Acquired Indebtedness (and any Indebtedness which
Refinances such Acquired Indebtedness) incurred in accordance with the
covenant described under "-- Certain Covenants -- Limitation on Incurrence
of Additional Indebtedness"; provided that (A) such Liens secured the
Acquired Indebtedness at the time of and prior to the incurrence of such
Acquired Indebtedness by the Parent Guarantor and were not granted in
connection with, or in anticipation of the incurrence of such Acquired
Indebtedness by the Parent Guarantor and (B) such Liens do not extend to or
cover any property or assets of the Parent Guarantor other than the
property or assets that secured the Acquired Indebtedness prior to the time
such Indebtedness became Acquired Indebtedness of the Parent Guarantor.
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
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"Public Equity Offering" has the meaning set forth under
"-- Redemption -- Optional Redemption upon Public Equity Offerings."
"Purchase Money Indebtedness" means Indebtedness of the Parent Guarantor or
any Restricted Subsidiary incurred for the purpose of financing all or any part
of the purchase price or the cost of construction or improvement of any
property, provided that the aggregate principal amount of such Indebtedness does
not exceed the lesser of the fair market value of such property or such purchase
price or cost.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Reference Date" has the meaning set forth under "-- Certain
Covenants -- Limitation on Restricted Payments."
"Refinance" means in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Parent Guarantor or
any Restricted Subsidiary of Indebtedness incurred in accordance with the
covenant described under "-- Certain Covenants Limitation on Incurrence of
Additional Indebtedness" (other than pursuant to clause (ii), (iii), (iv), (v),
(vi), (vii), (viii), (x) or (xi) of the definition of Permitted Indebtedness),
in each case that does not (1) result in an increase in the aggregated principal
amount of any of Indebtedness of such Person as of the date of such proposed
Refinancing (plus the amount of any premium required to be paid under the terms
of the instrument governing such Indebtedness and plus the amount of reasonable
expenses incurred in connection with such Refinancing) or (2) create
Indebtedness with (A) a Weighted Average Life to Maturity that is less than the
Weighted Average Life to Maturity of the Indebtedness being Refinanced or (B) a
final maturity earlier than the final maturity of the Indebtedness being
Refinanced; provided that if such Indebtedness being Refinanced is Indebtedness
of the Issuer and/or the Parent Guarantor, then such Refinancing Indebtedness
shall be Indebtedness solely of the Issuer and/or the Parent Guarantor.
"Registration Rights Agreement" means (i) the Registration Rights Agreement
dated the Issue Date among the Issuer, the Parent Guarantor and the Initial
Purchasers, and (ii) any registration rights agreement by and among the Issuer,
the Parent Guarantor and purchasers of Notes issued after the Issue Date.
"Restricted Payment" has the meaning set forth under "-- Certain
Covenants -- Limitation on Restricted Payments."
"Restricted Subsidiary" means any Subsidiary of the Parent Guarantor that
has not been designated by the Board of Directors of the Parent Guarantor, by a
Board Resolution delivered to the Trustee, as an Unrestricted Subsidiary
pursuant to and in compliance with the covenant described under "-- Certain
Covenants -- Limitation on Designations of Unrestricted Subsidiaries." Any such
Designation may be revoked by a Board Resolution of the Parent Guarantor
delivered to the Trustee, subject to the provisions of such covenant.
"Revocation" has the meaning set forth under "-- Certain
Covenants -- Limitation on Designations of Unrestricted Subsidiaries."
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Parent Guarantor or a Restricted Subsidiary of any property,
whether owned by the Parent Guarantor or any Restricted Subsidiary at the Issue
Date or later acquired, which has been or is to be sold or transferred by the
Parent Guarantor or such Restricted Subsidiary to such Person or to any other
Person from whom funds have been or are to be advanced by such Person on the
security of such Property.
"Significant Subsidiary" means any Restricted Subsidiary that satisfies the
criteria for a "significant subsidiary" set forth in Rule 1.02(w) of Regulation
S-X under the Exchange Act.
"Subsidiary," with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary
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circumstances shall at the time be owned, directly or indirectly, by such Person
or (ii) any other Person of which at least a majority of the voting interest
under ordinary circumstances is at the time, directly or indirectly, owned by
such Person.
"Surviving Entity" has the meaning set forth under "-- Certain
Covenants -- Merger, Amalgamation, Consolidation and Sale of Assets."
"Tax" means any tax, duty, assessment or governmental charge of whatever
nature (or interest on, or penalties or other additions to, any of the
foregoing) imposed or levied by or on behalf of, or within, Canada or any
Province of Canada or any political subdivision or taxing authority of Canada or
any Province of Canada.
"Unrestricted Subsidiary" means any Subsidiary of the Parent Guarantor
designated as such pursuant to and in compliance with the covenant described
under "-- Certain Covenants -- Limitation on Designations of Unrestricted
Subsidiaries." Any such designation may be revoked by a Board Resolution of the
Parent Guarantor delivered to the Trustee, subject to the provisions of such
covenant.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date the making of such payment.
BOOK ENTRY; DELIVERY AND FORM
Except as described in the next paragraph, the Notes initially will be
issued in one or more global certificates in definitive, fully registered form
(the "Global Notes"). The Global Notes will be deposited on the Issue Date with,
or on behalf of, DTC and registered in the name of a nominee of DTC.
Notes held by QIBs who elect to take physical delivery of their
certificates instead of holding their interest through the Global Notes (and
which are thus ineligible to trade through DTC) (collectively referred to herein
as the "Non-Global Purchasers") will be issued in registered certificated form
("Certificated Securities"). Upon the transfer to a QIB of any Certificated
Security initially issued to a Non-Global Purchaser, such Certificated Security
will, unless the transferee requests otherwise or the Global Notes have
previously been exchanged in whole for Certificated Securities, be exchanged for
an interest in a Global Note.
THE GLOBAL NOTES
The Issuer expects that pursuant to procedures established by DTC (i) upon
the issuance of the Global Notes, DTC or its custodian will credit, on its
internal system, the principal amount of Notes of the individual beneficial
interest represented by such Global Notes to the respective accounts for persons
who have accounts with DTC ("participants") and (ii) ownership of beneficial
interest in the Global Notes will be shown on, and the transfer of such
ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants).
Such accounts initially will be designated by or on behalf of the Initial
Purchasers and ownership of beneficial interests in the Global Notes will be
limited to participants or persons who hold interest through participants. QIBs
hold their interests in the Global Notes directly through DTC, if they are
participants, or indirectly through organizations which are participants. Any
person acquiring an interest in a Global Note through an offshore transaction in
reliance on Regulation S of the Securities Act may hold such interest through
Cedel or Euroclear. The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and such laws may impair the ability to transfer beneficial
interests in a Global Note.
So long as DTC or its nominee is the registered owner or holder of the
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by such Global Note for all purposes
under the Indenture. No beneficial owner of an interest in any Global Note will
be able to transfer
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that interest except in accordance with DTC's procedures, in addition to those
provided for under the Indenture.
Payments of the principal of, premium, if any, and interest (including
Additional Interest) on, the Global Notes will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of the Issuer, the
Trustee or any paying agent of the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the Global Notes or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interest.
The Issuer expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest (including Additional Interest) in
respect of the Global Notes, will credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of the Global Notes as shown on the records of DTC or its nominee. The
Issuer also expects that payments by participants to owners of beneficial
interest in the Global Notes held through such participants will be governed by
standing instructions and customary practice, as is now the case with securities
held for the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds. Transfers
between participants in Euroclear and Cedel will be effected in accordance with
their respective rules and operating procedures. If a holder requires physical
delivery of a Certificated Security for any reason, including to sell Notes to
persons in states which require physical delivery of the Certificated
Securities, or to pledge such securities, such holder must transfer its interest
in the Global Notes in accordance with the normal procedures of DTC and with the
procedures set forth in the Indenture.
DTC has advised the Issuer that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more participants to whose
account the DTC interests in the Global Notes are credited and only in respect
of such portion of the aggregate principal amount of Notes as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default under the Indenture, DTC will exchange the Global Notes
for Certificated Securities, which it will distribute to its participants.
DTC has advised the Issuer as follows: DTC is a limited purpose trust
company organized under the Banking Laws of the State of New York, a member of
the Federal Reserve System, a "clearing corporation" within the meaning of the
New York Uniform Commercial Code and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of securities certificates. Participants include securities
brokers and dealers, banks, trust companies and clearing corporations and
certain other organizations, some of whom (or their representatives) own DTC.
Access to the DTC system is available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly ("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is under
no obligation to perform and continue to perform such procedures, and such
procedures may be discontinued at any time. None of the Issuer, the Initial
Purchasers or the Trustee will have any responsibility for the performance by
DTC or its participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
CERTIFICATED SECURITIES
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Notes and a successor depositary is not appointed by the Issuer
within 90 days, Certificated Securities will be issued in exchange for the
Global Notes.
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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
EXCHANGE OF OLD NOTES FOR NEW NOTES
The following is a summary of the material generally applicable U.S.
federal income tax consequences resulting from the exchange of Old Notes for New
Notes pursuant to the Exchange Offer.
The exchange of the Old Notes for the New Notes pursuant to the Exchange
Offer should not be treated as a taxable transaction for federal income tax
purposes because the New Notes do not differ materially in kind or extent from
the Old Notes. Accordingly, no gain or loss should be recognized by a Holder who
exchanges an Old Note for a New Note pursuant to the Exchange Offer, and each
New Note should be viewed as a continuation of the corresponding Old Note. For
purposes of determining gain or loss upon a subsequent sale or exchange of the
New Notes, a holder's initial basis in the New Notes will be the same as such
holder's adjusted basis in the Old Notes exchanged therefor, and the holding
period of a holder for the New Note should include the period during which such
holder held such corresponding Old Note.
The following is a general discussion of certain U.S. federal income and
estate tax considerations relevant to original persons who hold the Notes as
capital assets (within the meaning of Section 1221 of the Internal Revenue Code
of 1986, as amended (the "Code"). This discussion in based upon the Code,
Treasury Regulations, Internal Revenue Service ("IRS") rulings and judicial
decisions now in effect, all of which are subject to change (possibly with
retroactive effect) or different interpretations. There can be no assurance that
the IRS will not challenge one or more of the conclusions described herein, and
the Company has not obtained, nor does it intend to obtain, a ruling from the
IRS or an opinion of counsel with respect to the U.S. federal income or estate
tax consequences of acquiring, holding or disposing of Notes.
This discussion is for general information only and does not purport to
address all aspects of U.S. federal income or estate taxation that may be
relevant to a particular holder, including, without limitation, the treatment of
certain categories of holders, some of which may be subject to special rules
(including, for example, dealers in securities, banks, insurance companies,
tax-exempt organizations, foreign persons that are hybrid entities, persons
holding Notes as part of a hedging or conversion transaction, straddle or other
risk reduction transactions, persons who actually or constructively own 10% or
more of the total combined voting power of the Company's stock, controlled
foreign corporations (within the meaning of Section 957 of the Code), and U.S.
expatriates (including former citizens or residents of the U.S.)). In addition,
it does not discuss all of the consequences that may be relevant to a holder of
Notes in light of the holder's particular tax circumstances (including, for
example, persons subject to the alternative minimum tax provisions of the Code).
The discussion also does not discuss any aspect of state, local or foreign tax
law, or U.S. federal estate and gift tax law other than certain U.S. federal
estate tax provisions relating to non-resident alien individuals.
PROSPECTIVE PURCHASERS OF THE NOTES ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES
OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES.
U.S. HOLDERS
The following discussion is limited to a noteholder that for U.S. federal
income tax purposes is (i) a citizen or resident (as defined in Section 7701(b)
of the Code) of the United States, (ii) a corporation, partnership or limited
liability company formed under the laws of the United States or any political
subdivision thereof, (iii) an estate the income of which is subject to U.S.
federal income taxation regardless of its source or (iv) a trust, if a U.S.
court is able to exercise primary supervision over its administration and one or
more U.S. persons have the authority to control all substantial decisions of the
trust (each a "U.S. Holder").
Interest and Original Issue Discount
Notes. Stated interest on the Notes will generally be includable in a U.S.
Holder's gross income and taxable as ordinary income for U.S. federal income tax
purposes at the time it is paid or accrued in accordance
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with the U.S. Holder's regular method of accounting. The Notes do not have any
original issue discount ("OID").
Sale, Exchange or Retirement of a Note
Each U.S. Holder generally will recognize capital gain or loss upon the
sale, exchange, redemption, retirement or other taxable disposition of a Note
equal to the difference (if any) between (i) the sum of the amount of cash and
the fair market value of any property received (except to the extent that such
cash or other property is attributable to the payment of accrued interest not
previously included in income, which amount will be taxable as ordinary income)
and (ii) such holder's adjusted tax basis in the Note. Gain on most capital
assets held (or deemed held) by a noncorporate U.S. Holder for more than 18
months is subject to tax at a maximum rate of 20%, and gain on most capital
assets held by a noncorporate U.S. Holder for more than one year and up to 18
months is subject to tax at a maximum rate of 28%. A U.S. Holder's initial tax
basis in a Note will be the amount paid therefor.
A U.S. Holder will not recognize any taxable gain or loss on the exchange
of a Note for an Exchange Note pursuant to an Exchange Offer.
Additional Amounts. As more fully described in "Purpose of the Exchange
Offer," in the event of a Registration Default with respect to the Notes, the
Company will be required to pay additional amounts to the holders of such Notes
as Additional Interest. According to Treasury Regulations, additional payments
will not affect the amount of interest income recognized by a U.S. Holder (or
the timing of such recognition) if the likelihood of such additional payment, as
of the date the debt obligations are issued, is remote. The Company believes
that the likelihood of the imposition of liquidated damages is remote and does
not intend to treat the possibility of such payment as affecting the yield to
maturity of any Note. Similarly, the Company intends to take the position that
the likelihood of a redemption or a repurchase upon a "Change of Control" or
"Asset Sale" is remote under the Treasury Regulations. Accordingly, such
payments should be included in the U.S. Holder's income in accordance with it
regular method of accounting. In this regard, the Company's determination is
binding on a U.S. Holder unless the U.S. Holder explicitly discloses on its
timely filed U.S. federal income tax return for the year in which the Note was
acquired that it is taking a position contrary to the Company.
Backup Withholding
A U.S. Holder of a Note may be subject to "backup withholding" at a rate of
31% with respect to certain "reportable payments," including payments of
interest (and OID) and, under certain circumstances, principal payments on the
Notes. These backup withholding rules apply if the U.S. Holder, among other
things, (i) fails to furnish the Company with his or its social security number
or other taxpayer identification number ("TIN"), certified under penalties of
perjury, within a reasonable time after the request therefor, (ii) furnishes an
incorrect TIN, (iii) fails to properly report the receipt of interest, or (iv)
under certain circumstances, fails to provide a certified statement, signed
under penalties of perjury, that the TIN furnished is the correct number and
that such holder is not subject to backup withholding. Any amount withheld from
a payment to a U.S. Holder under the backup withholding rules is creditable
against the U.S. Holder's U.S. federal income tax liability, provided that the
required information is furnished to the IRS. Backup withholding will not apply,
however, with respect to payments made to certain holders (including
corporations and tax-exempt organizations), provided their exemptions from
backup withholding are properly established. A U.S. Holder who does not provide
the Company with its correct TIN also may be subject to penalties imposed by the
IRS.
NON-U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a Non-U.S. Holder and certain U.S. federal estate tax
consequences of a nonresident alien individual (for U.S. federal estate tax
purposes). As used herein, a "Non-U.S. Holder" is any holder other than a U.S.
Holder. For purposes of the U.S. withholding tax on interest discussed below, a
Non-U.S. Holder includes a non-resident
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fiduciary of an estate or trust. For purposes of this discussion, interest and
gain on the sale, exchange or other disposition of a Note will generally be
considered to be "U.S. trade or business income" if such income or gain is (i)
effectively connected with the conduct of a U.S. trade or business of the holder
or (ii) in the case of most treaty residents, attributable to a permanent
establishment (or, in the case of an individual, a fixed base) in the U.S.
Interest
Generally, any interest of a Non-U.S. Holder on a Note that is not U.S.
trade or business income will not be subject to U.S. federal income tax if the
interest qualifies as "portfolio interest." Interest on the Notes will generally
qualify as portfolio interest if either (a) the beneficial owner of a Note
certifies, under penalties of perjury, to the Company or its Paying Agent, as
the case may be, that such owner is a non-U.S. person and provides such owner's
name and address or (b) a securities clearing organization, bank or other
financial institution that holds customer securities in the ordinary course of
its trade or business (a "Financial Institution") and holds the Note on behalf
of a beneficial owner thereof, certifies, under penalties of perjury, that such
certificate has been received by it or by a Financial Institution between it and
the beneficial owner and furnishes the payor with a copy thereof. Recently
adopted Treasury Regulations that will be effective beginning January 1, 2000
(the "New Regulations") provide alternative methods for satisfying the
certification requirement. The New Regulations will generally require, in the
case of Notes held by a foreign partnership, that the certificate be provided by
the partners rather than by the foreign partnership, and that the partnership
provide certain information including a U.S. TIN.
The gross amount of payments to a Non-U.S. Holder of interest that do not
qualify for the portfolio interest exemption and that are not U.S. trade or
business income will be subject to withholding of U.S. federal income tax at a
30% rate, unless a U.S. income tax treaty applies to reduce or eliminate such
withholding. U.S. trade or business income will be subject to U.S. federal
income tax on a net income basis at applicable graduated tax rates in the same
manner as a U.S. Holder and would be exempt from the 30% withholding tax
described above. In the case of a Non-U.S. Holder that is a corporation, such
U.S. trade or business income may also, under certain circumstances, be subject
to an additional branch profits tax at a 30% rate (or, if applicable, a lower
treaty rate).
To claim the benefit of a tax treaty or to claim an exemption from
withholding because interest income is U.S. trade or business income, a Non-U.S.
Holder must provide the Company with a properly executed Form 1001 or 4224, as
applicable, prior to the payment of interest. These forms must be periodically
updated. Under the New Regulations, a holder claiming either such exemption will
be required to provide a Form W-8, subject to certain transition rules, and may
be required to provide a TIN. Special procedures are provided in the New
Regulations for payments through qualified intermediaries. Prospective investors
should consult their own tax advisors regarding the effect to them, if any, of
the New Regulations.
A Non-U.S. Holder of a Note that is eligible for a reduced rate of U.S.
withholding tax pursuant to an income tax treaty may obtain a refund of any
amounts currently withheld by filing an appropriate claim for a refund with the
IRS.
Sale, Exchange or Retirement of a Note
Subject to the discussion concerning backup withholding, any gain realized
by a Non-U.S. Holder on the sale, exchange, redemption, retirement or other
taxable disposition of a Note generally will not be subject to U.S. federal
income tax unless (i) such gain is U.S. trade or business income or (ii) subject
to certain exceptions, the Non-U.S. Holder is an individual who is present in
the U.S. for 183 days or more in the taxable year of the disposition.
Information Reporting and Backup Withholding
The Company must report annually to the IRS and to each Non-U.S. Holder any
interest that is subject to withholding, or that is exempt from U.S. withholding
tax pursuant to a tax treaty, or interest that is exempt from U.S. federal
income tax under the portfolio interest exception. Copies of these information
returns may
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also be made available under the provisions of a specific treaty or agreement to
the tax authorities of the country in which the Non-U.S. Holder resides.
Treasury Regulations provide that backup withholding and additional
information reporting will not apply to payments of principal on the Notes by
the Company to a Non-U.S. Holder if the holder certifies as to its non-U.S.
status under penalties of perjury or otherwise establishes an exemption
(provided that neither the Company nor its Paying Agent has actual knowledge
that the holder is a U.S. person or that the conditions of any other exemption
are not, in fact, satisfied).
The payment of the proceeds from the disposition of Notes to or through the
U.S. office of any broker, U.S. or foreign, will be subject to information
reporting and possible backup withholding at a rate of 31% unless the owner
certifies as to its non-U.S. status under penalty of perjury or otherwise
establishes an exemption, provided that the broker does not have actual
knowledge that the holder is a U.S. person or that the conditions of any other
exemption are not, in fact, satisfied. The payment of the proceeds from the
disposition of a Note to or through a non-U.S. office of a non-U.S. broker that
is not a U.S. related person will not be subject to information reporting or
backup withholding. In the case of the payment of proceeds from the disposition
of a Note to or through a non-U.S. office of a broker that is either a U.S.
person or a U.S. related person, information reporting is required on the
payment unless the broker has documentary evidence in its files that the owner
is a Non-U.S. Holder and the broker has no knowledge to the contrary. Backup
withholding will not apply to payments made through foreign offices of a broker
that is not a U.S. person or a U.S. related person (absent actual knowledge that
the payee is a U.S. person). For purposes of this section, a "U.S. related
person" is (i) a controlled foreign corporation for U.S. federal income tax
purposes, (ii) a foreign person 50% or more of whose gross income from all
sources for the three-year period ending with the close of its taxable year
preceding the payment (or for such part of the period that the broker has been
in existence) is derived from activities that are effectively connected with the
conduct of a U.S. trade or business or (iii) with respect to payments made after
December 31, 1999, a foreign partnership that, at any time during its taxable
year, is 50% or more (by income or capital interest) owned by U.S. persons or is
engaged in the conduct of a U.S. trade or business. The New Regulations provide
certain presumptions under which a Non-U.S. Holder will be subject to backup
withholding and information reporting unless the Non-U.S. Holder provides a
certification as to its non-U.S. Holder status.
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or a credit against such Non-U.S.
Holder's U.S. federal income tax liability, provided that the requisite
procedures are followed.
U.S. Federal Estate Tax
A Note that is held, or treated as held, by a non-resident alien individual
(as specifically determined under residence rules for U.S. federal estate tax
purposes) at the time of death will not be subject to U.S. federal estate tax
provided that the interest thereon qualifies as portfolio interest (without
regard to the certification requirement) and was not U.S. trade or business
income. Otherwise, the Non-U.S. Holder could be subject to a U.S. federal estate
tax of up to 55% on the value of his Notes at the time of his death (subject to
reduction by treaty, if applicable).
THE PRECEDING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME AND ESTATE TAX
CONSEQUENCES IS FOR GENERAL INFORMATION ONLY, AND DOES NOT CONSTITUTE TAX
ADVICE. ACCORDINGLY, EACH INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO IT OF PURCHASING, HOLDING AND DISPOSING OF NOTES,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY U.S. FEDERAL, STATE, LOCAL OR
FOREIGN TAX LAWS, AS WELL AS ANY POSSIBLE CHANGES IN THE TAX LAWS.
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CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
The following general summary describes the principal Canadian federal
income tax considerations applicable to a holder of Notes acquired under this
Offering (a "Holder") who, at all relevant times, for purposes of the Income Tax
Act (Canada) (the "Canadian Tax Act"), is a non-resident or is deemed to be a
non-resident of Canada, deals at arm's length with the Parent Guarantor, does
not use or hold and is not deemed to use or hold the Notes in carrying on a
business in Canada, and, in the case of a Holder that is an insurer, whose Notes
are not designated insurance property. This summary is based upon the current
provisions of the Canadian Tax Act and the regulations thereunder (the
"Regulations"), all specific proposals to amend the Canadian Tax Act and
Regulations publicly announced by the Minister of Finance (Canada) prior to the
date hereof and counsel's understanding of the current administrative practices
of Revenue Canada in effect as of the date hereof. This summary is not
exhaustive of all possible Canadian federal income tax considerations and,
except as mentioned above, does not anticipate any changes in law whether by
legislative, governmental or judicial decision or action, nor does it take into
account provincial, territorial or foreign tax considerations, which may differ
significantly from those discussed herein.
This summary is of a general nature only and is not intended to be legal or
tax advice to any particular Holder of Notes and no representation with respect
to the income tax consequences to any particular Holder is made. Consequently,
prospective purchasers of Notes should consult their own tax advisors with
respect to their particular circumstances.
The exchange of an Old Note for a New Note is not a taxable event for the
purposes of the Canadian Tax Act.
Where a person resident in Canada pays or credits, or is deemed to pay or
credit, amounts on account, in lieu of payment, or in satisfaction of interest
to non-residents of Canada, such amounts are generally subject to a 25%
non-resident withholding tax under the Canadian Tax Act. Such rate of tax may be
reduced by the application of international tax treaties to which Canada is a
party. For example, the Canada-U.S. Income Tax Convention generally reduces the
rate of withholding tax on interest to 10%.
On the assumption that the Issuer is and continues to be a non-resident of
Canada which does not carry on business in Canada for purposes of the Canadian
Tax Act, payments by the Issuer on the Notes will not be subject to Canadian
non-resident withholding tax. However, in the event that the Parent Guarantor
pays amounts in accordance with the Parent Guarantee in satisfaction of any
amounts that may reasonably be regarded as being or being attributable to
interest payable under the Notes, such amounts may be subject to non-resident
withholding tax at a rate determined pursuant to the Canadian Tax Act and any
applicable income tax treaty to which Canada is a party. The Parent Guarantor
has agreed to gross up any such payment made by it pursuant to the Parent
Guarantee. See "Description of Notes -- Parent Guarantee."
No other taxes on income (including taxable capital gains) are payable
under the Canadian Tax Act in respect of the Notes or interest thereon by
Holders of Notes.
LEGAL MATTERS
The legality of the New Notes and of the Parent Guarantee will be passed
upon by Tuke Yopp & Sweeney, PLC, Nashville, Tennessee with respect to matters
of the United States law and by Osler, Hoskin & Harcourt, Toronto, Ontario, with
respect to matters of Canadian law.
EXPERTS
The consolidated financial statements and schedules of the Parent
Guarantor, as of December 31, 1997, and for the year then ended, included and/or
incorporated by reference herein and elsewhere in the Registration Statement
have been audited by Arthur Andersen & Co., Chartered Accountants, as indicated
in their reports with respect thereto, and have been incorporated and/or
included herein in reliance upon the authority of said firm as experts in giving
said reports.
74
<PAGE> 76
The consolidated financial statements and schedules of the Parent
Guarantor, as of December 31, 1996, and for each of the two years in the period
ended December 31, 1996, included and/or incorporated by reference herein and
elsewhere in the Registration Statement have been incorporated herein in
reliance on the report of PricewaterhouseCoopers, Chartered Accountants, given
on the authority of that firm as experts in accounting and auditing.
Any financial statements and schedules hereafter incorporated by reference
in the registration statement that have been audited and are the subject of a
report by independent accountants will be so incorporated by reference in
reliance upon such reports and upon the authority of such firms as experts in
accounting and auditing to the extent covered by consents filed with the
Commission.
AVAILABLE INFORMATION
The Issuer and the Parent Guarantor have filed with the Commission a
Registration Statement on Form S-4 under the Securities Act for the registration
of the New Notes offered hereby. As permitted by the rules and regulations of
the Commission, this Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits thereto. For further
information with respect to the Issuer, the Parent Guarantor and the New Notes
offered hereby, reference is made to the Registration Statement and to the
exhibits filed therewith. Statements contained in this Prospectus concerning the
contents of any contract or other document are not necessarily complete. With
respect to each such contract or other document filed with the Commission as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference.
The Parent Guarantor is subject to the informational requirements of the
Exchange Act, and in accordance therewith files periodic reports and other
information with the Commission. Such periodic reports and other information
filed with the Commission may be inspected without charge at the Public
Reference Section of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and will also be available for inspection and copying at
the regional offices of the Commission located at Seven World Trade Center, 13th
Floor, New York, New York 10048; and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of all or any portion of such
material also may be obtained at prescribed rate from the Public Reference
Section of the Commission upon payment of certain prescribed fees. In addition,
the Commission maintains a website that contains periodic reports and other
information filed by the Parent Guarantor. This website can be accessed at
www.sec.gov. Copies of such material can also be obtained from the Company upon
request. In addition, such material can be inspected at the offices of the
American Stock Exchange, Inc., 86 Trinity Place, New York, New York 10006-1881.
The Company expects that the Issuer will not become subject to the
informational requirements of the Exchange Act. The Company has filed a request
with the Commission seeking to exempt the Issuer from these requirements and, in
view of the Parent Guarantee and the fact that the Parent Guarantor is subject
to these requirements, expects this request to be granted. Instead, the Company
will include in a footnote to its financial statements, summarized financial
information regarding the Issuer.
PLAN OF DISTRIBUTION
Each broker-dealer who holds Old Notes that are Transfer Restricted
Securities that were acquired for its own account as a result of market-making
activities or other trading activities (other than Transfer Restricted
Securities acquired directly from the Issuer) may exchange such Old Notes
pursuant to the Exchange Offer; however, such broker-dealer may be deemed an
"underwriter" within the meaning of the Securities Act and must, therefore,
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. This Prospectus as it may be amended or supplemented from time
to time may be used by a broker-dealer for such purpose. The Issuer and the
Parent Guarantor have agreed that for a period of 180 days after the Exchange
Offer is consummated, it will, upon reasonable request, make this Prospectus, as
amended or supplemented, available promptly to any broker-dealer for use in
connection with any such resale.
75
<PAGE> 77
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act, and any profit on any such resale of New Notes and any
commissions and concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the effective date of the Registration
Statement of which this Prospectus is a part, the Issuer and the Parent
Guarantor will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Issuer and the Parent Guarantor
have agreed to pay the expenses incident to the Exchange Offer and will
indemnify the Holders of the Old Notes against certain liabilities, including
certain liabilities under the Securities Act, in connection with the Exchange
Offer.
76
<PAGE> 78
INTERNATIONAL COMFORT PRODUCTS CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PRO FORMA PAGE
- --------- ----
<S> <C>
Pro Forma Selected Financial Data........................... F-2
Pro Forma Statement of Income Data.......................... F-3
Pro Forma Balance Sheet Data................................ F-4
Notes to Pro Forma Selected Financial Data.................. F-5
HISTORICAL
Audited Financial Statements
Auditors' Report -- 1997.................................. F-7
Auditors' Report -- 1996 and 1995......................... F-8
Consolidated Statements of Income (Loss) and Deficit for
the years ended December 31, 1995, 1996 and 1997....... F-9
Consolidated Balance Sheets as at December 31, 1996 and
1997................................................... F-10
Consolidated Statements of Changes in Financial Position
for the years ended December 31, 1995, 1996 and 1997... F-11
Notes to Consolidated Financial Statements................ F-12
Unaudited Financial Statements
Consolidated Statements of Income for the three months
ended March 31, 1997 and 1998.......................... F-33
Consolidated Balance Sheets as at March 31, 1997 and 1998,
and December 31, 1997.................................. F-34
Consolidated Statements of Changes in Financial Position
for the three months ended March 31, 1997 and 1998..... F-35
Notes to Consolidated Financial Statements................ F-36
</TABLE>
F-1
<PAGE> 79
INTERNATIONAL COMFORT PRODUCTS CORPORATION
PRO FORMA SELECTED FINANCIAL DATA
(UNAUDITED)
Effective January 31, 1998, International Comfort Products Corporation and
its subsidiaries (the "Company") completed the purchase of the stock of United
Electric Company ("United Electric").
The unaudited pro forma statement of income data for the year ended
December 31, 1997 has been prepared based on the historical income statements of
the Company, as adjusted to reflect the acquisition of the operations of United
Electric, the issuance of the Company's 8 5/8% Senior Notes due 2008 (the
"Notes"), and the application of the estimated net proceeds, as if the
acquisition had occurred and the Notes had been issued on January 1, 1997. The
unaudited pro forma statement of income data for the three months ended March
31, 1998 has been prepared based on the historical income statements of the
Company, as adjusted to reflect the issuance of the Notes and the application of
the estimated net proceeds as if the Notes had been issued on January 1, 1998.
The unaudited pro forma balance sheet data as of March 31, 1998 has been
prepared based on the historical balance sheet of the Company, as adjusted to
reflect the issuance of the Notes and the application of the estimated net
proceeds, as if the Notes had been issued on March 31, 1998. The pro forma
statement of income data may not be indicative of the future results of
operations and what the actual results of operations would have been had the
transactions described above been effective January 1, 1997 and January 1, 1998,
respectively. The pro forma selected financial data should be read in connection
with the consolidated financial statements and notes thereto included herein.
F-2
<PAGE> 80
INTERNATIONAL COMFORT PRODUCTS CORPORATION
PRO FORMA STATEMENT OF INCOME DATA
(UNAUDITED, IN MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
FOR THE YEAR ENDED DECEMBER 31, 1997 MARCH 31, 1998
---------------------------------------------- ----------------------------------
UNITED
ICP ELECTRIC ADJUSTMENTS PRO FORMA ICP ADJUSTMENTS PRO FORMA
-------- -------- ----------- --------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Revenue......... $ 630.7 $25.0 -- $ 655.7 $ 132.8 -- $ 132.8
Cost of Sales............. 503.7 17.0 -- 520.7 104.3 -- 104.3
-------- ----- ----- ------- ------- ----- -------
Gross Margin.............. 127.0 8.0 -- 135.0 28.5 -- 28.5
Selling, General and
Administrative
Expenses................ 85.5 4.5 $ 0.3(a) 90.3 20.2 -- 20.2
-------- ----- ----- ------- ------- ----- -------
Operating Profit.......... 41.5 3.5 (0.3) 44.7 8.3 -- 8.3
Financial Expenses
Interest expense........ 18.2 0.3 (0.2)(b) 18.3 4.5 $(0.3)(f) 4.2
Amortization of debt
issuance costs....... 1.3 -- (0.3)(c) 1.0 0.3 (0.1)(g) 0.2
Other................... -- (0.5) 0.4(d) (0.1) -- --
-------- ----- ----- ------- ------- ----- -------
19.5 (0.2) (0.1) 19.2 4.8 (0.4) 4.4
-------- ----- ----- ------- ------- ----- -------
Income Before Income
Taxes................... 22.0 3.7 (0.2) 25.5 3.5 0.4 3.9
Income Taxes.............. -- (1.3) 0.9(e) (0.4) -- -- --
-------- ----- ----- ------- ------- ----- -------
Net Income................ $ 22.0 $ 2.4 $ 0.7 $ 25.1 $ 3.5 $ 0.4 $ 3.9
======== ===== ===== ======= ======= ===== =======
Income Per Ordinary
Share................... $ 0.56 $ 0.63 $ 0.09 $ 0.10
======== ======= ======= =======
Weighted Average Number of
Ordinary Shares (in
millions)............... 39.664 39.664 39.856 39.856
======== ======= ======= =======
Other Data:
EBITDA(h)............... $ 56.6 $ 60.2 $ 12.4 $ 12.4
======== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE> 81
INTERNATIONAL COMFORT PRODUCTS CORPORATION
PRO FORMA BALANCE SHEET DATA
MARCH 31, 1998
(UNAUDITED, IN MILLIONS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
ICP ADJUSTMENTS PRO FORMA
------- ----------- ---------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term deposits............................... $ 10.1 $ 1.7(i) $ 11.8
Accounts receivable, net................................... 102.3 -- 102.3
Inventories................................................ 125.4 -- 125.4
Prepaid expenses and other................................. 5.6 -- 5.6
------- ------ -------
243.4 1.7 245.1
------- ------ -------
FIXED ASSETS
Property, plant and equipment -- at cost................... 222.6 -- 222.6
Accumulated depreciation................................... 124.5 -- 124.5
------- ------ -------
98.1 -- 98.1
------- ------ -------
INTANGIBLE ASSETS, NET..................................... 26.7 -- 26.7
OTHER ASSETS, NET.......................................... 10.6 3.6(j) 14.2
------- ------ -------
$ 378.8 $ 5.3 $ 384.1
======= ====== =======
LIABILITIES
CURRENT LIABILITIES
Short-term borrowings...................................... $ 37.4 $ -- $ 37.4
Accounts payable........................................... 51.0 -- 51.0
Accrued liabilities........................................ 28.2 -- 28.2
Product warranty........................................... 9.5 -- 9.5
Current portion of long-term debt.......................... 0.2 -- 0.2
------- ------ -------
126.3 -- 126.3
------- ------ -------
LONG-TERM DEBT............................................. 165.6 10.0(k) 175.6
PRODUCT WARRANTY........................................... 14.6 -- 14.6
OTHER LONG-TERM LIABILITIES................................ 16.9 -- 16.9
------- ------ -------
323.4 10.0 333.4
------- ------ -------
SHAREHOLDERS' EQUITY
ORDINARY SHARES............................................ 171.5 -- 171.5
DEFICIT.................................................... (113.0) (4.7)(l) (117.7)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT.................... (3.1) -- (3.1)
------- ------ -------
55.4 (4.7) 50.7
------- ------ -------
$ 378.8 $ 5.3 $ 384.1
======= ====== =======
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE> 82
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO PRO FORMA SELECTED FINANCIAL DATA
(UNAUDITED, IN MILLIONS OF U.S. DOLLARS)
(a) Reflects the elimination of certain expenses associated with the previous
owners of United Electric offset by amortization of goodwill recorded in
connection with the acquisition over thirty years.
<TABLE>
<S> <C>
Previous owner expenses..................................... $ (0.2)
Amortization of goodwill.................................... 0.5
-------
$ 0.3
=======
</TABLE>
(b) Reflects the reduced interest expense under the Notes as compared with the
9 3/4% Senior Secured Notes due 2000 (the "Refinanced Debentures") and
interest income from the net cash proceeds, offset by imputed interest
expense on the acquisition purchase price.
<TABLE>
<S> <C>
Reduced interest expense.................................... $ (1.2)
Interest income............................................. (0.2)
Interest expense on purchase price.......................... 1.2
-------
$ (0.2)
=======
</TABLE>
(c) Reflects the reduced amortization of debt issuance costs under the Notes as
compared with the Refinanced Debentures.
<TABLE>
<S> <C>
Notes amortization.......................................... $ 0.5
Refinanced Debenture amortization........................... (0.8)
-------
$ (0.3)
=======
</TABLE>
(d) Reflects the elimination of income earned by United Electric on an
investment retained by the previous owners of United Electric.
(e) Reflects adjustment of income taxes due to earnings of United Electric.
(f) Reflects the reduced interest expense under the Notes as compared with the
9 3/4% Senior Secured Notes due 2000 (the "Refinanced Debentures")
partially offset by interest income from the net cash proceeds.
(g) Reflects the reduced amortization of debt issuance costs under the Notes as
compared with the Refinanced Debentures.
<TABLE>
<S> <C>
Notes amortization.......................................... $ 0.1
Refinanced Debenture amortization........................... (0.2)
-------
$ (0.1)
=======
</TABLE>
(h) Represents income before income taxes, plus interest expense, write-off of
debt issuance costs and depreciation and amortization.
(i) Reflects the proceeds from the issuance of the Notes, the repurchase of the
Refinanced Debentures and the payment of offering expenses.
<TABLE>
<S> <C>
Proceeds from sale of Notes................................. $ 148.2
Repurchase of Refinanced Debentures......................... (140.0)
Repurchase premium.......................................... (2.3)
Offering expenses........................................... (4.2)
-------
$ 1.7
=======
</TABLE>
F-5
<PAGE> 83
(j) Reflects the write-off of deferred costs associated with the Refinanced
Debentures and the payment of expenses associated with the offering of the
Notes.
<TABLE>
<S> <C>
Write-off of deferred costs -- Refinanced Debentures........ $ (2.4)
Offering expenses -- Notes.................................. 4.2
Discount on issuance of the Notes........................... 1.8
-------
$ 3.6
=======
</TABLE>
(k) Reflects the repurchase of the Refinanced Debentures and the issuance of
the Notes.
<TABLE>
<S> <C>
Long-term debt -- Repurchase of the Refinanced Debentures $(140.0)
-- Issuance of the Notes 150.0
-------
$ 10.0
=======
</TABLE>
(l) Reflects the write-off of deferred costs associated with the Refinanced
Debentures and the payment of the repurchase premium on the Refinanced
Debentures.
<TABLE>
<S> <C>
Write-off of deferred costs -- Refinanced Debentures........ $ (2.4)
Payment of repurchase premium -- Refinanced Debentures...... (2.3)
-------
$ (4.7)
=======
</TABLE>
NOTE The pro forma statement of income data does not include non-recurring
expenses which will be recorded by the Company in connection with the
repurchase of the Refinanced Debentures related to the required repurchase
premium and the write-off of deferred costs ($4.7 at March 31, 1998).
F-6
<PAGE> 84
AUDITORS' REPORT
To The Shareholders
International Comfort Products Corporation
We have audited the consolidated balance sheet of International Comfort
Products Corporation (formerly Inter-City Products Corporation) as at December
31, 1997 and the consolidated statements of income (loss) and deficit and
changes in financial position for the year then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in Canada. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of International Comfort Products
Corporation as at December 31, 1997 and the results of its operations and the
changes in its financial position for the year then ended in accordance with
accounting principles generally accepted in Canada.
/s/ Arthur Andersen & Co.
Chartered Accountants
February 9, 1998
Mississauga, Canada
F-7
<PAGE> 85
<TABLE>
<S> <C> <C>
Coopers & Lybrand 145 King Street West tel.: (416) 869-1130
Chartered Accountants Toronto, Ontario fax: (416) 863-0926
Canada M5H 1V8 direct tel.: 941-8237
direct fax: 941-8446
</TABLE>
AUDITORS' REPORT
To The Shareholders
Inter-City Products Corporation
We have audited the consolidated balance sheet of Inter-City Products
Corporation as at December 31, 1996 and the consolidated statements of income
and deficit and changes in financial position for the years ended December 31,
1996 and 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of Inter-City Products Corporation
as at December 31, 1996 and the results of its operations and the changes in its
financial position for the years ended December 31, 1996 and 1995 in accordance
with generally accepted accounting principles.
/s/ Coopers & Lybrand
Coopers & Lybrand
Chartered Accountants
Toronto, Ontario
February 11, 1997
F-8
<PAGE> 86
INTERNATIONAL COMFORT PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
(IN MILLIONS OF U.S. DOLLARS)
<S> <C> <C> <C>
OPERATING REVENUE........................................... $ 532.8 $ 641.9 $ 630.7
Cost of Sales............................................... 467.4 517.8 503.7
------- ------- -------
Gross Margin................................................ 65.4 124.1 127.0
Selling, General and Administrative Expenses................ 93.2 90.7 85.5
Asset Writedowns and Restructuring Costs(Note 17)........... 15.5 -- --
------- ------- -------
OPERATING PROFIT (LOSS)..................................... (43.3) 33.4 41.5
------- ------- -------
Financial Expenses
Interest expense.......................................... 21.7 19.4 18.2
Amortization of debt issuance costs....................... 1.3 1.8 1.3
Write-off of debt issuance costs.......................... 2.1 .6 --
------- ------- -------
25.1 21.8 19.5
------- ------- -------
Income (Loss) Before Income Taxes........................... (68.4) 11.6 22.0
Income Taxes(Note 11)....................................... (12.8) -- --
------- ------- -------
Income (Loss) From Continuing Operations.................... (81.2) 11.6 22.0
Loss From Discontinued Operations(Note 16).................. (12.0) (3.1) --
------- ------- -------
NET INCOME (LOSS)........................................... (93.2) 8.5 22.0
Deficit -- Beginning of the Year............................ (53.7) (146.9) (138.4)
------- ------- -------
Deficit -- End of the Year.................................. $(146.9) $(138.4) $(116.4)
======= ======= =======
Income (Loss) Per Ordinary Share(Note 12)
</TABLE>
see accompanying notes
F-9
<PAGE> 87
INTERNATIONAL COMFORT PRODUCTS CORPORATION
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
------- -------
(IN MILLIONS OF
U.S. DOLLARS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term deposits................................ $ $17.6 $ 31.0
Accounts receivable -- trade (less allowance for doubtful
accounts; 1996 -- $7.7; 1997 -- $6.0)..................... 78.0 96.5
Note receivable(Note 2)..................................... -- 7.7
Inventories(Note 3)......................................... 117.7 94.5
Prepaid expenses and other.................................. 6.0 7.6
------- -------
219.3 237.3
------- -------
FIXED ASSETS(NOTE 4)
Property, plant and equipment -- at cost.................... 213.2 214.3
Accumulated depreciation.................................... 113.0 120.7
------- -------
100.2 93.6
------- -------
INTANGIBLE ASSETS, NET(NOTE 5).............................. 12.1 11.0
OTHER ASSETS, NET(NOTE 6)................................... 13.4 10.1
------- -------
$ 345.0 $ 352.0
======= =======
LIABILITIES
CURRENT LIABILITIES
Short-term borrowings(Note 7)............................... $ 39.0 $ 19.7
Accounts payable............................................ 39.6 44.8
Accrued liabilities......................................... 28.2 26.5
Product warranty............................................ 8.7 9.5
Current portion of long-term debt(Note 8)................... -- .2
------- -------
115.5 100.7
------- -------
LONG-TERM DEBT(NOTE 8)...................................... 165.0 165.6
PRODUCT WARRANTY............................................ 17.9 16.2
ENVIRONMENTAL LIABILITIES................................... 13.6 12.9
OTHER LONG-TERM LIABILITIES................................. 4.2 5.1
------- -------
316.2 300.5
------- -------
Commitments and Contingencies(Note 15)
SHAREHOLDERS' EQUITY
ORDINARY SHARES(NOTE 9)..................................... 169.2 171.2
DEFICIT..................................................... (138.4) (116.4)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT(NOTE 10)............ (2.0) (3.3)
------- -------
28.8 51.5
------- -------
$ 345.0 $ 352.0
======= =======
</TABLE>
see accompanying notes
F-10
<PAGE> 88
INTERNATIONAL COMFORT PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
(IN MILLIONS OF U.S. DOLLARS)
<S> <C> <C> <C>
Cash provided by (used for):
OPERATIONS
Income (loss) from continuing operations.................... $(81.2) $ 11.6 $ 22.0
Items not involving current cash flows(Note 18a)............ 54.4 20.9 17.3
Changes in working capital(Note 18b)........................ 97.3 (18.4) (20.1)
------ ------ ------
70.5 14.1 19.2
Discontinued Steel Pipe Operation........................... (.2) .5 --
------ ------ ------
70.3 14.6 19.2
------ ------ ------
INVESTING
Property, plant and equipment............................... (24.5) (11.8) (8.5)
Proceeds on sale of fixed assets............................ 11.8 1.6 .2
Proceeds from sale of/(acquisition of) Coastline and
General(Note 2)........................................... -- (15.3) 24.6
Acquisitions of distribution companies(Note 2).............. -- -- (5.6)
Discontinued operations..................................... 1.9 6.5 --
------ ------ ------
(10.8) (19.0) 10.7
------ ------ ------
FINANCING
Ordinary shares issued...................................... .6 .5 2.0
Long-term debt issued....................................... -- -- .8
Refinancing costs........................................... (.9) (4.5) --
Discontinued Steel Pipe Operation........................... (1.4) (2.1) --
Other....................................................... -- 2.2 --
------ ------ ------
(1.7) (3.9) 2.8
------ ------ ------
Increase (Decrease) in Cash (Net Borrowings)................ 57.8 (8.3) 32.7
Net Borrowings -- Beginning of the Year..................... (70.9) (13.1) (21.4)
------ ------ ------
Net Cash (Borrowings) -- End of the Year.................... $(13.1) $(21.4) $ 11.3
====== ====== ======
Represented by
Cash and short-term deposits.............................. $ 13.0 $ 17.6 $ 31.0
Less: Short-term borrowings............................... (17.7) (39.0) (19.7)
------ ------ ------
(4.7) (21.4) 11.3
Discontinued operations................................... (8.4) -- --
------ ------ ------
$(13.1) $(21.4) $ 11.3
====== ====== ======
</TABLE>
see accompanying notes
F-11
<PAGE> 89
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN MILLIONS OF U.S. DOLLARS UNLESS OTHERWISE STATED)
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
International Comfort Products Corporation, formerly Inter-City Products
Corporation, is a Canadian holding company which has two primary operating
subsidiaries: International Comfort Products Corporation (USA) ("ICP (USA)"),
and International Comfort Products Corporation (Canada) ("ICP (Canada)").
These financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") in Canada which differ in certain
respects with accounting principles in the United States. The differences
between GAAP in Canada and the United States as they affect the Company are
described in note 19.
CONSOLIDATION
The consolidated financial statements include the assets, liabilities and
operating results of all subsidiary companies from the dates of acquisition, on
the basis of purchase accounting. All significant intercompany transactions have
been eliminated.
NATURE OF OPERATIONS
The Company manufactures and markets central air conditioning and heating
products for residential and light commercial use primarily in the United States
and Canada. At the end of 1997, the Company's network consisted of approximately
400 independent distributors, of which one distributor accounted for
approximately 11% of the Company's operating revenue. The Company's network also
includes company-owned distribution centers in Canada, Mexico, Brazil and Spain.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of the Company's Canadian and foreign operations
are translated into United States dollars at the rate of exchange in effect at
the balance sheet date. Revenues and expenses are translated at the average
exchange rates prevailing during the year. The unrealized translation gains and
losses are accumulated in a separate component of shareholders' equity.
REVENUE AND EXPENSE RECOGNITION
Product sales are recognized at the time of shipment. Selling, general and
administrative costs are charged to expense as incurred. Service contract
revenue is deferred and amortized into income over the life of the contract on a
straight-line basis.
INVENTORIES
Raw materials and supplies, work in process and finished goods, are valued
at the lower of cost (first-in, first-out) or net realizable value.
F-12
<PAGE> 90
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIXED ASSETS
Fixed assets are recorded at cost less accumulated depreciation.
Depreciation is provided on a straight-line basis at the following annual rates
based on the estimated useful lives of the applicable assets:
<TABLE>
<S> <C>
Buildings................................................... 2.5% - 10%
Machinery, equipment and furniture.......................... 5% - 20%
Tooling and drawings........................................ 10% - 33%
Land improvements........................................... 5% - 10%
</TABLE>
INTANGIBLE AND OTHER ASSETS
Intangible and other assets include amounts paid for patents, tradenames,
goodwill and debt issuance costs. Amortization of intangible assets is provided
on a straight-line basis over various periods, not exceeding twenty years. The
realizability of goodwill and other intangibles is evaluated periodically as
events and circumstances indicate a possible inability to recover their carrying
amount. Such evaluation is based on undiscounted cash flow projections. The
analyses necessarily involve significant management judgment regarding such
projections and the actual results could differ materially from these
projections. Amortization of debt issuance costs is provided on a straight-line
basis over the term of the related debt.
INCOME TAXES
The Company follows the deferral method of tax allocation in accounting for
income taxes. Under this method, timing differences between accounting and
taxable income result in the recording of deferred income taxes.
PRODUCT WARRANTIES
A liability for estimated warranty expense is established by a charge
against operations at the time products are sold. The subsequent costs incurred
for warranty claims serve to reduce the product warranty liability. The actual
warranty costs the Company will ultimately pay could differ materially from this
estimate. The Company offers and sells extended warranty contracts for its
products through certain distributors. The revenue for such contracts is
deferred and recognized over the life of the contract on a straight-line basis.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides certain retirement benefits for its retired employees.
Retirement benefits include health care benefits and life insurance. The Company
accounts for these benefit payments on a cash basis.
FINANCIAL INSTRUMENTS
Periodically, the Company enters into interest rate swap agreements and
forward rate agreements to hedge its interest exposure. The fair values of swap
and forward rate agreements are based on current interest rates and any payments
and receipts relating to these agreements are recognized in interest expense
over the period of the respective agreement. All interest rate swaps are subject
to market risks as interest rates fluctuate. The Company is exposed to credit
risk in the event of nonperformance by counterparties. The Company was not party
to any interest rate swap or forward rate agreements during 1997.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the
F-13
<PAGE> 91
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
reported amounts of revenues and expenses during the reporting period. Such
estimates include, but are not limited to, allowance for doubtful accounts,
product warranty, product liability, environmental liability, sales returns and
allowances, inventory obsolescence, pension obligation assumptions, and
self-insured medical claims. Actual results could differ from these estimates.
RECLASSIFICATIONS
Certain comparative figures have been reclassified to conform with current
financial statement presentations.
2. ACQUISITIONS AND DIVESTITURES
Effective January 31, 1998, ICP (USA) acquired United Electric Company
("United Electric") of Wichita Falls, Texas, a manufacturer of air conditioning
components for commercial HVAC systems through a cash payment of approximately
$25.0. United Electric's estimated 1997 sales were approximately $25.0. This
acquisition will be included in the consolidated financial statements of the
Company upon the acquisition date.
During 1997, the Company acquired four distributors for a total
consideration of approximately $5.6, comprised of cash payments of $3.6 and
assumption of debt of $2.0. The total goodwill recorded on these transactions
was approximately $2.8.
On September 30, 1997, ICP (USA) sold substantially all of the assets and
liabilities of General Heating and Cooling Company ("General"), a heating and
cooling products distributor, and a company-owned factory branch for net book
value of approximately $10.0. The total consideration is comprised of a cash
payment of $2.3 and a current note receivable of $7.7. In 1997, General and the
factory branch contributed operating revenue of approximately $19.2.
On January 27, 1997, ICP (USA) sold Coastline Distribution, Inc.
("Coastline"), a heating and cooling products distributor, and four
company-owned factory branches for net book value of approximately $22.3, the
proceeds of which were used to repay short-term borrowings.
On July 25, 1996, ICP (USA) acquired all of the outstanding shares of
Coastline and General. The purchase price was allocated on the basis of the fair
market value estimates of the net assets acquired as follows:
<TABLE>
<CAPTION>
NET ASSETS ACQUIRED
- -------------------
<S> <C>
Accounts receivable......................................... $ 12.8
Inventories................................................. 18.1
Fixed assets................................................ 1.4
Intangible and other assets................................. 4.2
Current liabilities......................................... (20.0)
Long-term debt assumed...................................... (16.5)
------
Net purchase price.......................................... $ --
======
</TABLE>
F-14
<PAGE> 92
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. INVENTORIES
Inventories are classified as follows:
<TABLE>
<CAPTION>
1996 1997
------ -----
<S> <C> <C>
Finished goods.............................................. $ 86.3 $58.8
Raw materials and work in process........................... 15.7 13.4
Service parts............................................... 15.7 22.3
------ -----
$117.7 $94.5
====== =====
</TABLE>
4. FIXED ASSETS
Fixed assets are classified as follows:
<TABLE>
<CAPTION>
1996 1997
--------------------------------- ---------------------------------
ACCUMULATED NET BOOK ACCUMULATED NET BOOK
COST DEPRECIATION VALUE COST DEPRECIATION VALUE
------ ------------ --------- ------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Machinery, equipment and
furniture................ $101.7 $ 58.4 $ 43.3 $100.2 $ 59.7 $40.5
Buildings and
improvements............. 51.2 16.6 34.6 51.3 18.0 33.3
Tooling and drawings....... 49.0 34.3 14.7 51.3 38.9 12.4
Land and land
improvements............. 11.3 3.7 7.6 11.5 4.1 7.4
------ ------ ------ ------ ------ -----
$213.2 $113.0 $100.2 $214.3 $120.7 $93.6
====== ====== ====== ====== ====== =====
</TABLE>
Depreciation expense for the year amounted to $14.2 (1996 -- $14.1;
1995 -- $14.8).
5. INTANGIBLE ASSETS
Intangible assets, net of accumulated amortization, are classified as
follows:
<TABLE>
<CAPTION>
1996 1997
----- -----
<S> <C> <C>
Goodwill.................................................... $ 4.7 $ 7.0
Patents..................................................... 2.8 2.4
Tradenames.................................................. 1.7 1.6
Customer lists.............................................. 2.8 --
Other intangible assets..................................... .1 --
----- -----
$12.1 $11.0
===== =====
</TABLE>
Amortization of intangible assets during the year was $.9 (1996 -- $1.6;
1995 -- $4.0). The accumulated amortization of intangible assets at December 31,
1997, was $10.5 (1996 -- $9.6).
In 1995, the Company reengineered various business processes which led to a
change in the extent to which certain intangibles were used in the Company's
operations. Impairments were recognized when the undiscounted expected future
operating cash flows derived from such intangible assets were less than their
carrying values or in the case of certain patents and technology, on the
discontinued use of such identifiable intangibles. The 1995 operating loss
included a $1.3 million loss on the impairment of such intangible assets.
F-15
<PAGE> 93
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. OTHER ASSETS
Other assets are classified as follows:
<TABLE>
<CAPTION>
1996 1997
----- -----
<S> <C> <C>
Debt issuance costs, less accumulated amortization.......... $ 5.7 $ 4.3
Due from insurers on environmental claim(Note 15(b))........ 5.6 5.0
Other....................................................... 2.1 .8
----- -----
$13.4 $10.1
===== =====
</TABLE>
7. SHORT-TERM BORROWINGS
The details of short-term borrowings at December 31 are as follows:
<TABLE>
<CAPTION>
1996 1997
----- -----
<S> <C> <C>
ICP (USA) -- Receivables Purchase Agreement................. $27.0 $10.0
ICP (Canada)................................................ 12.0 8.8
Industrias HVH, S.A. -- Line of Credit...................... -- .9
----- -----
$39.0 $19.7
===== =====
</TABLE>
(A) ICP (USA)
RECEIVABLES PURCHASE AGREEMENT
On July 25, 1996, ICP (USA) entered into a five year agreement to sell on a
revolving basis, up to a $70.0 undivided participation ownership interest in a
designated pool of its accounts receivable. This transfer of receivables does
not constitute a sale for accounting purposes on the basis that all the
significant risks and rewards of ownership of the receivables are not
transferred to the purchaser. Accordingly, the pool of receivables of $10.0 is
included in accounts receivable at December 31, 1997 (1996 -- $27.0). In
connection with the significant change in and amendment to previous financing
agreements, ICP (USA) recorded a write-off of debt issuance costs of $2.1 in the
1995 consolidated statement of loss.
The receivables purchase agreement requires ICP (USA) to pay fees plus
certain administrative costs. At December 31, 1997, the cost of the receivable
facility including unused line fees was 10.4% (1996 -- 9.8%). The unamortized
transaction fees of $1.1 are included in Other Assets at December 31, 1997.
REVOLVING CREDIT FACILITY
On July 18, 1997, ICP (USA) entered into a two year $15.0 million revolving
credit facility secured by inventories. This revolving credit facility accrues
interest at prime or LIBOR plus 1.5%. As of December 31, 1997, the Company has
no outstanding balance owing on this facility.
(B) ICP (CANADA)
ICP (Canada) has a Cdn. $30.0 million revolving credit facility, of which
$8.8 (Cdn. $12.6 million) was utilized at December 31, 1997. This three year
facility was established on December 19, 1996. ICP (Canada)'s revolving credit
facility accrues interest at prime plus 1.0% per annum or at Bankers' Acceptance
rates plus a stamping fee of 2.0% as selected by the Company (7.0% at December
31, 1997). All of ICP (Canada)'s assets are pledged as collateral under its
facility which contains covenants, the most restrictive of which require it to
maintain a certain minimum interest coverage and net worth and precludes the
payment of dividends. At December 31, 1997, the restricted net assets of ICP
(Canada) were approximately $13.0.
F-16
<PAGE> 94
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Subsequent to year end, ICP (Canada) obtained a waiver of its covenant breach
for the minimum interest coverage ratio which existed at December 31, 1997.
(C) The maximum amount of short-term borrowings outstanding, including the
advances received under the receivables purchase agreement at any month-end
during the year ended December 31, 1997, was $65.9 (1996 -- $64.4). The average
short-term borrowings outstanding, including the advances received under the
receivables purchase agreement, calculated by averaging month-end balances,
during the year ended December 31, 1997, was $39.2 (1996 -- $46.0).
The weighted average interest rate on the outstanding short-term borrowings
at December 31, 1997, was 8.2% (1996 -- 7.9%). Weighted average interest rates
are calculated based on actual interest rates in effect and the short-term
borrowings outstanding as at December 31.
8. LONG-TERM DEBT
(A) The details of long-term debt are as follows:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
9.75% Senior Notes due March 1, 2000........................ $140.0 $140.0
Term bank loan, due 2000 and 2001........................... 25.0 25.0
Note payable................................................ -- .8
------ ------
165.0 165.8
Current portion of note payable included in current
liabilities............................................... -- .2
------ ------
$165.0 $165.6
====== ======
</TABLE>
(B) ICP (USA)
On March 11, 1993, ICP (USA) issued $140.0 of 9.75% senior secured notes
("Senior Notes") which are repayable on March 1, 2000. The Senior Notes require
mandatory prepayments if ICP (USA) has certain cash proceeds from asset sales as
defined in the Senior Note agreement. Interest on the Senior Notes is payable
semi-annually in March and September. The Senior Notes were trading 101.50/102
(bid/offer) at December 31, 1997.
The Senior Notes are collateralized by substantially all the real and
personal property of ICP (USA), other than accounts receivable and inventories.
The Senior Notes indenture contains covenants which limit certain transactions
including the payment of dividends.
On July 25, 1996, ICP (USA) terminated $20.0 notional amount of interest
rate swaps which had effectively converted this amount of the Senior Notes to a
variable rate of interest. In connection with the termination of this interest
rate swap, ICP (USA) incurred costs of $1.9 which were deferred and are being
amortized over the remaining term of the Senior Notes. As of December 31, 1997,
the entire $140.0 Senior Notes are fixed at a rate of 9.75% through the maturity
date of March 1, 2000.
(C) CHL HOLDINGS INC.
On December 19, 1996, CHL Holdings Inc., a wholly owned United States
subsidiary of the Company, arranged an unsecured term bank loan in the amount of
$25.0 due in full by October 15, 2001. The Company is required to repay $15.0 in
2000 and $10.0 in 2001. The term bank loan accrues interest at LIBOR plus 0.25%
(6.2% at December 31, 1997) and has been guaranteed by a third party. The
guarantor holds a $15.0 subordinated security interest in ICP (Canada)'s
receivables and inventories, and the shares of ICP (Canada) have been pledged in
support of the guarantee. The pledge agreement contains certain covenants, the
most
F-17
<PAGE> 95
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
restrictive of which requires ICP (Canada) to maintain a minimum level of
receivables and inventories in excess of its borrowings.
(D) Under the provisions of the various loan agreements and indentures, the
Company is required to make installments of $.2, $.2, $155.2, $10.2, and nil
during the next five years beginning in 1998.
9. SHARE CAPITAL
(A) ORDINARY SHARES
(i) Authorized and Outstanding
The Company is authorized to issue an unlimited number of ordinary shares.
Changes in the issued and outstanding ordinary shares for the years 1995, 1996
and 1997 are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------------------- ------------------- -------------------
NUMBER AMOUNT NUMBER AMOUNT NUMBER AMOUNT
---------- ------ ---------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Issued and outstanding
Beginning of the year..... 38,649,949 $165.9 39,042,574 $166.5 39,260,322 $169.2
Issued under the Employee
Stock Option Plan......... -- -- -- -- 474,200 1.3
Issued under the Share
Ownership Savings Plan.... 392,625 .6 201,763 .5 95,920 .6
Issued under the Directors
Share Compensation
Arrangement............... -- -- 15,985 -- 16,670 .1
Receipt of Funds from
Trustee for 1990 Plan of
Arrangement............... -- -- -- 2.2 -- --
---------- ------ ---------- ------ ---------- ------
Issued and outstanding
End of the year........... 39,042,574 $166.5 39,260,322 $169.2 39,847,112 $171.2
========== ====== ========== ====== ========== ======
</TABLE>
(ii) Employee Stock Option Plan
A maximum of 2,500,000 ordinary shares have been reserved for issuance to
officers and employees of the Company under the Employee Stock Option Plan. The
term of all options cannot exceed ten years from the date the option is granted
and are vested at an annual rate of 20% per year on a cumulative basis, except
in certain circumstances where the exercise of such options would be
accelerated.
The option exercise price is fixed by the Board of Directors at the time
each option is authorized and cannot be less than the weighted average sales
price per share on The Toronto Stock Exchange on the business day preceding the
date of authorization.
Changes in the share options outstanding from January 1, 1995 to December
31, 1997 are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Balance -- Beginning of the year...................... 1,281,400 776,000 1,720,000
Granted............................................... -- 1,000,000 770,000
Exercised............................................. -- -- (474,200)
Canceled.............................................. (515,400) (56,000) (56,000)
1990 LTIP units converted............................. 10,000 -- --
--------- --------- ---------
Balance -- End of the year............................ 776,000 1,720,000 1,959,800
========= ========= =========
</TABLE>
F-18
<PAGE> 96
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The details of the options outstanding at December 31, 1997, at each exercise
price are as follows:
<TABLE>
<CAPTION>
NUMBER
EXERCISE PRICE (CDN.$) EXPIRY DATE OF SHARES
---------------------- ----------- ---------
<C> <S> <C>
$3.10 February 29, 2000..................................... 25,000
$3.10 May 30, 2000.......................................... 25,000
$3.50 August 24, 2001 ...................................... 65,000
$3.10 December 19, 2001..................................... 211,000
$2.80 April 16, 2003........................................ 723,800
$3.90 July 11, 2003......................................... 105,000
$4.20 July 31, 2003......................................... 10,000
$4.10 August 23, 2003 ...................................... 15,000
$3.83 November 29, 2003..................................... 10,000
$5.20 January 31, 2004...................................... 45,000
$5.80 February 28, 2004..................................... 15,000
$7.05 April 29, 2004........................................ 710,000
---------
1,959,800
=========
</TABLE>
(iii) Share Ownership Savings Plan
Effective July 1, 1992, certain employees of the Company were eligible to
participate in the Company's Share Ownership Savings Plan (the "Savings Plan").
Generally, the Savings Plan is available to all non-union employees following
the completion of one year of continuous service with the Company. The Savings
Plan allows eligible employees to contribute from one to six percent of their
salary to the Savings Plan. The Company is required to match 25% of the
employees' contributions and may make additional annual contributions of up to
75% of the employees' contribution at its discretion. In February 1997, the
hourly employees began participating in a hourly savings plan with no matching
company contributions. In 1997, the Company's expense with respect to both
savings plans was $.3 (1996 -- $.1).
(iv) Long-Term Incentive Plans
Effective April 29, 1997, the Company adopted the 1997 Long-Term Incentive
Plan (the "1997 Plan") which will provide deferred compensation opportunities to
certain senior managers of the Company. This deferred cash compensation plan is
based on the awarding of Performance Units, the value of which is related to the
appreciation in the value of the ordinary shares of the Company.
The 1997 Plan is comprised of (i) Three year Performance Units which are
awarded, valued and paid at the end of a three calendar year period (the
"Performance Period") as designated by the Pension and Compensation Committee
(the "Committee") of the Board of Directors, and (ii) Long-term Performance
Units which are awarded at the end of the Performance Period, but paid upon
retirement, according to a vesting schedule, and subject to forfeiture. The
initial grant price of the Performance Units is the value established by the
Committee at the beginning of the Performance Period, to which the future
ordinary share price shall be compared to determine the appreciated value for
purposes of determining the value of Performance Units attributable to that
Performance Period. At the end of the Performance Period, the number of
Performance Units earned, if any, will be based on the extent to which the
established objectives of average three year earnings per share goals have been
achieved. If the threshold objective is not met, no Performance Units are
earned. If the target objective is exceeded, additional Performance Units can be
earned, up to a predetermined maximum level.
Performance Units shall be valued in the currency of the resident country
of the participant. The value of a Three year Performance Unit is calculated as
the equivalent of the difference in price of the Company's
F-19
<PAGE> 97
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ordinary shares for the average of the last five business days of the last
calendar year of the Performance Period, less the Grant Price. The value of a
Long-term Performance Unit is calculated as the equivalent of the difference in
price of the Company's ordinary shares for the average of the six months prior
to termination or retirement, less the grant price.
On April 29, 1997, the Company awarded target thresholds of 177,500
Performance Units and 180,000 Long-term Performance Units to senior management
at a grant price of Cdn. $7.05. The expense for 1997 relating to the 1997 Plan
based upon the increase in the Company's stock price since the date of grant is
$.4.
In 1990, the Company adopted a long-term incentive plan (the "1990 Plan").
Under the 1990 Plan, certain key officers and employees of the Company were
granted long-term incentive compensation units ("1990 LTIP Units") the value of
which shall be determined by reference to the appreciation in the market value
of the ordinary shares over stated periods of time. Based on the discretion of
the Board of Directors of the Company, the appreciation in the market value of
the ordinary shares will be distributed to the holder thereof by payment of
cash, issuance of ordinary shares or a combination thereof.
As at December 31, 1997, 34,000 units from the February 1, 1993 granting
were outstanding under the 1990 Plan with an initial value per unit of Cdn.
$7.125 and a valuation date of February 1, 1998. In 1997, the Company's expense
with respect to the 1990 Plan was approximately $.1.
(B) PREFERENCE SHARES
The Company is authorized to issue an unlimited number of Class A
preference shares issuable in series and rank senior to the Class B preference
shares and ordinary shares as to dividends and participation in certain
distributions of assets on liquidation. Any series of the shares may be made
convertible into ordinary shares and have no voting rights as a class. The
Company is also authorized to issue an unlimited number of Class B preference
shares issuable in series and rank senior to ordinary shares and junior to the
Class A preference shares as to dividends and participation in certain
distributions of assets on liquidation. Any series of the shares may be made
convertible into ordinary shares and have no voting rights as a class.
As of December 31, 1997, the Company has not issued any Class A or B
preference shares.
10. FOREIGN CURRENCY TRANSLATION ADJUSTMENT
The Company adopted the United States dollar as its reporting currency,
effective January 1, 1994. Accordingly, the foreign currency translation
adjustment which is included as a component of shareholders' equity, represents
the unrealized gain or loss on translation of financial statements of
self-sustaining operations up to December 31, 1997. Prior to 1994, this
adjustment represented the unrealized gain or loss on translation of financial
statements of self-sustaining operations in the United States. Changes during
the respective years are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Cumulative unrealized loss at January 1..................... $(1.9) $(1.1) $(2.0)
Unrealized gain (loss) on translation of net assets......... .8 (.9) (1.3)
----- ----- -----
Cumulative unrealized loss at December 31................... $(1.1) $(2.0) $(3.3)
===== ===== =====
</TABLE>
The rate of exchange as at December 31, 1997 was U.S. $1.00 = Cdn. $1.4291
(1996 -- U.S. $1.00 = Cdn. $1.3706), and the average rate for the year was U.S.
$1.00 = Cdn. $1.3847 (1996 -- U.S. $1.00 = Cdn. $1.3636; 1995 -- U.S. $1.00 =
Cdn. $1.3727).
F-20
<PAGE> 98
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. INCOME TAXES
The components of income (loss) before income taxes and the income tax
provision (recovery) are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------ ----- -----
<S> <C> <C> <C>
Income (loss) before income taxes
Canada.................................................... $ (1.3) $ 2.0 $ (.3)
United States............................................. (67.1) 9.6 22.3
------ ----- -----
$(68.4) $11.6 $22.0
====== ===== =====
Current income tax provision (recovery)
Canada.................................................... $ 1.8 $ -- $ --
United States............................................. (.4) -- .6
------ ----- -----
1.4 -- .6
------ ----- -----
Deferred income tax provision (recovery)
Canada.................................................... 3.9 -- --
United States............................................. 7.5 -- (.6)
------ ----- -----
11.4 -- (.6)
------ ----- -----
Total income tax provision (recovery)............. $ 12.8 $ -- $ --
====== ===== =====
</TABLE>
In 1995, the deferred income tax provision of $11.4 represented the
write-off of accumulated deferred income tax debits recorded as of December 31,
1994. This write-off was required since there was no longer reasonable assurance
as of December 31, 1995, that the timing differences supporting these deferred
tax debits would reverse.
A reconciliation between the combined statutory and the effective rate of
income tax is provided below:
<TABLE>
<CAPTION>
1995 1996 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Income (loss) before income taxes... $(68.4) $11.6 $22.0
Combined statutory tax rate......... 38.8% 38.8% 38.8%
-------------- -------------- --------------
Computed income tax provision
(recovery)........................ (26.5) 4.5 8.5
Increase (decrease) resulting from:
Non-deductible depreciation....... .8 .3 .3
Unrecognized (recognized) benefit
of losses and expenses......... 25.7 (1.6) (.8)
Prior years' deferred taxes
written-off.................... 11.4 -- --
Utilization of loss
carryforwards.................. -- (3.4) (7.7)
Other............................. 1.4 .2 (.3)
-------------- -------------- --------------
Actual income tax provision
(recovery)........................ $ 12.8 $ -- $ --
============== ============== ==============
Effective rate of income tax
recovery.......................... not meaningful not meaningful not meaningful
============== ============== ==============
</TABLE>
F-21
<PAGE> 99
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1997, the Corporation and its subsidiaries had the
following approximate amounts available to reduce future years' earnings for
income tax purposes, the effect of which has not been recognized in the
financial statements.
<TABLE>
<CAPTION>
UNITED
LOSSES FOR TAX PURPOSES EXPIRING IN CANADA STATES TOTAL
- ----------------------------------- ------ ------ -----
<S> <C> <C> <C>
1998........................................................ $ 3.5 $ -- $ 3.5
1999........................................................ 6.5 -- 6.5
2000........................................................ .5 -- .5
2001........................................................ 7.9 -- 7.9
2002........................................................ 5.5 -- 5.5
2003........................................................ 2.9 -- 2.9
2004........................................................ 1.6 -- 1.6
2010........................................................ -- 21.0 21.0
2011........................................................ -- 4.6 4.6
----- ----- -----
Total losses...................................... 28.4 25.6 54.0
Other deductions and basis differences not yet taken as a
deduction for income tax purposes......................... 9.6 32.1 41.7
----- ----- -----
$38.0 $57.7 $95.7
===== ===== =====
</TABLE>
12. INCOME (LOSS) PER ORDINARY SHARE
The basic income (loss) per ordinary share is calculated on the weighted
average number of shares outstanding during the respective years as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Income (loss) to ordinary shareholders before discontinued
operations.............................................. $ (81.2) $ 11.6 $ 22.0
Loss from discontinued operations......................... (12.0) (3.1) --
------- ------- -------
Net income (loss) to ordinary shareholders................ $ (93.2) $ 8.50 $ 22.0
======= ======= =======
Weighted average number of ordinary shares outstanding
during the year (in millions)........................... 38.828 39.161 39.664
======= ======= =======
Income (loss) per ordinary share
From continuing operations.............................. $ (2.09) $ 0.30 $ 0.56
After discontinued operations........................... $ (2.40) $ 0.22 $ 0.56
======= ======= =======
</TABLE>
The calculation of net income per ordinary share on a fully diluted basis
assumes the exercise of outstanding stock options if such action would result in
dilution of earnings per share. In 1997, fully diluted net income per ordinary
share was approximately $0.54.
F-22
<PAGE> 100
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. PENSION PLANS
The Company and its subsidiaries have various defined benefit pension plans
available to substantially all permanent full-time employees. The total pension
expense for 1997 amounted to $2.9 (1996 -- $2.8; 1995 -- $3.5) and is comprised
of the following:
<TABLE>
<CAPTION>
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Current service costs....................................... $ 2.3 $ 2.3 $ 2.4
Interest costs on projected benefit obligation.............. 4.5 4.1 4.5
Return on assets held in the plans.......................... (6.2) (4.5) (4.3)
Net amortization and deferral............................... 2.9 .9 .3
----- ----- -----
$ 3.5 $ 2.8 $ 2.9
===== ===== =====
</TABLE>
The actuarial present value of accrued pension benefits represents the
discounted value of benefits expected to be paid to plan members, based on
projected salaries prorated on service. No escalation of salaries is used to
determine the actuarial present value of accrued pension benefits where the
pension benefit is fixed and subject to renegotiation.
Certain key assumptions used in determining both the pension expense for
1997, and the actuarial present value of accrued pension benefits as at December
31, 1997, are as follows:
<TABLE>
<CAPTION>
CANADIAN
PLANS U.S. PLANS
-------- ----------
<S> <C> <C>
Discount rate............................................... 8.0% 7.5%
Rate of increase of compensation levels..................... 6.0 4.5
Expected long-term rates of return on plan assets........... 8.0 9.0
--- ---
</TABLE>
The status of pension plans at December 31, 1997, is as follows:
<TABLE>
<CAPTION>
CANADIAN
PLANS U.S. PLANS
-------- -----------
<S> <C> <C>
Actuarial present value of
Vested benefit obligations................................ $13.6 $36.9
Nonvested benefit obligations............................. -- 3.2
----- -----
Accumulated benefit obligations............................. 13.6 40.1
Additional amounts related to projected salary and wage
increases................................................. .5 9.2
----- -----
Total projected benefit obligations......................... 14.1 49.3
Plan assets at market value................................. 16.6 43.7
----- -----
Plan assets in excess of (less than) projected benefit
obligations............................................... 2.5 (5.6)
Unrecognized net (gain) loss................................ (1.5) 2.7
Unrecognized prior service cost............................. .2 1.4
Unrecognized net (asset) obligation......................... (.6) 1.1
----- -----
Prepaid (accrued) pension cost.............................. $ .6 $ (.4)
===== =====
</TABLE>
F-23
<PAGE> 101
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. BUSINESS SEGMENTS
The following is an analysis of certain financial information by business
lines and geographical areas for the three years ended December 31, 1995, 1996
and 1997 as it relates to operating revenue, operating profit (loss),
identifiable assets, capital expenditures and depreciation and amortization of
intangibles. Operating profit is total revenue less operating expenses which
includes an allocation of corporate expenses. Identifiable assets include only
those assets directly identifiable with those operations.
<TABLE>
<CAPTION>
OPERATING REVENUE OPERATING PROFIT (LOSS)
------------------------ -------------------------
1995 1996 1997 1995 1996 1997
------ ------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Heating and cooling
Canada......................................... $ 79.0 $ 76.8 $ 74.0 $ (1.0) $ 3.3 $ .3
United States.................................. 453.6 564.7 556.3 (38.3) 30.2 41.2
------ ------ ------ ------ ----- -----
532.6 641.5 630.3 (39.3) 33.5 41.5
Corporate........................................ .2 .4 .4 (4.0) (.1) --
------ ------ ------ ------ ----- -----
$532.8 $641.9 $630.7 $(43.3) $33.4 $41.5
====== ====== ====== ====== ===== =====
</TABLE>
<TABLE>
<CAPTION>
AMORTIZATION OF
INTANGIBLES AND
IDENTIFIABLE ASSETS CAPITAL EXPENDITURES DEPRECIATION
------------------------ -------------------- ---------------------
1995 1996 1997 1995 1996 1997 1995 1996 1997
------ ------ ------ ----- ----- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Heating and cooling
Canada....................... $ 42.2 $ 46.5 $ 43.8 $ .6 $ .4 $1.4 $ .6 $ .6 $ .9
United States................ 251.0 280.4 293.1 23.9 11.4 7.1 17.7 15.1 14.2
------ ------ ------ ----- ----- ---- ----- ----- -----
293.2 326.9 336.9 24.5 11.8 8.5 18.3 15.7 15.1
Corporate...................... 25.0 18.1 15.1 -- -- -- .5 -- --
------ ------ ------ ----- ----- ---- ----- ----- -----
318.2 345.0 352.0 $24.5 $11.8 $8.5 $18.8 $15.7 $15.1
===== ===== ==== ===== ===== =====
Discontinued Steel Pipe
Operation.................... 27.6 -- --
------ ------ ------
$345.8 $345.0 $352.0
====== ====== ======
</TABLE>
15. COMMITMENTS AND CONTINGENCIES
(a) ICP (USA) has been involved in paying the costs of assessing the extent
of, and remediating, environmental contamination at its Lewisburg manufacturing
facility caused by a sudden and accidental spill in 1980. ICP (USA) has paid for
certain investigative activities and remediation at the manufacturing facility
as well as off-site drum storage locations. At December 31, 1997, the costs of
the remainder of the environmental cleanup, which management believes are
reasonably determinable over a ten year period, were discounted at 5.5%. At
December 31, 1997, ICP (USA) has an accrual of $3.1 for the cost of this
cleanup, of which $2.7 is included in Environmental Liabilities and $.4 in
Accrued liabilities.
The undiscounted cash flows are estimated to be as follows:
<TABLE>
<CAPTION>
YEAR
----
<S> <C>
1998..................................................... $ .4
1999..................................................... .7
2000..................................................... .2
2001..................................................... .2
2002..................................................... .2
Thereafter.................................................. 1.6
----
$3.3
====
</TABLE>
F-24
<PAGE> 102
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the environmental remediation at the off-site drum
storage locations, ICP (USA) has entered into a cost-sharing agreement with the
previous owner. This agreement calls for each entity to bear fifty percent of
the investigation, cleanup, monitoring, removal and treatment of the existing
drum storage sites. Additionally, in the event that other drum storage sites are
discovered, ICP (USA) and the previous owner shall bear the additional costs at
a ratio of sixty percent to forty percent, respectively. The estimated costs to
clean up the existing drum storage sites are included in the amounts detailed
above.
(b) In 1991, the Company and Flying J, Inc. ("Flying J") entered into a
cost sharing agreement whereby the Company will participate with Flying J in the
financing of future cleanup activities for environmental contamination at
various refinery sites sold by the Company to Flying J in 1980. This settlement
does not affect claims by Flying J or the Company against third parties who may
be responsible for contribution to refinery cleanup costs. In 1991, the Company
also reached a settlement with several of its insurance carriers whereby the
insurers will reimburse the Company for a portion of the expenses the Company
will incur in the cleanup activities at the refineries. Ongoing cleanup
activities at four refinery sites are at different regulatory stages.
Although the scope of the projects is becoming better understood and
defined with the various regulatory agencies, the ultimate scope of the projects
remains uncertain and it is not possible to definitively estimate the ultimate
costs of remediation of such environmental contamination. At December 31, 1997,
the Company has an accrual of $11.0 for its estimated share of future cleanup
costs, of which $10.2 is included in Environmental Liabilities and $.8 in
Accrued liabilities. The Company has offsetting receivables due from insurers of
$5.0 and $1.8 which are included in Other Assets and Accounts receivable,
respectively.
The undiscounted cash flows are expected to be as follows:
<TABLE>
<CAPTION>
YEAR
----
<S> <C>
1998..................................................... $ .8
1999..................................................... .8
2000..................................................... 1.5
2001..................................................... .5
2002..................................................... .5
Thereafter.................................................. 6.9
-----
$11.0
=====
</TABLE>
Based on current information prepared by independent environmental
consultants, the Company's share of the cost of environmental cleanup,
discounted at 5.5% is currently estimated to be approximately $7.2 over the next
21 years. The expected insurance recoveries discounted at 5.5% are currently
estimated to be approximately $3.6 over the next 21 years.
(c) In February 1995, an action was commenced against ICP (Canada) in the
Ontario Court (General Division) (the "Court"), for damages for breach of
contract or negligence in the amount of $4.9 (Cdn. $7.0 million), plus interest
and costs, arising out of alleged defective cooling banks which were designed,
manufactured and delivered by Unifin International, a former division of ICP
(Canada) ("Unifin"), to the plaintiffs between 1981 and 1984.
The Company has filed a statement of Defense with the Court that denies the
plaintiffs' allegations and intends to vigorously defend its position against
the claim. The Company has notified its primary and umbrella liability insurance
carriers for their possible involvement with this claim. The Company believes
that it has insurance coverage for this claim.
In a similar action, ICP (Canada) was served with an Amended Summons on
January 22, 1998, in an action commenced in the Supreme Court of New South
Wales, Sydney Registry ("Supreme Court"),
F-25
<PAGE> 103
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
alleging that Unifin designed, manufactured and supplied defective oil coolers
to a generator/transformer project in Australia. The plaintiff pleads that
Unifin's negligence caused the oil coolers to produce aluminum alloy metal
contamination of the transformer cooling oil, in turn causing major damage to
the generators/transformers necessitating major repairs in the amount of at
least approximately $9.0 (Aus $14.0 million).
The Company was not represented on the hearing of an application for leave
to amend the Summons and intends to move the Supreme Court to contest its
jurisdiction, and set aside the substitution and service of the Amended Summons.
While it is too early to evaluate the merits of the plaintiff's claim against
it, the Company believes that the plaintiff's action should be heard in the
Ontario Court, if at all, and consolidated with the similar February 1995 action
brought in Ontario which is based on substantially the same allegations of fact.
(d) The Company leases certain facilities and equipment under noncancelable
operating leases. Lease rental expense during the current year amounted to $4.0
(1996 -- $5.9; 1995 -- $6.8). The approximate aggregate minimum annual rentals
under long-term leases in future years, excluding capital leases, at December
31, 1997, are as follows:
<TABLE>
<CAPTION>
YEAR
----
<S> <C>
1998................................................... $2.8
1999................................................... 2.0
2000................................................... 1.6
2001................................................... .6
2002................................................... .4
Thereafter.................................................. .6
----
$8.0
====
</TABLE>
(e) The Company and its subsidiaries are parties to various other claims
and lawsuits. The Company believes that such proceedings will not have a
material effect on the Company's financial position or future operating results,
although no assurance can be given with respect to the ultimate outcome for any
such litigation.
16. DISCONTINUED OPERATIONS
There were no discontinued operations in 1997. In the consolidated
statements of income (loss), discontinued operations consisted of the following:
<TABLE>
<CAPTION>
1995 1996
------ -----
<S> <C> <C>
Steel Pipe Operations....................................... $(14.3) $(3.1)
Settlement of Former Resources Claim ....................... 2.9 --
Utilization of Prior Years' Tax Losses...................... 1.3 --
Write-off of Deferred Tax Debit -- Flying J Environmental
Provision................................................. (1.9) --
------ -----
$(12.0) $(3.1)
====== =====
</TABLE>
(i) Steel Pipe Operations
On May 30, 1996, the Company sold Thompson Pipe and Steel Company, its
wholly owned steel pipe manufacturing subsidiary, for total consideration of
approximately $6.5, including the assumption of bank indebtedness of
approximately $6.1.
F-26
<PAGE> 104
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Operating results of the Steel Pipe Operation for the year ended December
31, 1995 and the five months ended May 30, 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
------ -----
<S> <C> <C>
Operating revenue........................................... $ 37.9 $10.9
====== =====
Loss before income taxes.................................... (8.0) (3.1)
Provision for income taxes.................................. (.3) --
------ -----
Loss from Steel Pipe Operations............................. (8.3) (3.1)
Write-down to estimated net realizable value................ (5.4) --
Estimated disposal costs.................................... (.6) --
------ -----
$(14.3) $(3.1)
====== =====
</TABLE>
(ii) Settlement of Former Resources Claim
In December 1995, the Company received a final cash settlement resulting
from a favorable judgment relating to the Company's former Resources Operations,
which were sold in 1989. The $2.9 received has been recorded as income from
discontinued operations.
(iii) Utilization of Prior Years' Tax Losses
The Company has utilized prior years' tax losses which resulted from the
costs incurred on the sale of the Company's Utilities and Propane Operations in
1990 to reduce current taxes otherwise payable from continuing operations.
(iv) Write-off of Deferred Tax Debit -- Flying J Environmental Provision
In 1995, the deferred tax provision of $1.9 represents the write-off of a
deferred tax debit established in prior years. This write-off was required since
there was no longer reasonable assurance as of December 31, 1995, that the
timing differences supporting this deferred tax debit would reverse.
17. ASSET WRITEDOWNS AND RESTRUCTURING COSTS
Through the continuation of the business process reengineering efforts
which began in 1993, ICP (USA) identified in 1995 certain fixed assets which
were no longer considered to be economically viable to the production process.
These assets included a coil delivery system with a carrying value of $3.4, an
automated paint system with a carrying value of $4.1, and other idle assets with
a carrying value of $1.2. ICP (USA) recognized an impairment loss on these
assets of $8.7 which was included in asset writedowns and restructuring costs in
1995.
In 1995, ICP (Canada) wrote down the carrying value of idle assets,
comprised of machinery and equipment by $1.4 to orderly liquidation value. This
writedown was also included in asset writedowns and restructuring costs for
1995.
During 1995, the restructuring and reengineering programs resulted in $2.2
of severance and benefits expense at ICP (USA). In addition, reductions in
salaried personnel at ICP (Canada) resulted in severance costs of $1.1. Finally,
the Company's decision in December 1995 to move its Canadian Corporate head
office to Lewisburg, Tennessee, resulted in severance and other retirement
benefits of $2.8. The restructuring costs totaling $6.1 were partially offset by
a reduction of prior years' restructuring accruals of $.7, resulting in a 1995
restructuring charge of $5.4 which was included in asset writedowns and
restructuring costs.
F-27
<PAGE> 105
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A rollforward of the restructuring cost accrual is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
----- ----- ----
<S> <C> <C> <C>
Balance -- Beginning of the year............................ $ 3.6 $ 6.1 $2.4
Restructuring cost provision................................ 6.1 -- --
Reversals of prior years' accruals.......................... (.7) -- (.4)
Payments.................................................... (2.9) (3.7) (.6)
----- ----- ----
Balance -- End of the year.................................. $ 6.1 $ 2.4 $1.4
===== ===== ====
</TABLE>
18. DETAILS OF CASH PROVIDED BY (USED FOR) OPERATIONS
<TABLE>
<CAPTION>
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
(a) ITEMS NOT INVOLVING CURRENT CASH FLOWS
Depreciation and amortization........................... $20.1 $17.5 $16.4
Deferred income taxes................................... 11.4 -- --
Asset writedowns........................................ 10.1 -- --
Provision for bad debts................................. 9.7 2.8 .9
Write-off of debt issuance costs........................ 2.1 .6 --
Other................................................... 1.0 -- --
----- ----- -----
$54.4 $20.9 $17.3
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
1995 1996 1997
----- ------ ------
<S> <C> <C> <C>
(b) CHANGES IN WORKING CAPITAL
Accounts and note receivable........................... $33.8 $ 5.7 $(37.5)
Inventories............................................ 59.9 (14.1) 10.2
Accounts payable, accrued liabilities and product
warranty................................................ 8.3 (15.3) 10.2
Other.................................................. (4.7) 5.3 (3.0)
----- ------ ------
$97.3 $(18.4) $(20.1)
===== ====== ======
</TABLE>
F-28
<PAGE> 106
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
19. SIGNIFICANT DIFFERENCES BETWEEN CANADIAN AND U.S. ACCOUNTING
PRACTICES
Accounting principles adopted by the Company as reflected in these
consolidated financial statements in accordance with Canadian GAAP are generally
consistent with accounting principles accepted in the United States ("U.S.
GAAP") with certain exceptions. The following reconciliations reflect the
differences in these accounting principles where applicable to the Company. If
accounting principles generally accepted in the United States were followed, the
effect on the consolidated financial statements would be:
(a) Net income (loss) in accordance with U.S. GAAP
<TABLE>
<CAPTION>
1995 1996 1997
------ ------- ------
<S> <C> <C> <C>
Income (loss) from continuing operations (as reported)...... $(81.2) $ 11.6 $ 22.0
U.S. GAAP adjustments
Accounting for income taxes(1)............................ 2.8 (.7) (.7)
Postretirement benefits, net of income tax recovery of nil
in 1997 (1996 -- nil; 1995 -- $.5)(2).................. (.8) (1.8) (1.9)
Loss on early extinguishment of debt, net of income tax
recovery of nil in 1996 and 1995(3).................... .9 .6 --
Utilization of prior years' tax losses from discontinued
operations(4).......................................... 1.3 -- --
Discount on sale of receivables, net of income tax
provision of $.8 in 1995(5)............................ 1.3 -- --
------ ------- ------
Adjusted income (loss) from continuing operations........... (75.7) 9.7 19.4
Loss from discontinued operations, net of income taxes...... (13.3) (3.1) --
------ ------- ------
Income (loss) before extraordinary item..................... (89.0) 6.6 19.4
Extraordinary item
Loss on early extinguishment of debt, net of income tax
recovery of nil in 1996 and 1995(3).................... (.9) (.6) --
------ ------- ------
Net income (loss) under U.S. GAAP........................... $(89.9) $ 6.0 $ 19.4
====== ======= ======
Weighted average number of ordinary shares outstanding
during the year under U.S. GAAP (in millions)
Basic..................................................... 38.828 39.161 39.664
Diluted................................................... 38.828 39.254 40.549
Basic income (loss) per ordinary share under U.S. GAAP (in
dollars)
From continuing operations................................ $(1.95) $ 0.25 $ 0.49
Before extraordinary item................................. $(2.29) $ 0.17 $ 0.49
After extraordinary item.................................. $(2.32) $ 0.15 $ 0.49
Diluted income (loss) per ordinary share under U.S. GAAP (in
dollars)
From continuing operations................................ $(1.95) $ 0.25 $ 0.48
Before extraordinary item................................. $(2.29) $ 0.17 $ 0.48
After extraordinary item.................................. $(2.32) $ 0.15 $ 0.48
</TABLE>
- ---------------
(1) This reconciliation reflects the application of Statement of Financial
Accounting Standard ("SFAS") No. 109 "Accounting for Income Taxes".
Additionally, the following table outlines the significant components of the
Company's deferred tax assets (liabilities) as at December 31, 1996 and
1997, under U.S. GAAP disclosure requirements.
F-29
<PAGE> 107
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
UNITED
DECEMBER 31, 1996 STATES CANADA TOTAL
- ----------------- ------- ------ ------
<S> <C> <C> <C>
Deferred tax assets
Net operating losses and other carryforwards.............. $ 14.0 $ 12.5 $ 26.5
Product liability and warranty............................ 10.1 .9 11.0
Allowance for doubtful accounts........................... 2.0 -- 2.0
Other tax assets.......................................... 14.1 1.9 16.0
------ ------ ------
Total deferred tax assets before allowance........ 40.2 15.3 55.5
Valuation allowance for deferred tax assets................. (26.3) (14.8) (41.1)
------ ------ ------
Deferred tax assets......................................... 13.9 .5 14.4
------ ------ ------
Deferred tax liabilities
Tax over book depreciation................................ (12.7) -- (12.7)
Other tax liabilities..................................... (1.2) (.5) (1.7)
------ ------ ------
Total deferred tax liabilities.................... (13.9) (.5) (14.4)
------ ------ ------
Net deferred tax assets........................... $ -- $ -- $ --
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
UNITED
DECEMBER 31, 1997 STATES CANADA TOTAL
- ----------------- ------- ------ ------
<S> <C> <C> <C>
Deferred tax assets
Net operating losses and other carryforwards.............. $ 8.7 $ 12.3 $ 21.0
Product liability and warranty............................ 10.6 .8 11.4
Allowance for doubtful accounts........................... 1.6 -- 1.6
Other tax assets.......................................... 11.9 1.7 13.6
------ ------ ------
Total deferred tax assets before allowance........ 32.8 14.8 47.6
Valuation allowance for deferred tax assets................. (18.2) (14.3) (32.5)
------ ------ ------
Deferred tax assets......................................... 14.6 .5 15.1
------ ------ ------
Deferred tax liabilities
Tax over book depreciation................................ (12.6) -- (12.6)
Other tax liabilities..................................... (1.4) (.5) (1.9)
------ ------ ------
Total deferred tax liabilities.................... (14.0) (.5) (14.5)
------ ------ ------
Net deferred tax assets........................... $ .6 $ -- $ .6
====== ====== ======
</TABLE>
(2) This reconciliation reflects the application of SFAS No. 106 "Employers'
Accounting for Postretirement Benefits Other Than Pensions", for the
Company's U.S. plans. The standard requires, among other things, the
recognition of postretirement benefits on an accrual basis as opposed to the
practice of recognizing the expense on a cash basis. The application of the
new accounting method, prospectively, results in the transition obligation
of U.S. $9.7 million being amortized on a straight-line basis over 25 years
for hourly employees and 21 years for salaried employees. The effect of
applying SFAS 106 was to decrease net income by $1.9 and $1.8 for 1997 and
1996, respectively, and increase the net loss by $.8 in 1995. Under Canadian
GAAP, the Company expenses such benefits as incurred.
The net periodic cost for postretirement health care benefits during 1995,
1996 and 1997, includes the following:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Service cost................................................ $ .7 $1.1 $1.0
Interest cost............................................... 1.3 1.4 1.4
Amortization of transition obligation....................... .5 .6 .6
---- ---- ----
$2.5 $3.1 $3.0
==== ==== ====
</TABLE>
F-30
<PAGE> 108
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In general, retiree health benefits are paid as covered expenses are
incurred. The following table sets forth the funded status for the
Company's postretirement health care plan at December 31, 1996 and 1997.
<TABLE>
<CAPTION>
1996 1997
----- -----
<S> <C> <C>
Accumulated postretirement benefit obligations:
Retirees.................................................. $ 6.2 $ 8.8
Fully eligible active plan participants................... 2.5 2.7
Other active plan participants............................ 10.3 10.5
----- -----
Total obligation.................................. 19.0 22.0
Unrecognized:
Transition obligation..................................... (8.1) (6.8)
Change in actuarial assumptions........................... (5.0) (7.1)
----- -----
Accrued postretirement benefit.............................. $ 5.9 $ 8.1
===== =====
</TABLE>
The assumed discount rate was 7.5% and 7.75% at December 31, 1997 and 1996,
respectively, and the rate of increase in per capita costs of covered health
care benefits is assumed to be 6% in 1997, decreasing gradually to 5% by the
year 1999. Increasing the assumed health care cost trend rate by 1
percentage point would increase the accumulated postretirement benefit
obligation as of December 31, 1997, by approximately 13% and increase net
periodic postretirement benefit cost by approximately 16% in 1997.
(3) Under Canadian GAAP, this item is included in loss from continuing
operations. Under U.S. GAAP, such an item is treated as an extraordinary
item.
(4) There are differences between Canadian and U.S. GAAP in the presentation of
the Statement of Changes in Financial Position and the Statements of Income
(Loss). Under U.S. GAAP, the utilization of prior years' tax losses is
included in loss from continuing operations in 1995. Accordingly, cash
provided by continuing operations, under U.S. GAAP for the year ended
December 31, 1995, was $71.8. In addition, U.S. GAAP defines cash and cash
equivalents to include cash and short-term, highly liquid investments,
whereas Canadian GAAP defines cash to include cash, net of short-term
borrowings.
(5) There are differences between Canadian and U.S. GAAP in the recognition of a
transfer of receivables as a sale. Under Canadian GAAP, for a transfer of
receivables to be recognized as a sale, the transferor must transfer the
significant risks and rewards of ownership of the receivables, whereas U.S.
GAAP focuses on the control of the assets involved.
(b) Additional disclosure required under U.S. GAAP
(1) SFAS 123 permits the Company to continue to apply the recognition and
measurement principles of Accounting Principles Board Opinion No. 25.,
"Accounting for Stock Issued to Employees," to its stock option plan. If the
compensation cost for the Company's stock option plan had been determined based
on the fair value at the grant dates for the 1997 and 1996 options, consistent
with the method provided in SFAS 123, the Company's 1997 and 1996 pro forma net
income and earnings per share would have been $18.5 and $5.7, and $0.47 and
$0.15, respectively. The weighted average fair values of the 1997 and 1996
option grants are estimated on the dates of grant using the Black-Scholes option
pricing model with the following assumptions: expected volatility for 1997 and
1996 was 70 percent and 53 percent, respectively; risk-free interest rates for
1997 and 1996 were 5.7% and 6.6%, respectively; and expected lives of seven
years for both years. The weighted average fair values of the options granted in
1997 and 1996 were Cdn. $4.39 and Cdn. $1.46, respectively.
(2) Research and development expenses in 1997, 1996 and 1995 were $3.0,
$2.9 and $2.8, respectively.
F-31
<PAGE> 109
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(c) Consolidated Balance Sheets
<TABLE>
<CAPTION>
AMOUNTS AS ADJUSTED
AMOUNTS REPORTED TO
UNDER CONFORM WITH
CANADIAN GAAP U.S. GAAP
----------------- -------------------
1996 1997 1996 1997
------- ------- -------- --------
<S> <C> <C> <C> <C>
Prepaid expenses and other................................ $ 6.0 $ 7.6 $ 7.2 $ 8.8
Fixed assets.............................................. 100.2 93.6 102.3 95.5
Intangible assets......................................... 12.1 11.0 16.3 14.8
Accrued liabilities....................................... 28.2 26.5 32.4 30.8
Other long-term liabilities............................... 4.2 5.1 9.0 13.2
Deficit................................................... (138.4) (116.4) (140.6) (118.2)
Shareholders' equity...................................... 28.8 51.5 26.6 49.7
</TABLE>
20. SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARY
The following reflects the summarized consolidated financial information of
CHL Holdings, Inc., a wholly-owned subsidiary of the Company (predecessor to
International Comfort Products Holdings, Inc.):
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Statement of Income Data:
Operating Revenue...................................... $470.4 $587.6 $577.0
Gross Margin........................................... 51.6 111.0 113.9
Income (Loss) From Continuing Operations............... (73.4) 9.3 22.8
Discontinued Operations................................ (16.2) (3.1) --
Net Income (Loss)...................................... (89.6) 6.2 22.8
</TABLE>
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Balance Sheet Data:
Current Assets......................................... $182.8 $207.3
Total Assets........................................... 306.2 316.1
Current Liabilities.................................... 104.8 94.2
Total Liabilities...................................... 302.2 289.3
Shareholders' Equity................................... 4.0 26.8
</TABLE>
F-32
<PAGE> 110
INTERNATIONAL COMFORT PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(IN MILLIONS OF U.S. DOLLARS) -- CANADIAN GAAP
UNAUDITED
<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Operating Revenue........................................... $ 136.6 $ 132.8
Cost of Sales............................................... 108.7 104.3
------- -------
Gross Margin................................................ 27.9 28.5
Selling, General and Administrative Expenses................ 21.5 20.2
------- -------
Operating Profit............................................ 6.4 8.3
------- -------
Financial Expenses
Interest expense.......................................... 4.7 4.5
Amortization of debt issuance costs....................... .3 .3
------- -------
5.0 4.8
------- -------
Net Income.................................................. $ 1.4 $ 3.5
======= =======
Weighted Average Number of Ordinary Shares (in millions).... 39.359 39.856
======= =======
Income per Ordinary Share................................... $ 0.04 $ 0.09
======= =======
</TABLE>
See accompanying notes
F-33
<PAGE> 111
INTERNATIONAL COMFORT PRODUCTS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS OF U.S. DOLLARS) -- CANADIAN GAAP
UNAUDITED
<TABLE>
<CAPTION>
MARCH 31,
----------------- DECEMBER 31,
1997 1998 1997
------- ------- ------------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and short-term deposits.............................. $ 10.6 $ 10.1 $ 31.0
Accounts receivable....................................... 102.7 102.3 96.5
Note receivable........................................... -- -- 7.7
Inventories............................................... 126.9 125.4 94.5
Prepaid expenses and other................................ 10.8 5.6 7.6
------- ------- -------
251.0 243.4 237.3
------- ------- -------
Fixed Assets
Property, plant and equipment............................. 211.6 222.6 214.3
Accumulated depreciation.................................. 115.9 124.5 120.7
------- ------- -------
95.7 98.1 93.6
------- ------- -------
Intangible Assets, net...................................... 9.1 26.7 11.0
Other Assets, net........................................... 12.8 10.6 10.1
------- ------- -------
$ 368.6 $ 378.8 $ 352.0
======= ======= =======
LIABILITIES
Current Liabilities
Short-term borrowings..................................... $ 59.3 $ 37.4 $ 19.7
Accounts payable.......................................... 47.4 51.0 44.8
Accrued liabilities....................................... 22.7 28.2 26.5
Product warranty.......................................... 8.7 9.5 9.5
Current portion of long-term debt......................... -- .2 .2
------- ------- -------
138.1 126.3 100.7
Long-Term Debt.............................................. 165.0 165.6 165.6
Product Warranty............................................ 17.1 14.6 16.2
Other Long-Term Liabilities................................. 17.3 16.9 18.0
------- ------- -------
337.5 323.4 300.5
------- ------- -------
SHAREHOLDERS' EQUITY
Ordinary Shares........................................... 170.5 171.5 171.2
Deficit................................................... (137.1) (113.0) (116.4)
Foreign Currency Translation Adjustment................... (2.3) (3.1) (3.3)
------- ------- -------
31.1 55.4 51.5
------- ------- -------
$ 368.6 $ 378.8 $ 352.0
======= ======= =======
</TABLE>
See accompanying notes
F-34
<PAGE> 112
INTERNATIONAL COMFORT PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(IN MILLIONS OF U.S. DOLLARS) -- CANADIAN GAAP
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
CASH PROVIDED BY (USED FOR)
OPERATIONS
Net income.................................................. $ 1.4 $ 3.5
Items not involving current cash flows
Depreciation and amortization............................. 4.2 4.4
Changes in working capital
Accounts receivable....................................... (29.9) 6.0
Inventories............................................... (28.3) (25.5)
Prepaid expenses and other................................ ( 5.5) 1.0
Accounts payable, accrued liabilities, and product
warranty............................................... 7.0 .4
------ ------
(51.1) (10.2)
------ ------
INVESTING
Property, plant and equipment............................. (.6) ( 3.2)
Acquisition of United Electric Company.................... -- (25.6)
Proceeds from sale of Coastline and factory branches...... 23.1 --
------ ------
22.5 (28.8)
------ ------
FINANCING
Ordinary shares issued.................................... 1.3 .3
------ ------
Increase in Borrowings...................................... (27.3) (38.7)
Net Cash (Borrowings) --
Beginning of the period................................... (21.4) 11.4
------ ------
Net Borrowings -- End of the period......................... $(48.7) $(27.3)
====== ======
Represented by
Short-term borrowings..................................... $(59.3) $(37.4)
Less: Cash and short-term deposits........................ 10.6 10.1
------ ------
$(48.7) $(27.3)
====== ======
</TABLE>
See accompanying notes
F-35
<PAGE> 113
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(IN MILLIONS OF U.S. DOLLARS) -- CANADIAN GAAP
UNAUDITED
1. Reference should be made to the consolidated financial statements for
the year ended December 31, 1997 included in Form 10-K filed on March 31, 1998,
for details of significant accounting policies. Certain comparative figures have
been reclassified to conform with current financial statement presentation.
2. In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position as of
March 31, 1998 and 1997, the results of operations and changes in financial
position for the three months then ended. The interim results are not
necessarily indicative of the results to be expected for the full year.
3. Details of inventories are as follows:
<TABLE>
<CAPTION>
MARCH 31,
--------------- DECEMBER 31,
1997 1998 1997
------ ------ ------------
<S> <C> <C> <C>
Finished goods........................................... $ 95.3 $ 87.2 $58.8
Raw materials and work in process........................ 11.4 15.9 13.4
Service parts............................................ 20.2 22.3 22.3
------ ------ -----
$126.9 $125.4 $94.5
====== ====== =====
</TABLE>
4. Significant Differences Between Canadian and U.S. Accounting Practices
Accounting principles adopted by the Company as reflected in these
consolidated financial statements are generally consistent with accounting
principles accepted in the United States ("U.S. GAAP"). The following
reconciliations reflect the approximate differences in these accounting
principles where applicable to the Company. If accounting principles generally
accepted in the United States were followed, the effect on the consolidated
financial statements would be:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1997 1998
-------- --------
<S> <C> <C>
Net income (as reported).................................... $ 1.4 $ 3.5
Accounting for income taxes................................. (.2) (.2)
Post-retirement benefits.................................... (.5) (.7)
------- -------
Net income under U.S. GAAP.................................. $ 0.7 $ 2.6
======= =======
Weighted average number of ordinary shares outstanding
during the period under U.S. GAAP (in millions)
Basic..................................................... 39.359 39.856
Diluted................................................... 40.764 41.804
Net income per share under U.S. GAAP (in dollars)
Basic..................................................... $ 0.02 $ 0.07
Diluted................................................... $ 0.02 $ 0.06
</TABLE>
F-36
<PAGE> 114
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(IN MILLIONS OF U.S. DOLLARS) -- CANADIAN GAAP
UNAUDITED
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
--------------- DECEMBER 31,
1997 1998 1997
------ ------ ------------
<S> <C> <C> <C>
Total assets (as reported).................................. $368.6 $378.8 $352.0
Items increasing reported total assets
Deferred income taxes..................................... 3.9 3.8 3.4
Post-retirement and pension benefits...................... 4.1 4.7 3.9
------ ------ ------
Total assets -- U.S. GAAP......................... $376.6 $387.3 $359.3
====== ====== ======
Shareholders' equity (as reported).......................... $ 31.1 $ 55.4 $ 51.5
Items increasing (decreasing) reported shareholders' equity
Deferred income taxes..................................... 3.9 3.8 3.4
Post-retirement and pension benefits...................... (5.5) (5.2) (5.2)
------ ------ ------
Shareholders' equity -- U.S. GAAP........................... $ 29.5 $ 54.0 $ 49.7
====== ====== ======
</TABLE>
5. Summarized Financial Information of Subsidiary
The following reflects the unaudited summarized financial information of
CHL Holdings, Inc., a wholly-owned subsidiary of the Company (predecessor to
International Comfort Products Holdings, Inc.) for the three months ended March
31, 1997 and 1998 and as at March 31, 1998:
<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
Statement of Income Data:
Operating Revenue......................................... $126.2 $123.5
Gross Margin.............................................. 26.4 25.9
Net Income................................................ 2.9 4.6
1998
------
Balance Sheet Data:
Current Assets.................................................... $213.0
Total Assets...................................................... 342.8
Current Liabilities............................................... 118.4
Total Liabilities................................................. 311.4
Shareholder's Equity.............................................. 31.4
</TABLE>
F-37
<PAGE> 115
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER CONTAINED HEREIN OTHER THAN THOSE
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND THE ACCOMPANYING
LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE ISSUER OR THE PARENT
GUARANTOR. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL,
OR BOTH TOGETHER, CONSTITUTE AN OFFER OR A SOLICITATION OF ANY OFFER TO BUY ANY
SECURITY OTHER THAN THOSE TO WHICH THEY RELATE, NOR DO THEY CONSTITUTE AN OFFER
TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR
BOTH TOGETHER, NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUER
OR THE PARENT GUARANTOR SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. UNTIL
, 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF THE DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by
Reference............................ 4
Prospectus Summary..................... 5
Historical and Pro Forma Consolidated
Financial Data....................... 13
Risk Factors........................... 16
Use of Proceeds........................ 21
Capitalization......................... 22
Selected Historical and Pro Forma
Consolidated Financial Data.......... 23
Business............................... 26
Description of Other Indebtedness...... 36
Purpose of the Exchange Offer.......... 37
Terms of the Exchange Offer............ 39
Description of Notes................... 45
Book Entry; Delivery and Form.......... 68
Certain U.S. Federal Tax
Considerations....................... 70
Certain Canadian Federal Income Tax
Considerations....................... 74
Legal Matters.......................... 74
Experts................................ 74
Available Information.................. 75
Plan of Distribution................... 75
Index to Financials.................... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$150,000,000
(ICP LOGO)
INTERNATIONAL COMFORT PRODUCTS
HOLDINGS, INC.
8 5/8% SENIOR NOTES DUE 2008
GUARANTEED ON A SENIOR BASIS BY
INTERNATIONAL COMFORT PRODUCTS
CORPORATION
------------------
PROSPECTUS
, 1998
------------------
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 116
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Canada Business Corporations Act (the "CBCA"), under which the Parent
Guarantor is continued, permits (except in respect of an action by or on behalf
of the corporation to procure a judgment in its favour) a corporation to
indemnify a director or officer of the corporation, a former director or officer
of the corporation or a person who acts or acted at the corporation's request as
a director or officer of a body corporate of which the corporation is or was a
shareholder or creditor, and his or her heirs and legal representatives, against
all costs, charges and expenses, including an amount paid to settle an action or
satisfy a judgment, reasonably incurred by him or her in respect of any civil,
criminal or administrative action or proceeding to which he or she is made a
party by reason of his or her being or having been a director or officer of such
corporation or body corporate, if (i) he or she acted honestly and in good faith
with a view to the best interests of the corporation, and (ii) in the case of a
criminal or administrative action or proceeding that is enforced by a monetary
penalty, he or she had reasonable grounds for believing that his or her conduct
was lawful, and requires the corporation to so indemnify any such person who has
been substantially successful on the merits in his or her defense of such action
or proceeding and who has fulfilled the conditions set out in (i) and (ii)
above.
The By-laws of the Parent Guarantor provide that subject to the limitations
contained in the CBCA but without limit to the right of the Parent Guarantor to
indemnify any person under the CBCA or otherwise, the Parent Guarantor shall
indemnify present and former directors and officers of the Parent Guarantor or
any person who acts or acted at the Parent Guarantor's request as a director or
officer of a body corporate of which the Parent Guarantor is or was a
shareholder or creditor, and his or her heirs and legal representatives, against
all costs, charges and expenses, including an amount paid to settle an action or
satisfy a judgment, reasonably incurred by such person in respect of any civil,
criminal and administrative action or proceeding to which he or she is made a
party by reason of being or having been a director or officer of the Parent
Guarantor or of a body corporate of which the Parent Guarantor is or was a
shareholder or creditor, if such person (i) acted honestly and in good faith
with a view to the best interests of the Parent Guarantor and (ii) in the case
of a criminal or administrative action or proceeding that is enforced by a
monetary penalty, had reasonable grounds for believing that his or her conduct
was lawful.
Section 145 of the Delaware General Corporation Law, under which the Issuer
is formed, contains provisions permitting and, in some situations, requiring
Delaware corporations, such as the Issuer, to provide indemnification to their
officers and directors for losses and litigation expense incurred in connection
with their service to the corporation in those capacities. The Issuer's
Certificate of Incorporation contains provisions requiring indemnification by
the Issuer of its directors and officers to the fullest extent that is permitted
by law. Among other things, these provisions will provide indemnification for
officers and directors against liabilities for judgments in and settlements of
lawsuits and other proceedings and for the advance and payment of fees and
expenses reasonably incurred by the director or officer in defense of any such
lawsuit or proceeding.
The Issuer's Certificate of Incorporation provides that no director of the
Company shall be liable to the Issuer or any stockholder for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Issuer or its stockholders, (ii)
for acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law (governing distributions to stockholders) or (iv) for any
transaction from which the director derived an improper personal benefit.
The Issuer's Certificate of Incorporation also provides that if Delaware
law is amended to further eliminate or limit the liability of directors, then
the liability of a director of the Issuer shall be eliminated or limited,
without further shareholder action, to the fullest extent possible under
Delaware law as so amended.
The Parent Guarantor and the Issuer maintain a contract for insurance
coverage under which the officers and directors of the Parent Guarantor and the
Issuer are indemnified under certain circumstances with respect
II-1
<PAGE> 117
to litigation and other costs and liabilities arising out of actual or alleged
misconduct of such directors and officers.
ITEM 21. EXHIBITS.
In accordance with the provisions of Item 601 of Regulation S-K, the
following have been furnished as Exhibits to this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C> <C>
3(i).1, 4.1 -- Articles of Incorporation of International Comfort Products
Corporation filed as Exhibit 3(i)/4.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 filed with the Commission on November 14,
1997, and incorporated herein by this reference.
3(i).2, 4.2 -- Certificate of Incorporation of International Comfort
Products Holdings, Inc.
3(ii).1, 4.3 -- Bylaws of International Comfort Products Corporation filed
as Exhibit 1.2 to the Company's Annual Report on Form 20-F
for the year ended December 31, 1993 filed with the
Commission on June 29, 1994, and incorporated herein by this
reference.
3(ii).2, 4.4 -- Bylaws of International Comfort Products Holdings, Inc.
4.5 -- Indenture, dated as of May 13, 1998, by and among
International Comfort Products Holdings, Inc., International
Comfort Products Corporation and United States Trust Company
of New York, as Trustee, with respect to the Series A and
Series B 8 5/8% Senior Notes due 2008.
4.6 -- Purchase Agreement, dated May 8, 1998, by and among Salomon
Brothers Inc, Credit Suisse First Boston Corporation and
First Union Capital Markets, a division of Wheat First
Securities, Inc. (collectively, the "Initial Purchasers").
4.7 -- Registration Rights Agreement, dated as of May 13, 1998, by
and among the Issuer, the Parent Guarantor and the Initial
Purchasers.
4.4 -- Form of New Note (contained in Exhibit 4.5).
5.1 -- Opinion of Tuke Yopp & Sweeney, PLC, as to the legality of
the New Notes registered hereunder.*
5.2 -- Opinion of Osler, Hoskin & Harcourt, as to the legality of
the Parent Guarantee registered hereunder.*
10.1 -- Master Trust Pooling and Service Agreement, dated as of July
25, 1996 among Inter-City Products Receivables Company,
L.P.("ICP-Receivables"), ICP (USA) and LaSalle National
Bank, as Trustee filed as Exhibit 4.4 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 filed with the Commission on November 14,
1997, and incorporated herein by this reference.
10.2 -- Series 1996-1 Supplement to Master Trust Pooling and Service
Agreement, dated as of July 25, 1996 among ICP -Receivables,
ICP (USA) and LaSalle National Bank, as Trustee (and
correlative form of Class A (Series 1996-1) Certificate and
form of Class B (Series 1996-1) Certificate, and form of
Guaranty from ICP (USA) filed as Exhibit 4.5 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997 filed with the Commission on
November 14, 1997, and incorporated herein by this
reference.
10.3 -- Receivables Purchase Agreement dated as of July 25, 1996
among ICP (USA), Inter-City Products Partner Corporation
("ICP-Partner") and ICP-Receivables filed as Exhibit 4.6 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997 filed with the Commission on
November 14, 1997, and incorporated herein by this
reference.
</TABLE>
II-2
<PAGE> 118
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C> <C>
10.4 -- Certificate Purchase Agreement (Series 1996-1, Class A)
dated as of July 25, 1996 among ICP-Receivables, ICP (USA),
the Purchasers named therein and The Chicago Corporation, as
Agent filed as Exhibit 4.7 to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1997 filed
with the Commission on November 14, 1997, and incorporated
herein by this reference.
10.5 -- Certificate Purchase Agreement (Series 1996-1, Class B)
dated as of July 25, 1996 among ICP-Receivables, ICP (USA)
and Argos Funding Corp. filed as Exhibit 4.8 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997 filed with the Commission on
November 14, 1997, and incorporated herein by this
reference.
10.6 -- First Amendment to Certificate Purchase Agreement (Series
1996-1, Class A) dated as of December 1, 1996 among
ICP-Receivables, ICP (USA), the Purchasers named therein and
The Chicago Corporation, as Agent filed as Exhibit 4.9 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997 filed with the Commission on
November 14, 1997, and incorporated herein by this
reference.
10.7 -- First Amendment to Receivables Purchase Agreement and Second
Amendment to Certificate Purchase Agreement (Series 1996-1,
Class A) dated as of January 27, 1997 among ICP-USA,
ICP-Partner, General Heating and Cooling Company, Coastline
Distribution, Inc., ICP-Receivables, Anagram Funding Corp.
and ABN AMRO Chicago Corporation filed as Exhibit 4.10 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997 filed with the Commission on
November 14, 1997, and incorporated herein by this
reference.
10.8 -- Second Amendment to Receivables Purchase Agreement as of
September 30, 1997 among ICP (USA), ICP-Partner, General
Heating and Cooling Company, ICP-Receivables, Anagram
Funding Corp. and ABN AMRO Chicago Corporation filed as
Exhibit 4.11 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997 filed with the
Commission on November 14, 1997, and incorporated herein by
this reference.
10.9 -- Loan and Security Agreement dated as of July 18, 1997
between ICP (USA) and NationsBank, N.A. filed as Exhibit
4.12 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997 filed with the Commission
on November 14, 1997, and incorporated herein by this
reference.
10.10 -- International Comfort Products Corporation Employee Stock
Option Plan filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-8 filed with the Commission
on March 16, 1995, and incorporated herein by this
reference.
10.11 -- International Comfort Products Corporation Share
Compensation Arrangement for Non-Employee Directors filed as
Exhibit 10.3 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1997 filed with the Commission
on March 30, 1998, and incorporated herein by this
reference.
10.12 -- International Comfort Products Corporation Long Term
Incentive Plan filed as Exhibit 10.25 to ICP (USA)'s
Registration Statement on Form S-1 (File No. 33-56238) filed
with the Commission on December 23, 1992, and incorporated
herein by this reference.
10.13 -- Amendment to International Comfort Products Corporation Long
Term Incentive Plan filed as Exhibit 10.11 to ICP (USA)'s
Annual Report on Form 10-K for the year ended December 31,
1993 filed with the Commission on March 28, 1994, and
incorporated herein by this reference.
</TABLE>
II-3
<PAGE> 119
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C> <C>
10.14 -- International Comfort Products Corporation 1997 Long Term
Incentive Plan for Senior Management filed as Exhibit 10.6
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997 filed with the Commission on March
30, 1998, and incorporated herein by this reference.
10.15 -- ICP (USA) Share Ownership Savings Plan filed as Exhibit
10.26 to ICP (USA)'s Registration Statement on Form S-1
(File No. 33-56238) filed with the Commission on December
23, 1992, and incorporated herein by this reference.
10.16 -- Amendments to ICP (USA)'s Share Ownership Savings Plan filed
as Exhibit 10.8 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997 filed with the
Commission on March 30, 1998, and incorporated herein by
this reference.
10.17 -- Retirement Plan for Salaried Employees filed as Exhibit
10.27 to ICP (USA)'s Registration Statement on Form S-1
(File No. 33-56238) filed with the Commission on December
23, 1992, and incorporated herein by this reference.
10.18 -- Supplemental Retirement Benefit Agreement dated September 1,
1994 with W. Michael Clevy filed as Exhibit 10.16 to ICP
(USA)'s Annual Report on Form 10-K for the year ended
December 31, 1995 filed with the Commission on March 28,
1996, and incorporated herein by this reference.
10.19 -- Termination Agreement with W. Michael Clevy filed as Exhibit
10.11 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1997 filed with the Commission on
March 30, 1998, and incorporated herein by this reference.
10.20 -- Termination Agreement with Stephen L. Clanton filed as
Exhibit 10.12 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997 filed with the
Commission on March 30, 1998, and incorporated herein by
this reference.
10.21 -- Termination Agreement with James L. Kirwan.**
10.22 -- Termination Agreement with Herman V. Kling.**
10.23 -- Change in Control Agreement with David P. Cain filed as
Exhibit 10.15 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997 filed with the
Commission on March 30, 1998, and incorporated herein by
this reference.
10.24 -- Change in Control Agreement with Francis C. Harrell.***
10.25 -- Change in Control Agreement with Robert C. Henningsen.***
10.26 -- Change in Control Agreement with Alexander T. Lim.***
10.27 -- Change in Control Agreement with Augusto H. Millan.***
10.28 -- Change in Control Agreement with H. David Tayler.***
10.29 -- Change in Control Agreement with James R. Wiese.***
10.30 -- International Comfort Products Corporation 1998 Stock Option
Plan.
12.1 -- Computation of ratio of earnings to fixed charges.
21.1 -- Subsidiaries
23.1 -- Consent of Tuke Yopp & Sweeney, PLC (contained in Exhibit
5.1).
23.2 -- Consent of Osler, Hoskin & Harcourt (contained in Exhibit
5.2).
23.3 -- Consent of Arthur Andersen & Co., Chartered Accountants.*
23.4 -- Consent of PricewaterhouseCoopers, Chartered Accountants.*
24.1 -- Powers of Attorney of certain directors and officers of the
Company (included on the signature pages to this
registration statement).
25.1 -- Form T-1 Statement of Eligibility and Qualification under
the Trust Indenture Act of 1939, as amended, of United
States Trust Company, as Trustee.
</TABLE>
II-4
<PAGE> 120
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C> <C>
99.1 -- Form of Letter of Transmittal with respect to the Exchange
Offer.
99.2 -- Form of Letter of Guaranteed Delivery.
99.3 -- Form of Letter to Brokers, Dealers.
99.4 -- Form of Letter to Clients.
</TABLE>
- ---------------
* To be filed by amendment
** Document not filed because substantially identical to Exhibit 10.20
*** Document not filed because substantially identical to Exhibit 10.23
ITEM 22. UNDERTAKINGS.
1. The undersigned registrants hereby undertake:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(1) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(2) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(3) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) shall not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by
the registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act") that are incorporated by
reference in the registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
2. The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act, each filing of the Parent
Guarantor's annual report pursuant to Section 13(a) or 15(d) of the Exchange Act
(and, where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
3. The undersigned registrants hereby undertake as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by
II-5
<PAGE> 121
any person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuers undertake that such reoffering prospectus will contain
the information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
4. The registrants undertake that every prospectus: (i) that is filed
pursuant to paragraph (3) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
5. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrants pursuant to the foregoing provisions, or otherwise, the registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrants of expenses
incurred or paid by a director, officer or controlling person of the registrants
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrants will, unless in the opinion of their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
6. The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
7. The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-6
<PAGE> 122
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Franklin, State of
Tennessee, on this 8th day of July, 1998.
INTERNATIONAL COMFORT PRODUCTS
HOLDINGS, INC.
By: /s/ S. CLANTON
------------------------------------
Stephen L. Clanton
Senior Vice President, Chief
Financial Officer and Treasurer
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby severally constitutes and appoints Stephen L. Clanton and David P.
Cain and each of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities to sign any and all amendments (including
pre-effective and post-effective amendments) to this Registration Statement and
all documents relating thereto and to file the same with all exhibits thereto
and other documents in connection therewith with the Securities and Exchange
Commission and each state securities regulatory authority, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing necessary or advisable to be done in and about the premises
as fully to all intents and purposes as he might or could do in person hereby
ratifying and confirming all that said attorneys-in-fact and agents or his
substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated, on this 8th day of July, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ W. MICHAEL CLEVY President, Chief Executive Officer and
- ----------------------------------------------------- Director
(W. Michael Clevy)
/s/ DAVID P. CAIN Senior Vice President, General Counsel and
- ----------------------------------------------------- Secretary
(David P. Cain)
/s/ S. CLANTON Senior Vice President, Chief Financial Officer
- ----------------------------------------------------- and Treasurer (Principal financial and
(Stephen L. Clanton) accounting officer)
</TABLE>
II-7
<PAGE> 123
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Franklin, State of
Tennessee, on this 8th day of July, 1998.
INTERNATIONAL COMFORT PRODUCTS
CORPORATION
By: /s/ S. CLANTON
------------------------------------
Stephen L. Clanton
Senior Vice President, Chief
Financial Officer and Treasurer
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby severally constitutes and appoints Stephen L. Clanton and David P.
Cain and each of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities to sign any and all amendments (including
pre-effective and post-effective amendments) to this Registration Statement and
all documents relating thereto and to file the same with all exhibits thereto
and other documents in connection therewith with the Securities and Exchange
Commission and each state securities regulatory authority, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing necessary or advisable to be done in and about the premises
as fully to all intents and purposes as he might or could do in person hereby
ratifying and confirming all that said attorneys-in-fact and agents or his
substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated, on this 8th day of July, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S> <C>
/s/ RICHARD W. SNYDER Chairman of the Board and Director
- -----------------------------------------------------
(Richard W. Snyder)
/s/ W. MICHAEL CLEVY President, Chief Executive Officer and
- ----------------------------------------------------- Director
(W. Michael Clevy)
/s/ DAVID P. CAIN Senior Vice President, General Counsel
- ----------------------------------------------------- and Secretary
(David P. Cain)
/s/ S. CLANTON Senior Vice President, Chief Financial
- ----------------------------------------------------- Officer and Treasurer (Principal
(Stephen L. Clanton) financial and accounting officer)
/s/ RICHARD C. BARNETT Director
- -----------------------------------------------------
(Richard C. Barnett)
/s/ STANLEY M. BECK Director
- -----------------------------------------------------
(Stanley M. Beck)
/s/ WILLIAM G. DAVIS Director
- -----------------------------------------------------
(William G. Davis)
/s/ JOHN F. FRASER Director
- -----------------------------------------------------
(John F. Fraser)
/s/ ROY T. GRAYDON Director
- -----------------------------------------------------
(Roy T. Graydon)
</TABLE>
II-8
<PAGE> 124
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S> <C>
/s/ MARVIN G. MARSHALL Director
- -----------------------------------------------------
(Marvin G. Marshall)
/s/ ERNEST C. MERCIER Director
- -----------------------------------------------------
(Ernest C. Mercier)
/s/ DAVID H. MORRIS Director
- -----------------------------------------------------
(David H. Morris)
/s/ DAVID A. RATTEE Director
- -----------------------------------------------------
(David A. Rattee)
/s/ WILLIAM A. WILSON Director
- -----------------------------------------------------
(William A. Wilson)
</TABLE>
II-9
<PAGE> 125
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C> <C>
3(i).1, 4.1 -- Articles of Incorporation of International Comfort Products
Corporation filed as Exhibit 3(i)/4.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 filed with the Commission on November 14,
1997, and incorporated herein by this reference.
3(i).2, 4.2 -- Certificate of Incorporation of International Comfort
Products Holdings, Inc.
3(ii).1, 4.3 -- Bylaws of International Comfort Products Corporation filed
as Exhibit 1.2 to the Company's Annual Report on Form 20-F
for the year ended December 31, 1993 filed with the
Commission on June 29, 1994, and incorporated herein by this
reference.
3(ii).2, 4.4 -- Bylaws of International Comfort Products Holdings, Inc.
4.5 -- Indenture, dated as of May 13, 1998, by and among
International Comfort Products Holdings, Inc., International
Comfort Products Corporation and United States Trust Company
of New York, as Trustee, with respect to the Series A and
Series B 8 5/8% Senior Notes due 2008.
4.6 -- Purchase Agreement, dated May 8, 1998, by and among Salomon
Brothers Inc, Credit Suisse First Boston Corporation and
First Union Capital Markets, a division of Wheat First
Securities, Inc. (collectively, the "Initial Purchasers").
4.7 -- Registration Rights Agreement, dated as of May 13, 1998, by
and among the Issuer, the Parent Guarantor and the Initial
Purchasers.
4.4 -- Form of New Note (contained in Exhibit 4.5).
5.1 -- Opinion of Tuke Yopp & Sweeney, PLC, as to the legality of
the New Notes registered hereunder.*
5.2 -- Opinion of Osler, Hoskin & Harcourt, as to the legality of
the Parent Guarantee registered hereunder.*
10.1 -- Master Trust Pooling and Service Agreement, dated as of July
25, 1996 among Inter-City Products Receivables Company,
L.P.("ICP-Receivables"), ICP (USA) and LaSalle National
Bank, as Trustee filed as Exhibit 4.4 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 filed with the Commission on November 14,
1997, and incorporated herein by this reference.
10.2 -- Series 1996-1 Supplement to Master Trust Pooling and Service
Agreement, dated as of July 25, 1996 among ICP -Receivables,
ICP (USA) and LaSalle National Bank, as Trustee (and
correlative form of Class A (Series 1996-1) Certificate and
form of Class B (Series 1996-1) Certificate, and form of
Guaranty from ICP (USA) filed as Exhibit 4.5 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997 filed with the Commission on
November 14, 1997, and incorporated herein by this
reference.
10.3 -- Receivables Purchase Agreement dated as of July 25, 1996
among ICP (USA), Inter-City Products Partner Corporation
("ICP-Partner") and ICP-Receivables filed as Exhibit 4.6 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997 filed with the Commission on
November 14, 1997, and incorporated herein by this
reference.
10.4 -- Certificate Purchase Agreement (Series 1996-1, Class A)
dated as of July 25, 1996 among ICP-Receivables, ICP (USA),
the Purchasers named therein and The Chicago Corporation, as
Agent filed as Exhibit 4.7 to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1997 filed
with the Commission on November 14, 1997, and incorporated
herein by this reference.
</TABLE>
II-10
<PAGE> 126
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C> <C>
10.5 -- Certificate Purchase Agreement (Series 1996-1, Class B)
dated as of July 25, 1996 among ICP-Receivables, ICP (USA)
and Argos Funding Corp. filed as Exhibit 4.8 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997 filed with the Commission on
November 14, 1997, and incorporated herein by this
reference.
10.6 -- First Amendment to Certificate Purchase Agreement (Series
1996-1, Class A) dated as of December 1, 1996 among
ICP-Receivables, ICP (USA), the Purchasers named therein and
The Chicago Corporation, as Agent filed as Exhibit 4.9 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997 filed with the Commission on
November 14, 1997, and incorporated herein by this
reference.
10.7 -- First Amendment to Receivables Purchase Agreement and Second
Amendment to Certificate Purchase Agreement (Series 1996-1,
Class A) dated as of January 27, 1997 among ICP-USA,
ICP-Partner, General Heating and Cooling Company, Coastline
Distribution, Inc., ICP-Receivables, Anagram Funding Corp.
and ABN AMRO Chicago Corporation filed as Exhibit 4.10 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997 filed with the Commission on
November 14, 1997, and incorporated herein by this
reference.
10.8 -- Second Amendment to Receivables Purchase Agreement as of
September 30, 1997 among ICP (USA), ICP-Partner, General
Heating and Cooling Company, ICP-Receivables, Anagram
Funding Corp. and ABN AMRO Chicago Corporation filed as
Exhibit 4.11 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997 filed with the
Commission on November 14, 1997, and incorporated herein by
this reference.
10.9 -- Loan and Security Agreement dated as of July 18, 1997
between ICP (USA) and NationsBank, N.A. filed as Exhibit
4.12 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997 filed with the Commission
on November 14, 1997, and incorporated herein by this
reference.
10.10 -- International Comfort Products Corporation Employee Stock
Option Plan filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-8 filed with the Commission
on March 16, 1995, and incorporated herein by this
reference.
10.11 -- International Comfort Products Corporation Share
Compensation Arrangement for Non-Employee Directors filed as
Exhibit 10.3 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1997 filed with the Commission
on March 30, 1998, and incorporated herein by this
reference.
10.12 -- International Comfort Products Corporation Long Term
Incentive Plan filed as Exhibit 10.25 to ICP (USA)'s
Registration Statement on Form S-1 (File No. 33-56238) filed
with the Commission on December 23, 1992, and incorporated
herein by this reference.
10.13 -- Amendment to International Comfort Products Corporation Long
Term Incentive Plan filed as Exhibit 10.11 to ICP (USA)'s
Annual Report on Form 10-K for the year ended December 31,
1993 filed with the Commission on March 28, 1994, and
incorporated herein by this reference.
10.14 -- International Comfort Products Corporation 1997 Long Term
Incentive Plan for Senior Management filed as Exhibit 10.6
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997 filed with the Commission on March
30, 1998, and incorporated herein by this reference.
10.15 -- ICP (USA) Share Ownership Savings Plan filed as Exhibit
10.26 to ICP (USA)'s Registration Statement on Form S-1
(File No. 33-56238) filed with the Commission on December
23, 1992, and incorporated herein by this reference.
</TABLE>
II-11
<PAGE> 127
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C> <C>
10.16 -- Amendments to ICP (USA)'s Share Ownership Savings Plan filed
as Exhibit 10.8 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997 filed with the
Commission on March 30, 1998, and incorporated herein by
this reference.
10.17 -- Retirement Plan for Salaried Employees filed as Exhibit
10.27 to ICP (USA)'s Registration Statement on Form S-1
(File No. 33-56238) filed with the Commission on December
23, 1992, and incorporated herein by this reference.
10.18 -- Supplemental Retirement Benefit Agreement dated September 1,
1994 with W. Michael Clevy filed as Exhibit 10.16 to ICP
(USA)'s Annual Report on Form 10-K for the year ended
December 31, 1995 filed with the Commission on March 28,
1996, and incorporated herein by this reference.
10.19 -- Termination Agreement with W. Michael Clevy filed as Exhibit
10.11 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1997 filed with the Commission on
March 30, 1998, and incorporated herein by this reference.
10.20 -- Termination Agreement with Stephen L. Clanton filed as
Exhibit 10.12 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997 filed with the
Commission on March 30, 1998, and incorporated herein by
this reference.
10.21 -- Termination Agreement with James L. Kirwan.**
10.22 -- Termination Agreement with Herman V. Kling.**
10.23 -- Change in Control Agreement with David P. Cain filed as
Exhibit 10.15 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997 filed with the
Commission on March 30, 1998, and incorporated herein by
this reference.
10.24 -- Change in Control Agreement with Francis C. Harrell.***
10.25 -- Change in Control Agreement with Robert C. Henningsen.***
10.26 -- Change in Control Agreement with Alexander T. Lim.***
10.27 -- Change in Control Agreement with Augusto H. Millan.***
10.28 -- Change in Control Agreement with H. David Tayler.***
10.29 -- Change in Control Agreement with James R. Wiese.***
10.30 -- International Comfort Products Corporation 1998 Stock Option
Plan.
12.1 -- Computation of ratio of earnings to fixed charges.
21.1 -- Subsidiaries
23.1 -- Consent of Tuke Yopp & Sweeney, PLC (contained in Exhibit
5.1).
23.2 -- Consent of Osler, Hoskin & Harcourt (contained in Exhibit
5.2).
23.3 -- Consent of Arthur Andersen & Co., Chartered Accountants.*
23.4 -- Consent of PricewaterhouseCoopers, Chartered Accountants.*
24.1 -- Powers of Attorney of certain directors and officers of the
Company (included on the signature pages to this
registration statement).
25.1 -- Form T-1 Statement of Eligibility and Qualification under
the Trust Indenture Act of 1939, as amended, of United
States Trust Company, as Trustee.
99.1 -- Form of Letter of Transmittal with respect to the Exchange
Offer.
</TABLE>
II-12
<PAGE> 128
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C> <C>
99.2 -- Form of Letter of Guaranteed Delivery.
99.3 -- Form of Letter to Brokers, Dealers.
99.4 -- Form of Letter to Clients.
</TABLE>
- ---------------
* To be filed by amendment
** Document not filed because substantially identical to Exhibit 10.20
*** Document not filed because substantially identical to Exhibit 10.23
II-13
<PAGE>
CERTIFICATE OF INCORPORATION
OF
INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC.
The undersigned, in order to form a corporation for the purposes stated
below, pursuant to the General Corporation Law of Delaware, certifies as
follows:
ARTICLE I
The name of the corporation is International Comfort Products Holdings,
Inc.
ARTICLE II
The address of the registered office of the corporation is Corporation
Trust Center, 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of Delaware.
ARTICLE IV
The total number of shares which the corporation shall have the
authority to issue is one hundred (100) shares of common stock, $.01 par
value per share, that have unlimited voting rights and that are entitled to
receive the net assets of the corporation upon dissolution.
ARTICLE V
The name and mailing address of the incorporator are Steven E.
Blumenthal, Tuke Yopp & Sweeney, PLC, NationsBank Plaza, Suite 1100, 414
Union Street, Nashville, Tennessee 37219. The power of the incorporator as
such shall terminate upon the filing of this Certificate of Incorporation.
ARTICLE VI
The names and mailing addresses of the persons who are to serve as
directors until the first annual meeting of stockholders or until their
successors are elected and qualified are:
Name Mailing Address
---- ---------------
W. Michael Clevy 501 Corporate Centre Drive, Suite 200
Franklin, Tennessee 37067
<PAGE>
David P. Cain 501 Corporate Centre Drive, Suite 200
Franklin, Tennessee 37067
Stephen L. Clanton 501 Corporate Centre Drive, Suite 200
Franklin, Tennessee 37067
ARTICLE VII
The Board of Directors is expressly authorized to adopt, amend, or
repeal the Bylaws of the corporation by a vote of the majority of the Board
of Directors.
ARTICLE VIII
(a) To the fullest extent that the General Corporation Law of
Delaware, as it exists on the date hereof or as it may hereafter be amended,
permits the elimination or limitation of the personal liability of directors,
a director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for a breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its shareholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the General
Corporation Law of Delaware as the same exists or hereafter may be amended,
or (iv) for any transaction from which the director derived an improper
personal benefit. If the General Corporation Law of Delaware hereafter is
amended to authorize the further elimination or limitation of the liability
of directors, then the liability of a director of the corporation, in
addition to the limitation on personal liability provided herein, shall be
limited to the fullest extent permitted by the amended General Corporation
Law of Delaware. This Article VII shall not eliminate or limit the liability
of a director for any act or omission occurring prior to the date when
Article VII becomes effective, if such a limitation or elimination of
liability of a director for such acts or omissions is prohibited by the
General Corporation Law of Delaware as then in effect. Any repeal or
modification of this Article VII by the shareholders of the corporation shall
be prospective only, and shall not adversely affect any limitation on the
personal liability of a director of the corporation existing at the time of
such repeal or modification.
(b) The corporation shall have the power to indemnify any person who
is or was a director, officer, employee, or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise (including, without limitation, any employee benefit
plan) to the fullest extent permitted by the General Corporation Law of
Delaware as it exists on the date hereof or as it may hereafter be amended.
The indemnification provided by this paragraph (b) shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
(c) By action of its Board of Directors, notwithstanding any
interest of the directors in the action, the corporation may purchase and
maintain insurance, in such amounts as the
-2-
<PAGE>
Board of Directors deems appropriate, on behalf of any person who is or was
a director, officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, or other
enterprise (including, without limitation, any employee benefit plan) against
any liability asserted against him and incurred by him in any such capacity
or arising out of his status as such (including, without limitation,
expenses, judgments, fines, and amounts paid in settlement) to the fullest
extent permitted by the General Corporation Law of Delaware as it exists on
the date hereof or as it may hereafter be amended, and whether or not the
corporation would have the power to indemnify him against such liability. For
purposes of this paragraph (c), "fines" shall include any excise taxes
assessed on a person with respect to any employee benefit plan.
Dated: April 15, 1998
/s/ Steven E. Blumenthal
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Steven E. Blumenthal, Incorporator
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BY-LAWS
OF
INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC.
ARTICLE I - STOCKHOLDERS
SECTION 1. ANNUAL MEETING.
An annual meeting of the stockholders, for the election of directors to
succeed those whose terms expire and for the transaction of such other
business as may properly come before the meeting, shall be held at such
place, on such date and at such time as the Board of Directors shall fix,
which date shall be within thirteen (13) months of the last annual meeting of
stockholders or, if no such meeting has been held, the date of incorporation.
SECTION 2. SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or purposes
prescribed in the notice of the meeting, may be called by the Board of
Directors or the President and shall be held at such place, on such date and
at such time as they or he or she shall fix.
SECTION 3. NOTICE OF MEETINGS.
Written notice of the place, date and time of all meetings of the
stockholders shall be given, not less than ten (10) and no more than sixty
(60) days before the date on which the meeting is to be held, to each
stockholder entitled to vote at such meeting, except as otherwise provided
herein or required by law (meaning, here and hereinafter, as required from
time to time by the Delaware General Corporation Law or the Certificate of
Incorporation of the Corporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than
thirty (30) days after the date for which the meeting was originally noticed,
or if a new record date is fixed for the adjourned meeting, written notice of
the place, date and time of the adjourned meeting shall be given in
conformity herewith. At any adjourned meeting, any business may be
transacted which might have been transacted at the original meeting.
SECTION 4. QUORUM.
At any meeting of the stockholders, the holders of a majority of all of
the shares of the stock entitled to vote at the meeting, present in person or
by proxy, shall constitute a quorum for all purposes, unless or except to the
extent that the presence of a larger number may be
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required by law or by the Certificate of Incorporation. Where a separate
vote by a class or classes is required, a majority of the shares of such
class or classes present in person or represented by proxy shall constitute
a quorum entitled to take action with respect to that vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of stock entitled to vote
who are present, in person or by proxy, may adjourn the meeting to another
place, date or time.
SECTION 5. ORGANIZATION.
Such person as the Board of Directors may have designated or, in the
absence of such a person, the President of the Corporation or, in his or her
absence, such person as may be chosen by the holders of a majority of the
shares entitled to vote who are present, in person or by proxy, shall call to
order any meeting of the stockholders and act as chairman of the meeting. In
the absence of the Secretary of the Corporation, the secretary of the meeting
shall be such person as the chairman appoints.
SECTION 6. CONDUCT OF BUSINESS.
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to him or her in
order. The date and time of the opening and closing of the polls for each
matter upon which the stockholders will vote at the meeting shall be
announced at the meeting.
SECTION 7. PROXIES AND VOTING.
At any meeting of the stockholders, every stockholder entitled to vote
may vote in person or by proxy authorized by an instrument in writing or by
a transmission permitted by law filed in accordance with the procedure
established for the meeting. Any copy, facsimile telecommunication or other
reliable reproduction of the writing or transmission created pursuant to this
paragraph may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of
the entire original writing or transmission.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that,
upon demand therefor by a stockholder entitled to vote or by his or her
proxy, a stock vote shall be taken. Every stock vote shall be taken by
ballots, each of which shall state the name of the stockholder or proxy
voting and such other information as may be required under the procedure
established for the meeting. The Corporation may, and to the extent required
by law, shall, in advance of any meeting of stockholders, appoint one or more
inspectors to act at the meeting and make a written report
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thereof. The Corporation may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is able to act at a meeting of stockholders, the person presiding
at the meeting may, and to the extent required by law, shall, appoint one or
more inspectors to act at the meeting. Each inspector, before entering upon
the discharge of his or her duties, shall take and sign an oath faithfully to
execute the duties of inspector with strict impartiality and according to the
best of his or her ability. Every vote taken by ballots shall be counted by
an inspector or inspectors appointed by the chairman of the meeting.
All elections shall be determined by a plurality of the votes cast, and,
except as otherwise required by law, all other matters shall be determined by
a majority of the votes cast affirmatively or negatively.
SECTION 8. STOCK LIST.
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and
showing the address of each such stockholder and the number of shares
registered in his or her name, shall be open to the examination of any such
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten (10) days prior to the meeting, either at
a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at the place
where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the
identity of the stockholders entitled to vote at the meeting and the number
of shares held by each of them.
SECTION 9. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING.
Any action required to be taken at any annual or special meeting of
stockholders of the Corporation, or any action which may be taken at any
annual or special meeting of the stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted and shall be delivered
to the Corporation by delivery to its registered office in Delaware, its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be made
by hand or by certified or registered mail, return receipt requested.
Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective
to take the corporate action referred to therein
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unless, within sixty (60) days of the date of the earliest dated consent
delivered to the Corporation, a written consent or consents signed by a
sufficient number of holders to take action are delivered to the Corporation
in the manner prescribed in the first paragraph of this Section.
ARTICLE II - BOARD OF DIRECTORS
SECTION 1. NUMBER AND TERM OF OFFICE.
The number of directors who shall constitute the whole Board shall be
such number as the Board of Directors shall from time to time have
designated. Each director shall be elected for a term of one year and until
his or her successor is elected and qualified, except as otherwise provided
herein or required by law.
Whenever the authorized number of directors is increased between annual
meetings of the stockholders, a majority of the directors then in office
shall have the power to elect such new directors for the balance of a term
and until their successors are elected and qualified. Any decrease in the
authorized number of directors shall not become effective until the
expiration of the term of the directors then in office unless, at the time of
such decrease, there shall be vacancies on the board which are being
eliminated by the decrease.
SECTION 2. VACANCIES.
If the office of any director becomes vacant by reason of death,
resignation, disqualification, removal or other cause, a majority of the
directors remaining in office, although less than a quorum, may elect a
successor for the unexpired term and until his or her successor is elected
and qualified.
SECTION 3. REGULAR MEETINGS.
Regular meetings of the Board of Directors shall be held at such place
or places, on such date or dates, and at such time or times as shall have
been established by the Board of Directors and publicized among all
directors. A notice of each regular meeting shall not be required.
SECTION 4. SPECIAL MEETINGS.
Special meetings of the Board of Directors may be called by one-third
(1/3) of the directors then in office (rounded up to the nearest whole
number) or by the President, and shall be held at such place, on such date,
and at such time as they or he or she shall fix. Notice of the place, date
and time of each such special meeting shall be given to each director (unless
such director waives notice as provided in Article VI Section 2) by mailing
written notice not less than five (5) days before the meeting or by
telegraphing or telexing or by facsimile transmission
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of the same not less than twenty-four (24) hours before the meeting. Unless
otherwise indicated in the notice thereof, any and all business may be
transacted at a special meeting.
SECTION 5. QUORUM.
At any meeting of the Board of Directors, a majority of the total number
of the whole Board shall constitute a quorum for all purposes. If a quorum
shall fail to attend any meeting, a majority of those present may adjourn the
meeting to another place, date or time, without further notice or waiver
thereof.
SECTION 6. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
SECTION 7. CONDUCT OF BUSINESS.
At any meeting of the Board of Directors, business shall be transacted
in such order and manner as the Board may from time to time determine, and
all matters shall be determined by the vote of a majority of the directors
present, except as otherwise provided herein or required by law. Action may
be taken by the Board of Directors without a meeting if all members thereof
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors.
SECTION 8. POWERS.
The Board of Directors may, except as otherwise required by law,
exercise all such powers and do all such acts and things as may be exercised
or done by the Corporation, including, without limiting the generality of the
foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as
it may determine, of written obligations of every kind,
negotiable or non-negotiable, secured or unsecured, and to do
all things necessary in connection therewith;
(4) To remove any officer of the Corporation with or without cause,
and from time to time to devolve the powers and duties of any
officer upon any other person for the time being;
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(5) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and
agents;
(6) To adopt from time to time such stock, option, stock purchase,
bonus or other compensation plans for directors, officers,
employees and agents of the Corporation and its subsidiaries as
it may determine;
(7) To adopt from time to time such insurance, retirement and other
benefit plans for directors, officers, employees and agents of
the Corporation and its subsidiaries as it may determine; and,
(8) To adopt from time to time regulations, not inconsistent with
these By-Laws, for the management of the Corporation's business
and affairs.
SECTION 9. COMPENSATION OF DIRECTORS.
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as directors,
including, without limitation, their services as members of committees of the
Board of Directors.
ARTICLE III - COMMITTEES
SECTION 1. COMMITTEES OF THE BOARD OF DIRECTORS.
The Board of Directors, by a vote of a majority of the whole Board, may
from time to time designate committees of the Board, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure
of the Board and shall, for those committees and any others provided for
herein, elect a director or directors to serve as the member or members,
designating, if it desires, other directors as alternate members who may
replace any absent or disqualified member at any meeting of the committee.
Any committee so designated may exercise the power and authority of the Board
of Directors to declare a dividend, to authorize the issuance of stock or to
adopt a certificate of ownership and merger pursuant to Section 253 of the
Delaware General Corporation Law if the resolution which designates the
committee or a supplemental resolution of the Board of Directors shall so
provide. In the absence or disqualification of any member of any committee
and any alternate member in his or her place, the member or members of the
committee present at the meeting and not disqualified from voting, whether or
not he or she or they constitute a quorum, may by unanimous vote appoint
another member of the Board of Directors to act at the meeting in the place
of the absent or disqualified member.
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SECTION 2. CONDUCT OF BUSINESS.
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be
made for notice to members of all meetings; one-third (1/3) of the members
shall constitute a quorum unless the committee shall consist of one (1) or
two (2) members, in which event one (1) member shall constitute a quorum; and
all matters shall be determined by a majority vote of the members present.
Action may be taken by any committee without a meeting if all members thereof
consent thereto in writing, and the writing or writings are filed with the
minutes of the proceedings of such committee.
ARTICLE IV - OFFICERS
SECTION 1. GENERALLY.
The officers of the Corporation shall consist of a Chairman (which is an
office that may be filled by the Board of Directors, in its descretion),
President and a Secretary and such other officers as may from time to time be
appointed by the Board of Directors. Officers shall be elected by the Board
of Directors, which shall consider that subject at its first meeting after
every annual meeting of stockholders. Each officer shall hold office until
his or her successor is elected and qualified or until his or her earlier
resignation or removal. Any number of offices may be held by the same
person. The Board of Directors may also designate either the Chairman or the
President as the Chief Executive Officer.
SECTION 2. CHAIRMAN.
The Chairman, if present, shall preside at the meetings of the Board of
Directors and exercise and perform such other powers and duties as may from
time to time be assigned to him or her by the Board of Directors or
prescribed by these By-Laws.
SECTION 3. PRESIDENT.
Subject to the provisions of these By-Laws and to the direction of the
Board of Directors, the President shall have the responsibility for the
general management and control of the business and affairs of the Corporation
and shall perform all duties and have all powers which are commonly incident
to the office of chief executive or which are delegated to him or her by the
Board of Directors. He or she shall have power to sign all stock
certificates, contracts and other instruments of the Corporation which are
authorized and shall have general supervision and direction of all of the
other officers, employees and agents of the Corporation.
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SECTION 4. CHIEF FINANCIAL OFFICER/TREASURER.
The Chief Financial Officer/Treasurer shall have the responsibility for
maintaining the financial records of the Corporation. He or she shall make
such disbursements of the funds of the Corporation as are authorized and
shall render from time to time an account of all such transactions and of the
financial condition of the Corporation. The Chief Financial
Officer/Treasurer shall also perform such other duties as the Board of
Directors may from time to time prescribe.
SECTION 5. SECRETARY.
The Secretary shall issue all authorized notices for, and shall keep
minutes of, all meetings of the stockholders and the Board of Directors. He
or she shall have charge of the corporate books and shall perform such other
duties as the Board of Directors may from time to time prescribe.
SECTION 6. DELEGATION OF AUTHORITY.
The Board of Directors may from time to time delegate the powers or
duties of any officer to any other officers or agents, notwithstanding any
provision hereof.
SECTION 7. REMOVAL.
Any officer of the Corporation may be removed at any time, with or
without cause, by the Board of Directors.
SECTION 8. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS.
Unless otherwise directed by the Board of Directors, the President or
any officer of the Corporation authorized by the President shall have power
to vote and otherwise act on behalf of the Corporation, in person or by
proxy, at any meeting of stockholders of or with respect to any action of
stockholders of any other corporation in which this Corporation may hold
securities and otherwise to exercise any and all rights and powers which this
Corporation may possess by reason of its ownership of securities in such
other corporation.
ARTICLE V - STOCK
SECTION 1. CERTIFICATES OF STOCK.
Each stockholder shall be entitled to a certificate signed by, or in the
name of the Corporation by, the President and by the Secretary certifying the
number of shares owned by such stockholder. Any or all of the signatures on
the certificate may be by facsimile.
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SECTION 2. TRANSFERS OF STOCK.
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where
a certificate is issued in accordance with Section 4 of this Article V of
these By-Laws, an outstanding certificate for the number of shares involved
shall be surrendered for cancellation before a new certificate is issued
therefor.
SECTION 3. RECORD DATE.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise
any rights in respect of any change, conversion or exchange of stock or for
the purpose of any other lawful action, the Board of Directors may fix a
record date, which record date shall not precede the date on which the
resolution fixing the record date is adopted and which record date shall not
be more than sixty (60) nor less than ten (10) days before the date of any
meeting of stockholders, nor more than sixty (60) days prior to the time for
such other action as hereinbefore described; provided, however, that if no
record date for determining stockholders shall be at the close of business on
the day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the day next preceding the day on which
the meeting is held, and, for determining stockholders entitled to receive
payment of any dividend or other distribution or allotment of rights or to
exercise any rights of change, conversion or exchange of stock or for any
other purpose, the record date shall be at the close of business on the day
on which the Board of Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors,
and which record date shall not be more than ten (10) days after the date
upon which the resolution fixing the record date is adopted. If no record
date has been fixed by the Board of Directors and no prior action by the
Board of Directors is required by the Delaware General Corporation Law, the
record date shall be the first date on which a signed written consent setting
forth the action taken or proposed to be taken is delivered to the
Corporation in the manner prescribed by Article I, Section 9 hereof. If no
record date has been fixed by the Board of Directors and prior action by the
Board of Directors is required by the Delaware General Corporation Law with
respect to the proposed action by written consent of the stockholders, the
record date for determining stockholders entitled to consent to corporate
action in writing shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action.
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SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES.
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
SECTION 5. REGULATIONS.
The issue, transfer, conversion and registration of certificates of
stock shall be governed by such other regulations as the Board of Directors
may establish.
ARTICLE VI - NOTICES
SECTION 1. NOTICES.
Except as otherwise specifically provided herein or required by law, all
notices required to be given to any stockholder, director, officer, employee
or agent shall be in writing and may in every instance be effectively given
by hand delivery to the recipient thereof, by depositing such notice in the
mails, postage paid, or by sending such notice by pre-paid telegram or
mailgram. Any such notice shall be addressed to such stockholder, director,
office, employee or agent at his or her last known address as the same
appears on the books of the Corporation. The time when such notice is
received, if hand delivered, or dispatched, if delivered through the mails or
by telegram or mailgram, shall be the time of the giving of the notice.
SECTION 2. WAIVERS.
A written waiver of any notice, signed by a stockholder, director,
officer, employee or agent, whether before or after the time of the event for
which notice is to be given, shall be deemed equivalent to the notice
required to be given to such stockholder, director, officer, employee or
agent. Neither the business nor the purpose of any meeting need be specified
in such a waiver.
ARTICLE VII - MISCELLANEOUS
SECTION 1. FACSIMILE SIGNATURES.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these By-Laws, facsimile signatures of any officer
or officers of the Corporation may be used whenever and as authorized by the
Board of Directors or a committee thereof.
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SECTION 2. CORPORATE SEAL.
The Board of Directors may provide a suitable seal, containing the name
of the Corporation, which seal shall be in the charge of the Secretary. If
and when so directed by the Board of Directors or a committee thereof,
duplicates of the seal may be kept and used by the Chief Financial
Officer/Treasurer or by an Assistant Secretary or Assistant Treasurer.
SECTION 3. RELAINCE UPON BOOKS, REPORTS AND RECORDS.
Each director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the performance of
his or her duties, be fully protected in relying in good faith upon the books
of account or other records of the Corporation and upon such information,
opinions, reports or statements presented to the Corporation by any of its
officers or employees or committees of the Board of Directors so designated,
or by any other person as to matters which such director or committee member
reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of
the Corporation.
SECTION 4. FISCAL YEAR.
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
SECTION 5. TIME PERIODS.
In applying any provision of these By-Laws which requires that an act be
done or not be done a specified number of days prior to an event or that an
act be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be
excluded, and the day of the event shall be included.
ARTICLE VIII - INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. RIGHT TO INDEMNIFICATION.
Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative, or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a director or
an officer of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, including
service with respect to an employee benefit plan (hereinafter an
"indemnitee"), whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights
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than such law permitted the Corporation to provide prior to such amendment),
against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith; provided, however, that, except as provided in Section 3 of this
ARTICLE VIII with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation.
SECTION 2. RIGHT TO ADVANCEMENT OF EXPENSES.
The right to indemnification conferred in Section 1 of this ARTICLE VIII
shall include the right to be paid by the Corporation the expenses (including
attorney's fees) incurred in defending any such proceeding in advance of its
final disposition (hereinafter an "advancement of expenses"); provided,
however, that, if the Delaware General Corporation Law requires, an
advancement of expenses incurred by an indemnitee in his or her capacity as
a director or officer (and not in any other capacity in which service was or
is rendered by such indemnitee, including, without limitation, service to an
employee benefit plan) shall be made only upon delivery to the Corporation of
an undertaking (hereinafter an "undertaking"), by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is not further right
to appeal (hereinafter a "final adjudication") that such indemnitee is not
entitled to be indemnified for such expenses under this Section 2 or
otherwise. The rights to indemnification and to the advancement of expenses
conferred in Section 1 and 2 of this ARTICLE VIII shall be contract rights
and such rights shall continue as to an indemnitee who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators.
SECTION 3. RIGHT OF INDEMNITEE TO BRING SUIT.
If a claim under Section 1 or 2 of this ARTICLE VIII is not paid in full
by the Corporation within sixty (60) days after a written claim has been
received by the Corporation, except in the case of a claim for an advancement
of expenses, in which case the applicable period shall be twenty (20) days,
the indemnitee may at any time thereafter bring suit against the Corporation
to recover the unpaid amount of the claim. If successful in whole or in part
in any such suit, or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an advancement of expenses
pursuant to the terms of an undertaking, the indemnitee shall be entitled to
be paid also to the expense of prosecuting or defending such suit. In (i)
any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to
an advancement of expenses) it shall be a defense that, and (ii) in any suit
brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the Corporation shall be entitled to recover
such expenses upon a final adjudication that, the indemnitee has not met any
applicable standard for indemnification set forth in the Delaware General
Corporation Law. Neither the failure of the Corporation (including its Board
of Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification of
the indemnitee is proper in the circumstances because the indemnitee has met
the applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Corporation (including
its Board of Directors, independent legal
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counsel, or its stockholders) that the indemnitee has not met such applicable
standard of conduct, shall create a presumption that the indemnitee has not
met the applicable standard of conduct or, in the case of such a suit brought
by the indemnitee, be a defense to such suit. In any suit brought by the
indemnitee to enforce a right to indemnification or to an advancement of
expenses hereunder, or brought by the Corporation to recover an advancement
of expenses pursuant to the terms of an undertaking, the burden of proving
that the indemnitee is not entitled to be indemnified, or to such advancement
of expenses, under this ARTICLE VIII or otherwise shall be on the
Corporation.
SECTION 4. NON-EXCLUSIVITY OF RIGHTS.
The right to indemnification and to the advancement of expenses
conferred in this ARTICLE VIII shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, the
Corporation's Certificate of Incorporation, By-Laws, agreement, vote of
stockholder or disinterested directors or otherwise.
SECTION 5. INSURANCE.
The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
SECTION 6. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION.
The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification and to the advancement of
expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of this Article with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
ARTICLE IX - AMENDMENTS
These By-Laws may be amended or repealed by the Board of Directors at
any meeting or by the stockholders at any meeting.
-13-
<PAGE>
- --------------------------------------------------------------------------
INDENTURE
Dated as of May 13, 1998
among
INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC.,
as Issuer,
INTERNATIONAL COMFORT PRODUCTS CORPORATION,
as Guarantor,
and
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
---------------
up to $225,000,000
8 5/8% Senior Notes due 2008, Series A
8 5/8% Senior Notes due 2008, Series B
- ---------------------------------------------------------------------------<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- ---------
310(a)(1)..................................................7.10
(a)(2)..................................................7.10
(a)(3)..................................................N.A.
(a)(4)..................................................N.A.
(a)(5)..................................................7.10
(b).....................................................7.08; 7.10
(c).....................................................N.A.
311(a).....................................................7.11
(b).....................................................7.11
(c).....................................................N.A.
312(a).....................................................2.05
(b).....................................................11.03
(c).....................................................11.03
313(a).....................................................7.06
(b)(1)..................................................7.06
(b)(2)..................................................7.06; 7.07
(c).....................................................7.05; 7.06;11.02
(d).....................................................7.06
314(a).....................................................4.08; 4.10;11.02
(b).....................................................N.A.
(c)(1)..................................................4.08; 11.04
(c)(2)..................................................11.04
(c)(3...................................................4.08; 11.04
(d).....................................................N.A.
(e).....................................................11.05
(f).....................................................N.A.
315(a).....................................................7.01(b)
(b).....................................................7.05; 11.02
(c).....................................................7.01(a)
(d).....................................................7.01(c)
(e).....................................................6.11
316(a)(last sentence)......................................2.09
(a)(1)(A)...............................................6.05
(a)(1)(B)...............................................6.04
(a)(2)..................................................N.A.
(b).....................................................6.07; 9.04
(c).....................................................9.04
317(a)(1)..................................................6.08
(a)(2)..................................................6.09
(b).....................................................2.04
318(a).....................................................11.01
(c).....................................................11.01
- ------------------------------
"N.A." means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose,
be deemed to be a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions..............................1
SECTION 1.02. Incorporation by Reference of TIA........24
SECTION 1.03. Rules of Construction....................24
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating..........................25
SECTION 2.02. Execution and Authentication.............26
SECTION 2.03. Registrar and Paying Agent...............27
SECTION 2.04. Paying Agent To Hold Assets in Trust.....27
SECTION 2.05. Securityholder Lists.....................28
SECTION 2.06. Transfer and Exchange....................28
SECTION 2.07. Replacement Securities...................29
SECTION 2.08. Outstanding Securities...................29
SECTION 2.09. Treasury Securities......................30
SECTION 2.10. Temporary Securities.....................30
SECTION 2.11. Cancellation.............................30
SECTION 2.12. Defaulted Interest.......................31
SECTION 2.13. CUSIP Number.............................31
SECTION 2.14. Deposit of Moneys........................31
SECTION 2.15. Book-Entry Provisions for Global
Securities.............................32
SECTION 2.16. Registration of Transfers and
Exchanges..............................33
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.......................38
SECTION 3.02. Selection of Securities To Be Redeemed...38
SECTION 3.03. Notice of Redemption.....................39
SECTION 3.04. Effect of Notice of Redemption...........40
SECTION 3.05. Deposit of Redemption Price..............40
SECTION 3.06. Securities Redeemed in Part..............41
-i-
<PAGE>
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities....................41
SECTION 4.02. Maintenance of Office or Agency..........41
SECTION 4.03 Limitation on Incurrence of
Additional Indebtedness................42
SECTION 4.04. Limitation on Restricted Payments........42
SECTION 4.05. Corporate Existence......................44
SECTION 4.06. Payment of Taxes and Other Claims........44
SECTION 4.07. Maintenance of Properties and
Insurance..............................45
SECTION 4.08. Compliance Certificate;
Notice of Default......................46
SECTION 4.09. Compliance with Laws.....................46
SECTION 4.10. SEC Reports..............................47
SECTION 4.11. Waiver of Stay, Extension or Usury
Laws...................................47
SECTION 4.12. Limitation on Asset Sales................48
SECTION 4.13. Limitation on Dividend and Other
Payment Restrictions Affecting
Restricted Subsidiaries................51
SECTION 4.14. Limitation on Preferred Stock of
Restricted Subsidiaries................52
SECTION 4.15. Limitation on Liens......................52
SECTION 4.16. [Intentionally Omitted]..................53
SECTION 4.17. [Intentionally Omitted]..................53
SECTION 4.18. Limitations on Transactions with
Affiliates.............................53
SECTION 4.19. [Intentionally Omitted]..................54
SECTION 4.20. [Intentionally Omitted]..................54
SECTION 4.21. Conduct of Business......................54
SECTION 4.22. Payments for Consent.....................54
SECTION 4.23. Limitation on Designations of
Unrestricted Subsidiaries..............54
SECTION 4.24. Change of Control........................56
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Amalgamation, Consolidations
and Sales of Assets....................58
SECTION 5.02. Successor Corporation Substituted........60
-ii-
<PAGE>
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default........................61
SECTION 6.02. Acceleration.............................63
SECTION 6.03. Other Remedies...........................64
SECTION 6.04. Waiver of Past Defaults..................64
SECTION 6.05. Control by Majority......................65
SECTION 6.06. Limitation on Suits......................65
SECTION 6.07. Rights of Holders To Receive Payment.....66
SECTION 6.08. Collection Suit by Trustee...............66
SECTION 6.09. Trustee May File Proofs of Claim.........66
SECTION 6.10. Priorities...............................67
SECTION 6.11. Undertaking for Costs....................67
SECTION 6.12. Restoration of Rights and Remedies.......68
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee........................68
SECTION 7.02. Rights of Trustee........................70
SECTION 7.03. Individual Rights of Trustee.............71
SECTION 7.04. Trustee's Disclaimer.....................71
SECTION 7.05. Notice of Default........................72
SECTION 7.06. Reports by Trustee to Holders............72
SECTION 7.07. Compensation and Indemnity...............72
SECTION 7.08. Replacement of Trustee...................74
SECTION 7.09. Successor Trustee by Merger, Etc.........75
SECTION 7.10. Eligibility; Disqualification............75
SECTION 7.11. Preferential Collection of Claims
Against Company........................76
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. Legal Defeasance and Covenant
Defeasance.............................76
SECTION 8.02. Satisfaction and Discharge...............80
SECTION 8.03. Survival of Certain Obligations..........81
SECTION 8.04. Acknowledgment of Discharge by Trustee...81
SECTION 8.05. Application of Trust Assets..............82
SECTION 8.06. Repayment to the Company or the
Guarantor; Unclaimed Money.............82
SECTION 8.07. Reinstatement............................83
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<PAGE>
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders...............83
SECTION 9.02. With Consent of Holders..................84
SECTION 9.03. Compliance with TIA......................86
SECTION 9.04. Revocation and Effect of Consents........86
SECTION 9.05. Notation on or Exchange of Securities....87
SECTION 9.06. Trustee To Sign Amendments, Etc..........87
ARTICLE TEN
GUARANTEE
SECTION 10.01. Unconditional Guarantee.................87
SECTION 10.02. Severability............................89
SECTION 10.03. Waiver of Subrogation...................89
SECTION 10.04. Execution of Guarantees.................89
SECTION 10.05. Waiver of Stay, Extension or
Usury Laws............................90
SECTION 10.06. Payments of Additional Amounts..........90
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls............................92
SECTION 11.02. Notices.................................92
SECTION 11.03. Communications by Holders with
Other Holders.........................93
SECTION 11.04. Certificate and Opinion as to
Conditions Precedent..................93
SECTION 11.05. Statements Required in Certificate
or Opinion............................93
SECTION 11.06. Rules by Trustee, Paying Agent,
Registrar.............................94
SECTION 11.07. Legal Holidays..........................94
SECTION 11.08. Governing Law...........................94
SECTION 11.09. No Adverse Interpretation of
Other Agreements......................95
SECTION 11.10. No Recourse Against Others..............95
SECTION 11.11. Successors..............................95
SECTION 11.12. Duplicate Originals.....................95
SECTION 11.13. Severability............................95
SECTION 11.14. Table of Contents, Headings, Etc........95
SECTION 11.15. Agent for Service; Submission to
Jurisdiction; Waiver of Immunities....96
SECTION 11.16. Judgment Currency.......................97
-iv-
<PAGE>
Exhibit A - Form of Series A Security
Exhibit B - Form of Series B Security
Exhibit C - Form of Legend for Global Securities
Exhibit D - Transfer Certificate
Exhibit E - Transferee Certificate for Institutional Accredited
Investors
Exhibit F - Transferee Certificate for Regulation S Transfers
Note: This Table of Contents shall not, for any purpose, be deemed
to be a part of the Indenture.
-v-
<PAGE>
INDENTURE dated as of May 13, 1998, among INTERNATIONAL COMFORT
PRODUCTS HOLDINGS, INC., a Delaware corporation (the "Company" or the
"Issuer"), as Issuer, INTERNATIONAL COMFORT PRODUCTS CORPORATION, a
corporation organized under the Canada Business Corporations Act (the
"Guarantor"), as Guarantor, and UNITED STATES TRUST COMPANY OF NEW YORK, as
Trustee (the "Trustee").
The Company has duly authorized the issue of 8 5/8% Senior Notes
due 2008, Series A, and 8 5/8% Senior Notes due 2008, Series B, to be
issued in exchange for the Series A Securities, pursuant to the
Registration Rights Agreement and, to provide therefor, the Company has
duly authorized the execution and delivery of this Indenture. All things
necessary to make the Securities, when duly issued and executed by the
Company and authenticated and delivered hereunder, the valid and binding
obligations of the Company, and to make this Indenture a valid and binding
agreement of the Company, have been done.
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the
Securities:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Accounts Receivable Subsidiary" means any Restricted Subsidiary
that is organized solely for the purpose of and engaged solely in (i)
purchasing, financing and collecting accounts receivable obligations of
customers of the Guarantor and its Restricted Subsidiaries; (ii) the sale
or financing of such accounts receivable; and (iii) other activities
incident thereto.
"Acquired Indebtedness" means Indebtedness of a Person or any of
its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary or at the time it merges or consolidates with the Guarantor or
any of the Restricted Subsidiaries or assumed in connection with the
acquisition of assets from such Person and in each case not incurred by
such Person in connection with, or in anticipation or contemplation of,
such Person becoming a Restricted Subsidiary or such acquisition, merger or
consolidation.
<PAGE>
-2-
"Affiliate" means, with respect to any specified Person, any
other Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such
specified Person. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative of the foregoing.
"Affiliate Transaction" has the meaning provided in Section 4.18.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Asset Acquisition" means (a) an Investment by the Guarantor or
any Restricted Subsidiary in any other Person pursuant to which such Person
shall become a Restricted Subsidiary, or shall be merged with or into the
Guarantor or any Restricted Subsidiary, or (b) the acquisition by the
Guarantor or any Restricted Subsidiary of the assets of any Person (other
than a Restricted Subsidiary) which constitute all or substantially all of
the assets of such Person or comprises any division or line of business of
such Person or any other properties or assets of such Person other than in
the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in
the ordinary course of business), assignment or other transfer for value by
the Guarantor or any of the Restricted Subsidiaries (including any Sale and
Leaseback Transaction) to any Person other than the Guarantor or a
Restricted Subsidiary of (a) any Capital Stock of any Restricted Subsidiary
other than of an Assuming Party in connection with a Domestication Event;
or (b) any other property or assets of the Guarantor or any Restricted
Subsidiary other than in the ordinary course of business; PROVIDED,
HOWEVER, that Asset Sales shall not include (i) a transaction or series of
related transactions for which the Guarantor or the Restricted Subsidiaries
receive aggregate consideration of less than $1.0 million, (ii) the sale,
lease, conveyance, disposition or other transfer of all or substantially
all of the assets of the Guarantor as permitted by Article Five hereof;
(iii) any sale of accounts receivable or inventories in the normal course
of business (including sales by an Accounts Receivable Subsidiary) or in
connection with the sale of a distribution business or a sale of a
<PAGE>
-3-
Restricted Subsidiary principally engaged in a distribution business; (iv)
any sale of Excluded Assets.
"Assuming Party" means a corporation organized by the Guarantor
under the laws of the United States, any State thereof, or the District of
Columbia for the purpose of succeeding to the business of the Guarantor in
a Domestication Event.
"Bankruptcy Law" means Title 11, U.S. Code, the Companies
Creditors Arrangement Act (Canada), the Bankruptcy and Insolvency Act
(Canada) or any similar Federal, state or foreign law for the relief of
debtors.
"Board of Directors" means, as to any Person, the board of
directors of such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such
Person to have been duly adopted by the Board of Directors of such Person
and to be in full force and effect on the date of such certification, and
delivered to the Trustee.
"Business Day" means any day other than a Saturday, Sunday or any
other day on which banking institutions in the City of New York or the City
of Nashville are required or authorized by law or other governmental action
to be closed.
"Capitalized Lease Obligation" means, as to any Person, the
obligations of such Person under a lease that are required to be classified
and accounted for as capital lease obligations under GAAP and, for purposes
of this definition, the amount of such obligations at any date shall be the
capitalized amount of such obligations at such date, determined in
accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other
equivalents (however designated and whether or not voting) of corporate
stock, including each class of Common Stock and Preferred Stock of such
Person and options, warrants or other rights to acquire the same and (ii)
with respect to any Person that is not a corporation, any and all
partnership or other equity interests of such Person.
<PAGE>
-4-
"Cash Equivalents" means (i) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or
issued by any agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state
of the United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within one year from
the date of acquisition thereof and, at the time of acquisition, having one
of the two highest ratings obtainable from either Standard & Poor's
Corporation ("S&P") or Moody's Investors Service, Inc. ("MOODY'S"); (iii)
commercial paper maturing no more than one year from the date of creation
thereof and, at the time of acquisition, having a rating of at least A-1
from S&P or at least P-1 from Moody's; (iv) certificates of deposit or
bankers' acceptances maturing within one year from the date of acquisition
thereof issued by any bank organized under the laws of the United States of
America or any state thereof or the District of Columbia or any U.S. branch
of a foreign bank having at the date of acquisition thereof combined
capital and surplus of not less than $250,000,000; (v) repurchase
obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) above entered into with any
bank meeting the qualifications specified in clause (iv) above; and (vi)
investments in money market funds which invest substantially all their
assets in securities of the types described in clauses (i) through (v)
above.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially
all of the assets of the Guarantor (other than to an Assuming Party in a
Domestication Event) to any Person or group of related Persons for purposes
of Section 13(d) of the Exchange Act (a "GROUP"), together with any
Affiliates thereof (whether or not otherwise in compliance with the
provisions of this Indenture); (ii) the approval by the holders of Capital
Stock of the Guarantor of any plan or proposal for the liquidation or
dissolution of the Guarantor (whether or not otherwise in compliance with
the provisions of this Indenture) (other than in connection with a
Domestication Event if (x) such plan or proposal will not be effected until
after the Assuming Party has been substituted for the Guarantor as provided
in this Indenture and (y) after giving effect to such Domestication Event,
no Person or Group shall become the beneficial owner, directly or
indirectly, of shares representing more than 50% of the aggregate voting
power represented by the issued and outstanding Capital Stock of the
<PAGE>
-5-
Assuming Party); or (iii) any Person or Group shall become the beneficial
owner, directly or indirectly, of shares representing more than 50% of the
aggregate ordinary voting power represented by the issued and outstanding
Capital Stock of the Guarantor other than shares of Capital Stock of the
Guarantor acquired by the Assuming Party in connection with a Domestication
Event.
"Change of Control Date" has the meaning provided in
Section 4.24.
"Change of Control Offer" has the meaning provided in
Section 4.24.
"Change of Control Payment Date" has the meaning provided in
Section 4.24.
"Commission" means the Securities and Exchange Commission.
"Common Stock" of any Person means any and all shares, interests
or other participations in, and other equivalents (however designated and
whether voting or non-voting) of such Person's common stock, whether
outstanding on the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Company" or the "Issuer" means the party named as such in this
Indenture until a successor replaces it pursuant to this Indenture and
thereafter means such successor.
"Consolidated EBITDA" means, with respect to the Guarantor, for
any period, the sum (without duplication) of (i) Consolidated Net Income
and (ii) to the extent Consolidated Net Income has been reduced thereby,
(A) all income taxes of the Guarantor and the Restricted Subsidiaries paid
or accrued in accordance with GAAP for such period (other than income taxes
attributable to extraordinary, unusual or nonrecurring gains or losses or
taxes attributable to sale or dispositions outside the ordinary course of
business), (B) Consolidated Interest Expense and (C) Consolidated Non-cash
Charges, LESS any non-cash items increasing Consolidated Net Income in
excess of $3.0 million for such period, all as determined on a consolidated
basis for the Guarantor and the Restricted Subsidiaries in accordance with
GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to
the Guarantor, the ratio of Consolidated EBITDA of the Guarantor during the
<PAGE>
-6-
four full fiscal quarters (the "FOUR QUARTER PERIOD") ending on or prior to
the date of the transaction giving rise to the need to calculate the
Consolidated Fixed Charge Coverage Ratio (the "TRANSACTION DATE") to
Consolidated Fixed Charges of the Guarantor for the Four Quarter Period.
In addition to and without limitation of the foregoing, for purposes of
this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges"
shall be calculated after giving effect on a pro forma basis for the period
of such calculation to (i) the incurrence or repayment of any Indebtedness
of the Guarantor or any of the Restricted Subsidiaries (and the application
of the proceeds thereof) giving rise to the need to make such calculation
and any incurrence or repayment of other Indebtedness (and the application
of the proceeds thereof), other than the incurrence or repayment of
Indebtedness in the ordinary course of business for working capital
purposes pursuant to working capital facilities, occurring during the Four
Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the
proceeds thereof), occurred on the first day of the Four Quarter Period and
(ii) any asset sales or other disposition or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make
such calculation as a result of the Guarantor or one of the Restricted
Subsidiaries (including any person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) incurring, assuming or otherwise being
liable for Acquired Indebtedness and also including any Consolidated EBITDA
(provided that such Consolidated EBITDA shall be included only to the
extent includable pursuant to the definition of "Consolidated Net Income"
attributable to the assets which are the subject of the Asset Acquisition
or asset sale or other disposition during the Four Quarter Period)
occurring during the Four Quarter Period or at any time subsequent to the
last day of the Four Quarter Period and on or prior to the Transaction Date
as if such Asset Acquisition or asset sale or other disposition (including
the incurrence, assumption or liability for any such Acquired Indebtedness)
occurred on the first day of the Four Quarter Period. If the Guarantor or
any of the Restricted Subsidiaries directly or indirectly guarantees
Indebtedness of a third Person, the preceding sentence shall give effect to
the incurrence of such guaranteed Indebtedness as if the Guarantor or any
Restricted Subsidiary had directly incurred or otherwise assumed such
guaranteed Indebtedness. Furthermore, in calculating "Consolidated Fixed
Charges" for purposes of determining the denominator (but not the
numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1) interest
on outstanding Indebtedness determined on a fluctuating basis as of the
<PAGE>
-7-
Transaction Date and which will continue to be so determined thereafter
shall be deemed to have accrued at a fixed rate per annum equal to the rate
of interest on such Indebtedness in effect on the Transaction Date; (2) if
interest on any Indebtedness actually incurred on the Transaction Date may
optionally be determined at an interest rate based upon a factor of a prime
or similar rate, a eurocurrency interbank offered rate, or other rates,
then the interest rate in effect on the Transaction Date will be deemed to
have been in effect during the Four Quarter Period; and (3) notwithstanding
clause (1) above, interest on Indebtedness determined on a fluctuating
basis, to the extent such interest is covered by agreements relating to
Interest Swap Obligations, shall be deemed to accrue at the rate per annum
resulting after giving effect to the operation of such agreements.
"Consolidated Fixed Charges" means, with respect to the Guarantor
for any period, the sum, without duplication, of (i) Consolidated Interest
Expense, plus (ii) the product of (x) the amount of all dividend payments
on any series of Preferred Stock of the Guarantor (other than dividends
paid in Qualified Capital Stock) paid, accrued or scheduled to be paid or
accrued during such period times (y) a fraction, the numerator of which is
one and the denominator of which is one minus the then current effective
consolidated foreign, federal, state, provincial and local income tax rate
of the Guarantor, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to the
Guarantor for any period, the sum of, without duplication: (i) the
aggregate of the interest expense (net of interest income) of the Guarantor
and the Restricted Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, including, without limitation,
(a) any amortization of debt discount, (b) the net costs under Interest
Swap Obligations, (c) all capitalized interest and (d) the interest portion
of any deferred payment obligation; and (ii) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by the Guarantor and the Restricted Subsidiaries during such period
as determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to the Guarantor,
for any period, the aggregate net income (or loss) of the Guarantor and the
Restricted Subsidiaries for such period on a consolidated basis, determined
in accordance with GAAP; PROVIDED that there shall be excluded therefrom
<PAGE>
-8-
(i) after-tax gains and losses from Asset Sales or abandonments or reserves
relating thereto, (ii) extraordinary or nonrecurring gains, (iii) the net
income of any Person acquired in a "pooling of interests" transaction
accrued prior to the date it becomes a Restricted Subsidiary or is merged
or consolidated with the Guarantor or any Restricted Subsidiary, (iv) the
net income (but not loss) of any Restricted Subsidiary to the extent that
the declaration of dividends or similar distributions by that Restricted
Subsidiary of that income is restricted by a contract, operation of law or
otherwise (other than any such restriction permitted pursuant to clauses
(5), (6) and (7) of Section 4.13), (v) the net income of any Person, other
than a Restricted Subsidiary, except to the extent of cash dividends or
distributions paid to the Guarantor or to a Restricted Subsidiary by such
person, (vi) any restoration to income of any contingency reserve, except
to the extent that provision for such reserve was made out of Consolidated
Net Income accrued at any time following the Issue Date, (vii) income or
loss attributable to discontinued operations (including, without
limitation, operations disposed of during such period whether or not such
operations were classified as discontinued) and (viii) in the case of a
successor to the Guarantor by consolidation or merger or as a transferee of
the Guarantor's assets, any earnings of the successor corporation prior to
such consolidation, merger or transfer of assets.
"Consolidated Non-cash Charges" means, with respect to the
Guarantor, for any period, the aggregate depreciation, amortization and
other non-cash expenses of the Guarantor and the Restricted Subsidiaries
reducing Consolidated Net Income of the Guarantor for such period,
determined on a consolidated basis in accordance with GAAP (excluding any
such charges in excess of $3.0 million in the aggregate during such period
which require an accrual of or a reserve for cash charges for any future
period).
"Covenant Defeasance" has the meaning provided in Section 8.01.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed
to protect the Guarantor or any Restricted Subsidiary against fluctuations
in currency values.
"Custodian" means any receiver, receiver-manager, trustee,
assignee, liquidator, sequestrator or similar official under any Bankruptcy
Law.
<PAGE>
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"Default" means an event or condition the occurrence of which is,
or with the lapse of time or the giving of notice or both would be, an
Event of Default.
"Depository" means, with respect to the Securities issued in the
form of one or more Global Securities, The Depository Trust Company or
another Person designated as Depository by the Company, which must be a
clearing agency registered under the Exchange Act.
"Designation" has the meaning provided in Section 4.23.
"Designation Amount" has the meaning provided in Section 4.23.
"Disqualified Capital Stock" means that portion of any Capital
Stock which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is mandatorily exchangeable for Indebtedness,
or is redeemable, or exchangeable for Indebtedness, at the sole option of
the holder thereof on or prior to the final maturity date of the
Securities, in each case other than redemptions or exchanges in which the
consideration to be received is Qualified Capital Stock.
"Domestication Event" means a transaction or series of
transactions pursuant to which an Assuming Party succeeds to the business
of the Guarantor, through the direct or indirect acquisition of the
Guarantor or by which the Guarantor becomes a Subsidiary of the Assuming
Party or the Assuming Party otherwise acquires directly or indirectly all
or substantially all the assets of the Guarantor, and in any case assumes
the liabilities of the Guarantor, provided that (i) the Assuming Party
concurrently assumes the obligations of the Guarantor under the Guarantee
and this Indenture pursuant to a supplemental indenture (in form reasonably
satisfactory to the Trustee) executed and delivered to the Trustee, (ii)
immediately before and immediately after giving effect to such transaction
and the assumption contemplated by clause (i) above, no Default or Event of
Default shall have occurred and be continuing, and (iii) the Guarantor and
the Assuming Party shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel stating that the Domestication Event
and the supplemental indenture required in connection with the
Domestication Event comply with the applicable provisions of this Indenture
<PAGE>
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and that all conditions precedent in this Indenture relating to the
Domestication Event have been satisfied.
"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.
"Excluded Assets" means the property and assets located at the
research, development and training center in LaVergne, Tennessee and the
distribution facility in Brantford, Ontario.
"fair market value" means, with respect to any asset or property,
the price which could be negotiated in an arm's-length, free market
transaction, for cash, between a willing seller and a willing and able
buyer, neither of whom is under undue pressure or compulsion to complete
the transaction. Fair market value shall be determined by the Board of
Directors of the Issuer acting reasonably and in good faith and shall be
evidenced by a Board Resolution of the Board of Directors of the Issuer
delivered to the Trustee.
"Final Maturity Date" means May 15, 2008.
"Four Quarter Period" has the meaning provided in the definition
of "Consolidated Fixed Charge Coverage Ratio" above.
"GAAP" means generally accepted accounting principles set forth
in the opinions and pronouncements of the Canadian Institute of Chartered
Accountants.
"Global Security" means a security evidencing all or a part of
the Securities issued to the Depository in accordance with Section 2.01 and
bearing the legend prescribed in EXHIBIT C.
"Guarantee" means the obligations of the Guarantor under Article
Ten hereof.
"Guarantor" means the party named as such in this Indenture until
a successor replaces it pursuant to this Indenture and thereafter means
such successor.
"Holder" or "Securityholder" means a Person in whose name a
Security is registered on the Registrar's books.
<PAGE>
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"incur" has the meaning provided in Section 4.03.
"Indebtedness" means, with respect to any Person, without
duplication, (i) all Obligations of such Person for borrowed money, (ii)
all Obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments, (iii) all Capitalized Lease Obligations of such
Person, (iv) all Obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale obligations and
all Obligations under any title retention agreement (but excluding trade
accounts payable and other accrued liabilities arising in the ordinary
course of business that are not overdue by 90 days or more or are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted), (v) all Obligations for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (i) through (v) above and clause (viii)
below, (vii) all Obligations of any other Person of the type referred to in
clauses (i) through (vi) which are secured by any Lien on any property or
asset of such Person, the amount of such Obligation being deemed to be the
lesser of the fair market value of such property or asset or the amount of
the Obligation so secured, (viii) all Obligations under currency agreements
and interest swap agreements of such Person and (ix) all Disqualified
Capital Stock issued by such Person with the amount of Indebtedness
represented by such Disqualified Capital Stock being equal to the greater
of its voluntary or involuntary liquidation preference and its maximum
fixed repurchase price, but excluding accrued dividends, if any. For
purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital Stock
as if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to this Indenture,
and if such price is based upon, or measured by, the fair market value of
such Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the Board of Directors of the issuer of
such Disqualified Capital Stock. "Indebtedness," shall not be deemed to
include customary indemnity obligations of the Guarantor or a Restricted
Subsidiary incurred in connection with an Asset Sale or warranty
obligations of the Guarantor or a Restricted Subsidiary incurred in the
ordinary course of business.
<PAGE>
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"Indenture" means this Indenture, as amended or supplemented from
time to time in accordance with the terms hereof.
"Independent" when used with respect to any specified Person
means such a Person who (a) is in fact independent; (b) does not have any
direct financial interest or any material indirect financial interest in
the Company or any of its Subsidiaries, or in any Affiliate of the Company
or any of its Subsidiaries; and (c) is not an officer, employee, promoter,
underwriter, trustee, partner, director or Person performing similar
functions for the Company or any of its Subsidiaries. Whenever it is
provided in this Indenture that any Independent Person's opinion or
certificate shall be furnished to the Trustee, such Person shall be
appointed by the Company, and such opinion or certificate shall state that
the signer has read this definition and that the signer is Independent
within the meaning hereof.
"Independent Financial Advisor" means a firm (i) which does not,
and whose directors, officers and employees and Affiliates do not, have a
direct or indirect financial interest in the Guarantor or any of the
Restricted Subsidiaries and (ii) which, in the judgment of the Board of
Directors of the Guarantor, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Initial Purchasers" means Salomon Brothers Inc, Credit Suisse
First Boston Corporation and First Union Capital Markets, a division of
Wheat First Securities, Inc.
"Institutional Accredited Investor" means an institution that is
an "accredited investor" as that term is defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act.
"Interest Payment Date" means the stated maturity of an
installment of interest on the Securities.
"Interest Swap Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of
interest on a stated notional amount in exchange for periodic payments made
by such other Person calculated by applying a fixed or a floating rate of
interest on the same notional amount and shall include, without limitation,
interest rate swaps, caps, floors, collars and similar agreements.
<PAGE>
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"Investment" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without limitation,
a guarantee) to or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or services
for the account or use of others), or any purchase or acquisition by such
Person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by, any Person. "Investment" shall
exclude extensions of trade credit by the Guarantor and the Restricted
Subsidiaries on commercially reasonable terms in accordance with normal
trade practices of the Guarantor or such Restricted Subsidiary, as the case
may be. If the Guarantor or any Restricted Subsidiary sells or otherwise
disposes of any Capital Stock of any Restricted Subsidiary (the "Referent
Subsidiary") such that, after giving effect to any such sale or disposition
the Referent Subsidiary shall cease to be a Restricted Subsidiary, the
Guarantor shall be deemed to have made an Investment on the date of any
such sale or disposition equal to the fair market value of the Capital
Stock of the Referent Subsidiary not sold or disposed of.
"Issue Date" means the date of original issuance of the
Securities.
"Judgment Currency" has the meaning provided in Section 11.16.
"Legal Defeasance" has the meaning provided in Section 8.01.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale
or other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents, including payments in
respect of deferred payment obligations, when received in the form of cash
or Cash Equivalents (other than the portion of any such deferred payment
constituting interest) received by the Guarantor or any of the Restricted
Subsidiaries from such Asset Sale net of (a) reasonable out-of-pocket
expenses and fees relating to such Asset Sale (including, without
limitation, legal, accounting and investment banking fees and sales
commissions), (b) taxes paid or payable after taking into account any
reduction in consolidated tax liability due to available tax credits or
<PAGE>
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deductions and any tax sharing arrangements, (c) repayments of Indebtedness
secured by the property or assets subject to such Asset Sale that is
required to be repaid in connection with such Asset Sale and (d)
appropriate amounts to be provided by the Guarantor or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP,
against any liabilities associated with such Asset Sale and retained by the
Guarantor or any Restricted Subsidiary, as the case may be, after such
Asset Sale, including, without limitation, pension and other post-
employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated
with such Asset Sale.
"Net Proceeds Offer" has the meaning provided in Section 4.12.
"Net Proceeds Offer Amount" has the meaning provided in
Section 4.12.
"Net Proceeds Offer Payment Date" has the meaning provided in
Section 4.12.
"Net Proceeds Offer Trigger Date" has the meaning provided in
Section 4.12.
"Obligations" means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and
other liabilities payable under the documentation governing any
Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the
Chief Financial Officer, the Controller, or the Secretary of such Person.
"Officers' Certificate" means a certificate signed by two
Officers of the Company.
"Offshore Physical Securities" has the meaning provided in
Section 2.01.
"Opinion of Counsel" means a written opinion from legal counsel
which and who are acceptable to the Trustee.
"Participants" has the meaning provided in Section 2.15.
<PAGE>
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"Paying Agent" has the meaning provided in Section 2.03.
"Permitted Indebtedness" means, without duplication, each of the
following:
(i) Indebtedness under the Securities, this Indenture and the
Guarantee in an aggregate principal amount not to exceed $150.0
million;
(ii) Indebtedness in an aggregate principal amount at any time
outstanding not to exceed on the date of incurrence the greater
of (x) $100.0 million, and (y) the sum of (a) 85% of the net book
value of accounts receivable of the Guarantor and the Restricted
Subsidiaries and (b) 65% of the net book value of the inventory
of the Guarantor and the Restricted Subsidiaries;
(iii) Interest Swap Obligations of the Guarantor and the
Restricted Subsidiaries covering Indebtedness of the Guarantor or
any Restricted Subsidiary; PROVIDED, HOWEVER, that such Interest
Swap Obligations are entered into to protect the Guarantor and
the Restricted Subsidiaries from fluctuations in interest rates
on Indebtedness incurred in accordance with this Indenture to the
extent the notional principal amount of such Interest Swap
Obligations does not exceed the principal amount of the
Indebtedness to which such Interest Swap Obligations relate;
(iv) Indebtedness under Currency Agreements; PROVIDED that in
the case of Currency Agreements which relate to Indebtedness,
such Currency Agreements do not increase the Indebtedness of the
Guarantor and the Restricted Subsidiaries outstanding other than
as a result of fluctuations in foreign currency exchange rates or
by reason of fees, indemnities and compensation payable
thereunder;
(v) Indebtedness of a Restricted Subsidiary to the Guarantor
or a Restricted Subsidiary for so long as such Indebtedness is
held by the Guarantor or a Restricted Subsidiary, in each case
subject to no Lien held by a Person other than the Guarantor or a
Restricted Subsidiary; PROVIDED that if as of any date any Person
other than the Guarantor or a Restricted Subsidiary owns or holds
any such Indebtedness or holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness by the
issuer of such Indebtedness.
<PAGE>
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(vi) Indebtedness of the Guarantor to a Restricted Subsidiary
for so long as such Indebtedness is held by a Restricted
Subsidiary, in each case subject to no Lien; PROVIDED that (a)
any Indebtedness of the Guarantor to any Restricted Subsidiary is
unsecured and subordinated, pursuant to a written agreement, to
the Guarantor's obligations under this Indenture and the
Guarantee and (b) if as of any date any person other than a
Restricted Subsidiary owns or holds any such Indebtedness or any
Person holds a Lien in respect of such Indebtedness, such date
shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the Guarantor;
(vii) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar
instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary
course of business; PROVIDED, HOWEVER, that such Indebtedness is
extinguished within five business days of incurrence;
(viii) Indebtedness of the Guarantor or any of the Restricted
Subsidiaries represented by letters of credit for the account of
the Guarantor or such Restricted Subsidiary, as the case may be,
in order to provide security for workers' compensation claims,
payment obligations in connection with self-insurance or similar
requirements in the ordinary course of business;
(ix) Refinancing Indebtedness;
(x) Purchase Money Indebtedness and Capitalized Lease
Obligations (and any Indebtedness incurred to Refinance such
Purchase Money Indebtedness or Capitalized Lease Obligations) not
to exceed $15.0 million at any one time outstanding; and
(xi) Indebtedness of the Guarantor and the Restricted
Subsidiaries in an aggregate principal amount not to exceed $20.0
million at any one time outstanding.
"Permitted Investments" means (i) Investments by the Guarantor or
any Restricted Subsidiary in any Person that is or will become immediately
after such Investment a Restricted Subsidiary or that will merge or
consolidate into the Guarantor or a Restricted Subsidiary; (ii) Investments
in the Guarantor by any Restricted Subsidiary; PROVIDED that any
Indebtedness evidencing such Investment is unsecured and subordinated,
<PAGE>
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pursuant to a written agreement, to the Guarantor's obligations under the
Guarantee and this Indenture; (iii) Investments in cash and Cash
Equivalents; (iv) loans and advances to employees and officers of the
Guarantor and the Restricted Subsidiaries in the ordinary course of
business for bona fide business purposes not in excess of $2.0 million at
any time outstanding; (v) Currency Agreements and Interest Swap Obligations
entered into in the ordinary course of the Guarantor's or a Restricted
Subsidiary's businesses and otherwise in compliance with this Indenture;
(vi) Investments in securities of trade creditors or customers received
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers, or the
refinancing of, or a settlement of amounts due under, one or more trade
accounts extended in the normal course of business to customers of the
Guarantor or a Restricted Subsidiary which are in default under their
standard credit terms; (vii) Investments made by the Guarantor or the
Restricted Subsidiaries as a result of consideration received in connection
with an Asset Sale made in compliance with Section 4.12; (viii) Investments
of the Guarantor in Qualified Capital Stock of an Assuming Party; and (ix)
Investments in Persons, including, without limitation, Unrestricted
Subsidiaries and joint ventures, engaged in a business similar or related
to the businesses in which the Guarantor and the Restricted Subsidiaries
are engaged on the Issue Date not to exceed $15.0 million at any one time
outstanding.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or
claims either (a) not delinquent or (b) contested in good faith
by appropriate proceedings and as to which the Guarantor shall
have set aside on its books such reserves as may be required
pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and
other Liens imposed by law incurred in the ordinary course of
business for sums not yet delinquent or being contested in good
faith, if such reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made in respect
thereof;
(iii) Liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation,
unemployment insurance and other types of social security,
including any Lien securing letters of credit issued in the
ordinary course of business consistent with past practice in
<PAGE>
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connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return-of-money bonds and
other similar obligations (exclusive of obligations for the
payment of borrowed money);
(iv)judgment Liens not giving rise to an Event of Default so long
as such Lien is adequately bonded and any appropriate legal
proceeds which may have been duly initiated for the review of
such judgment shall not have been finally terminated or the
period within which such proceedings may be initiated shall not
have expired;
(v) easements, rights-of-way, zoning restrictions and other
similar charges or encumbrances in respect of real property not
interfering in any material respect with the ordinary conduct of
the business of the Guarantor;
(vi) purchase money Liens securing Indebtedness to finance
property or assets of the Guarantor, and Liens securing
Indebtedness which Refinances any such Indebtedness; PROVIDED,
HOWEVER, that (A) the related purchase money Indebtedness (or
Refinancing Indebtedness) shall not exceed the cost of such
property or assets and shall not be secured by any property or
assets of the Guarantor other than the property and assets so
acquired and (B) the Lien securing the purchase money
Indebtedness shall be created within 90 days of such acquisition;
(vii) Liens upon specific items of inventory or other goods
and proceeds of any Person securing such Person's obligations in
respect of bankers' acceptances issued or created for the account
of such Person to facilitate the purchase, shipment or storage of
such inventory or other goods;
(viii) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other
property relating to such letters of credit and products and
proceeds thereof;
(ix) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty
requirements of the Guarantor, including rights of offset and
set-off;
<PAGE>
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(x) Liens securing Interest Swap Obligations, which Interest
Swap Obligations related to Indebtedness that is otherwise
permitted under this Indenture;
(xi) Liens securing Indebtedness under Currency Agreements;
and
(xii) Liens securing Acquired Indebtedness (and any
Indebtedness which Refinances such Acquired Indebtedness)
incurred in accordance with Section 4.03; PROVIDED that (A) such
Liens secured the Acquired Indebtedness at the time of and prior
to the incurrence of such Acquired Indebtedness by the Guarantor
and were not granted in connection with, or in anticipation of
the incurrence of such Acquired Indebtedness by the Guarantor and
(B) such Liens do not extend to or cover any property or assets
of the Guarantor other than the property or assets that secured
the Acquired Indebtedness prior to the time such Indebtedness
became Acquired Indebtedness of the Guarantor.
"Person" means an individual, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or
a governmental agency or political subdivision thereof.
"Physical Securities" has the meaning provided in Section 2.01.
"Preferred Stock" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such
Person with respect to dividends or redemptions or upon liquidation.
"Private Placement Legend" means the legend initially set forth
on the Securities in the form set forth on EXHIBIT A.
"pro forma" means, with respect to any calculation made or
required to be made pursuant to the terms of this Indenture, a calculation
in accordance with Article 11 of Regulation S-X under the Securities Act as
interpreted by the Company's Board of Directors in consultation with its
independent certified public accountants.
"Public Equity Offering" has the meaning provided in Paragraph 6
of the Securities.
"Purchase Agreement" means (i) in connection with the issuance of
Securities on the Issue Date, the purchase agreement dated as of May 8,
<PAGE>
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1998 by and among the Company, the Guarantor and the Initial Purchasers and
(ii) any other purchase agreements by and among the Company, the Guarantor
and the purchasers of Securities issued under this Indenture thereafter.
"Purchase Money Indebtedness" means Indebtedness of the Guarantor
or any Restricted Subsidiary incurred for the purpose of financing all or
any part of the purchase price or the cost of construction or improvement
of any property, provided that the aggregate principal amount of such
Indebtedness does not exceed the lesser of the fair market value of such
property or such purchase price or cost.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"Record Date" means the Record Dates specified in the Securities;
PROVIDED that if any such date is not a Business Day, the Record Date shall
be the first day immediately preceding such specified day that is a
Business Day.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to this
Indenture and the Securities.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price fixed for such redemption, payable in immediately
available funds, pursuant to this Indenture and the Securities.
"Reference Date" has the meaning provided in Section 4.04.
"Refinance" means in respect of any security or
Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem,
defease or retire, or to issue a security or Indebtedness in exchange or
replacement for, such security or Indebtedness in whole or in part.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Guarantor
or any Restricted Subsidiary of Indebtedness incurred in accordance with
Section 4.03 (other than pursuant to clause (ii), (iii), (iv), (v), (vi),
(vii), (viii), (x) or (xi) of the definition of Permitted Indebtedness), in
<PAGE>
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each case that does not (1) result in an increase in the aggregated
principal amount of any of the Indebtedness of such Person as of the date
of such proposed Refinancing (plus the amount of any premium required to be
paid under the terms of the instrument governing such Indebtedness and plus
the amount of reasonable expenses incurred in connection with such
Refinancing) or (2) create Indebtedness with (A) a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced or (B) a final maturity earlier than the
final maturity of the Indebtedness being Refinanced; PROVIDEDd that if such
Indebtedness being Refinanced is Indebtedness of the Issuer and/or the
Guarantor, then such Refinancing Indebtedness shall be Indebtedness solely
of the Issuer and/or the Guarantor.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means (i) the Registration Rights
Agreement dated as of the Issue Date among the Company, the Guarantor and
the Initial Purchasers and (ii) any registration rights agreement by and
among the Company, Guarantor and purchasers of Securities issued after the
Issue Date.
"Regulation S" means Regulation S under the Securities Act.
"Responsible Officer" shall mean, when used with respect to the
Trustee, any officer in the Corporate Trust Administration of the Trustee
including any vice president, assistant vice president or any other officer
of the Trustee who customarily performs functions similar to those
performed by the Persons who at the time shall be such officers,
respectively, and also means with respect to any other matter, any other
officer to whom any corporate trust matter is referred because of such
officer's knowledge of and familiarity with the particular subject.
"Restricted Payment" has the meaning provided in Section 4.04.
"Restricted Security" has the meaning set forth in Rule 144(a)(3)
under the Securities Act; PROVIDED that the Trustee shall be entitled to
request and conclusively rely upon an Opinion of Counsel with respect to
whether any Security is a Restricted Security.
<PAGE>
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"Restricted Subsidiary" means any Subsidiary of the Guarantor
that has not been designated by the Board of Directors of the Guarantor, by
a Board Resolution delivered to the Trustee, as an Unrestricted Subsidiary
pursuant to and in compliance with Section 4.23. Any such Designation may
be revoked by a Board Resolution of the Guarantor delivered to the Trustee,
subject to the provisions of such covenant.
"Revocation" has the meaning provided in Section 4.23.
"Rule 144A" means Rule 144A under the Securities Act.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party,
providing for the leasing to the Guarantor or a Restricted Subsidiary of
any property, whether owned by the Guarantor or any Restricted Subsidiary
at the Issue Date or later acquired, which has been or is to be sold or
transferred by the Guarantor or such Restricted Subsidiary to such Person
or to any other Person from whom funds have been or are to be advanced by
such Person on the security of such property.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Series A Securities and the Series B
Securities treated as a single class of securities, as amended or
supplemented from time to time in accordance with the terms hereof, that
are issued pursuant to this Indenture.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Series A Securities" means the 8 5/8% Senior Notes due 2008,
Series A, of the Company issued pursuant to this Indenture.
"Series B Securities" means the 8 5/8% Senior Notes due 2008,
Series B, of the Company to be issued pursuant to this Indenture, including
in exchange for the Series A Securities pursuant to the registered exchange
offer as contemplated by the Registration Rights Agreement.
"Significant Subsidiary" means any Restricted Subsidiary that
satisfies the criteria for a "significant subsidiary" set forth in Rule
1.02(w) of Regulation S-X under the Exchange Act.
<PAGE>
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"Subsidiary," with respect to any Person, means (i) any
corporation of which the outstanding Capital Stock having at least a
majority of the votes entitled to be cast in the election of directors
under ordinary circumstances shall at the time be owned, directly or
indirectly, by such Person or (ii) any other Person of which at least a
majority of the voting interest under ordinary circumstances is at the
time, directly or indirectly, owned by such Person.
"Surviving Entity" has the meaning provided in Section 5.01.
"Tax" means any tax, duty, assessment or governmental charge of
whatever nature (or interest on, or penalties or other additions to, any of
the foregoing) imposed or levied by or on behalf of, or within, Canada or
any Province of Canada or any political subdivision or taxing authority of
Canada or any Province of Canada.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Secs. 77aaa-
77bbbb), as amended, as in effect on the date of the execution of this
Indenture until such time as this Indenture is qualified under the TIA, and
thereafter as in effect on the date on which this Indenture is qualified
under the TIA, except as otherwise provided in Section 9.03.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture
and thereafter means such successor.
"Unrestricted Subsidiary" means any Subsidiary of the Guarantor
designated as such pursuant to and in compliance with Section 4.23. Any
such designation may be revoked by a Board Resolution of the Guarantor
delivered to the Trustee, subject to the provisions of such covenant.
"U.S. Government Obligations" shall have the meaning provided in
Section 8.01(d)(1).
"U.S. Legal Tender" means such coin or currency in immediately
available funds of the United States of America as at the time of payment
shall be legal tender for the payment of public and private debts.
"U.S. Physical Securities" shall have the meaning set forth in
Section 2.01.
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"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding aggregate principal amount of such Indebtedness into
(b) the sum of the total of the products obtained by multiplying (i) the
amount of each then remaining installment, sinking fund, serial maturity or
other required payment of principal, including payment at final maturity,
in respect thereof, by (ii) the number of years (calculated to the nearest
one-twelfth) which will elapse between such date and the making of such
payment.
SECTION 1.02. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this
Indenture. The following TIA terms used in this Indenture have the
following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder or a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, the
Guarantor and any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule
and not otherwise defined herein have the meanings assigned to them
therein.
SECTION 1.03. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
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(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions;
and
(6) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article,
Section or other subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. FORM AND DATING.
The Series A Securities and the Trustee's certificate of
authentication thereof shall be substantially in the form of EXHIBIT A
annexed hereto, which is hereby incorporated in and expressly made a part
of this Indenture. The Series B Securities and the Trustee's certificate
of authentication thereof shall be substantially in the form of EXHIBIT B
annexed hereto, which is hereby incorporated in and expressly made a part
of this Indenture. The Securities may have notations, legends or endorse-
ments (including notations relating to the Guarantee, stock exchange rule
or usage). The Company and the Trustee shall approve the form of the Secu-
rities and any notation, legend or endorsement (including notations relat-
ing to the Guarantee) on them. Each Security shall be dated the date of
its issuance and shall be authenticated by the Trustee.
Securities offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more permanent Global Securities in
registered form, substantially in the form set forth in EXHIBIT A,
deposited with the Trustee, as custodian for the Depository, and shall bear
the legend set forth on EXHIBIT C. The aggregate principal amount of any
Global Security may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the
Depository, as hereinafter provided.
Securities offered and sold in offshore transactions in reliance
on Regulation S shall be issued in the form of certificated Securities in
registered form in substantially the form set forth in EXHIBIT A (the
"Offshore Physical Securities"). Securities offered and sold in reliance
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on any other exemption from registration under the Securities Act other
than as described in the preceding paragraph shall be issued, and
Securities offered and sold in reliance on Rule 144A may be issued, in the
form of certificated Securities in registered form in substantially the
form set forth in EXHIBIT A (the "U.S. Physical Securities"). The Offshore
Physical Securities and the U.S. Physical Securities are sometimes collec-
tively herein referred to as the "Physical Securities."
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers, or an Officer and an Assistant Secretary, shall
sign, or one Officer shall sign and one Officer or an Assistant Secretary
(each of whom shall, in each case, have been duly authorized by all
requisite corporate actions) shall attest to, the Securities for the Compa-
ny by manual or facsimile signature. The Company's seal shall also be
reproduced on the Securities.
If an Officer or Assistant Secretary whose signature is on a
Security was an Officer or Assistant Secretary at the time of such
execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless. The
Guarantor shall execute the Guarantee in the manner set forth in Section
10.04.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the
Security. The signature shall be conclusive evidence that the Security has
been authenticated under this Indenture.
The Trustee shall authenticate Securities upon a written order of
the Company in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of Securities to be authenticated, the
series of Securities and the date on which the Securities are to be
authenticated. The aggregate principal amount of Securities outstanding at
any time may not exceed $225,000,000, except as provided in Section 2.07.
Upon receipt of a written order of the Company in the form of an Officers'
Certificate, the Trustee shall authenticate Securities in substitution for
Securities originally issued to reflect any name change of the Company.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate Securities. Unless otherwise
provided in the appointment, an authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this
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Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an Agent to deal
with the Company and Affiliates of the Company.
The Securities shall be issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple there-of.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where (a) Securities may be presented or
surrendered for registration of transfer or for exchange ("Registrar"), (b)
Securities may be presented or surrendered for payment ("Paying Agent") and
(c) notices and demands in respect of the Securities and this Indenture may
be served. The Registrar shall keep a register of the Securities and of
their transfer and exchange. The Company, upon written notice to the
Trustee, may have one or more co-Registrars and one or more additional
Paying Agents reasonably acceptable to the Trustee. The term "Paying
Agent" includes any additional Paying Agent. The Company initially
appoints the Trustee as Registrar and Paying Agent until such time as the
Trustee has resigned or a successor has been appointed. Neither the
Company nor any Affiliate of the Company may act as Paying Agent except as
otherwise expressly provided in the form of the Security.
SECTION 2.04. PAYING AGENT TO HOLD ASSETS IN TRUST.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that each Paying Agent shall hold in trust for
the benefit of Holders or the Trustee all assets held by the Paying Agent
for the payment of principal of, premium if any, or interest on, the
Securities, and shall notify the Trustee in writing of any Default by the
Company in making any such payment. The Company at any time may require a
Paying Agent to distribute all assets held by it to the Trustee and account
for any assets disbursed and the Trustee may at any time, but shall be
under no obligation to, during the continuance of any payment Default, upon
written request to a Paying Agent, require such Paying Agent to distribute
all assets held by it to the Trustee and to account for any assets distrib-
uted. Upon distribution to the Trustee of all assets that shall have been
delivered by the Company to the Paying Agent, the Paying Agent shall have
no further liability for such assets.
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SECTION 2.05. SECURITYHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses
of Holders. If the Trustee is not the Registrar, the Company shall furnish
to the Trustee before each Record Date and at such other times as the
Trustee may request in writing a list as of such date and in such form as
the Trustee may reasonably require of the names and addresses of Holders,
which list may be conclusively relied upon by the Trustee.
SECTION 2.06. TRANSFER AND EXCHANGE.
Subject to the provisions of Sections 2.15 and 2.16, when
Securities are presented to the Registrar or a co-Registrar with a request
to register the transfer of such Securities or to exchange such Securities
for an equal principal amount of Securities of other authorized
denominations of the same series, the Registrar or co-Registrar shall
register the transfer or make the exchange as requested if its requirements
for such transaction are met; PROVIDED, HOWEVER, that the Securities
surrendered for transfer or exchange shall be duly endorsed or accompanied
by a written instrument of transfer in form satisfactory to the Company and
the Registrar or co-Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing. To permit registrations of transfers
and exchanges, the Company shall execute the Securities and the Guarantor
shall execute the Guarantee and the Trustee shall authenticate Securities
at the Registrar's or co-Registrar's written request. No service charge
shall be made for any registration of transfer or exchange, but the Company
may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than any
such transfer taxes or other governmental charge payable upon exchanges or
transfers pursuant to Section 2.02, 2.10, 3.06, 4.12, 4.24 or 9.05). The
Registrar or co-Registrar shall not be required to register the transfer of
or exchange of any Security (i) during a period beginning at the opening of
business 15 days before the mailing of a notice of redemption of Securities
and ending at the close of business on the day of such mailing and (ii)
selected for redemption in whole or in part pursuant to Article Three,
except the unredeemed portion of any Security being redeemed in part.
Any Holder of a Global Security shall, by acceptance of such
Global Security, agree that transfers of beneficial interests in such
Global Security may be effected only through a book-entry system maintained
by the Depository (or its agent), and that ownership of a beneficial
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interest in a Global Security shall be required to be reflected in a book-
entry system.
SECTION 2.07. REPLACEMENT SECURITIES.
If a mutilated Security is surrendered to the Trustee or if the
Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall
authenticate upon written notice from the Company a replacement Security if
the Trustee's requirements are met. If required by the Trustee or the
Company, such Holder must provide an indemnity bond or other indemnity,
sufficient in the judgment of both the Company and the Trustee, to protect
the Company, the Trustee and any Agent from any loss which any of them may
suffer if a Security is replaced. The Company and the Trustee may charge
such Holder for their respective reasonable out-of-pocket expenses in
replacing a Security, including reasonable fees and expenses of counsel.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. OUTSTANDING SECURITIES.
Securities outstanding at any time are all the Securities that
have been authenticated by the Trustee except those cancelled by it, those
delivered to it for cancellation and those described in this Section as not
outstanding. Subject to Section 2.09, a Security does not cease to be
outstanding because the Company or any of its Affiliates holds the
Security.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser. A mutilated Security
ceases to be outstanding upon surrender of such Security and replacement
thereof pursuant to Section 2.07.
If on a Redemption Date or the Final Maturity Date the Paying
Agent holds U.S. Legal Tender or U.S. Government Obligations sufficient to
pay all of the principal and interest due on the Securities payable on that
date, then on and after that date such Securities cease to be outstanding
and interest on them ceases to accrue.
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SECTION 2.09. TREASURY SECURITIES.
In determining whether the Holders of the required principal
amount of Securities have concurred in any direction, waiver or consent,
Securities owned by the Company, the Guarantor or any of their respective
Affiliates shall be disregarded, except that, for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities that a Responsible Officer of
the Trustee actually knows are so owned shall be disregarded.
The Trustee may require an Officers' Certificate listing
Securities owned by the Company, the Guarantor or any of their respective
Affiliates.
SECTION 2.10. TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Company
may prepare and the Trustee shall authenticate temporary Securities upon
receipt of a written order of the Company in the form of an Officers'
Certificate. The Officers' Certificate shall specify the amount of
temporary Securities to be authenticated and the date on which the
temporary Securities are to be authenticated. Temporary Securities shall
be substantially in the form of definitive Securities but may have
variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate upon receipt of a written order of the Company pursuant to
Section 2.02 definitive Securities in exchange for temporary Securities.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Securities surrendered to them for transfer, exchange or
payment. The Trustee, or at the direction of the Trustee, the Registrar or
the Paying Agent, and no one else, shall cancel and, at the written
direction of the Company, shall dispose (subject to the record retention
requirements of the Exchange Act) of all Securities surrendered for
transfer, exchange, payment or cancellation. Subject to Section 2.07, the
Company may not issue new Securities to replace Securities that it has paid
or delivered to the Trustee for cancellation. If the Company or the
Guarantor shall acquire any of the Securities, such acquisition shall not
operate as a redemption or satisfaction of the Indebtedness represented by
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such Securities unless and until the same are surrendered to the Trustee
for cancellation pursuant to this Section 2.11.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the
Securities, it shall pay the defaulted amounts, plus (to the extent
permitted by law) any interest payable on defaulted amounts pursuant to
Section 4.01 hereof, to the persons who are Holders on a subsequent special
record date. The Company shall fix the special record date and payment
date in a manner satisfactory to the Trustee and provide the Trustee at
least 20 days notice of the proposed amount of defaulted interest to be
paid and the special payment date. At least 15 days before the special
record date, the Company shall mail or cause to be mailed to each Holder at
his address as it appears on the Securities register maintained by the
Registrar a notice that states the special record date, the payment date
(which shall be not less than five nor more than ten days after the special
record date), and the amount to be paid. In lieu of the foregoing
procedures, the Company may pay defaulted interest in any other lawful
manner satisfactory to the Trustee.
SECTION 2.13. CUSIP NUMBER.
The Company in issuing the Securities will use a "CUSIP" number,
and if so, the Trustee shall use the CUSIP number in notices of redemption
or exchange as a convenience to Holders; PROVIDED that any such notice may
state that no representation is made as to the correctness or accuracy of
the CUSIP number printed in the notice or on the Securities, and that
reliance may be placed only on the other identification numbers printed on
the Securities. The Company shall promptly notify in writing the Trustee
of any such CUSIP numbers used by the Company in connection with the
Securities and any changes in such CUSIP number.
SECTION 2.14. DEPOSIT OF MONEYS.
Prior to 10:00 a.m. New York City time on each Interest Payment
Date and the Final Maturity Date, the Company shall deliver by wire
transfer to the Paying Agent in immediately available funds money
sufficient to make cash payments due on such Interest Payment Date or the
Final Maturity Date, as the case may be, in a timely manner which permits
the Paying Agent to remit payment to the Holders on such Interest Payment
Date or the Final Maturity Date, as the case may be.
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SECTION 2.15. BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITIES.
(a) The Global Securities initially shall (i) be registered in
the name of the Depository or the nominee of such Depository, (ii) be
delivered to the Trustee as custodian for such Depository and (iii) bear
legends as set forth in EXHIBIT C.
Members of, or participants in, the Depository ("Participants")
shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depository, or the Trustee as its
custodian, or under the Global Security, and the Depository may be treated
by the Company, the Trustee and any agent of the Company or the Trustee as
the absolute owner of the Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company,
the Trustee or any agent of the Company or the Trustee from giving effect
to any written certification, proxy or other authorization furnished by the
Depository or impair, as between the Depository and Participants, the oper-
ation of customary practices governing the exercise of the rights of a
Holder of any Security.
(b) Transfers of Global Securities shall be limited to transfers
in whole, but not in part, to the Depository, its successors or their
respective nominees. Interests of beneficial owners in the Global
Securities may be transferred or exchanged for Physical Securities in
accordance with the rules and procedures of the Depository and the
provisions of Section 2.16. In addition, Physical Securities shall be
transferred to all beneficial owners in exchange for their beneficial
interests in Global Securities if (i) the Depository notifies the Company
that it is unwilling or unable to continue as Depository for any Global
Security and a successor depositary is not appointed by the Company within
90 days of such notice or (ii) an Event of Default has occurred and is
continuing and the Registrar has received a request from the Depository to
issue Physical Securities.
(c) In connection with the transfer of Global Securities as an
entirety to beneficial owners pursuant to paragraph (b) of this Section
2.15, the Global Securities shall be deemed to be surrendered to the
Trustee for cancellation, and the Company shall execute (and the Guarantor
shall execute the Guarantee) and the Trustee shall upon written
instructions from the Company authenticate and deliver, to each beneficial
owner identified by the Depository in exchange for its beneficial interest
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in the Global Securities, an equal aggregate principal amount of Physical
Securities of authorized denominations.
(d) Any Physical Security constituting a Restricted Security
delivered in exchange for an interest in a Global Security pursuant to
paragraph (b) or (c) of this Section 2.15 shall, except as otherwise
provided by Section 2.16, bear the Private Placement Legend.
(e) The Holder of any Global Security may grant proxies and
otherwise authorize any Person, including Participants and Persons that may
hold interests through Participants, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
SECTION 2.16. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) TRANSFER AND EXCHANGE OF PHYSICAL SECURITIES. When Physical
Securities are presented to the Registrar with a request:
(i) to register the transfer of the Physical Securities; or
(ii) to exchange such Physical Securities for an equal number
of Physical Securities of other authorized denominations,
the Registrar shall register the transfer or make the exchange as
requested if the requirements under this Indenture as set forth
in this Section 2.16 for such transactions are met; PROVIDED,
HOWEVER, that the Physical Securities presented or surrendered
for registration of transfer or exchange:
(I) shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Registrar or
co-Registrar, duly executed by the Holder thereof or his attorney
duly authorized in writing; and
(II) in the case of Physical Securities the offer and sale of
which have not been registered under the Securities Act, such
Physical Securities shall be accompanied by an Opinion of Counsel
addressed to the Registrar to the effect that such transfer and
exchange is in compliance with applicable securities law and, in
the sole discretion of the Company, by the following additional
information and documents, as applicable:
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(A) if such Physical Security is being delivered to the
Registrar by a holder for registration in the name of such
holder, without transfer, a certification from such holder to
that effect (in substantially the form of EXHIBIT D hereto); or
(B) if such Physical Security is being transferred to a
Qualified Institutional Buyer in accordance with Rule 144A under
the Securities Act, a certification to that effect (in
substantially the form of EXHIBIT D hereto); or
(C) if such Physical Security is being transferred to an
Institutional Accredited Investor, delivery of a certification to
that effect (in substantially the form of EXHIBIT D hereto) and a
Transferee Certificate for Institutional Accredited Investors in
substantially the form of EXHIBIT E hereto; or
(D) if such Physical Security is being transferred in
reliance on Regulation S, delivery of a certification to that
effect (in substantially the form of EXHIBIT D hereto) and a
Transferee Certificate for Regulation S Transfers in
substantially the form of EXHIBIT F hereto and an Opinion of
Counsel reasonably satisfactory to the Company to the effect that
such transfer is in compliance with the Securities Act; or
(E) if such Physical Security is being transferred in
reliance on Rule 144 under the Securities Act, delivery of a
certification to that effect (in substantially the form of
EXHIBIT D hereto) and an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such transfer is
in compliance with the Securities Act; or
(F) if such Physical Security is being transferred in
reliance on another exemption from the registration requirements
of the Securities Act, a certification to that effect (in
substantially the form of EXHIBIT D hereto) and an Opinion of
Counsel reasonably satisfactory to the Company to the effect that
such transfer is in compliance with the Securities Act.
(b) RESTRICTIONS ON TRANSFER OF A PHYSICAL SECURITY FOR A
BENEFICIAL INTEREST IN A GLOBAL SECURITY. A Physical Security may not be
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exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the
Registrar of a Physical Security, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Registrar,
together with:
(A) a certification, in substantially the form of EXHIBIT
D hereto, that such Physical Security is being transferred to a
Qualified Institutional Buyer; and
(B) written instructions directing the Registrar to make,
or to direct the Depository to make, an endorsement on the Global
Security to reflect an increase in the aggregate amount of the
Securities represented by the Global Security, then the Registrar
shall cancel such Physical Security and cause, or direct the
Depository to cause, in accordance with the standing instructions
and procedures existing between the Depository and the Registrar,
the number of Securities represented by the Global Security to be
increased accordingly. If no Global Security is then
outstanding, the Company shall issue and the Trustee shall upon
written instructions from the Company authenticate a new Global
Security in the appropriate amount.
(c) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. The transfer
and exchange of Global Securities or beneficial interests therein shall be
effected through the Depository, in accordance with this Indenture
(including the restrictions on transfer set forth herein) and the
procedures of the Depository therefor.
(d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL SECURITY FOR A
PHYSICAL SECURITY.
(i) Any Person having a beneficial interest in a Global Security
may upon request exchange such beneficial interest for a Physical
Security. Upon receipt by the Registrar of written instructions
or such other form of instructions as is customary for the
Depository from the Depository or its nominee on behalf of any
Person having a beneficial interest in a Global Security and upon
receipt by the Trustee of a written order or such other form of
instructions as is customary for the Depository or the Person
designated by the Depository as having such a beneficial interest
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containing registration instructions and, in the case of any such
transfer or exchange of a beneficial interest in Securities the
offer and sale of which have not been registered under the
Securities Act, the following additional information and
documents:
(A) if such beneficial interest is being transferred to
the Person designated by the Depository as being the beneficial
owner, a certification from such Person to that effect (in
substantially the form of EXHIBIT D hereto); or
(B) if such beneficial interest is being transferred to a
Qualified Institutional Buyer in accordance with Rule 144A under
the Securities Act, a certification to that effect (in
substantially the form of EXHIBIT D hereto); or
(C) if such beneficial interest is being transferred to
an Institutional Accredited Investor, delivery of a certification
to that effect (in substantially the form of EXHIBIT D hereto)
and a Certificate for Institutional Accredited Investors in
substantially the form of EXHIBIT E hereto; or
(D) if such beneficial interest is being transferred in
reliance on Regulation S, delivery of a certification to that
effect (in substantially the form of EXHIBIT D hereto) and a
Transferee Certificate for Regulation S Transfers in
substantially the form of EXHIBIT F hereto and an Opinion of
Counsel reasonably satisfactory to the Company to the effect that
such transfer is in compliance with the Securities Act; or
(E) if such beneficial interest is being transferred in
reliance on Rule 144 under the Securities Act, delivery of a
certification to that effect (in substantially the form of
EXHIBIT D hereto) and an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such transfer is
in compliance with the Securities Act; or
(F) if such beneficial interest is being transferred in
reliance on another exemption from the registration requirements
of the Securities Act, a certification to that effect (in
substantially the form of EXHIBIT D hereto) and an Opinion of
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Counsel reasonably satisfactory to the Company to the effect
that such transfer is in compliance with the Securities Act,
then the Registrar will cause, in accordance with the standing
instructions and procedures existing between the Depository and
the Registrar, the aggregate amount of the Global Security to be
reduced and, following such reduction, the Company will execute
and, upon receipt of an authentication order in the form of an
Officers' Certificate, the Trustee will authenticate and deliver
to the transferee a Physical Security.
(ii) Securities issued in exchange for a beneficial interest in
a Global Security pursuant to this Section 2.16(d) shall be
registered in such names and in such authorized denominations as
the Depository, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Registrar
in writing. The Registrar shall deliver such Physical Securities
to the Persons in whose names such Physical Securities are so
registered.
(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL SECURITIES.
Notwithstanding any other provisions of this Indenture, a Global Security
may not be transferred as a whole except by the Depository to a nominee of
the Depository or by a nominee of the Depository to the Depository or
another nominee of the Depository or by the Depository or any such nominee
to a successor Depository or a nominee of such successor Depository.
(f) PRIVATE PLACEMENT LENGEND. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing
the Private Placement Legend, the Registrar shall deliver only Securities
that bear the Private Placement Legend unless, and the Trustee is hereby
authorized to deliver Securities without the Private Placement Legend if,
(i) there is delivered to the Trustee an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act or (ii) such
Security has been sold pursuant to an effective registration statement
under the Securities Act.
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(g) GENERAL. By its acceptance of any Security bearing the
Private Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and
in the Private Placement Legend and agrees that it will transfer such
Security only as provided in this Indenture.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.15 or this
Section 2.16. The Company shall have the right to inspect and make copies
of all such letters, notices or other written communications at any
reasonable time upon the giving of reasonable written notice to the
Registrar.
ARTICLE THREE
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Securities pursuant to Paragraph
5 or Paragraph 6 of the Securities, it shall notify the Trustee in writing
of the Redemption Date, the Redemption Price and the principal amount of
Securities to be redeemed. The Company shall give notice of redemption to
Trustee at least 45 days but not more than 60 days before the Redemption
Date (unless a shorter notice shall be agreed to by the Trustee in
writing), together with an Officers' Certificate stating that such
redemption will comply with the conditions contained herein.
SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED.
If fewer than all of the Securities are to be redeemed, the
Trustee shall select the Securities to be redeemed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate or if
the Securities are then listed on a national securities exchange in
accordance with the rules of such exchange; PROVIDED, HOWEVER, that if the
Securities are redeemed pursuant to Paragraph 6 of the Securities, the
Securities shall be redeemed solely on a pro rata basis or on as nearly a
pro rata basis as is practicable (subject to the procedures of the
Depository) unless the securities exchange, if any, on which the Securities
are listed requires a different method or such method is prohibited by law.
If the Securities are listed on any national securities exchange, the
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Company shall notify the Trustee in writing of the requirements of such
exchange in respect of any redemption. The Trustee shall make the
selection from the Securities outstanding and not previously called for
redemption and shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Security
selected for partial redemption, the principal amount thereof to be
redeemed. The Trustee may select for redemption portions (equal to $1,000
or any integral multiple thereof) of the principal of Securities that have
denominations larger than $1,000. Provisions of this Indenture that apply
to Securities called for redemption also apply to portions of Securities
called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a Redemption
Date, the Company shall mail or cause to be mailed a notice of redemption
by first-class mail, postage prepaid, to each Holder whose Securities are
to be redeemed. At the Company's written request, the Trustee shall give
the notice of redemption in the Company's name and at the Company's
expense. Each notice for redemption shall identify the Securities to be
redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if
any, to be paid;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered
to the Paying Agent to collect the Redemption Price plus accrued interest,
if any;
(5) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the Redemption Date, and the only remaining right of the Holders
of such Securities is to receive payment of the Redemption Price and
accrued interest, if any, to the Redemption Date upon surrender to the
Paying Agent of the Securities redeemed;
(6) if any Security is being redeemed in part, the portion of
the principal amount of such Security to be redeemed and that, after the
Redemption Date, and upon surrender of such Security, a new Security or
Securities in aggregate principal amount equal to the unredeemed portion
thereof will be issued;
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(7) if fewer than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Securities to be
redeemed and the aggregate principal amount of Securities to be outstanding
after such partial redemption; and
(8) the Paragraph of the Securities pursuant to which the
Securities are to be redeemed.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section
3.03, Securities called for redemption become due and payable on the
Redemption Date and at the Redemption Price plus accrued interest, if any.
Upon surrender to the Paying Agent, such Securities called for redemption
shall be paid at the Redemption Price (which shall include accrued interest
thereon to the Redemption Date), but installments of interest, the maturity
of which is on or prior to the Redemption Date, shall be payable to Holders
of record at the close of business on the relevant Record Dates.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
Prior to 11:00 a.m. New York City time on the Redemption Date,
the Company shall deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the Redemption Price plus accrued interest, if any, of
all Securities to be redeemed on that date.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price plus accrued
interest, if any, interest on the Securities to be redeemed will cease to
accrue on and after the applicable Redemption Date, whether or not such
Securities are presented for payment.
SECTION 3.06. SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is to be redeemed in part, the
Trustee shall authenticate for the Holder a new Security or Securities
equal in principal amount to the unredeemed portion of the Security
surrendered.
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ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF SECURITIES.
The Company shall pay the principal of and interest on the
Securities in the manner provided in the Securities. An installment of
principal of or interest on the Securities shall be considered paid on the
date it is due if the Trustee or Paying Agent holds on that date U.S. Legal
Tender designated for and sufficient to pay the installment.
The Company shall pay, to the extent such payments are lawful,
interest on overdue principal and it shall pay interest on overdue
installments of interest (without regard to any applicable grace periods)
from time to time on demand at the rate borne by the Securities plus 2% per
annum. Interest will be computed on the basis of a 360-day year comprised
of twelve 30-day months.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, The City
of New York, the office or agency required under Section 2.03. The Company
shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or shall
fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 11.02. The Company hereby initially
designates the office of the Trustee at 114 West 47th Street, 25th Floor,
New York, New York 10036-1532 as its office or agency in the Borough of
Manhattan, The City of New York.
SECTION 4.03. LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS.
The Guarantor will not, and will not permit any of the Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee,
acquire, become liable, contingently or otherwise, with respect to, or
otherwise become responsible for payment of (collectively, "INCUR") any
Indebtedness (other than Permitted Indebtedness); PROVIDED, HOWEVER, that
if no Default or Event of Default shall have occurred and be continuing at
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the time of or as a consequence of the incurrence of any such Indebtedness,
the Guarantor or any Restricted Subsidiary may incur Indebtedness
(including, without limitation, Acquired Indebtedness) if on the date of
the incurrence of such Indebtedness, after giving effect to the incurrence
thereof, the Consolidated Fixed Charge Coverage Ratio of the Guarantor is
greater than (a) 2.0 to 1.0 if such incurrence occurs on or prior to May
15, 2000 or (b) 2.25 to 1.0 if such incurrence occurs after May 15, 2000.
No Indebtedness incurred pursuant to the Consolidated Fixed
Charge Coverage Ratio test of the preceding paragraph shall reduce the
amount of Indebtedness which may be incurred pursuant to any clause of the
definition of Permitted Indebtedness (including without limitation,
Indebtedness pursuant to clause (ii) of the definition of Permitted
Indebtedness).
The Guarantor shall not incur any Indebtedness which is
subordinated in right of payment to any other Indebtedness of the Guarantor
unless such Indebtedness is subordinated in right of payment to the
Guarantee at least to the same extent as such Indebtedness is subordinated
to such other Indebtedness.
Indebtedness of a Person existing at the time such Person becomes
a Restricted Subsidiary or which is secured by a Lien on an asset acquired
by the Company or a Restricted Subsidiary (whether or not such Indebtedness
is assumed by the acquiring Person) shall be deemed incurred at the time
the Person becomes a Restricted Subsidiary or at the time of the asset
acquisition, as the case may be.
SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS.
The Guarantor will not, and will not cause or permit any of the
Restricted Subsidiaries to, directly or indirectly, (a) declare or pay any
dividend or make any distribution (other than dividends or distributions
payable in Qualified Capital Stock of the Guarantor) on or in respect of
shares of the Guarantor's Capital Stock to holders of such Capital Stock,
(b) purchase, redeem or otherwise acquire or retire for value any Capital
Stock of the Guarantor or any warrants, rights or options to purchase or
acquire shares of any class of such Capital Stock or (c) make any
Investment (other than Permitted Investments) (each of the foregoing
actions set forth in clauses (a), (b) and (c) being referred to as a
"Restricted Payment"), if at the time of such Restricted Payment or
immediately after giving effect thereto, (i) a Default or an Event of
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Default shall have occurred and be continuing or (ii) the Guarantor is not
able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with Section 4.03 or (iii) the
aggregate amount of Restricted Payments (including such proposed Restricted
Payment) made subsequent to the Issue Date (the amount expended for such
purpose, if other than in cash, being the fair market value of such
property as determined reasonably and in good faith by the Board of
Directors of the Guarantor) shall exceed the sum of: (w) 50% of the
cumulative Consolidated Net Income (or if cumulative Consolidated Net
Income shall be a loss, minus 100% of such loss) of the Guarantor earned
subsequent to the Issue Date and on or prior to the date the Restricted
Payment occurs (the "Reference Date") (treating such period as a single
accounting period); PLUS (x) 100% of the fair market value of the aggregate
net proceeds received by the Guarantor from any Person (other than a
Subsidiary of the Guarantor) from the issuance and sale subsequent to the
Issue Date and on or prior to the Reference Date of Qualified Capital Stock
of the Guarantor; PLUS (y)without duplication of any amounts included in
clause (iii)(x) above, 100% of the fair market value of the aggregate net
proceeds of any contribution to the common equity capital of the Guarantor
received by the Guarantor from a holder of the Guarantor's Capital Stock
(excluding, in the case of clauses (iii)(x) and (y), any net proceeds from
a Public Equity Offering to the extent used to redeem the Securities); PLUS
(z) an amount equal to the lesser of (A) the sum of the fair market value
of the Capital Stock of an Unrestricted Subsidiary owned by the Guarantor
and the Restricted Subsidiaries and the aggregate amount of all
Indebtedness of such Unrestricted Subsidiary owed to the Guarantor and the
Restricted Subsidiaries on the date of Revocation of such Unrestricted
Subsidiary as an Unrestricted Subsidiary in accordance with Section 4.23 or
(B) the Designation Amount with respect to such Unrestricted Subsidiary on
the date of the Designation of such Subsidiary as an Unrestricted
Subsidiary in accordance with Section 4.23.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any
dividend within 60 days after the date of declaration of such dividend if
the dividend would have been permitted on the date of declaration; (2) if
no Default or Event of Default shall have occurred and be continuing, the
acquisition of any shares of Capital Stock of the Guarantor, either (i)
solely in exchange for shares of Qualified Capital Stock of the Guarantor
or of an Assuming Party in a Domestication Event or (ii) through the
application of net proceeds of a substantially concurrent sale for cash
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(other than to a Subsidiary of the Guarantor) of shares of Qualified
Capital Stock of the Guarantor; (3) so long as no Default or Event of
Default shall have occurred and be continuing, repurchases of Capital Stock
of the Guarantor from officers, directors, employees or consultants
pursuant to equity ownership or compensation plans not to exceed $1.0
million in any year; and (4) so long as no Default or Event of Default
shall have occurred and be continuing, other Restricted Payments in an
aggregate amount not to exceed $10.0 million. In determining the aggregate
amount of Restricted Payments made subsequent to the Issue Date in
accordance with clause (iii) of the immediately preceding paragraph,
amounts expended pursuant to clauses (1) through (4) shall be included in
such calculation.
SECTION 4.05. CORPORATE EXISTENCE.
Except as otherwise permitted by Article Five, the Guarantor
shall do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and the corporate,
partnership or other existence of each of the Restricted Subsidiaries in
accordance with the respective organizational documents of each Restricted
Subsidiary and the rights (charter and statutory) and material franchises
of the Guarantor and each of its Restricted Subsidiaries; PROVIDED,
HOWEVER, that the Guarantor shall not be required to preserve any such
right or franchise, or the corporate existence of any Restricted
Subsidiary, if the Board of Directors of the Guarantor shall determine that
the preservation thereof is no longer desirable in the conduct of the
business of the Guarantor and its Restricted Subsidiaries, taken as a
whole, and that the loss thereof is not, and will not be, adverse in any
material respect to the Holders.
SECTION 4.06. PAYMENT OF TAXES AND OTHER CLAIMS.
The Guarantor shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all material
taxes, assessments and governmental charges levied or imposed upon it or
any of the Restricted Subsidiaries or upon the income, profits or property
of it or any of the Restricted Subsidiaries and (ii) all lawful claims for
labor, materials and supplies which, in each case, if unpaid, might by law
become a material liability or Lien upon the property of it or any of the
Restricted Subsidiaries; PROVIDED, HOWEVER, that the Guarantor shall not be
required to pay or discharge or cause to be paid or discharged any such
tax, assessment, charge or claim whose amount, applicability or validity is
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being contested in good faith by appropriate proceedings and for which
appropriate provision has been made.
SECTION 4.07. MAINTENANCE OF PROPERTIES AND INSURANCE.
(1) The Guarantor shall cause all material properties owned by
or leased by it or any of the Restricted Subsidiaries used in the conduct
of its business or the business of any of the Restricted Subsidiaries to be
improved or maintained and kept in normal condition, repair and working
order (reasonable wear and tear excepted) and supplied with all necessary
equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in its judgment
may be necessary, so that the business carried on in connection therewith
may be properly and advantageously conducted at all times; PROVIDED,
HOWEVER, that nothing in this Section 4.07 shall prevent the Guarantor or
any of the Restricted Subsidiaries from discontinuing the use, operation or
maintenance of any of such properties, or disposing of any of them, if such
discontinuance or disposal is, in the judgment of the Board of Directors of
the Guarantor or of the Board of Directors of any Restricted Subsidiary, or
of an officer (or other agent employed by the Guarantor or of any of the
Restricted Subsidiaries) of the Guarantor or any of its Restricted
Subsidiaries having managerial responsibility for any such property,
desirable in the conduct of the business of the Guarantor or any Restricted
Subsidiary, and if such discontinuance or disposal is not adverse in any
material respect to the Holders.
(2) The Guarantor shall maintain, and shall cause the
Restricted Subsidiaries to maintain, insurance with responsible carriers
against such risks and in such amounts, and with such deductibles,
retentions, self-insured amounts and co-insurance provisions, as are
customarily carried by similar businesses of similar size, including
property and casualty loss, workers' compensation and interruption of
business insurance.
SECTION 4.08. COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT.
(1) The Company shall deliver to the Trustee, within 100 days
after the close of each fiscal year an Officers' Certificate stating that a
review of the activities of the Company and the Guarantor has been made
under the supervision of the signing officers with a view to determining
whether they have kept, observed, performed and fulfilled their respective
obligations under this Indenture and further stating, as to each such
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Officer signing such certificate, that to the best of his knowledge the
Company and the Guarantor during such preceding fiscal year have kept,
observed, performed and fulfilled each and every such covenant and no
Default or Event of Default occurred during such year and at the date of
such certificate no Default or Event of Default has occurred and is
continuing or, if such signers do know of such Default or Event of Default,
the certificate shall describe its status with particularity. The
Officers' Certificate shall also notify the Trustee should the Guarantor
elect to change the manner in which it fixes its fiscal year end.
(2) The annual financial statements delivered pursuant to
Section 4.10(2) shall be accompanied by a written report of the Guarantor's
independent accountants (who shall be a firm of established reputation)
that in conducting their audit of such financial statements nothing has
come to their attention that would lead them to believe that the Company or
the Guarantor has violated any provisions of Article Four, Five or Six of
this Indenture insofar as they relate to accounting matters or, if any such
violation has occurred, specifying the nature and period of existence
thereof, it being understood that such accountants shall not be liable
directly or indirectly to any Person for any failure to obtain knowledge of
any such violation.
(3) The Company shall deliver to the Trustee, within ten days
of becoming aware of any Default or Event of Default in the performance of
any covenant, agreement or condition contained in this Indenture, an
Officers' Certificate specifying the Default or Event of Default and
describing its status with particularity.
SECTION 4.09. COMPLIANCE WITH LAWS.
The Guarantor shall comply, and shall cause each of the
Restricted Subsidiaries to comply, with all applicable statutes, rules,
regulations, orders and restrictions in respect of the conduct of their
respective businesses and the ownership of their respective properties,
except for such noncompliances as would not in the aggregate have a
material adverse effect on the financial condition or results of operations
of the Guarantor and the Restricted Subsidiaries taken as a whole.
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SECTION 4.10. SEC REPORTS.
(1) The Guarantor will file with the SEC all information
documents and reports to be filed with the SEC pursuant to Section 13 or
15(d) of the Exchange Act, whether or not the Guarantor is subject to such
filing requirements so long as the SEC will accept such filings. The
Guarantor (at its own expense) will file with the Trustee within 15 days
after it files them with the SEC, copies of the quarterly and annual
reports and of the information, documents and other reports (or copies of
such portions of any of the foregoing as the SEC may by rules and
regulations prescribe) which the Guarantor files with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act. Upon qualification of this
Indenture under the TIA, the Guarantor and the Company shall also comply
with the provisions of TIA Sec. 314(a).
(2) At the Guarantor's expense, regardless of whether the
Guarantor is required to furnish such reports to its stockholders pursuant
to the Exchange Act, the Guarantor shall cause annual or quarterly reports,
to be delivered to the Trustee and the Holders. The Guarantor will also
make such reports available to prospective purchasers of the Securities,
securities analysts and broker-dealers upon their request.
(3) For so long as any of the Securities remain outstanding
the Guarantor will make available to any prospective purchaser of the
Securities or beneficial owner of the Securities in connection with any
sale thereof the information required by Rule 144A(d)(4) under the
Securities Act during any period when the Company is not subject to Section
13 or 15(d) under the Exchange Act.
SECTION 4.11. WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company covenants (to the extent that it may lawfully do so)
that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension
law or any usury law or other law that would prohibit or forgive the
Company from paying all or any portion of the principal of and/or interest
on the Securities as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the
performance of this Indenture, and (to the extent that it may lawfully do
so) the Company hereby expressly waives all benefit or advantage of any
such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been
enacted.
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SECTION 4.12. LIMITATION ON ASSET SALES.
The Guarantor will not, and will not permit any of the Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Guarantor or the
applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair
market value of the assets sold or otherwise disposed of (as determined in
good faith by the Guarantor's Board of Directors), (ii) at least 75% of the
consideration received by the Guarantor or the Restricted Subsidiary, as
the case may be, from such Asset Sale shall be in the form of cash or Cash
Equivalents and is received at the time of such disposition (with the
principal amount or accreted value, as the case may be, of Indebtedness of
the Guarantor and the Restricted Subsidiaries assumed by the transferee in
connection with such Asset Sale treated as cash for purposes of this clause
(ii)); and (iii) upon the consummation of an Asset Sale, the Guarantor
shall apply, or cause such Restricted Subsidiary to apply, the Net Cash
Proceeds relating to such Asset Sale within 360 days of receipt thereof
either (A) to prepay any Indebtedness of a Restricted Subsidiary or Indebt-
edness of the Guarantor which is not subordinated in right of payment to
any other Indebtedness of the Guarantor, (B) to purchase or make an invest-
ment in properties and assets (including inventory) that will be used in
the business of the Guarantor or the Restricted Subsidiaries as existing on
the Issue Date or in businesses reasonably related thereto, or (C) a
combination of prepayment and investment permitted by the foregoing clauses
(iii)(A) and (iii)(B). On the 361st day after an Asset Sale or such
earlier date, if any, as the Board of Directors of the Guarantor or of such
Restricted Subsidiary determines not to apply the Net Cash Proceeds
relating to such Asset Sale as set forth in clauses (iii)(A), (iii)(B) and
(iii)(C) of the next preceding sentence (each, a "Net Proceeds Offer
Trigger Date"), such aggregate amount of Net Cash Proceeds which have not
been applied on or before such Net Proceeds Offer Trigger Date as permitted
in clauses (iii)(A), (iii)(B) and (iii)(C) of the next preceding sentence
(each a "Net Proceeds Offer Amount") shall be applied by the Issuer to make
an offer to purchase (the "Net Proceeds Offer") on a date (the "Net
Proceeds Offer Payment Date") not less than 30 nor more than 60 days
following the applicable Net Proceeds Offer Trigger Date, from all Holders
who validly accept such offer on a pro rata basis, that principal amount of
Securities equal to the Net Proceeds Offer Amount at a price equal to 100%
of the principal amount of the Securities to be purchased, plus accrued and
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unpaid interest, if any, thereon to the date of purchase; PROVIDED,
HOWEVER, that if at any time any non-cash consideration received by the
Guarantor or any Restricted Subsidiary, as the case may be, in connection
with any Asset Sale is converted into or sold or otherwise disposed of for
cash (other than interest received with respect to any such non-cash
consideration), then such conversion or disposition shall be deemed to
constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall
be applied in accordance with this covenant. The Issuer may defer the Net
Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer
Amount equal to or in excess of $5,000,000 resulting from one or more Asset
Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and
not just the amount in excess of $5,000,000 shall be applied as required
pursuant to this paragraph).
In the event of the transfer of substantially all (but not all)
of the property and assets of the Guarantor and the Restricted Subsidiaries
as an entirety to a Person in a transaction permitted under Article Five,
the successor corporation shall be deemed to have sold the properties and
assets of the Guarantor and the Restricted Subsidiaries not so transferred
for purposes of this covenant, and shall comply with the provisions of this
covenant with respect to such deemed sale as if it were an Asset Sale. In
addition, the fair market value of such properties and assets of the
Guarantor or the Restricted Subsidiaries deemed to be sold shall be deemed
to be Net Cash Proceeds for purposes of this covenant.
Notice of each Net Proceeds Offer pursuant to this Section 4.12
will be mailed or caused to be mailed, by first class mail, by the Company
within 30 days following the Net Proceeds Offer Trigger Date to all Holders
at their last registered addresses, with a copy to the Trustee. The notice
shall contain all instructions and materials necessary to enable such
Holders to tender Securities pursuant to the Net Proceeds Offer and shall
state the following terms:
(1) that the Net Proceeds Offer is being made pursuant to
Section 4.12 and that all Securities tendered in whole or in part in
integral multiples of $1,000 will be accepted for payment; PROVIDED,
HOWEVER, that if the principal amount of Securities validly tendered in a
Net Proceeds Offer exceeds the aggregate amount of the Net Cash Proceeds
Offer Amount, the Company shall select the Securities to be purchased on a
pro rata basis (based on amounts tendered);
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(2) the purchase price (including the amount of accrued
interest, if any) and the Net Proceeds Offer Payment Date (which shall be
at least 20 Business Days from the date of mailing of notice of such Net
Proceeds Offer, or such longer period as required by law);
(3) that any Security not validly tendered will continue to
accrue interest;
(4) that, unless the Company defaults in making payment
therefor, any Security accepted for payment pursuant to the Net Proceeds
Offer shall cease to accrue interest after the Net Proceeds Offer Payment
Date;
(5) that Holders electing to have a Security purchased
pursuant to a Net Proceeds Offer will be required to surrender the
Security, with the form entitled "Option of Holder to Elect Purchase" on
the reverse of the Security completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the Net Proceeds
Offer Payment Date;
(6) that Holders will be entitled to withdraw their election
if the Paying Agent receives, not later than the Business Day prior to the
Net Proceeds Offer Payment Date, a facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Security the
Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Security purchased; and
(7) that Holders whose Securities are purchased only in part
will be issued new Securities in a principal amount equal to the
unpurchased portion of the Securities surrendered.
On or before the Net Proceeds Offer Payment Date, the Company
shall (i) accept for payment Securities or portions thereof validly
tendered pursuant to the Net Proceeds Offer which are to be purchased in
accordance with item (1) above, (ii) deposit with the Paying Agent in
accordance with Section 2.14 U.S. Legal Tender sufficient to pay the
purchase price plus accrued interest, if any, of all Securities to be
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purchased and (iii) deliver to the Trustee Securities so accepted together
with an Officers' Certificate stating the Securities or portions thereof
being purchased by the Company. The Paying Agent shall promptly mail to
the Holders of Securities so accepted payment in an amount equal to the
purchase price plus accrued interest, if any. For purposes of this Section
4.12, the Trustee shall act as the Paying Agent.
The Company shall and shall cause its Subsidiaries to comply with
all tender offer rules under state and Federal securities laws, including,
but not limited to, Section 14(e) under the Exchange Act and Rule 14e-1
thereunder, to the extent applicable to such Net Proceeds Offer. To the
extent that the provisions of any securities laws or regulations conflict
with the foregoing provisions of this Indenture, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed
to have breached its obligations under the foregoing provisions of this
Indenture by virtue thereof.
SECTION 4.13. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED SUBSIDIARIES.
The Guarantor will not, and will not cause or permit any of the
Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or permit to exist or become effective any encumbrance or restriction
on the ability of any Restricted Subsidiary to (a) pay dividends or make
any other distributions on or in respect of its Capital Stock; (b) make
loans or advances or to pay any Indebtedness or other obligation owed to
the Guarantor or any other Restricted Subsidiary; or (c) transfer any of
its property or assets to the Guarantor or any other Restricted Subsidiary,
except for such encumbrances or restrictions existing under or by reasons
of: (1) applicable law; (2) this Indenture; (3) customary non-assignment
provisions of any contract or any lease governing a leasehold interest of
any Restricted Subsidiary; (4) any instrument governing Acquired
Indebtedness, which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person or
the properties or assets of the Person so acquired; (5) agreements existing
on the Issue Date to the extent and in the manner such agreements are in
effect on the Issue Date; (6) any other agreement entered into after the
Issue Date which contains encumbrances and restrictions which are no more
restrictive with respect to any Restricted Subsidiary than those in effect
with respect to such Restricted Subsidiary pursuant to agreements as in
effect on the Issue Date; (7) an agreement governing Refinancing
Indebtedness incurred to Refinance the Indebtedness issued, assumed or
incurred pursuant to an agreement referred to in clause (2), (4) or (5)
above; PROVIDED, HOWEVER, that the provisions relating to such encumbrance
or restriction contained in any such Refinancing Indebtedness are no more
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restrictive than the provisions relating to such encumbrance or restriction
contained in agreements referred to in such clause (2), (4) or (5); and (8)
restrictions applicable only to an Accounts Receivable Subsidiary.
SECTION 4.14. LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES.
The Guarantor will not permit any of the Restricted Subsidiaries
to issue any Preferred Stock (other than to the Guarantor or to a
Restricted Subsidiary) or permit any Person (other than the Guarantor or a
Restricted Subsidiary) to own any Preferred Stock of any Restricted Subsid-
iary.
SECTION 4.15. LIMITATION ON LIENS.
The Guarantor will not, directly or indirectly, create, incur,
assume or permit or suffer to exist any Liens of any kind against or upon
any property or assets of the Guarantor, whether owned on the Issue Date or
acquired after the Issue Date, or any proceeds therefrom, or assign or
otherwise convey any right to receive income or profits therefrom unless
(i) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Guarantee, the Guarantee
is secured by a Lien on such property, assets or proceeds that is senior in
priority to such Liens and (ii) in all other cases, the Guarantee is
equally and ratably secured, except for (A) Liens securing the Guarantee;
(B) Liens in favor of the Issuer or the Guarantor; (C) Liens securing
Refinancing Indebtedness which is incurred to Refinance any Indebtedness
which has been secured by a Lien permitted under this Indenture and which
has been incurred in accordance with the provisions of this Indenture;
PROVIDED, HOWEVER, that such Liens do not extend to or cover any property
or assets of the Guarantor not securing the Indebtedness so Refinanced; and
(D) Permitted Liens.
SECTION 4.16. [INTENTIONALLY OMITTED].
SECTION 4.17. [INTENTIONALLY OMITTED].
SECTION 4.18. LIMITATIONS ON TRANSACTIONS WITH AFFILIATES.
(a) The Guarantor will not, and will not permit any of the
Restricted Subsidiaries to, directly or indirectly, enter into or permit to
exist any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease or exchange of any property or the
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rendering of any service) with, or for the benefit of, any of its
Affiliates (each an "AFFILIATE TRANSACTION"), other than (x) Affiliate
Transactions permitted under paragraph (b) below and (y) Affiliate
Transactions on terms that are no less favorable than those that might
reasonably have been obtained in a comparable transaction at such time on
an arm's-length basis from a Person that is not an Affiliate of the
Guarantor or such Restricted Subsidiary. All Affiliate Transactions (and
each series of related Affiliate Transactions which are similar or part of
a common plan) involving aggregate payments or other property with a fair
market value in excess of $1.0 million shall be approved by the Board of
Directors of the Guarantor or such Restricted Subsidiary, as the case may
be, such approval to be evidenced by a Board Resolution stating that such
Board of Directors has determined that such transaction complies with the
foregoing provisions. If the Guarantor or any Restricted Subsidiary enters
into an Affiliate Transaction (or series of related Affiliate Transactions
related to a common plan) that involves an aggregate fair market value of
more than $5.0 million, the Guarantor or such Restricted Subsidiary, as the
case may be, shall, prior to the consummation thereof, obtain a favorable
opinion as to the fairness of such transaction or series of related
transactions to the Guarantor or the relevant Restricted Subsidiary, as the
case may be, from a financial point of view, from an Independent Financial
Advisor and file the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply
to (i) employment, consulting and compensation arrangements and agreements
of the Guarantor as in effect on the Issue Date; (ii) reasonable fees and
compensation paid to and indemnity provided on behalf of, officers,
directors, employees or consultants of the Guarantor or any Restricted
Subsidiary as determined in good faith by the Guarantor's Board of
Directors or senior management; (iii) transactions exclusively between or
among the Guarantor and any of the Restricted Subsidiaries or exclusively
between or among such Restricted Subsidiaries; (iv) Restricted Payments
permitted by this Indenture; and (v) a Domestication Event.
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SECTION 4.19. [INTENTIONALLY OMITTED].
SECTION 4.20. [INTENTIONALLY OMITTED].
SECTION 4.21. CONDUCT OF BUSINESS.
The Guarantor and the Restricted Subsidiaries will not engage in
any businesses which are not either: (i) the same, similar or reasonably
related to the businesses in which the Guarantor or any of the Restricted
Subsidiaries are engaged on the Issue Date; (ii)Permitted Investments; or
(iii) businesses acquired through an acquisition after the Issue Date which
are not material to the Guarantor and the Restricted Subsidiaries, taken as
a whole.
SECTION 4.22. PAYMENTS FOR CONSENT.
The Guarantor will not, and will not cause or permit any of its
Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder
of any Securities for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of this Indenture, the
Securities or the Guarantee unless such consideration is offered to be paid
to all Holders of the Securities who so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such
consent, waiver or agreement.
SECTION 4.23. LIMITATION ON DESIGNATIONS OF UNRESTRICTED SUBSIDIARIES.
The Guarantor may designate any Subsidiary of the Guarantor
(other than the Company or a Subsidiary of the Guarantor which owns Capital
Stock of a Restricted Subsidiary) as an "Unrestricted Subsidiary" under
this Indenture (a "DESIGNATION") only if:
(a) no Default shall have occurred and be continuing at the
time of or after giving effect to such Designation; and
(b) the Guarantor would be permitted under this Indenture to
make an Investment at the time of Designation (assuming the
effectiveness of such Designation) in an amount (the "DESIGNATION
AMOUNT") equal to the sum of (i) fair market value of the Capital
Stock of such Subsidiary owned by the Guarantor and the
Restricted Subsidiaries on such date and (ii) the aggregate
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amount of Indebtedness of such Subsidiary owed to the Guarantor
and the Restricted Subsidiaries on such date; PROVIDED that in
connection with a Domestication Event and a Designation by the
Assuming Party of International Comfort Products Corporation (the
"Former Guarantor") as an Unrestricted Subsidiary, in calculating
the amount of the Investment deemed to be made pursuant to this
clause (b), Qualified Capital Stock of the Assuming Party held by
the Former Guarantor shall be excluded from such calculation; and
(c) the Guarantor would be permitted to incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness)
pursuant to Section 4.03 at the time of Designation (assuming the
effectiveness of such Designation); PROVIDED that in connection
with a Domestication Event and a Designation by the Assuming
Party of the Former Guarantor as an Unrestricted Subsidiary, the
Designation need not comply with this clause (c).
In the event of any such Designation, the Guarantor shall be
deemed to have made an Investment constituting a Restricted Payment in the
Designation Amount pursuant to Section 4.04 for all purposes of this
Indenture. The Guarantor shall not, and shall not permit any Restricted
Subsidiary to, at any time (x) provide direct or indirect credit support
for or a guarantee of any Indebtedness of any Unrestricted Subsidiary
(including of any undertaking agreement or instrument evidencing such
Indebtedness), (y) be directly or indirectly liable for any Indebtedness of
any Unrestricted Subsidiary or (z) be directly or indirectly liable for any
Indebtedness which provides that the holder thereof may (upon notice, lapse
of time or both) declare a default thereon or cause the payment thereof to
be accelerated or payable prior to its final scheduled maturity upon the
occurrence of a default with respect to any Indebtedness of any Unrestrict-
ed Subsidiary (including any right to take enforcement action against such
Unrestricted Subsidiary), except, in the case of clause (x) or (y), to the
extent permitted under Section 4.04.
The Guarantor may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary ("REVOCATION"), whereupon such Subsidiary shall
then constitute a Restricted Subsidiary, if
(a) no Default shall have occurred and be continuing at the
time and after giving effect to such Revocation; and
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(b) all Liens and Indebtedness of such Unrestricted
Subsidiaries outstanding immediately following such Revocation
would, if incurred at such time, have been permitted to be
incurred for all purposes of this Indenture.
All Designations and Revocations must be evidenced by Board
Resolutions of the Guarantor delivered to the Trustee certifying compliance
with the foregoing provisions.
SECTION 4.24. CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, the Company
shall within 30 days of the Change of Control make an offer to purchase (a
"Change of Control Offer"), and shall purchase, on a Business Day not more
than 60 nor less than 30 days following the occurrence of the Change of
Control (the "Change of Control Payment Date"), all of the then outstanding
Securities at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, thereon to the Change of
Control Payment Date. The Change of Control Offer shall remain open for 20
Business Days (or such longer period as may be required by law) and until
the close of business on the Change of Control Payment Date.
(b) Within 30 days following the date upon which the Change of
Control occurred (the "Change of Control Date"), the Company shall mail, or
cause to be mailed, by first class mail, a notice to each Holder, with a
copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. The notice to the Holders shall contain all instructions
and materials necessary to enable such Holders to tender Securities
pursuant to the Change of Control Offer. Such notice shall state:
(1) that the Change of Control Offer is being made pursuant to
this Section 4.24 and that all Securities validly tendered and
not withdrawn will be accepted for payment;
(2) the purchase price (including the amount of accrued
interest) and the Change of Control Payment Date;
(3) that any Security not validly tendered will continue to
accrue interest;
(4) that, unless the Company defaults in making payment
therefor, any Security accepted for payment pursuant to the
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Change of Control Offer shall cease to accrue interest after the
Change of Control Payment Date;
(5) that Holders electing to have a Security purchased
pursuant to a Change of Control Offer will be required to
surrender the Security, with the form entitled "Option of Holder
to Elect Purchase" on the reverse of the Security completed, to
the Paying Agent at the address specified in the notice prior to
the close of business on the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election
if the Paying Agent receives, not later than the Business Day
prior to the Change of Control Payment Date, a facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Securities the Holder delivered for
purchase and a statement that such Holder is withdrawing his
election to have such Securities purchased;
(7) that Holders whose Securities are purchased only in part
will be issued new Securities in a principal amount equal to the
unpurchased portion of the Securities surrendered; and
(8) the circumstances and relevant facts regarding such Change
of Control.
On or before the Change of Control Payment Date, the Company
shall (i) accept for payment Securities or portions thereof validly
tendered pursuant to the Change of Control Offer, (ii) deposit with the
Paying Agent in accordance with Section 2.14 U.S. Legal Tender sufficient
to pay the purchase price plus accrued interest, if any, of all Securities
so tendered and (iii) deliver to the Trustee Securities so accepted
together with an Officers' Certificate stating the Securities or portions
thereof being purchased by the Company. Upon receipt by the Paying Agent
of the monies specified in clause (ii) above and a copy of the Officers'
Certificate specified in clause (iii) above, the Paying Agent shall
promptly mail to the Holders of Securities so accepted payment in an amount
equal to the purchase price plus accrued interest, if any, and the Trustee
shall promptly authenticate and mail to such Holders new Securities equal
in principal amount to any unpurchased portion of the Securities
surrendered. Any Securities not so accepted shall be promptly mailed by
the Company to the Holder thereof. For purposes of this Section 4.24, the
Trustee shall act as the Paying Agent.
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Any amounts remaining after the purchase of all validly tendered
and not validly withdrawn Securities pursuant to a Change of Control Offer
shall be returned by the Trustee to the Company.
The Company shall and shall cause its Subsidiaries to comply with
all tender offer rules under state and Federal securities laws, including,
but not limited to, Section 14(e) under the Exchange Act and Rule 14e-1
thereunder, to the extent applicable to such offer. To the extent that the
provisions of any securities laws or regulations conflict with this Section
4.24, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under
this Section 4.24 by virtue thereof.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. MERGERS, AMALGAMATION, CONSOLIDATIONS AND SALES OF ASSETS.
(a) The Guarantor will not, in a single transaction or series
of related transactions, consolidate, amalgamate or merge with or into any
Person, or sell, assign, transfer, lease, convey or otherwise dispose of
(or cause or permit any Restricted Subsidiary to sell, assign, transfer,
lease, convey or otherwise dispose of) all or substantially all of the
Guarantor's assets (determined on a consolidated basis for the Guarantor
and the Restricted Subsidiaries) whether as an entirety or substantially as
an entirety to any Person unless: (a) pursuant to a Domestication Event,
or (b) (i) either (1) the Guarantor shall be the surviving or continuing
corporation or (2) the Person (if other than the Guarantor) formed by such
amalgamation, consolidation or into which the Guarantor is merged or the
Person which acquires by sale, assignment, transfer, lease, conveyance or
other disposition the properties and assets of the Guarantor and the
Restricted Subsidiaries substantially as an entirety (the "SURVIVING
ENTITY") (x) shall be a corporation organized and validly existing under
the laws of (l) the United States or any State thereof or the District of
Columbia or (2) Canada or any Province thereof and (y) shall expressly
assume, by supplemental indenture (in form and substance satisfactory to
the Trustee), executed and delivered to the Trustee, all obligations of the
Guarantor under the Guarantee and the performance of every covenant of the
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Guarantor, this Indenture and the Registration Rights Agreement on the part
of the Guarantor to be performed or observed; (ii) immediately after giving
effect to such transaction and the assumption contemplated by clause
(i)(2)(y) above (including giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred in connection with or
in respect of such transaction), the Guarantor or such Surviving Entity, as
the case may be, shall be able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.03;
(iii) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including, without limitation, giving effect to any Indebtedness and
Acquired Indebtedness incurred or anticipated to be incurred and any Lien
granted in connection with or in respect of the transaction), no Default or
Event of Default shall have occurred or be continuing; and (iv) the
Guarantor or the Surviving Entity shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, amalgamation, merger, sale, assignment, transfer, lease,
conveyance or other disposition and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture
comply with the applicable provisions of this Indenture and that all
conditions precedent in this Indenture relating to such transaction have
been satisfied.
(b) For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of
one or more Restricted Subsidiaries, the Capital Stock of which constitutes
all or substantially all of the properties and assets of the Guarantor,
shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Guarantor.
(c) The Issuer will not consolidate with or merge with or into
any Person other than the Guarantor unless: (i) the entity formed by or
surviving any such consolidation or merger (if other than the Issuer) is a
corporation organized and existing under the laws of the United States or
any State thereof or the District of Columbia; (ii) such entity explicitly
assumes by supplemental indenture (in form reasonably satisfactory to the
Trustee), executed and delivered to the Trustee, the due and punctual
payment of the principal of and premium, if any, and interest on the
Securities and the performance of any covenant of the Securities, this
Indenture and the Registration Rights Agreement; (iii) immediately after
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giving effect to such transaction, no Default or Event of Default shall
have occurred and be continuing; (iv) immediately after giving effect to
such transaction and the use of any net proceeds therefrom on a pro forma
basis, the Guarantor could satisfy the provisions of clause (ii) of the
first paragraph of this covenant; and (v) the Issuer shall have delivered
to the Trustee an Officers' Certificate and Opinion of Counsel, each
stating that such consolidation or merger and, if a supplemental indenture
is required in connection with such transaction, such supplemental
indenture comply with the applicable provisions of this Indenture and that
all conditions precedent in this Indenture relating to such transaction
have been satisfied.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
In accordance with the foregoing, upon any such amalgamation,
consolidation, combination, merger, conveyance, lease or transfer of all or
substantially all of the assets of the Guarantor in which the Guarantor or
the Issuer, as the case may be, is not the continuing corporation, the
surviving entity formed by such consolidation or into which the Guarantor
or the Issuer, as the case may be, is merged or to which such amalgamation,
consolidation, merger, conveyance, lease or transfer is made shall succeed
to, and be substituted for, and may exercise every right and power of, the
Guarantor or the Issuer, as the case may be, under this Indenture and the
Guarantee or the Securities, as the case may be, with the same effect as if
such successor had been named as the Guarantor or the Issuer, as the case
may be, herein, and thereafter the predecessor corporation will be relieved
of all further obligations and covenants under this Indenture, the
Guarantee or the Securities, as the case may be, and the Registration
Rights Agreement; PROVIDED that solely for purposes of computing amounts
described in subclause (iii) of Section 4.04, any such Surviving Entity
shall only be deemed to have succeeded to and be substituted for the Guar-
antor with respect to periods subsequent to the effective time of such
merger, consolidation or transfer of assets.
<PAGE>
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ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(1) the Company fails to pay interest on any Security for a
period of 30 days after the same becomes due and payable; or
(2) the Company fails to pay the principal of any Security,
when such principal becomes due and payable, whether at maturity, upon
redemption or otherwise (including the failure to make a payment to
purchase Securities tendered pursuant to a Change of Control Offer or Net
Proceeds Offer); or
(3) the Company or the Guarantor defaults in the observance or
performance of any other covenant or agreement contained in this Indenture,
the Securities or the Guarantee, which default continues for a period of 30
days, after (x) the Company receives written notice specifying the default
and requiring the Company to remedy the same from the Trustee or (y) the
Company and the Trustee receive such a notice from Holders of at least 25%
in principal amount of outstanding Securities (except in the case of a
default with respect to Article Five, which will constitute an Event of
Default with such notice requirement but without such passage of time
requirement); or
(4) the Guarantor or a Restricted Subsidiary defaults under
any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness of the Guarantor
or of any Restricted Subsidiary (or the payment of which is guaranteed by
the Guarantor or any Restricted Subsidiary) whether such Indebtedness now
exists or is created after the Issue Date which default (a) is caused by a
failure to pay principal of such Indebtedness after any applicable grace
period provided in such Indebtedness on the date of such default (a
"principal payment default"), or (b) results in the acceleration of such
Indebtedness prior to its express maturity (and such acceleration is not
rescinded, or such Indebtedness is not repaid, within 30 days) and, in each
case, the principal amount of any such Indebtedness, together with the
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principal amount of any other such Indebtedness under which there has been
a principal payment default or the maturity of which has been so
accelerated (and such acceleration is not rescinded, or such Indebtedness
is not repaid, within 30 days), aggregates $5.0 million; or
(5) the Guarantor or any of its Significant Subsidiaries (A)
admits in writing its inability to pay its debts generally as they become
due, (B) commences a voluntary case or proceeding under any Bankruptcy Law
with respect to itself, (C) consents to the entry of a judgment, decree or
order for relief against it in an involuntary case or proceeding under any
Bankruptcy Law, (D) consents to the appointment of a Custodian of it or for
any material portion of its property, (E) consents to or acquiesces in the
institution of a bankruptcy or an insolvency proceeding against it, (F)
makes a general assignment for the benefit of its creditors, or (G) takes
any corporate action to authorize or effect any of the foregoing; or
(6) a court of competent jurisdiction enters a judgment,
decree or order for relief in respect of the Guarantor or any of its
Significant Subsidiaries in an involuntary case or proceeding under any
Bankruptcy Law, which shall (A) approve as properly filed a petition
seeking reorganization, arrangement, adjustment or composition in respect
of the Guarantor or any of its Significant Subsidiaries, (B) appoint a
Custodian of the Guarantor or any of its Significant Subsidiaries or for
substantially all of any of their property or (C) order the winding-up or
liquidation of its affairs; and such judgment, decree or order shall remain
unstayed and in effect for a period of 60 consecutive days; or
(7) one or more judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the
payment of money in excess of $5.0 million, either individually or in the
aggregate, shall be entered against the Guarantor or any Restricted
Subsidiary of the Guarantor or any of their respective properties and shall
not be discharged, paid or stayed and there shall have been a period of 60
days after the date on which any period for appeal has expired and during
which a stay of enforcement of such judgment, order or decree shall not be
in effect; or
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(8) the Guarantee ceases to be in full force and effect, or
the Guarantee is declared to be null and void and unenforceable or the
Guarantee is found to be invalid or the Guarantor denies its liability
under the Guarantee.
The Trustee shall, within 30 days after the occurrence of any
Default actually known to a Responsible Officer of the Trustee, give to the
holders of Securities notice of such Default; PROVIDED that, except in the
case of a Default in the payment of principal of or interest on any of the
Securities, the Trustee shall be protected in withholding such notice if
and so long as a Responsible Officer of the Trustee in good faith
determines that the withholding of such notice is in the interest of the
Holders of Securities. The Issuer shall provide an Officers' Certificate
to the Trustee within ten days of the Issuer obtaining knowledge of any
Default or Event of Default (provided that the Issuer shall provide such
certification at least annually whether or not it knows of any Default or
Event of Default) that has occurred and, if applicable, describe such
Default or Event of Default and the status thereof.
SECTION 6.02. ACCELERATION.
If an Event of Default (other than an Event of Default specified
in clause (5) or (6) above) occurs and is continuing, then the Trustee or
the Holders of not less than 25% in aggregate principal amount of the then
outstanding Securities may declare the unpaid principal of, premium, if
any, and accrued and unpaid interest on, all the Securities then
outstanding to be immediately due and payable, by notice in writing to the
Company (and to the Trustee, if given by Holders) specifying the respective
Event(s) of Default and that it is a "notice of acceleration" and upon such
declaration such principal amount, premium, if any, and accrued and unpaid
interest will become immediately due and payable. If an Event of Default
specified in clause (5) or (6) above occurs and is continuing, then all
unpaid principal of, and premium, if any, and accrued and unpaid interest
on, the Securities then outstanding will ipso facto become and be
immediately due and payable without any declaration or other act on the
part of the Trustee or any Holder.
At any time after a declaration of acceleration with respect to
the Securities as described in the preceding paragraph, the Holders of a
majority in principal amount of the Securities then outstanding may rescind
and cancel such declaration and its consequences (a) if the rescission
would not conflict with any judgment or decree, (b) if all existing Events
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of Default have been cured or waived except nonpayment of principal or
interest that has become due solely because of the acceleration, (c) to the
extent the payment of such interest is lawful, interest on overdue
installments of interest and overdue principal, which has become due
otherwise than by such declaration of acceleration, has been paid, (d) if
the Company has paid the Trustee its reasonable compensation and reimbursed
the Trustee for its expenses, disbursements and advances and (e) in the
event of the cure or waiver of an Event of Default of the type described in
clauses (5) and (6) of the description of Events of Default above, the
Trustee shall have received an Officers' Certificate and an Opinion of
Counsel that such Event of Default has been cured or waived. No such
rescission shall affect any subsequent Default or impair any right
consequent thereto.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect
the payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities, this Indenture or the
Guarantee.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default.
No remedy is exclusive of any other remedy. All available remedies are
cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Subject to Sections 6.02, 6.07 and 9.02, the Holders of not less
than a majority in principal amount of the outstanding Securities by
written notice to the Trustee may waive an existing Default or Event of
Default and its consequences, except a Default in the payment of principal
of, premium or interest on any Security as specified in clauses (1) and (2)
of Section 6.01. The Company shall deliver to the Trustee an Officers'
Certificate stating that the requisite percentage of Holders have consented
to such waiver and attaching copies of such consents upon which the Trustee
may conclusively rely. When a Default or Event of Default is waived, it is
cured and ceases.
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SECTION 6.05. CONTROL BY MAJORITY.
The Holders of not less than a majority in aggregate principal
amount of the outstanding Securities may direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee. Subject to Section
7.01, however, the Trustee may refuse to follow any direction that
conflicts with any law or this Indenture, that the Trustee determines may
be unduly prejudicial to the rights of another Holder, or that may involve
the Trustee in personal liability; PROVIDED that the Trustee may take any
other action deemed proper by the Trustee which is not inconsistent with
such direction.
In the event the Trustee takes any action or follows any
direction pursuant to this Indenture, the Trustee shall be entitled to
indemnification from the Company satisfactory to it in its sole discretion
against any fees, loss, liability, cost or expense caused by taking such
action or following such direction.
SECTION 6.06. LIMITATION ON SUITS.
A Holder may not pursue any remedy with respect to this
Indenture, the Securities or the Guarantee unless:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holder or Holders of at least 25% in principal amount
of the outstanding Securities make a written request to the Trustee to
pursue the remedy;
(3) such Holder or Holders offer and, if requested, provide to
the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(4) the Trustee does not comply with the request within 30
days after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(5) during such 30-day period the Holder or Holders of a
majority in principal amount of the outstanding Securities do not give the
Trustee a direction which, in the opinion of the Trustee, is inconsistent
with the request.
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A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other
Holder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right
of any Holder to receive payment of principal of, premium and interest on a
Security, on or after the respective due dates expressed in such Security,
or to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of
the Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of principal, premium or
interest specified in clause (1) or (2) of Section 6.01 occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Company, the Guarantor or any other obligor
on the Securities for the whole amount of principal and accrued interest
remaining unpaid, together with interest on overdue principal and, to the
extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum borne by the
Securities and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel
and any other amounts due the Trustee under Section 7.07.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of
the Trustee (including any claim for the reasonable compensation, expenses,
legal fees, disbursements and advances of the Trustee, its agents,
nominees, custodians, counsel, accountants and experts) and the Holders
allowed in any judicial proceedings relating to the Company, its creditors
or its property and the Guarantor or any other obligor upon the Notes, its
respective creditors or its respective property, and shall be entitled and
empowered to collect and receive any monies or securities or other property
payable or deliverable upon the conversion or exchange of the Securities or
upon any such claims and to distribute the same, and any Custodian in any
such judicial proceedings is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to
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the making of such payments directly to the Holders, to pay to the Trustee
any amount due to it for the reasonable compensation, expenses, legal fees,
disbursements and advances of the Trustee, its agents, nominees, custodians
and counsel, and any other amounts due the Trustee under Section 7.07.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee
to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money or property pursuant to this
Article Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts owing under Section 7.07;
Second: if the Holders are forced to proceed against the
Company, the Guarantor or any other obligor on the Securities
directly without the Trustee, to the Holders for their collection
costs;
Third: to the Holders for amounts due and unpaid on the
Securities for principal, premium and interest, ratably, without
preference or priority of any kind, according to the amounts due
and payable on the Securities for principal, premium and
interest, respectively; and
Fourth: to the Company or the Guarantor, as their respective
interests may appear.
The Trustee, upon prior notice to the Company, may fix a record
date and payment date for any payment to Holders pursuant to this Section
6.10; PROVIDED, HOWEVER, that the failure to give any such notice shall not
affect the establishment of such record date or payment date or any payment
to Holders pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing
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by any party litigant in the suit of an undertaking to pay the costs of the
suit, and the court in its discretion may assess reasonable costs,
including reasonable attorneys' fees and expenses, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.11 does not
apply to a suit by the Trustee, a suit by a Holder pursuant to Section
6.07, or a suit by a Holder or Holders of more than 10% in principal amount
of the outstanding Securities.
SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has
been discontinued or abandoned for any reason, or has been determined
adversely to the Trustee or to such Holder, then and in every case, subject
to any determination in such proceeding, the Company, the Guarantor, the
Trustee and the Holders shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of
the Trustee and the Holders shall continue as though no such proceeding had
been instituted.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default actually known to a Responsible
Officer of the Trustee has occurred and is continuing, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of his own
affairs. Subject to such provisions, the Trustee shall be under no
obligation to exercise any of its rights or powers under this Indenture at
the request, order or direction of any of the Holders of Securities, unless
they shall have offered to the Trustee security and indemnity satisfactory
to it in its sole discretion.
(b) Except during the continuance of an Event of Default
actually known to a Responsible Officer of the Trustee:
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(1) The Trustee need perform only those duties as are
specifically set forth herein and no others and no implied
covenants or obligations shall be read into this Indenture
against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates
or opinions and such other documents delivered to it pursuant to
Section 11.04 and Section 11.05 hereof furnished to the Trustee
and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer of the Trustee,
unless it is proved that the Trustee was negligent in
ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or to take or omit to
take any action under this Indenture or take any action at the request or
direction of Holders if it shall have reasonable grounds for believing that
repayment of such funds is not assured to it or it does not receive an
indemnity satisfactory to it in its sole discretion against such risk,
liability, loss, fee or expense which might be incurred by it in compliance
with such request or direction.
(e) Every provision of this Indenture that in any way relates
to the Trustee is subject to this Section 7.01.
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(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
Subject to Section 7.01:
(a) The Trustee may conclusively rely and shall be protected
in acting or refraining from acting on any document believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate and an Opinion of Counsel, which shall
conform to the provisions of Section 11.04 and Section 11.05. The Trustee
shall not be liable for any action it takes or omits to take in good faith
in reliance on such certificate or opinion.
(c) The Trustee may act through its attorneys, agents,
custodians and nominees and shall not be responsible for the misconduct or
negligence of any attorney, agent, custodian or nominee (other than such a
person who is an employee of the Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it reasonably believes to be authorized
or within its rights or powers.
(e) The Trustee may consult with counsel of its selection and
the advice or opinion of such counsel as to matters of law shall be full
and complete authorization and protection from liability in respect of any
action taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request, order
or direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the fees, costs, expenses and liabilities
which may be incurred therein or thereby.
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(g) Except with respect to Section 4.01, the Trustee shall not
have any duty as to inquire as to the performance by the Company of its
covenants or obligations under this Indenture. The Trustee shall not be
deemed to have notice or any knowledge of any matter (including without
limitation Defaults or Events of Default) unless a Responsible Officer
assigned to and working in the Trustee's Corporate Trust Administration has
actual knowledge thereof or unless written notice thereof is received by
the Trustee, attention: Corporate Trust Administration and such notice
references the Securities generally, the Company or this Indenture.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Securities and may otherwise deal with the Company,
its Subsidiaries, the Guarantor and their respective Affiliates with the
same rights it would have if it were not Trustee. Any Agent may do the
same with like rights. However, the Trustee must comply with Sections 7.10
and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Securities, it
shall not be accountable for the Company's use of the proceeds from the
Securities, it shall not be responsible for the use and application of any
money received by any Paying Agent other than the Trustee and it shall not
be responsible for any statement of the Company in this Indenture or any
document issued in connection with the sale of Securities (including
without limitation any preliminary or final offering memorandum) or any
statement in the Securities other than the Trustee's certificate of
authentication. The Trustee makes no representations with respect to the
effectiveness or adequacy of this Indenture. The Trustee shall not be
responsible for independently ascertaining or maintaining such validity, if
any, and shall be fully protected in relying upon certificates and opinions
delivered to it in accordance with the terms of this Indenture.
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SECTION 7.05. NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing and
a Responsible Officer of the Trustee receives actual notice of such event,
the Trustee shall mail to each Holder, as their names and addresses appear
on the Holder list described in Section 2.05, notice of the uncured Default
or Event of Default within 30 days after the Trustee receives such notice.
Except in the case of a Default or an Event of Default in payment of
principal of, premium or interest on, any Security, including the failure
to make payment on (i) the Change of Control Payment Date pursuant to a
Change of Control Offer or (ii) the Net Proceeds Offer Payment Date
pursuant to a Net Proceeds Offer, the Trustee may withhold the notice if
and so long as the board of directors, the executive committee, a trust
committee of directors or a committee of Responsible Officers of the
Trustee in good faith determines that withholding the notice is in the
interest of the Holders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
This Section 7.06 shall not be operative as a part of this
Indenture until this Indenture is qualified under the TIA, and, until such
qualification, this Indenture shall be construed as if this Section 7.06
were not contained herein.
Within 60 days after each May 15 of each year beginning with
1998, the Trustee shall, to the extent that any of the events described in
TIA Section 313(a) occurred within the previous twelve months, but not
otherwise, mail to each Holder a brief report dated as of such date that
complies with TIA Section 313(a). The Trustee also shall comply with TIA
Sections 313(b), 313(c) and 313(d).
A copy of each report at the time of its mailing to Holders shall
be mailed to the Company and filed with the SEC and each securities
exchange, if any, on which the Securities are listed.
The Company shall notify a Responsible Officer of the Trustee if
the Securities become listed on any securities exchange or of any delisting
thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company and the Guarantor shall pay to the Trustee from time
to time reasonable compensation for its services hereunder. The Trustee's
compensation shall not be limited by any law on compensation of a trustee
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of an express trust. The Company and the Guarantor shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and
advances (including reasonable fees and expenses of counsel) incurred or
made by it in addition to the compensation for its services, except any
such disbursements, expenses and advances as may be attributable to the
Trustee's negligence or bad faith. Such expenses shall include the
reasonable compensation, legal fees, disbursements and expenses of the
Trustee's agents, accountants, experts, nominees, custodians and counsel
and any taxes or other expenses incurred by a trust created pursuant to
Section 8.01 hereof.
The Company and the Guarantor shall indemnify the Trustee, its
directors, officers and employees and each predecessor trustee for, and
hold it harmless against, any loss, liability or expense incurred by the
Trustee without negligence or bad faith on its part arising out of or in
connection with the administration of this trust and its duties under this
Indenture, including the reasonable expenses and attorneys' fees of
defending itself against any claim of liability arising hereunder. The
Trustee shall notify the Company and the Guarantor promptly of any claim
asserted against the Trustee for which it may seek indemnity. However, the
failure by the Trustee to so notify the Company or the Guarantor shall not
relieve the Company or the Guarantor of its respective obligations
hereunder. The Company shall defend the claim and the Trustee shall
cooperate in the defense (and may employ its own counsel) at the Company's
expense. The Company need not pay for any settlement made without its
written consent, which consent shall not be unreasonably withheld or
delayed. Neither the Company nor the Guarantor needs to reimburse any
expense or indemnify against any loss or liability incurred by the Trustee
as a result of the violation of this Indenture by the Trustee if such
violation arose from the Trustee's negligence or bad faith.
To secure the Company's and the Guarantor's payment obligations
in this Section 7.07, the Trustee shall have a senior claim and lien prior
to the Securities against all money or property held or collected by the
Trustee, in its capacity as Trustee.
When the Trustee incurs expenses or renders services after an
Event of Default specified in clause (5) or (6) of Section 6.01 occurs, the
expenses (including the reasonable fees and expenses of its agents and
counsel) and the compensation for the services shall be preferred over the
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status of the Holders in a proceeding under any Bankruptcy Law and are
intended to constitute expenses of administration under any Bankruptcy Law.
The Company's obligations under this Section 7.07 and any claim arising
hereunder shall survive the resignation or removal of any Trustee, the
discharge of the Company's obligations pursuant to Article Eight and any
rejection or termination under any Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
The Trustee may resign at any time by so notifying the Company in
writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Company and the
Trustee in writing and may appoint a successor trustee with the Company's
consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes legally incapable of acting with
respect to its duties hereunder.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall notify each Holder
of such event and shall promptly appoint a successor Trustee. Within one
year after the successor Trustee takes office, the Holders of a majority in
principal amount of the Securities may appoint a successor Trustee to
replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after
that, the retiring Trustee shall transfer, after payment of all sums then
owing to the Trustee pursuant to Section 7.07, all property held by it as
Trustee to the successor Trustee, subject to the lien provided in Section
7.07, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture; PROVIDED, HOWEVER, that no
Trustee under this Indenture shall be liable for any act or omission of any
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successor Trustee. A successor Trustee shall mail notice of its succession
to each Holder.
If a successor Trustee does not take office within 30 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in principal amount of the
outstanding Securities may petition any court of competent jurisdiction for
the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder who
has been a Holder for at least six months may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment
of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall continue
for the benefit of the retiring Trustee and the Company shall pay to any
such replaced or removed Trustee all amounts owed under Section 7.07 upon
such replacement or removal.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to,
another corporation, the resulting, surviving or transferee corporation
without any further act shall, if such resulting, surviving or transferee
corporation is otherwise eligible hereunder, be the successor Trustee. In
case any Securities shall have been authenticated, but not delivered, by
the Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee may adopt such authentication
and deliver the Securities so authenticated with the same effect as if such
successor Trustee had itself authenticated such Securities.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA Sections 310(a)(1) and 310(a)(5). The Trustee shall
have a combined capital and surplus of at least $50,000,000 as set forth in
its most recent published annual report of condition. The Trustee shall
comply with TIA Section 310(b); PROVIDED, HOWEVERr, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities, or certificates of interest or
participation in other securities, of the Company are outstanding, if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
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SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee, in its capacity as Trustee hereunder, shall comply
with TIA Section 311(a), excluding any creditor relationship listed in TIA
Section 311(b). A Trustee who has resigned or been removed shall be
subject to TIA Section 311(a) to the extent indicated.
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
(a) The Company may, at its option by Board Resolution, at any
time, with respect to the Securities, elect to have either paragraph (b) or
paragraph (c) below be applied to the outstanding Securities upon
compliance with the conditions set forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the
option applicable to this paragraph (b), the Company shall be deemed to
have been released and discharged from its obligations with respect to the
outstanding Securities on the date the conditions set forth below are
satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal
Defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the outstanding
Securities, which shall thereafter be deemed to be "outstanding" only for
the purposes of the Sections and matters under this Indenture referred to
in (i) and (ii) below, and to have satisfied all its other obligations
under such Securities and this Indenture insofar as such Securities are
concerned, except for the following, which shall survive until otherwise
terminated or discharged hereunder: (i) the rights of the Holders of
outstanding Securities to receive payments in respect of the principal of,
premium, if any, and interest on such Securities when such payments are
due, (ii) the Company's obligations to issue temporary Securities, register
the transfer or exchange of any Securities, replace mutilated, destroyed,
lost or stolen Securities and maintain an office or agency for payments in
respect of the Securities, (iii) the rights, powers, trusts, duties and
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immunities of the Trustee, and (iv) the Legal Defeasance provisions of this
Indenture. The Company may exercise its option under this paragraph (b)
notwithstanding the prior exercise of its option under paragraph (c) below
with respect to the Securities.
(c) Upon the Company's exercise under paragraph (a) of the
option applicable to this paragraph (c), the Company and the Guarantor
shall be released and discharged from their respective obligations under
any covenant contained in Article Five and in Sections 4.03 through 4.24
with respect to the outstanding Securities on and after the date the
conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"), and the Securities shall thereafter be deemed to be not
"outstanding" for the purpose of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder. For this purpose, such
Covenant Defeasance means that, with respect to the outstanding Securities,
the Company and the Guarantor may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any
such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any
such covenant to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of
Default under Section 6.01(3), nor shall any event referred to in Section
6.01(4) or (7) thereafter constitute a Default or an Event of Default
thereunder but, except as specified above, the remainder of this Indenture
and such Securities shall be unaffected thereby.
(d) The following shall be the conditions to application of
either paragraph (b) or paragraph (c) above to the outstanding Securities:
(1) The Company shall have irrevocably deposited in trust with
the Trustee, pursuant to an irrevocable trust and security
agreement for the benefit of Holders in form and substance
satisfactory to the Trustee, U.S. Legal Tender or direct non-
callable obligations of, or non-callable obligations guaranteed
by, the United States of America for the payment of which
obligation or guarantee the full faith and credit of the United
States of America is pledged ("U.S. Government Obligations")
maturing as to principal and interest in such amounts and at such
times as are sufficient, without consideration of the
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reinvestment of such interest and principal and after payment of
all Federal, state and local taxes or other charges or
assessments in respect thereof payable by the Trustee, in the
opinion of a nationally recognized firm of Independent public
accountants expressed in a written certification thereof (in form
and substance reasonably satisfactory to the Trustee) delivered
to the Trustee, to pay the principal of, premium, if any, and
interest on all the outstanding Securities on the dates on which
any such payments are due and payable in accordance with the
terms of this Indenture and of the Securities;
(2) Such deposits shall not cause on the date of the deposit
the Trustee to have a conflicting interest as defined in and for
purposes of the TIA;
(3) The Trustee shall have received Officers' Certificates
stating that No Default of Event of Default or event which with
notice or lapse of time or both would become a Default or an
Event of Default with respect to the Securities shall have
occurred and be continuing on the date of such deposit or,
insofar as Section 6.01(5) or (6) is concerned, at any time
during the period ending on the 91st day after the date of such
deposit (it being understood that this condition shall not be
deemed satisfied until the expiration of such period);
(4) The Trustee shall have received Officers' Certificates
stating that such Legal Defeasance or Covenant Defeasance will
not result in a Default under this Indenture or a breach or
violation of, or constitute a default under, any other material
instrument or agreement to which the Guarantor or any of its
Subsidiaries is a party or by which it or its property is bound;
(5) (i) In the event the Company elects to exercise its option
under paragraph (b) hereof, the Company shall deliver to the
Trustee an Opinion of Counsel in the United States, in form and
substance reasonably satisfactory to the Trustee to the effect
that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since
the Issue Date, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall state that Holders of the
Securities will not recognize income gain or loss for federal
income tax purposes as a result of such deposit and the
defeasance contemplated hereby and will be subject to federal
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income taxes in the same amounts, the same manner and at the same
times as would have been the case if such deposit and defeasance
had not occurred, or (ii) in the event the Company elects to
exercise its options under paragraph (c) hereof, the Company
shall deliver to the Trustee an Opinion of Counsel in the United
States, in form and substance reasonably satisfactory to the
Trustee, to the effect that, Holders of the Securities will not
recognize income, gain or loss for federal income tax purposes as
a result of such deposit and the defeasance contemplated hereby
and will be subject to federal income tax in the same amounts and
in the same manner and at the same times as would have been the
case if such deposit and defeasance had not occurred;
(6) The Company shall have delivered to the Trustee an Opinion
of Counsel in form and substance reasonably satisfactory to the
Trustee stating that as a result of the Legal Defeasance or
Covenant Defeasance, neither the Trustee nor the trust have
become or are deemed to have become an "investment company" under
the Investment Company Act of 1940, as amended;
(7) The Company shall have delivered to the Trustee an
Officers' Certificate, in form and substance reasonably
satisfactory to the Trustee, stating that the deposit under
clause (1) was not made by the Company, the Guarantor or any
Subsidiary of the Guarantor with the intent of defeating,
hindering, delaying or defrauding any other creditors of the
Company, the Guarantor, or any such Subsidiary;
(8) The Company shall have delivered to the Trustee an Opinion
of Counsel, in form and substance reasonably satisfactory to the
Trustee, to the effect that (A) the trust funds deposited
pursuant to clause (1) will not be subject to the rights of
holders of Indebtedness of the Company or the Guarantor other
than the Securities and (B) assuming no intervening bankruptcy of
the Company between the date of deposit and the 91st day
following the deposit and that no Holder of Securities is an
insider of the Company, after the 91st day following the deposit,
the trust funds will not be subject to any applicable bankruptcy,
insolvency, reorganization or similar law affecting creditors'
rights generally; and
(9) The Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
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conditions precedent provided for or relating to the Legal
Defeasance or Covenant Defeasance contemplated by this Section
8.01 have been complied with; PROVIDED, HOWEVER, that no deposit
under clause (1) above shall be effective to terminate the
obligations of the Company under the Securities or this Indenture
prior to 90 days following any such deposit; and
(10) The Company shall have paid all amounts owing to the
Trustee pursuant to Section 7.07.
Notwithstanding the foregoing, the Opinion of Counsel required by
paragraph (5) above need not be delivered if all Securities not theretofore
delivered to the Trustee for cancellation (i) have become due and payable,
(ii) will become due and payable on the maturity date for the Securities
within one year, or (iii) are to be called for redemption within one year
under irrevocable arrangements satisfactory to the Trustee for the giving
of notice of redemption by the Trustee in the name, and at the expense, of
the Company.
In the event all or any portion of the Securities are to be
redeemed through such irrevocable trust, the Company must make irrevocable
arrangements satisfactory to the Trustee, at the time of such deposit, for
the giving of the notice of such redemption or redemptions by the Trustee
in the name and at the expense of the Company.
SECTION 8.02. SATISFACTION AND DISCHARGE.
In addition to the Company's rights under Section 8.01, the
Company may terminate all of its obligations under this Indenture (subject
to Section 8.03) when:
(1) all Securities theretofore authenticated and delivered
(other than Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 2.07) have been delivered
to the Trustee for cancellation; or
(2) all Securities not theretofore delivered to the Trustee
for cancellation (except lost, stolen or destroyed Securities which have
been replaced or paid) have been called for redemption pursuant to the
terms of the Securities or have otherwise become due and payable and the
Company has irrevocably deposited or caused to be deposited with the
Trustee funds in an amount sufficient to pay and discharge the entire
Indebtedness on the Securities not heretofore delivered to the Trustee for
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cancellation, for principal of, premium, if any, and interest on the
Securities to the date of deposit together with irrevocable instructions
from the Company directing the Trustee to apply such funds to the payment
thereof at maturity or redemption, as the case may be; and
(3) the Company has paid or caused to be paid all other sums
payable hereunder and under the Securities by the Company; and
(4) there exists no Default or Event of Default under this
Indenture; and
(5) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent specified herein relating to the satisfaction and discharge of
this Indenture have been complied with; and
(6) the Company shall have paid all amounts owing to the
Trustee pursuant to Section 7.07.
SECTION 8.03. SURVIVAL OF CERTAIN OBLIGATIONS.
Notwithstanding the satisfaction and discharge of this Indenture
and of the Securities referred to in Section 8.01 or 8.02, the respective
obligations of the Company, the Guarantor and the Trustee under Sections
2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.10, 2.12, 2.13, Article Three, 4.01,
4.02 and 6.07, Article Seven and Sections 8.05, 8.06 and 8.07 shall survive
until the Securities are no longer outstanding, and thereafter the
obligations of the Company, the Guarantor and the Trustee under Sections
7.07, 8.05, 8.06 and 8.07 shall survive. Nothing contained in this Article
Eight shall abrogate any of the rights, obligations or duties of the
Trustee under this Indenture.
SECTION 8.04. ACKNOWLEDGEMENT OF DISCHARGE BY TRUSTEE.
Subject to Section 8.07, after (i) the conditions of Section 8.01
or 8.02 have been satisfied, (ii) the Company has paid or caused to be paid
all other sums payable hereunder by the Company and (iii) the Company has
delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that all conditions precedent referred to in clause
(i) above relating to the satisfaction and discharge of this Indenture have
been complied with, the Trustee upon written request shall acknowledge in
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writing the discharge of the Company's obligations under this Indenture
except for those surviving obligations specified in Section 8.03.
SECTION 8.05. APPLICATION OF TRUSTE ASSETS.
The Trustee shall hold any U.S. Legal Tender or U.S. Government
Obligations deposited with it in the irrevocable trust established pursuant
to Sections 8.01 and 8.02. The Trustee shall apply the deposited U.S.
Legal Tender or the U.S. Government Obligations, together with earnings
thereon, through the Paying Agent, in accordance with this Indenture and
the terms of the irrevocable trust agreement established pursuant to
Section 8.01, to the payment of principal of and interest on the
Securities. The U.S. Legal Tender or U.S. Government Obligations so held
in trust and deposited with the Trustee in compliance with Section 8.01 or
Section 8.02 shall not be part of the trust estate under this Indenture,
but shall constitute a separate trust fund for the benefit of all Holders
entitled thereto.
SECTION 8.06. REPAYMENT TO THE COMPANY OR THE GUARANTOR; UNCLAIMED
MONEY.
Subject to Sections 7.07, 8.01 and 8.02, the Trustee shall
promptly pay to the Company, or if deposited with the Trustee by the
Guarantor, to the Guarantor, upon receipt by the Trustee of an Officers'
Certificate, any excess money, determined in accordance with Section 8.01,
held by it at any time. The Trustee and the Paying Agent shall pay to the
Company or the Guarantor, as the case may be, upon receipt by the Trustee
or the Paying Agent, as the case may be, of an Officers' Certificate, any
money held by it for the payment of principal, premium, if any, or interest
that remains unclaimed for two years after payment to the Holders is
required; PROVIDED, HOWEVER, that the Trustee and the Paying Agent before
being required to make any payment may, but need not, at the expense of the
Company cause to be published once in a newspaper of general circulation in
The City of New York or mail to each Holder entitled to such money notice
that such money remains unclaimed and that after a date specified therein
(which shall not be less than 30 days from the date of such mailing or
publication), which shall be at least 2 years from the date of such
publication or mailing, any unclaimed balance of such money then remaining
will be repaid to the Company. After payment to the Company or the
Guarantor, as the case may be, Holders entitled to money must look solely
to the Company and the Guarantor for payment as general creditors unless an
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applicable abandoned property law designates another Person, and all
liability of the Trustee or Paying Agent with respect to such money shall
thereupon cease.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations deposited with it in the irrevocable
trust established pursuant to Section 8.01 or in accordance with Section
8.02 in accordance with this Indenture by reason of any legal proceeding or
by reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, then and
only then the Company's and the Guarantor's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had been made pursuant to Section 8.01 or Section 8.02, as
applicable, of this Indenture until such time as the Trustee is permitted
to apply all such U.S. Legal Tender or U.S. Government Obligations in
accordance with this Indenture; PROVIDED, HOWEVER, that if the Company or
the Guarantor, as the case may be, have made any payment of principal of,
premium, if any, or interest on any Securities because of the reinstatement
of their obligations, the Company or the Guarantor, as the case may be,
shall be, subrogated to the rights of the holders of such Securities to
receive such payment from the U.S. Legal Tender or U.S. Government
Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS.
The Company and Guarantor (when authorized by Board Resolutions),
and the Trustee, together, may amend or supplement this Indenture or the
Securities without notice to or consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency so long as
such change does not adversely affect the rights of any of the Holders in
any material respect;
(2) to evidence the succession in accordance with Article Five
hereof of another Person to the Company or the Guarantor and the assumption
by any such successor of the covenants of the Company or the Guarantor
herein and in the Securities or the Guarantee, as the case may be;
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(3) to provide for uncertificated Securities in addition to or
in place of certificated Securities;
(4) to make any other change that does not materially
adversely affect the rights of any Holders hereunder; or
(5) to comply with any requirements of the SEC in connection
with the qualification of this Indenture under the TIA.
PROVIDED that each of the Company and the Guarantor has delivered to the
Trustee an Opinion of Counsel and an Officers' Certificate, each stating
that such amendment or supplement complies with the provisions of this
Section 9.01. In formulating its opinion on such matters, the Trustee will
be entitled to rely on such evidence as it deems appropriate including,
without limitation, an Opinion of Counsel.
SECTION 9.02. WITH CONSENT OF HOLDERS.
Subject to Section 6.07, the Company and the Guarantor (when
authorized by Board Resolutions) and the Trustee, together, with the writ-
ten consent of the Holder or Holders of at least a majority in aggregate
principal amount of the outstanding Securities, may amend or supplement
this Indenture, the Securities and the Guarantee without notice to any
other Holders. Subject to Section 6.07, the Holder or Holders of a majori-
ty in aggregate principal amount of the outstanding Securities may waive
compliance by the Company or the Guarantor with any provision of this In-
denture or the Securities without notice to any other Holder. Without the
consent of each Holder affected, however, no amendment, supplement or waiv-
er, including a waiver pursuant to Section 6.04, may:
(1) reduce the principal amount of Securities whose Holders
must consent to an amendment, supplement or waiver of any provision of this
Indenture, the Securities or the Guarantee;
(2) reduce the rate of or change or have the effect of
changing the time for payment of interest, including default interest, on
any Security;
(3) reduce the principal amount of any Security;
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(4) change or have the effect of changing the Final Maturity
Date of any Security, or alter the redemption or repurchase provisions
contained in this Indenture or the Securities in a manner adverse to any
Holder;
(5) make any change in provisions of this Indenture protecting
the right of each Holder to receive payment of principal of and interest on
such Security on or after the due date thereof or to bring suit to enforce
such payment, or permitting Holders of a majority in principal amount of
the Securities to waive Defaults or Events of Default;
(6) make any changes in Section 4.22, 6.04, 6.07 or this
Section 9.02;
(7) make the principal of, premium or the interest on any
Security payable in money other than as provided for in this Indenture as
in effect on the date hereof;
(8) modify or change any provision of this Indenture or the
related definitions affecting the ranking of the Securities or the Guaran-
tee, in each case in a manner adverse to the Holders;
(9) amend, modify or change in any material respect the
obligation of the Company to make or consummate a Change of Control Offer
after the occurrence of a Change of Control or make or consummate a Net
Proceeds Offer with respect to any Asset Sale that has been consummated or
waive any default in the performance thereof or modify any of the
provisions or definitions with respect to any such offers;
(10) release the Guarantor from any of its obligations under
the Guarantee or this Indenture otherwise than in accordance with the terms
of this Indenture; or
(11) make any change that would adversely affect the rights of
Holders to receive Additional Amounts.
It shall not be necessary for the consent of the Holders under
this Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves
the substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure
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of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture.
SECTION 9.03. COMPLIANCE WITH TIA.
From the date on which this Indenture is qualified under the TIA,
every amendment, waiver or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement pursuant to Section 9.02
becomes effective, a consent to it by a Holder is a continuing consent by
the Holder and every subsequent Holder of a Security or portion of a
Security that evidences the same debt as the consenting Holder's Security,
even if notation of the consent is not made on any Security. However, any
such Holder or subsequent Holder may revoke the consent as to his Security
or portion of his Security by notice to the Trustee or the Company received
before the date on which the Trustee receives an Officers' Certificate
certifying that the Holders of the requisite principal amount of Securities
have consented (and not theretofore revoked such consent) to the amendment,
supplement or waiver.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph,
those Persons who were Holders at such record date (or their duly
designated proxies), and only those Persons, shall be entitled to revoke
any consent previously given, whether or not such Persons continue to be
Holders after such record date. No such consent shall be valid or
effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Holder, unless it makes a change described in any of
clauses (1) through (11) of Section 9.02, in which case, the amendment,
supplement or waiver shall bind only each Holder of a Security who has
consented to it and every subsequent Holder of a Security or portion of a
Security that evidences the same debt as the consenting Holder's Security;
PROVIDED that any such waiver shall not impair or affect the right of any
Holder to receive payment of principal of and interest on a Security, on or
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after the respective due dates expressed in such Security, or to bring suit
for the enforcement of any such payment on or after such respective dates
without the consent of such Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it
to the Trustee. The Trustee may place an appropriate notation on the
Security about the changed terms and return it to the Holder.
Alternatively, if the Company or the Trustee so determines, the Company in
exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the
appropriate notation or to issue a new Security shall not affect the
validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; PROVIDED that the Trustee may,
but shall not be obligated to, execute any such amendment, supplement or
waiver which affects the Trustee's own rights, duties or immunities under
this Indenture. The Trustee shall be entitled to receive, and shall be
fully protected in relying upon, an Opinion of Counsel and an Officers'
Certificate each stating that the execution of any amendment, supplement or
waiver authorized pursuant to this Article Nine is authorized or permitted
by this Indenture and constituted the legal, valid and binding obligations
of the Company and the Guarantor enforceable against each of them in
accordance with its terms. Such Opinion of Counsel shall be at the expense
of the Company, and the Trustee shall have a lien under Section 7.07 for
any such expense.
ARTICLE TEN
GUARANTEE
SECTION 10.01. UNCONDITIONAL GUARANTEE.
The Guarantor agrees to unconditionally guarantee to each Holder
of a Security authenticated and delivered by the Trustee, and to the
Trustee and its successors and assigns, that: (i) the principal of,
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premium and interest on the Securities will be promptly paid in full when
due, subject to any applicable grace period, whether at maturity, by
acceleration or otherwise and interest on the overdue principal, if any,
and interest on any interest, to the extent lawful, of the Securities and
all other Obligations of the Company to the Holders or the Trustee
hereunder or thereunder will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and (ii) in case of any
extension of time of payment or renewal of any Securities or of any such
other Obligations, the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, subject
to any applicable grace period, whether at stated maturity, by acceleration
or otherwise. The Guarantor agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability
of the Securities or this Indenture or any security from time to time
granted in respect thereof, the absence of any action to enforce the same,
any waiver or consent by any Holder of the Securities with respect to any
provisions hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance which
might otherwise constitute a legal or equitable discharge or defense of the
Guarantor. The Guarantor waives diligence, presentment, demand of payment,
filing of claims with a court in the event of insolvency or bankruptcy of
the Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever and covenants that the Guarantee
will not be discharged except by complete performance of the obligations
contained in the Securities, this Indenture and the Guarantee. If any
Holder or the Trustee is required by any court or otherwise to return to
the Company or any custodian, trustee, liquidator or other similar official
acting in relation to the Company, any amount paid by the Company to the
Trustee or such Holder, the Guarantee to the extent theretofore discharged,
shall be reinstated in full force and effect. The Guarantor further agrees
that, as between the Guarantor, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article Six for the purposes of
the Guarantee notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed
hereby, and (y) in the event of any acceleration of such obligations as
provided in Article Six, such obligations (whether or not due and payable)
shall forthwith become due and payable by the Guarantor for the purpose of
its Guarantee.
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SECTION 10.02. SEVERABILITY.
In case any provision of the Guarantee shall be invalid, illegal
or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 10.03. WAIVER OF SUBROGATION.
Until all Guarantee Obligations are paid in full, the Guarantor
hereby irrevocably waives any claims or other rights which it may now or
hereafter acquire against the Company that arise from the existence,
payment, performance or enforcement of the Guarantor's obligations under
the Guarantee and this Indenture, including, without limitation, any right
of subrogation, reimbursement, exoneration, indemnification, and any right
to participate in any claim or remedy of any Holder of Securities against
the Company, whether or not such claim, remedy or right arises in equity,
or under contract, statute or common law, including, without limitation,
the right to take or receive from the Company, directly or indirectly, in
cash or other property or by set-off or in any other manner, payment or
security on account of such claim or other rights. If any amount shall be
paid to the Guarantor in violation of the preceding sentence and the
Securities shall not have been paid in full, such amount shall have been
deemed to have been paid to the Guarantor for the benefit of, and held in
trust for the benefit of, the Holders of the Securities, and shall
forthwith be paid to the Trustee for the benefit of such Holders to be
credited and applied upon the Securities, in accordance with the terms of
this Indenture. The Guarantor acknowledges that it will receive direct and
indirect benefits from the financing arrangements contemplated by this
Indenture and that the waiver set forth in this Section 10.03 is knowingly
made in contemplation of such benefits.
SECTION 10.04. EXECUTION OF GUARANTEES.
To evidence its guarantee to the Holders set forth in this
Article Ten, the Guarantor shall execute a Guarantee in substantially the
form set forth on the form of the Securities attached hereto, which shall
be endorsed on each Security ordered to be authenticated and delivered by
the Trustee. The Guarantor agrees that its Guarantee set forth in this
Article Ten shall remain in full force and effect notwithstanding any
failure to endorse on each Security a notation of the Guarantee. The
Guarantee shall be signed on behalf of the Guarantor by two Officers, or an
Officer and an Assistant Secretary or one Officer shall sign and one
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Officer or an Assistant Secretary (each of whom shall, in each case, have
been duly authorized by all requisite corporate actions) shall attest to
the Guarantee prior to the authentication of the Security on which it is
endorsed, and the delivery of such Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
Guarantee on behalf of the Guarantor. Such signatures upon the Guarantee
may be by manual or facsimile signature of such officers and may be
imprinted or otherwise reproduced on the Guarantee, and in case any such
officer who shall have signed the Guarantee shall cease to be such officer
before the Security on which the Guarantee is endorsed shall have been
authenticated and delivered by the Trustee or disposed of by the Company,
such Security nevertheless may be authenticated and delivered or disposed
of as though the person who signed the Guarantee had not ceased to be such
officer of the Guarantor.
SECTION 10.05. WAIVER OF STAY, EXTENSTION OR USURY LAWS.
The Guarantor covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension
law or any usury law or other law that would prohibit or forgive the
Guarantor from performing its Guarantee as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it
may lawfully do so) the Guarantor hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 10.06. PAYMENTS OF ADDITIONAL AMOUNTS.
The Guarantor agrees that all payments made by the Guarantor in
respect of its Guarantee will be made free and clear of and without
withholding or deduction for or on account of any present or future Taxes,
unless the Guarantor is required to withhold or deduct Taxes by law or by
the interpretation or administration thereof. If the Guarantor is required
to withhold or deduct any amount for or on account of Taxes from any
payment made under or with respect to the Guarantee, the Guarantor will pay
such additional amounts ("ADDITIONAL AMOUNTS") as may be necessary so that
the net amount received by each Holder of Securities (including Additional
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Amounts) after such withholding or deduction will not be less than the
amount the Holder would have received if such Taxes had not been withheld
or deducted; PROVIDED that no Additional Amounts will be payable with
respect to a payment made to a Holder (an "EXCLUDED HOLDER") (i) with which
the Guarantor does not deal at arm's length (within the meaning of the
Income Tax Act (Canada)) at the time of making such payment or at the time
that any such payment is deemed to be paid or credited or (ii) which is
subject to Taxes by reason of its being connected with Canada or any
province or territory thereof otherwise than by the mere acquisition,
holding or disposition of the Securities or the receipt of payments
thereunder. The Guarantor will also (i) make such withholding or deduction
and (ii) remit the full amount deducted or withheld to the relevant
authority in accordance with applicable law. The Guarantor will furnish to
the holders of the Securities that are outstanding on the date of any
withholding or deduction, within 30 days after the date of the payment of
any Taxes due pursuant to applicable law, certified copies of tax receipts
evidencing such payment by the Guarantor.
The Guarantor will indemnify and hold harmless each Holder of
Securities (other than an Excluded Holder) and, upon written request of any
Holder of Securities (other than an Excluded Holder), reimburse each such
Holder, for the amount of (i) any such Taxes so levied or imposed and paid
by such Holder as a result of payments made under or with respect to the
Guarantee; and (ii) any Taxes so levied or imposed with respect to any
reimbursement under the foregoing clause (i) so that the net amount
received by such Holder after such reimbursement will not be less than the
net amount the Holder would have received if Taxes on such reimbursement
had not been imposed.
At least 30 days prior to each date on which any payment under or
with respect to the Securities is due and payable, if the Guarantor will be
obligated to pay Additional Amounts with respect to such payment, the
Guarantor will deliver to the Trustee an Officers' Certificate stating the
fact that such Additional Amounts will be payable and specifying the
amounts so payable and will set forth such other information necessary to
enable the Trustee to pay such Additional Amounts to Holders of Securities
on the payment date. Whenever in this Indenture there is mentioned, in any
context, principal, premium, if any, interest or any other amount payable
under or with respect to any Security, such mention shall be deemed to
include the payment of Additional Amounts to the extent that, in such
context, Additional Amounts are, were or would be payable in respect
thereof.
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ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA CONTROLS.
If any provision of this Indenture limits, qualifies, or
conflicts with the duties imposed by operation of Section 318(c) of the
TIA, the imposed duties shall control.
SECTION 11.02. NOTICES.
Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by
hand delivery, by telex, by telecopier or registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
if to the Company or the Guarantor:
501 Corporate Center Drive
Suite 200
Franklin, Tennessee 37067
Attention: General Counsel
Facsimile: (615)-771-4001
Telephone: (615)-771-0216
if to the Trustee:
114 West 47th Street, 25th Floor
New York, New York 10036-1532
Attention: Corporate Trust Administration
Facsimile: (212) 852-1626
Telephone: (212) 852-1661
Each of the Company, the Guarantor and the Trustee by written
notice to each other such person may designate additional or different
addresses for notices to such person. Any notice or communication to the
Company or the Guarantor or the Trustee, shall be deemed to have been given
or made as of the date so delivered if personally delivered; when answered
back, if telexed; when receipt is acknowledged, if telecopied; and five (5)
calendar days after mailing if sent by registered or certified mail,
postage prepaid (except that a notice of change of address shall not be
deemed to have been given until actually received by the addressee).
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Any notice or communication mailed to a Holder shall be mailed to
him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be
sufficiently given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other
Holders. Except for a notice to the Trustee, which is deemed given only
when received, if a notice or communication is mailed in the manner
provided above, it is duly given, whether or not the addressee receives it.
SECTION 11.03. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture, the Securities
or the Guarantee. The Company, the Trustee, the Registrar and any other
Person shall have the protection of TIA Section 312(c).
SECTION 11.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the
Trustee at the request of the Trustee:
(1) an Officers' Certificate, in form and substance
satisfactory to the Trustee, stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the
Officers' Certificate required by Section 4.08, shall include:
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(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether or not, in the opinion of each
such person, such condition or covenant has been complied with;
PROVIDED, HOWEVER, that with respect to matters of fact an
Opinion of Counsel may rely on an Officers' Certificate or certificates of
public officials.
SECTION 11.06. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee, Paying Agent or Registrar may make reasonable rules
for its functions.
SECTION 11.07. LEGAL HOLIDAYS.
If a payment date is not a Business Day, payment may be made on
the next succeeding day that is a Business Day with the same force and
effect as if made on such payment date.
SECTION 11.08. GOVERNING LAW.
THIS INDENTURE (OTHER THAN ARTICLE TEN) AND THE SECURITIES SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. ARTICLE TEN
AND THE GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF ONTARIO, CANADA EXCEPT THAT UPON A SUBSTITUTION OF AN ASSUMING
PARTY FOR THE GUARANTOR IN A DOMESTICATION EVENT, THE GUARANTEE WILL BE
GOVERNED BY LAWS OF THE STATE OF NEW YORK.
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SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of any of the Company or any of its Subsidiaries or
the Guarantor. Any such indenture, loan or debt agreement may not be used
to interpret this Indenture.
SECTION 11.10. NO RECOURSE AGAINST OTHERS.
A director, officer, employee, stockholder or incorporator, as
such, of the Company or the Guarantor shall not have any liability for any
obligations of the Company or the Guarantor under the Securities, this
Indenture or the Guarantee or for any claim based on, in respect of or by
reason of such obligations or their creations. Each Holder by accepting a
Security waives and releases all such liability. Such waiver and release
are part of the consideration for the issuance of the Securities.
SECTION 11.11. SUCCESSORS.
All agreements of the Company and the Guarantor in this
Indenture, the Securities and the Guarantee shall bind their respective
successors. All agreements of the Trustee in this Indenture shall bind its
successor.
SECTION 11.12. DUPLICATE ORIGINALS.
All parties may sign any number of copies of this Indenture.
Each signed copy or counterpart shall be an original, but all of them
together shall represent the same agreement.
SECTION 11.13. SEVERABILITY.
In case any one or more of the provisions in this Indenture, in
the Securities or in the Guarantee shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions shall not in any way be affected or impaired thereby,
it being intended that all of the provisions hereof shall be enforceable to
the full extent permitted by law.
SECTION 11.14. TABLE OF CONTENTS, HEADINGS, ETC.
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience
<PAGE>
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of reference only, and are not to be considered a part hereof, and shall in
no way modify or restrict any of the terms or provisions hereof.
SECTION 11.15. AGENT FOR SERVICE; SUBMISSION TO JURISDICTION; WAIVER OF
IMMUNITIES.
By the execution and delivery of this Indenture, the Guarantor
(i) acknowledges that it has, by separate written instrument, designated
and appointed Osler, Hoskin & Harcourt, 280 Park Avenue, Suite 30W, New
York, N.Y. 10017 ("Osler") as its authorized agent upon which process may
be served in any suit, action or proceeding arising out of or relating to
the Securities or this Indenture that may be instituted in any Federal or
State court in the State of New York, Borough of Manhattan, or brought
under Federal or State securities laws or brought by the Trustee (whether
in its individual capacity or in its capacity as Trustee hereunder), and
acknowledges that Osler has accepted such designation, (ii) submits to the
jurisdiction of any such court in any such suit, action or proceeding, and
(iii) agrees that service of process upon Osler and written notice of said
service to it (mailed or delivered to it as specified in Section 11.02),
shall be deemed in every respect effective service of process upon it in
any such suit or proceeding. The Guarantor further agrees to take any and
all action, including the execution and filing of any and all such
documents and instruments as may be necessary to continue such designation
and appointment of Osler, in full force and effect so long as this
Indenture shall be in full force and effect; PROVIDED that the Guarantor
may and shall (to the extent Osler ceases to be able to be served on the
basis contemplated herein), by written notice to the Trustee, designate
such additional or alternative agents for service of process under this
Section 11.15 that (i) maintains an office located in the Borough of
Manhattan, The City of New York in the State of New York, (ii) are either
(x) counsel for the Guarantor or (y) a corporate service company which acts
as agent for service of process for other Persons in the ordinary course of
its business and (iii) agrees to act as agent for service of process in
accordance with this Section 11.15. Such notice shall identify the name of
such agent for process and the address of such agent for process in the
Borough of Manhattan, The City of New York, State of New York. Upon the
request of any Holder, the Trustee shall deliver such information to such
Holder. Notwithstanding the foregoing, there shall, at all times, be at
least one agent for service of process for the Guarantor, if any, appointed
and acting in accordance with this Section 11.15.
<PAGE>
-97-
To the extent that Guarantor has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid
of execution, execution or otherwise) with respect to itself or its
property, the Guarantor hereby irrevocably waives such immunity in respect
of its obligations under this Indenture and the Guarantee, to the extent
permitted by law.
SECTION 11.16. JUDGMENT CURRENCY.
The Guarantor shall indemnify each of the Holders and the Trustee
against any loss incurred by such party as a result of any judgment or
order being given or made for any amount due under this Indenture and such
judgment or order being expressed and paid in a currency (the "Judgment
Currency") other than United States dollars and as a result of any
variation as between (i) the rate of exchange at which the United States
dollar amount is converted into the Judgment Currency for the purpose of
such judgment or order and (ii) the spot rate of exchange in The City of
New York at which such party on the date of payment of such judgment or
order is able to purchase United States dollars with the amount of the
Judgment Currency actually received by such party. The foregoing indemnity
shall continue in full force and effect notwithstanding any such judgment
or order as aforesaid. The term "spot rate of exchange" shall include any
premiums and costs of exchange payable in connection with the purchase of,
or conversion into, United States dollars.
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed as of the date first written above.
INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC.
By: /s/ Stephen L. Clanton
-------------------------------
Name: Stephen L. Clanton
-----------------------------
Title: Senior Vice President, Chief
Financial Officer and Treasurer
----------------------------
INTERNATIONAL COMFORT PRODUCTS CORPORATION
By: /s/ W. Michael Clevy
-------------------------------
Name: W. Michael Clevy
-----------------------------
Title: Chief Executive Officer and
President
----------------------------
UNITED STATES TRUST COMPANY OF NEW YORK
By: /s/ Gerard F. Ganey
-------------------------------
Name: Gerard F. Ganey
-----------------------------
Title: Senior Vice President
----------------------------
<PAGE>
EXHIBIT A
[FORM OF SERIES A SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3)
OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS
NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE
A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED
STATES TO PERSONS OTHER THAN U.S. PERSONS IN OFFSHORE TRANSACTIONS MEETING
THE REQUIREMENTS OF RULE 904 UNDER REGULATIONS UNDER THE SECURITIES ACT,
(E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL
GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATIONS UNDER THE SECURITIES ACT.
A-1
<PAGE>
INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC.
8 5/8% Senior Notes
due 2008, Series A
CUSIP No.:
No. [ ] $[ ]
INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC., a Delaware
corporation (the "Company", which term includes any successor corporation),
for value received promises to pay to [ ] or
registered assigns, the principal sum of $[ ] Dollars, on May
15, 2008.
Interest Payment Dates: May 15 and November 15, commencing
November 15, 1998
Record Dates: May 1 and November 1
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if
set forth at this place.
A-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
Dated:
INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
A-3
<PAGE>
This is one of the 8 5/8% Senior Notes due 2008, Series A,
described in the within-mentioned Indenture.
Dated:
UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee
By:
-------------------------------
Authorized Signatory
A-4
<PAGE>
(REVERSE OF SECURITY)
INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC.
8 5/8% Senior Notes
due 2008, Series A
1. INTEREST.
INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC., a Delaware
corporation (the "Company"), promises to pay interest on the principal
amount of this Security at the rate per annum shown above. The Company
will pay interest semi-annually on May 15 and November 15 of each year (an
"Interest Payment Date"), commencing November 15, 1998. Interest on the
Securities will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from May 13, 1998*. Interest will
be computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal from time to
time on demand at the rate borne by the Securities plus 2% and on overdue
installments of interest (without regard to any applicable grace periods)
to the extent lawful.
2. METHOD OF PAYMENT.
The Company shall pay interest on the Securities (except
defaulted interest) to the persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest
Payment Date even if the Securities are cancelled on registration of
transfer or registration of exchange after such Record Date. Holders must
surrender Securities to a Paying Agent to collect principal payments. The
Company shall pay principal and interest in money of the United States that
at the time of payment is legal tender for payment of public and private
debts. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
- ----------------------------------
* With respect to any Securities that may be issued after the Issue
Date, interest shall accrue from, and this date shall reflect, the
date specified in such Authentication Order for such issuance.
A-5
<PAGE>
3. PAYING AGENT AND REGISTRAR.
Initially, United States Trust Company of New York (the
"Trustee") will act as Paying Agent and Registrar. The Company may change
any Paying Agent, Registrar or co-Registrar without notice to the Holders.
4. INDENTURE.
The Company issued the Securities under an Indenture, dated as of
May 13, 1998 (the "Indenture"), among the Company, the Guarantor and the
Trustee. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) (the
"TIA"), as in effect on the date of the Indenture until such time as the
Indenture is qualified under the TIA, and thereafter as in effect on the
date on which the Indenture is qualified under the TIA. Notwithstanding
anything to the contrary herein, the Securities are subject to all such
terms, and Holders of Securities are referred to the Indenture and the TIA
for a statement of them. The Securities are limited in aggregate principal
amount to $225,000,000.
5. OPTIONAL REDEMPTION.
The Securities will be redeemable, at the Company's option, in
whole at any time or in part from time to time, on and after May 15, 2003
at the following redemption prices (expressed as percentages of the
principal amount) if redeemed during the twelve-month period commencing on
May 15 of the years set forth below, plus, in each case, accrued interest
thereon to the date of redemption:
YEAR PERCENTAGE
2003 104.313%
2004 102.875%
2005 101.438%
2006 and thereafter 100.000%
6. OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERING.
At any time, or from time to time, on or prior to May 15, 2001
the Company may, at its option, use the net cash proceeds contributed or
otherwise made available to it of one or more Public Equity Offerings (as
defined) to redeem up to 35% of the Securities issued at a redemption price
equal to 108.625% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of redemption; PROVIDED that
A-6
<PAGE>
at least 65% of the principal amount of Securities originally issued
remains outstanding immediately after giving effect to any such redemption.
In order to effect the foregoing redemption with the net cash proceeds of a
Public Equity Offering, the Company shall make such redemption not later
than 180 days after the consummation of such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of the Guarantor
pursuant to a registration statement filed with and declared effective by
the SEC in accordance with the Securities Act.
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each Holder of Securities to be
redeemed at such Holder's registered address. Securities in denominations
of $1,000 may be redeemed only in whole. The Trustee may select for
redemption portions (equal to $1,000 or any integral multiple thereof) of
the principal of Securities that have denominations larger than $1,000.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal
amount equal to the unredeemed portion thereof will be issued in the name
of the Holder thereof upon cancellation of the original Security. On and
after the Redemption Date, interest will cease to accrue on Securities or
portions thereof called for redemption, unless the Company defaults in
making the redemption payment.
8. CHANGE OF CONTROL OFFER.
Upon the occurrence of a Change of Control, the Company will be
required to offer to purchase all of the outstanding Securities at a
purchase price equal to 101% of the principal amount thereof plus accrued
and unpaid interest, if any, to the date of repurchase.
9. LIMITATION ON DISPOSITION OF ASSETS.
The Company is, subject to certain conditions, obligated to make
an offer to purchase Securities at 100% of their principal amount plus
accrued and unpaid interest to the date of repurchase with certain net cash
proceeds of certain sales or other dispositions of assets in accordance
with the Indenture.
A-7
<PAGE>
10. DENOMINATIONS; TRANSFER; EXCHANGE.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture. The Registrar need not register
the transfer of or exchange any Securities or portions thereof selected for
redemption, except the unredeemed portion of any security being redeemed in
part.
11. PERSONS DEEMED OWNERS.
The registered Holder of a Security shall be treated as the owner
of it for all purposes.
12. UNCLAIMED FUNDS.
If funds for the payment of principal or interest remain
unclaimed for two years, the Trustee and the Paying Agent will repay the
funds to the Company at its request. After that, all liability of the
Trustee and such Paying Agent with respect to such funds shall cease.
13. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
The Company may be discharged from its obligations under the
Indenture and the Securities except for certain provisions thereof, and may
be discharged from its obligations to comply with certain covenants
contained in the Indenture and the Securities, in each case upon
satisfaction of certain conditions specified in the Indenture.
14. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Securities
may be amended or supplemented with the written consent of the Holders of
at least a majority in aggregate principal amount of the Securities then
outstanding, and any existing Default or Event of Default or compliance
with any provision may be waived with the consent of the Holders of a
majority in aggregate principal amount of the Securities then outstanding.
Without notice to or consent of any Holder, the parties thereto may amend
or supplement the Indenture or the Securities to, among other things, cure
any ambiguity, defect or inconsistency so long as such change does not
adversely affect the rights of any of the Holders in any material respect,
provide for uncertificated Securities in addition to or in place of
certificated
A-8
<PAGE>
Securities or comply with any requirements of the SEC in connection with
the qualification of the Indenture under the TIA.
15. RESTRICTIVE COVENANTS.
The Indenture contains certain covenants that, among other
things, limit the ability of the Guarantor and certain of its subsidiaries
to make restricted payments, to incur indebtedness, to create liens, to
issue preferred or other capital stock of subsidiaries, to sell assets, to
permit restrictions on dividends and other payments by subsidiaries to the
Company, to consolidate, merge or sell all or substantially all of its
assets, to engage in transactions with affiliates or to engage in certain
businesses. The limitations are subject to a number of important
qualifications and exceptions.
16. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in aggregate principal amount of Securities
then outstanding may declare all the Securities to be due and payable
immediately in the manner and with the effect provided in the Indenture.
Holders of Securities may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee is not obligated to
enforce the Indenture or the Securities unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of
the Securities then outstanding to direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of Securities
notice of any continuing Default or Event of Default (except a Default in
payment of principal, premium or interest, including an accelerated
payment) if it determines that withholding notice is in the interest of the
Holders.
17. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise
deal with the Company, the Subsidiaries, the Guarantor and their respective
Affiliates as if it were not the Trustee.
18. NO RECOURSE AGAINST OTHERS.
No stockholder, director, officer, employee or incorporator, as
such, of the Company or the Guarantor shall have any liability for any
liability or obligation of the Company or the Guarantor under the
Securities, the Indenture or the Guarantee or for any claim based on, in
respect of or by reason of,
A-9
<PAGE>
such obligations or their creation. Each Holder of a Security by accepting
a Security waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Securities.
19. AUTHENTICATION.
This Security shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on this
Security.
20. ABBREVIATIONS AND DEFINED TERMS.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
21. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP
numbers to be printed on the Securities as a convenience to the Holders of
the Securities. No representation is made as to the accuracy of such
numbers as printed on the Securities and reliance may be placed only on the
other identification numbers printed hereon.
22. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement, the Company will
be obligated upon the occurrence of certain events to consummate an
exchange offer pursuant to which the Holder of this Security shall have the
right to exchange this Series A Security for the Company's 8 5/8% Senior
Notes due 2008, Series B (the "Series B Securities"), which have been
registered under the Securities Act, in like principal amount and having
terms identical in all material respects as the Series A Securities. The
Holders shall be entitled to receive certain additional interest payments
in the event such exchange offer is not consummated and upon certain other
conditions, all pursuant to and in accordance with the terms of the
Registration Rights Agreement.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may be made
to: INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC., 501 Corporate Center
Drive, Suite 200, Franklin, Tennessee 37067, Attn: General Counsel.
A-10
<PAGE>
GUARANTEE
The undersigned Guarantor (as defined in the Indenture referred
to in the Security upon which this notation is endorsed and each referred
to as the "Guarantor," which term includes any successor person under the
Indenture) unconditionally guarantees on a senior basis (such guarantee by
the Guarantor being referred to herein as a "Guarantee") (i) the due and
punctual payment of the principal of, premium, if any, on and interest on
the Securities, whether at maturity, by acceleration or otherwise, the due
and punctual payment of interest on the overdue principal and interest, if
any, on the Securities, to the extent lawful, and the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee all in accordance with the terms set forth in Article Ten of the
Indenture and (ii) in case of any extension of time of payment or renewal
of any Securities or any of such other obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at stated maturity, by acceleration or
otherwise.
No stockholder, officer, director or incorporator, as such, past,
present or future, of the Guarantor shall have any liability under the
Guarantee by reason of his or its status as such stockholder, officer,
director or incorporator.
This Guarantee shall be governed by and considered in accordance
with the laws of Ontario, Canada.
A-11
<PAGE>
The Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Securities upon which the
Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized signatories.
INTERNATIONAL COMFORT PRODUCTS CORPORATION
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
A-12
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
(Print or type name, address and zip code of assignee or transferee)
- ---------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee or
transferee)
and irrevocably appoint
---------------------------------------------------
agent to transfer this Security on the books of the Company.
The agent may substitute another to act for him.
Dated: Signed:
-------------------------- --------------------------------
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee:
------------------------------------------------------
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
reasonably acceptable to the Trustee)
A-13
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.12 or Section 4.24 of the Indenture, check
the appropriate box:
Section 4.12 [ ] Section 4.24 [ ]
If you want to elect to have only part of this Security purchased
by the Company pursuant to Section 4.12 or Section 4.24 of the Indenture,
state the amount: $
-----------------------
Date: Your Signature:
------------------------- ---------------------------
(Sign exactly as your name
appears on the other side
of this Security)
Signature Guarantee:
------------------------------------------------------
A-14
<PAGE>
EXHIBIT B
[FORM OF SERIES B SECURITY]
INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC.
8 5/8% Senior Notes
due 2008, Series B
CUSIP No.: [ ]
No. [ ] $[ ]
INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC., a Delaware
corporation (the "Company", which term includes any successor corporation),
for value received promises to pay to [ ]
or registered assigns, the principal sum of $[ ]
Dollars, on May 15, 2008.
Interest Payment Dates: May 15 and November 15, commencing
November 15, 1998
Record Dates: May 1 and November 1
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if
set forth at this place.
B-1
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
Dated:
INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
B-2
<PAGE>
This is one of the 8 5/8% Senior Notes due 2008, Series B,
described in the within-mentioned Indenture.
Dated: May 13, 1998
UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee
By:
------------------------------
Authorized Signatory
B-3
<PAGE>
(REVERSE OF SECURITY)
INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC.
8 5/8% Senior Notes
due 2008, Series B
1. INTEREST.
INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC., a Delaware
corporation (the "Company"), promises to pay interest on the principal
amount of this Security at the rate per annum shown above. The Company
will pay interest semi-annually on May 15 and November 15 of each year (an
"Interest Payment Date"), commencing November 15, 1998. Interest on the
Securities will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from May 13, 1998.* Interest will
be computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal from time to
time on demand at the rate borne by the Securities plus 2% and on overdue
installments of interest (without regard to any applicable graceperiods) to
the extent lawful.
2. METHOD OF PAYMENT.
The Company shall pay interest on the Securities (except
defaulted interest) to the persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest
Payment Date even if the Securities are cancelled on registration of
transfer or registration of exchange after such Record Date. Holders must
surrender Securities to a Paying Agent to collect principal payments. The
Company shall pay principal and interest in money of the United States that
at the time of payment is legal tender for payment of public and private
debts. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
- ----------------------------------
* With respect to any Securities that may be issued after the Issue
Date, interest shall accrue from, and this date shall reflect, the
date specified in such Authentication Order for such issuance.
B-4
<PAGE>
3. PAYING AGENT AND REGISTRAR.
Initially, United States Trust Company of New York (the
"Trustee") will act as Paying Agent and Registrar. The Company may change
any Paying Agent, Registrar or co-Registrar without notice to the Holders.
4. INDENTURE.
The Company issued the Securities under an Indenture, dated as of
May 13, 1998 (the "Indenture"), among the Company, the Guarantor and the
Trustee. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) (the
"TIA"), as in effect on the date of the Indenture until such time as the
Indenture is qualified under the TIA, and thereafter as in effect on the
date on which the Indenture is qualified under the TIA. Notwithstanding
anything to the contrary herein, the Securities are subject to all such
terms, and Holders of Securities are referred to the Indenture and the TIA
for a statement of them. The Securities are limited in aggregate principal
amount to $225,000,000.
5. OPTIONAL REDEMPTION.
The Securities will be redeemable, at the Company's option, in
whole at any time or in part from time to time, on and after May 15, 2003
at the following redemption prices (expressed as percentages of the
principal amount) if redeemed during the twelve-month period commencing on
May 15 of the years set forth below, plus, in each case, accrued interest
thereon to the date of redemption:
YEAR PERCENTAGE
2003 104.313%
2004 102.875%
2005 101.438%
2006 and thereafter 100.000%
6. OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERING.
At any time, or from time to time, on or prior to May 15, 2001,
the Company may, at its option, use the net cash proceeds contributed or
otherwise made available to it of one or more Public Equity Offerings (as
defined) to redeem up to 35% of the Securities issued at a redemption price
equal to 108.625% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of redemption; PROVIDED that
B-5
<PAGE>
at least 65% of the principal amount of Securities originally issued
remains outstanding immediately after giving effect to any such redemption.
In order to effect the foregoing redemption with the net cash proceeds of a
Public Equity Offering, the Company shall make such redemption not later
than 180 days after the consummation of such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering"
means an underwritten public offering of Qualified Capital Stock of the
Guarantor pursuant to a registration statement filed with and declared
effective by the SEC in accordance with the Securities Act.
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each Holder of Securities to be
redeemed at such Holder's registered address. Securities in denominations
of $1,000 may be redeemed only in whole. The Trustee may select for
redemption portions (equal to $1,000 or any integral multiple thereof) of
the principal of Securities that have denominations larger than $1,000.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal
amount equal to the unredeemed portion thereof will be issued in the name
of the Holder thereof upon cancellation of the original Security. On and
after the Redemption Date, interest will cease to accrue on Securities or
portions thereof called for redemption, unless the Company defaults in
making the redemption payment.
8. CHANGE OF CONTROL OFFER.
Upon the occurrence of a Change of Control, the Company will be
required to offer to purchase all of the outstanding Securities at a
purchase price equal to 101% of the principal amount thereof plus accrued
and unpaid interest, if any, to the date of repurchase.
9. LIMITATION ON DISPOSITION OF ASSETS.
The Company is, subject to certain conditions, obligated to make
an offer to purchase Securities at 100% of their principal amount plus
accrued and unpaid interest to the date of repurchase with certain net cash
proceeds of certain sales or other dispositions of assets in accordance
with the Indenture.
B-6
<PAGE>
10. DENOMINATIONS; TRANSFER; EXCHANGE.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture. The Registrar need not register
the transfer of or exchange any Securities or portions thereof selected for
redemption, except the unredeemed portion of any security being redeemed in
part.
11. PERSONS DEEMED OWNERS.
The registered Holder of a Security shall be treated as the owner
of it for all purposes.
12. UNCLAIMED FUNDS.
If funds for the payment of principal or interest remain
unclaimed for two years, the Trustee and the Paying Agent will repay the
funds to the Company at its request. After that, all liability of the
Trustee and such Paying Agent with respect to such funds shall cease.
13. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
The Company may be discharged from its obligations under the
Indenture and the Securities except for certain provisions thereof, and may
be discharged from its obligations to comply with certain covenants
contained in the Indenture and the Securities, in each case upon
satisfaction of certain conditions specified in the Indenture.
14. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Securities
may be amended or supplemented with the written consent of the Holders of
at least a majority in aggregate principal amount of the Securities then
outstanding, and any existing Default or Event of Default or compliance
with any provision may be waived with the consent of the Holders of a
majority in aggregate principal amount of the Securities then outstanding.
Without notice to or consent of any Holder, the parties thereto may amend
or supplement the Indenture or the Securities to, among other things, cure
any ambiguity, defect or inconsistency so long as such change does not
adversely affect the rights of any of the Holders in any material respect,
provide for uncertificated Securities in addition to or in place of
certificated
B-7
<PAGE>
Securities or comply with any requirements of the SEC in connection with
the qualification of the Indenture under the TIA.
15. RESTRICTIVE COVENANTS.
The Indenture contains certain covenants that, among other
things, limit the ability of the Guarantor and certain of its subsidiaries
to make restricted payments, to incur indebtedness, to create liens, to
issue preferred or other capital stock of subsidiaries, to sell assets, to
permit restrictions on dividends and other payments by subsidiaries to the
Company, to consolidate, merge or sell all or substantially all of its
assets, to engage in transactions with affiliates or to engage in certain
businesses. The limitations are subject to a number of important
qualifications and exceptions.
16. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in aggregate principal amount of Securities
then outstanding may declare all the Securities to be due and payable
immediately in the manner and with the effect provided in the Indenture.
Holders of Securities may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee is not obligated to
enforce the Indenture or the Securities unless it has received indemnity
satisfactory to it.
The Indenture permits, subject to certain limitations therein
provided, Holders of a majority in aggregate principal amount of the
Securities then outstanding to direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Holders of Securities notice
of any continuing Default or Event of Default (except a Default in payment
of principal, premium or interest, including an accelerated payment) if it
determines that withholding notice is in the interest of the Holders.
17. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise
deal with the Company, the Subsidiaries the Guarantor and their respective
Affiliates as if it were not the Trustee.
19. NO RECOURSE AGAINST OTHERS.
No stockholder, director, officer, employee or incorporator, as
such, of the Company or the Guarantor shall have any liability for any
liability or obligation of the Company or the Guarantor under the
Securities, the Indenture or the Guarantee or for any claim based on, in
respect of or by reason of,
B-8
<PAGE>
such obligations or their creation. Each Holder of a Security by accepting
a Security waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Securities.
19. AUTHENTICATION.
This Security shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on this
Security.
20. ABBREVIATIONS AND DEFINED TERMS.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
21. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP
numbers to be printed on the Securities as a convenience to the Holders of
the Securities. No representation is made as to the accuracy of such
numbers as printed on the Securities and reliance may be placed only on the
other identification numbers printed hereon.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may be made
to: INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC., 501 Corporate Center
Drive, Suite 200, Franklin, Tennessee 37067, Attn: General Counsel.
B-9
<PAGE>
GUARANTEE
The undersigned Guarantor (as defined in the Indenture referred
to in the Security upon which this notation is endorsed and each referred
to as the "Guarantor," which term includes any successor person under the
Indenture) unconditionally guarantees on a senior basis (such guarantee by
the Guarantor being referred to herein as a "Guarantee") (i) the due and
punctual payment of the principal of, premium, if any, on and interest on
the Securities, whether at maturity, by acceleration or otherwise, the due
and punctual payment of interest on the overdue principal and interest, if
any, on the Securities, to the extent lawful, and the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee all in accordance with the terms set forth in Article Ten of the
Indenture and (ii) in case of any extension of time of payment or renewal
of any Securities or any of such other obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at stated maturity, by acceleration or
otherwise.
No stockholder, officer, director or incorporator, as such, past, present
or future, of the Guarantor shall have any liability under the Guarantee by
reason of his or its status as such stockholder, officer, director or
incorporator.
B-10
<PAGE>
This Guarantee shall be governed by and construed in accordance
with the laws of Ontario, Canada. The Guarantee shall not be valid or
obligatory for any purpose until the certificate of authentication on the
Securities upon which the Guarantee is noted shall have been executed by
the Trustee under the Indenture by the manual signature of one of its
authorized signatories.
INTERNATIONAL COMFORT PRODUCTS CORPORATION
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
B-11
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
(Print or type name, address and zip code of assignee or transferee)
- ---------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee or
transferee)
and irrevocably appoint
---------------------------------------------------
agent to transfer this Security on the books of the Company.
The agent may substitute another to act for him.
Dated: Signed:
------------------ ------------------------------------------
(Sign exactly as name appears on the other
side of this Security)
Signature Guarantee:
-------------------------------------------------------
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
B-12
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.12 or Section 4.24 of the Indenture, check
the appropriate box:
Section 4.12 [ ] Section 4.24 [ ]
If you want to elect to have only part of this Security purchased
by the Company pursuant to Section 4.12 or Section 4.24 of the Indenture,
state the amount: $
------------------------
Date: Your Signature:
-------------------- ----------------------------------
(Sign exactly as your name appears
on the other side of this
Security)
Signature Guarantee:
------------------------------------------------------
B-13
<PAGE>
EXHIBIT C
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security authenticated and delivered hereunder shall
bear a legend (which would be in addition to any other legends required in
the case of a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN
THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER
OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE,
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
C-1
<PAGE>
EXHIBIT D
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 8 5/8% Senior Notes due 2008, Series A, and 8 5/8%
Senior Notes due 2008, Series B (the "Securities"),
of INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC.
This Certificate relates to $[ ] principal amount of
Securities held in the form of* [ ] a beneficial interest in a Global
Security or* [ ] Physical Securities by [ ] (the "Transferor").
The Transferor:*
[ ] has requested by written order that the Registrar deliver in
exchange for its beneficial interest in the Global Security held by the
Depositary a Physical Security or Physical Securities in definitive,
registered form of authorized denominations and an aggregate number equal
to its beneficial interest in such Global Security (or the portion thereof
indicated above); or
[ ] has requested that the Registrar by written order to
exchange or register the transfer of a Physical Security or Physical
Securities.
In connection with such request and in respect of each such
Security, the Transferor does hereby certify that the Transferor is
familiar with the Indenture relating to the above captioned Securities and
the restrictions on transfers thereof as provided in Section 2.16 of such
Indenture, and that the transfer of this Securities does not require
registration under the Securities Act of 1933, as amended (the "Act")
because*:
[ ] Such Security is being acquired for the Transferor's own
account, without transfer (in satisfaction of Section 2.16(a)(II)(A) or
Section 2.16(d)(i)(A) of the Indenture).
[ ] Such Security is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the Act), in reliance
on Rule 144A.
[ ] Such Security is being transferred to an institutional
"accredited investor" (within the meaning of subparagraphs (a)(1), (2), (3)
or (7) of Rule 501 under the Act.
D-1
<PAGE>
[ ] Such Security is being transferred in reliance on
Regulation S under the Act
[ ] Such Security is being transferred in reliance on Rule 144
under the Act.
[ ] Such Security is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the Act
other than Rule 144A or Rule 144 or Regulation S under the Act to a person
other than an institutional "accredited investor."
- ----------------------------------
[INSERT NAME OF TRANSFEROR]
By:
-------------------------------
[Authorized Signatory]
Date:
-----------------------------
*Check applicable box.
D-2
<PAGE>
EXHIBIT E
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
---------------------,------
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Administration
Re: International Comfort Products Holdings, Inc. (the
"Company") Indenture (the "Indenture") relating to 8 5/8%
Senior Notes due 2008, Series A, or 8 5/8% Senior Notes
Due 2008, Series B
Ladies and Gentlemen:
In connection with our proposed purchase of 8 5/8% Senior Notes
due 2008, Series A, or 8 5/8% Senior Notes due 2008, Series B (the
"Securities"), of International Comfort Products Holdings, Inc. (the
"Company"), we confirm that:
1. We have received such information as we deem necessary in
order to make our investment decision.
2. We understand that any subsequent transfer of the Securities
is subject to certain restrictions and conditions set forth in the
Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Securities except in compliance with, such
restrictions and conditions and the Securities Act of 1933, as amended (the
"Securities Act").
3. We understand that the offer and sale of the Securities have
not been registered under the Securities Act, and that the Securities may
not be offered or sold within the United States or to, or for the account
or benefit of, U.S. persons except as permitted in the following sentence.
We agree, on our own behalf and on behalf of any accounts for which we are
acting as hereinafter stated, that if we should sell any Securities, we
will do so only (A) to the Company or any subsidiary thereof, (B) inside
the United States in accordance with Rule 144A under the Securities Act to
a "qualified institutional buyer" (as defined therein), (C) inside the
United States to an institutional "accredited investor" (as defined below)
E-1
<PAGE>
that, prior to such transfer, furnishes (or has furnished on its behalf by
a U.S. broker-dealer) to the Trustee a signed letter substantially in the
form hereof, (D) outside the United States in accordance with Regulations S
under the Securities Act, (E) pursuant to the exemption from registration
provided by Rule 144 under the Securities Act (if available), or (F)
pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any person purchasing Securities from us
a notice advising such purchaser that resales of the Securities are
restricted as stated herein.
4. We understand that, on any proposed resale of Securities, we
will be required to furnish to the Trustee and the Company, such
certification, legal opinions and other information as the Trustee and the
Company may reasonably require to confirm that the proposed sale complies
with the foregoing restrictions. We further understand that the Securities
purchased by us will bear a legend to the foregoing effect.
5. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
and have such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of our investment in the
Securities, and we and any accounts for which we are acting are each able
to bear the economic risk of our or their investment, as the case may be.
6. We are acquiring the Securities purchased by us for our
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
E-2
<PAGE>
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
Very truly yours,
[Name of Transferor]
By:
------------------------------
[Authorized Signatory]
E-3
<PAGE>
EXHIBIT F
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION
WITH REGULATION S TRANSFERS
---------------------,------
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Administration
Re: International Comfort Products Holdings, Inc. (the
"Company") 8 5/8% Senior Notes due 2008, Series A, and 8
5/8% Senior Notes due 2008, Series B (the "SECURITIES")
Dear Sirs:
In connection with our proposed sale of $[ ] aggregate
principal amount of the Securities, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the
Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, we represent that:
(1) the offer of the Securities was not made to a person in the
United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been pre-
arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule 904(b)
of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and
F-1
<PAGE>
(5) we have advised the transferee of the transfer restrictions
applicable to the Securities.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby. Defined terms used
herein without definition have the respective meanings provided in
Regulation S.
Very truly yours,
[Name of Transferor]
By:
------------------------------
[Authorized Signatory]
F-2
<PAGE>
$150,000,000
INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC.
8 5/8% Senior Notes due 2008
PURCHASE AGREEMENT
------------------
May 8, 1998
SALOMON BROTHERS INC
CREDIT SUISSE FIRST BOSTON CORPORATION
FIRST UNION CAPITAL MARKETS, a division
of Wheat First Securities, Inc.
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Dear Sirs:
International Comfort Products Holdings, Inc., a Delaware corporation
(the "Company"), proposes, upon the terms and conditions set forth herein,
to issue and sell to Salomon Brothers Inc, Credit Suisse First Boston
Corporation and First Union Capital Markets, a division of Wheat First
Securities, Inc. (the "Initial Purchasers") $150,000,000 aggregate
principal amount of its 8 5/8% Senior Notes due 2008 (the "Notes"). The
Notes will be guaranteed (the "Guarantee") on a senior basis by Interna-
tional Comfort Products Corporation, a corporation incorporated under the
laws of Canada (the "Parent Guarantor"). The Notes and the Guarantee are
referred to herein as the "Securities." The Securities will be issued
pursuant to an indenture, to be dated as of May 13, 1998 (the "Indenture"),
among the Company, the Parent Guarantor and the United States Trust Company
of New York, as trustee (the "Trustee").
The Company and the Parent Guarantor wish to confirm as follows their
agreement with the Initial Purchasers in connection with the purchase and
resale of the Securities.
1. Preliminary Offering Memorandum and Offering Memorandum. The
Securities will be offered and sold to the Initial Purchasers without
registration under the Securities Act of 1933, as amended (the "Act"), in
reliance on an exemption pursuant to Section 4(2) under the Act. The
Company has prepared a preliminary offering memorandum, dated April 24,
1998 (the "Preliminary Offering Memorandum"), and an offering
<PAGE>
-2-
memorandum, dated May 8, 1998 (the "Offering Memorandum"), setting forth
information regarding the Company and the Securities. Unless stated herein
to the contrary, all references herein to the Offering Memorandum are to
the Offering Memorandum at the date hereof and are not meant to include any
supplement or amendment subsequent thereto. The Company hereby confirms
that it has authorized the use of the Preliminary Offering Memorandum and
the Offering Memorandum in connection with the offering and resale of the
Securities by the Initial Purchasers on the terms and subject to the
conditions set forth herein.
The Company understands that the Initial Purchasers propose to make
offers and sales ("Exempt Resales") of the Securities purchased by the
Initial Purchasers hereunder only on the terms and in the manner set forth
in the Offering Memorandum and Section 2 hereof, as soon as the Initial
Purchasers deem advisable after this Agreement has been executed and
delivered, (i) to persons in the United States whom the Initial Purchasers
reasonably believe to be qualified institutional buyers ("Qualified
Institutional Buyers") as defined in Rule 144A under the Act, as such rule
may be amended from time to time ("Rule 144A"), in transactions under Rule
144A and (ii) outside the United States to persons other than U.S. persons
in reliance upon Regulation S under the Act ("Regulation S"). The persons
specified in clauses (i) and (ii) are referred to herein as the "Eligible
Purchasers." As used herein, the terms "United States" and "U.S. persons"
have the respective meanings given them in Regulation S.
It is understood and acknowledged that upon original issuance thereof,
and until such time as the same is no longer required under the applicable
requirements of the Act, each of the Securities (and each security issued
in exchange therefor or in substitution thereof) shall bear the following
legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET
FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT (AN "ACCREDITED INVESTOR")) OR (C) IT IS
NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN<PAGE>
-3-
OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN
TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY
RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO
THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
THE TRUSTEE), (D) OUTSIDE THE UNITED STATES TO PERSONS
OTHER THAN U.S. PERSONS IN OFFSHORE TRANSACTIONS MEETING
THE REQUIREMENTS OF RULE 904 UNDER REGULATION S UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
(3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON"
HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT.
It is also understood and acknowledged that holders (including
subsequent transferees) of the Securities will have the registration rights
set forth in the registration rights agreement (the "Registration Rights
Agreement") substantially in the form attached hereto as Exhibit A to be
dated as of the Closing Date (as defined) by and among the Company, the
Parent Guarantor and the Initial Purchasers.
2. Agreements to Sell, Purchase and Resell.
(a) The Company hereby agrees, upon the basis of the
representations, warranties and agreements of the Initial Purchasers herein
contained and subject to all the terms and conditions set forth herein, to
issue and sell to the Initial Purchasers and, upon the basis of the
representations, warranties and agreements of the Company and the Parent
Guarantor herein contained and subject to all the terms and conditions set
forth herein, each Initial Purchaser, severally and not jointly, agrees to
purchase from the Company that principal amount of Notes set forth opposite
the name of such Initial Purchaser on Schedule I attached hereto at a
purchase price of 96.348% of the principal amount thereof.
<PAGE>
-4-
(b) Each Initial Purchaser represents and warrants to the Company
and the Parent Guarantor that it is a Qualified Institutional Buyer with
such knowledge and experience in financial and business matters as are
necessary to evaluate the merits and risks of an investment in the
Securities and has advised the Company that it proposes to offer the
Securities for resale upon the terms and conditions set forth in this
Agreement and in the Offering Memorandum in Exempt Resales. Each Initial
Purchaser hereby represents and warrants to, and agrees with, the Company
and the Parent Guarantor that it (i) will not solicit offers for, or offer
to sell, the Securities by means of any form of general solicitation or
general advertising or in any manner involving a public offering within the
meaning of Section 4(2) of the Act (including, but not limited to, (A) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio,
or (B) any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising; provided, however, that such
limitation shall not preclude the Initial Purchasers from placing any
tombstone announcement with respect to the resale by the Initial Purchasers
of the Securities, provided that such announcement is not prohibited by
Regulation S), and (ii) will solicit offers for the Securities only from,
and will offer, sell or deliver the Securities as part of its initial
offering, only to (A) persons in the United States whom such Initial
Purchaser reasonably believes to be Qualified Institutional Buyers, or if
any such person is buying for one or more institutional accounts for which
such person is acting as fiduciary or agent, only when such person has
represented to such Initial Purchaser that each such account is a Qualified
Institutional Buyer, to whom notice has been given that such sale or
delivery is being made in reliance on Rule 144A, in each case, in
transactions under Rule 144A and (B) outside the United States to persons
other than U.S. persons in reliance on Regulation S. Each Initial
Purchaser has advised the Company that it will offer the Securities to
Eligible Purchasers at a price initially equal to 98.818% of the principal
amount thereof, plus accrued interest, if any, from May 13, 1998.
(c) Each Initial Purchaser represents and warrants to the Company
and the Parent Guarantor that (i) it has not offered or sold, and will not
offer or sell, directly or indirectly, any of the Securities in the United
Kingdom by means of any document, other than to persons whose ordinary
business it is to buy or sell shares or debentures whether as
<PAGE>
-5-
principal or agent (except in circumstances which do not constitute an
offer to the public within the meaning of the Companies Act 1985 of Great
Britain), (ii) it has complied with and will comply with all applicable
provisions of the Financial Services Act 1986 of the United Kingdom with
respect to anything done by such Initial Purchaser in relation to the
Securities in, from or otherwise involving the United Kingdom and (iii) it
has only issued or passed on and will only issue or pass on in or from the
United Kingdom to any persons any document received by such Initial
Purchaser in connection with the issue of the Securities if the recipient
is of a kind described in Article 9(3) of the Financial Services Act 1986
of the United Kingdom (Investment Advertisements) (Exemptions) Order 1988,
as amended.
(d) Each Initial Purchaser represents and warrants to the Company
and the Guarantor that it has not offered or sold, and will not offer or
sell, directly or indirectly, any of the Securities in Canada or to
Canadian residents in connection with the Exempt Resales.
(e) Each Initial Purchaser represents and warrants to the Company
and the Parent Guarantor that with respect to Securities offered and sold
or to be offered and sold pursuant to Regulation S it has offered and sold
the Securities and agrees that it will offer and sell the Securities (i) as
part of its initial distribution at any time and (ii) otherwise until 40
days after the later of the commencement of the offering of the Securities
and the Closing Date, only in accordance with Rule 903 of Regulation S.
Accordingly, each Initial Purchaser represents and agrees that with respect
to Securities offered and sold or to be offered and sold pursuant to
Regulation S none of it, its affiliates or any persons acting on its behalf
or on behalf of its affiliates have engaged or will engage in any directed
selling efforts in the United States with respect to the Securities, and it
and its affiliates have complied and will comply with the offering
restrictions requirements of Regulation S. Each Initial Purchaser agrees
that, at or prior to confirmation of any sale of Securities pursuant to
Regulation S, it will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that purchases
such Securities from it during the restricted period a confirmation or
notice to substantially the following effect:
The Securities covered hereby have not been registered
under the U.S. Securities Act of 1933, as
<PAGE>
-6-
amended (the "Securities Act"), and may not be offered and
sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of their initial
distribution at any time or (ii) otherwise until 40 days
after the later of the commencement of the offering and
the Closing Date, except in either case in accordance with
Regulation S or Rule 144A under the Securities Act. Terms
used above have the respective meanings given to them in
Regulation S under the Securities Act.
Each Initial Purchaser understands that the Company and the Parent
Guarantor and, for the purposes of the opinions to be delivered to the
Initial Purchasers pursuant to Section 7(c), 7(d), 7(e) and 7(f) hereof,
counsel to the Company, Canadian counsel to the Company, counsel to the
Initial Purchasers and Canadian counsel to the Initial Purchasers will rely
upon the accuracy and truth of the foregoing representations and agreements
and each Initial Purchaser hereby consents to such reliance.
3. Delivery of the Securities and Payment Therefor. Delivery to
the Initial Purchasers of and payment for the Securities shall be made at
the office of Cahill Gordon & Reindel, 80 Pine Street, New York, New York
at 9:00 a.m., New York City time, on May 13, 1998 (the "Closing Date").
The place of closing for the Securities and the Closing Date may be varied
by agreement between the Initial Purchasers and the Company.
The Securities will be delivered to the Initial Purchasers against
payment of the purchase price therefor by federal funds certified check or
wire transfer, in each case, of immediately available funds payable in
accordance with written instructions from the Company. The Securities will
be evidenced by one or more global securities (each, a "Global Security")
and/or by additional certificated securities, and will be registered, in
the case of a Global Security, in the name of Cede & Co. as nominee of The
Depository Trust Company ("DTC"), and in the other cases, in such names and
in such denominations as the Initial Purchasers shall request prior to 1:00
p.m., New York City time, on the business day preceding the Closing Date.
The Securities to be delivered to the Initial Purchasers shall be made
available to the Initial Purchasers in New York City for inspection and
packaging not later than 9:30 a.m., New York City time, on the business day
next preceding the Closing Date.
<PAGE>
-7-
4. Agreements of the Company and the Parent Guarantor. The
Company and the Parent Guarantor agree with the Initial Purchasers as
follows:
(a) Until the completion of the distribution of the
Securities by the Initial Purchasers to Eligible Purchasers,
the Company will advise the Initial Purchasers promptly and,
if requested, will confirm such advice in writing, of any
material adverse change in the condition (financial or
other), business, prospects, properties, net worth or results
of operations of either the Parent Guarantor and the
Subsidiaries (as defined), taken as a whole, or of the
happening of any event or the existence of any condition
which requires any amendment or supplement to the Offering
Memorandum (as then amended or supplemented) so that the
Offering Memorandum (x) will not contain any untrue statement
of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they
were made, not misleading, or (y) will comply with applicable
law.
(b) The Company will furnish to the Initial
Purchasers, without charge, such number of copies of the
Offering Memorandum, as they may then be amended or
supplemented, as they may reasonably request.
(c) The Company will not make any amendment or
supplement to the Preliminary Offering Memorandum or to the
Offering Memorandum of which the Initial Purchasers shall not
previously have been advised or to which they shall
reasonably object in writing after being so advised.
(d) Prior to the execution and delivery of this
Agreement, the Company has delivered or will deliver to the
Initial Purchasers, without charge, in such reasonable
quantities as the Initial Purchasers shall have requested or
may hereafter request, copies of the Preliminary Offering
Memorandum. The Company consents to the use, in accordance
with the securities or Blue Sky laws of the jurisdictions in
which the Securities are offered by the Initial Purchasers
and by dealers, prior to the date of the Offering Memorandum,
of each Preliminary Offering Memorandum so furnished by the
Company. The Company consents to the use of the Offering
Memorandum (and of any amendment or supplement thereto<PAGE>
-8-
prepared in accordance with Section 4(c)) in accordance
with the securities or Blue Sky laws of the jurisdictions
in which the Securities are offered by the Initial
Purchasers and by all dealers to whom Securities may be
sold, in connection with the offering and sale of the
Securities.
(e) If, at any time prior to completion of the
distribution of the Securities by the Initial Purchasers to
Eligible Purchasers, any event shall occur or condition shall
exist that in the judgment of the Company or in the opinion
of the Initial Purchasers based on advice of counsel requires
any amendment or supplement to the Offering Memorandum (as
then amended or supplemented) so that the Offering Memorandum
(x) will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading, or (y) will comply with applicable law, the
Company will, in each such case subject to Section 4(c),
forthwith prepare an appropriate supplement or amendment
thereto, and will expeditiously furnish to the Initial
Purchasers that number of copies thereof as they shall
reasonably request.
(f) The Company will cooperate with the Initial
Purchasers and with their counsel in connection with the
qualification of the Securities for offering and sale by the
Initial Purchasers and by dealers under the securities or
Blue Sky laws of such jurisdictions in the United States as
the Initial Purchasers may designate and will file such
consents to service of process or other documents necessary
or appropriate in order to effect such qualification;
provided that in no event shall the Company be obligated to
qualify to do business in any jurisdiction where it is not
now so qualified or to take any action which would subject it
to general service of process in any jurisdiction where it is
not now so subject.
(g) So long as any of the Securities are
outstanding, the Company and the Parent Guarantor will
furnish to the Initial Purchasers (i) as soon as available, a
copy of each report of the Company and the Parent Guarantor
mailed to stockholders or filed with the Securities and
Exchange Commission (the "Commission").
<PAGE>
-9-
(h) The Company will apply the proceeds from the
sale of the Securities to be sold by it hereunder in
accordance with the description set forth under "Use of
Proceeds" in the Offering Memorandum.
(i) The Company has not taken, nor will it take,
directly or indirectly, any action designed to or that might
reasonably be expected to cause or result in stabilization or
manipulation of the price of the Securities to facilitate the
sale or resale of the Securities. Except as permitted by the
Act, the Company will not distribute any offering material in
connection with the Exempt Resales. Except following the
effectiveness of the Exchange Offer Registration Statement or
the Shelf Registration Statement (each as defined in the
Registration Rights Agreement), the Company will not solicit
any offers to buy and will not offer to sell the Securities
by means of any form of general solicitation or general
advertising (within the meaning of Regulation D under the
Act) or by means of any directed selling efforts (as defined
under Regulation S and the Commission's releases related
thereto).
(j) The Company will assist the Initial Purchasers
in causing the Securities to be eligible for trading on the
PORTAL market.
(k) From and after the Closing Date, so long as any
of the Securities are outstanding and are "restricted
securities" within the meaning of Rule 144(a)(3) under the
Act or, if earlier, until two years after the Closing Date,
and during any period in which the Company is not subject to
Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), the Company and the Parent
Guarantor will furnish to holders of the Securities and
prospective purchasers of Securities designated by such
holders, upon request of such holders or such prospective
purchasers, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Act to permit compliance with
Rule 144A in connection with resales of the Securities.
(l) Each of the Company and the Parent Guarantor
agrees not to sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined
in the Act) that would be integrated with the sale of the
Securities in a manner that would re-
<PAGE>
-10-
quire the registration under the Act of the sale by the
Company and the Parent Guarantor to the Initial Purchasers or
by the Initial Purchasers to the Eligible Purchasers of the
Securities.
(m) The Company and the Parent Guarantor agree to
comply with all of the terms and conditions of the
Registration Rights Agreement, and all agreements set forth
in the representation letters of the Company to DTC relating
to the approval of the Securities by DTC for "book entry"
transfer.
(n) Each of the Company and the Parent Guarantor
agrees that not later than any registration of the Securities
pursuant to the Registration Rights Agreement, or at such
earlier time as may be so required, the Company shall use its
best efforts to cause the Indenture to be qualified under the
Trust Indenture Act of 1939 (the "1939 Act") and will cause
to be entered into any necessary supplemental indentures in
connection therewith.
(o) Each of the Company and the Parent Guarantor
shall not resell any Securities that have been acquired by
it.
(p) Prior to the Closing Date, the Parent Guarantor
will furnish to the Initial Purchasers, as soon as they have
been prepared, a copy of any unaudited interim consolidated
financial statements of the Parent Guarantor for any period
subsequent to the period covered by the most recent
consolidated financial statements of the Parent Guarantor
appearing in the Offering Memorandum.
5. Representations and Warranties of the Company and the Parent
Guarantor. The Company and the Parent Guarantor, jointly and severally,
represent and warrant to the Initial Purchasers that:
(a) No order or decree preventing the use of the
Preliminary Offering Memorandum or the Offering Memorandum or
any amendment or supplement thereto, or any order asserting
that the transactions contemplated by this Agreement are
subject to the registration requirements of the Act, has been
issued and no proceeding for any such purpose has been
commenced or is pending or,
<PAGE>
-11-
to the knowledge of the Company and the Parent Guarantor, is
threatened.
(b) The Preliminary Offering Memorandum and the
Offering Memorandum, as of their respective dates, and the
Offering Memorandum, as of the Closing Date, did not or will
not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading,
except that this representation and warranty does not apply
to statements in the Preliminary Offering Memorandum and
Offering Memorandum made in reliance upon and in conformity
with information relating to the Initial Purchasers furnished
to the Company in writing by the Initial Purchasers through
Salomon Brothers Inc expressly for use therein.
(c) As of the Closing Date, the Indenture will have
been duly and validly authorized by the Company and the
Parent Guarantor and, upon its execution and delivery by the
Company and the Parent Guarantor, and assuming due
authorization, execution and delivery by the Trustee, will be
a valid and binding agreement of the Company and the Parent
Guarantor, enforceable in accordance with its terms, except
as enforcement thereof may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of
creditors' rights generally and subject to the applicability
of general principles of equity; the Indenture conforms in
all material respects to the description thereof in the
Offering Memorandum; and no qualification of the Indenture
under the 1939 Act is required in connection with the offer
and sale of the Securities contemplated hereby or in
connection with the Exempt Resales.
(d) As of the Closing Date, (i) the Notes, Exchange
Notes (as defined in the Registration Rights Agreement) and
Private Exchange Notes (as defined in the Registration Rights
Agreement)and (ii) the Guarantee, the guarantee to be
endorsed on the Exchange Notes and the Private Exchange Notes
will have been duly authorized by the Company and the Parent
Guarantor, respectively, and, when executed by the Company
and the Parent Guarantor, respectively, and (in the case of
the Notes, Exchange Notes and Private Exchange Notes)
authenticated by the Trustee in accordance with the Indenture
and (in the case of Notes) delivered to the
<PAGE>
-12-
Initial Purchasers against payment therefor in accordance
with the terms hereof, will have been validly issued and
delivered, and will constitute valid and binding obligations
of the Company and the Parent Guarantor, respectively,
entitled to the benefits of the Indenture and enforceable in
accordance with their respective terms, except as enforcement
thereof may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights
generally and subject to the applicability of general
principles of equity; and the Securities conform in all
material respects to the description thereof in the Offering
Memorandum.
(e) Each direct and indirect subsidiary of the
Parent Guarantor is set forth on Schedule II attached hereto
(each, a "Subsidiary"). All the outstanding shares of
capital stock of the Parent Guarantor and each Subsidiary
have been duly authorized and validly issued, are fully paid
and nonassessable and are free of any preemptive or similar
rights.
(f) Each of the Parent Guarantor and the
Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate power and
authority to own, lease and operate its properties and to
conduct its business as described in the Offering Memorandum,
and is duly registered and qualified to conduct its business
as a foreign or extra-provincial corporation, as the case may
be, and is in good standing in each jurisdiction where the
nature of its properties or the conduct of its business
requires such registration or qualification, except where the
failure so to register or qualify could not reasonably be
expected to have a material adverse effect on the condition
(financial or other), business, prospects, properties, net
worth or results of operations of the Parent Guarantor and
Subsidiaries, taken as a whole (a "Material Adverse Effect").
(g) There are no legal or governmental proceedings
pending against the Parent Guarantor or any Subsidiary or, to
the knowledge of the Company or Parent Guarantor, threatened
against any of them or to which the Parent Guarantor or any
Subsidiary or to which any of the respective properties of
the Parent Guarantor or any Subsidiary is subject which are
not disclosed in
<PAGE>
-13-
the Offering Memorandum and which, if adversely decided,
could cause a Material Adverse Effect or materially adversely
affect the issuance of the Securities or the consummation of
any of the transactions contemplated by this Agreement, the
Indenture, the Securities or the Registration Rights
Agreement (collectively, the "Transaction Documents")).
There are no agreements, contracts, indentures, leases or
other instruments of the Parent Guarantor or any Subsidiary
that are material to the Parent Guarantor and Subsidiaries,
taken as a whole, which are not described in the Offering
Memorandum. Except as disclosed in the Offering Memorandum,
neither the Parent Guarantor nor any Subsidiary is involved
in any strike, job action or labor dispute with any group of
its employees which could reasonably be expected to have a
Material Adverse Effect, and, to the knowledge of the Company
and Parent Guarantor, no such action or dispute is
threatened.
(h) None of the Parent Guarantor or any Subsidiary
is (x) in violation of its certificate or articles of
incorporation or by-laws or other organizational documents,
or of any law, ordinance, administrative or governmental rule
or regulation applicable to it or of any decree of any court
or governmental agency or body having jurisdiction over it,
except where any such violation or violations in the
aggregate could not reasonably be expected to have a Material
Adverse Effect, or (y) in default in the performance of any
obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness or in
any agreement, indenture, lease or other instrument to which
the Parent Guarantor or any Subsidiary is a party or by which
any of them or any of their respective properties may be
bound, except as disclosed in the Offering Memorandum or
where any such default or defaults in the aggregate could not
reasonably be expected to have a Material Adverse Effect.
(i) None of (x) the issuance, offer, sale or
delivery of the Securities, (y) the execution, delivery or
performance of the Transaction Documents by the Parent
Guarantor or any Subsidiary to the extent a party thereto, or
(z) the consummation by the Parent Guarantor or any
Subsidiary of the transactions contemplated hereby or thereby
(i) requires any consent, approval, authorization or other
order of, or registration or filing with (each, a "Consent"),
any court, regulatory
<PAGE>
-14-
body, administrative agency or other governmental body,
agency or official (except such Consents as may have been
obtained or may be required in connection with the
registration under the Act of the Securities in accordance
with the Registration Rights Agreement, the qualification of
the Indenture under the 1939 Act and except for compliance
with the securities or Blue Sky laws of various jurisdictions
or the failure to obtain which could not reasonably be
expected to have a Material Adverse Effect or materially
adversely affect the transactions contemplated by the
Transaction Documents) or conflicts or will conflict with or
constitutes or will constitute a breach of, or a default
under, the certificate or articles of incorporation or
bylaws, or other organizational documents, of the Parent
Guarantor or any Subsidiary, except any such conflicts and
breaches that in the aggregate could not reasonably be
expected to have a Material Adverse Effect, or (ii) conflicts
or will conflict with or constitutes or will constitute a
breach of, or a default under, any agreement, indenture,
lease or other instrument to which the Parent Guarantor or
any Subsidiary is a party or by which any of them or any of
their respective properties may be bound, except as disclosed
in the Offering Memorandum or any such conflicts, breaches or
defaults that in the aggregate could not reasonably be
expected to have a Material Adverse Effect, or (iii) violates
or will violate any statute, law, regulation or judgment,
injunction, order or decree applicable to the Parent
Guarantor or any Subsidiary or any of their respective
properties, except any such violations that in the aggregate
could not reasonably be expected to have a Material Adverse
Effect, or (iv) will result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets
of the Parent Guarantor or any Subsidiary pursuant to the
terms of any agreement or instrument to which any of them is
a party or by which any of them may be bound or to which any
of their property or assets is subject, other than liens,
charges and encumbrances under the Credit Agreement as
disclosed in the Offering Memorandum or which could not in
the aggregate be expected to have a Material Adverse Effect.
(j) Each of Coopers & Lybrand and Arthur Andersen &
Co., who have certified the consolidated financial statements
of the Parent Guarantor, included as part of the Offering
Memorandum, are independent public ac-
<PAGE>
-15-
countants under Rule 101 of the AICPA's Code of Professional
Conduct and its interpretations and rulings.
(k) The consolidated financial statements of Parent
Guarantor included in the Offering Memorandum, together with
the related notes thereto, present fairly the consolidated
financial position, results of operations and cash flows of
Parent Guarantor at the dates and for the periods to which
they relate, and have been prepared in accordance with
generally accepted accounting principles in Canada applied on
a consistent basis ("GAAP"). The pro forma financial
statements and other pro forma financial information
(including the notes thereto) included in the Offering
Memorandum (A) present fairly in all material respects the
information shown therein, (B) have been prepared in
accordance with applicable requirements of Rule 11-02 of
Regulation S-X promulgated under the Act and (C) have been
properly computed on the basis described therein. The
assumptions used in the preparation of the pro forma
financial statements and other pro forma financial
information included in the Offering Memorandum are
reasonable and the adjustments used therein are appropriate
to give effect to the transactions or circumstances referred
to therein.
(l) Each of the Company and the Parent Guarantor has
all the requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement and
the Registration Rights Agreement; the execution and delivery
of, and the performance by each of the Company and the Parent
Guarantor of its obligations under, this Agreement and the
Registration Rights Agreement have been duly and validly
authorized by the Company and the Parent Guarantor and each
of this Agreement and, as of the Closing Date, the
Registration Rights Agreement will have been duly executed
and delivered by each of the Company and the Parent Guarantor
and will constitute the valid and legally binding agreement
of each of the Company and the Parent Guarantor, enforceable
against the Company and the Parent Guarantor in accordance
with its terms, except as the enforcement hereof and thereof
may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally
and subject to the applicability of general principles of
equity, and except as rights to indemnity and contribution
<PAGE>
-16-
hereunder and thereunder may be limited by Federal or state
securities laws or principles of public policy.
(m) Except as disclosed in the Offering Memorandum,
subsequent to the date as of which such information is given
in the Offering Memorandum, neither the Parent Guarantor nor
Subsidiary has incurred any liability or obligation, direct
or contingent, or entered into any transaction, not in the
ordinary course of business, that is material or will be
material to the Parent Guarantor and the Subsidiaries, taken
as a whole, and there has not been any material change in the
capital stock, or material increase in the short-term or
long-term debt of the Parent Guarantor or any Subsidiary.
(n) Each of the Parent Guarantor and the
Subsidiaries has good and marketable title to all property
(real and personal) described in the Offering Memorandum as
being owned by it, free and clear of all liens, claims,
security interests or other encumbrances except such as are
described in the Offering Memorandum or could not, in the
aggregate, reasonably be expected to have a Material Adverse
Effect and all the property described in the Offering
Memorandum as being held under lease by each of the Parent
Guarantor and the Subsidiaries is held by it under valid,
subsisting and enforceable leases, except as the enforcement
thereof may be limited by bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally
and subject to the applicability of general principles of
equity, or except such as are described in the Offering
Memorandum or could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(o) Except as permitted by the Act, neither the
Parent Guarantor nor any Subsidiary has distributed and,
prior to the later to occur of the Closing Date and
completion of the distribution of the Securities, will not
distribute any offering material in connection with the
offering and sale of the Securities other than the
Preliminary Offering Memorandum and Offering Memorandum (and
any amendment or supplement thereto in accordance with
Section 4(c) hereof).
(p) Each of the Parent Guarantor and the
Subsidiaries has such permits, licenses, franchises, certifi-
<PAGE>
-17-
cates of need and other approvals or authorizations of all
governmental or regulatory authorities ("Permits") as are
necessary under applicable law to own their respective
properties and to conduct their respective businesses in the
manner described in the Offering Memorandum, except to the
extent that the failure to have such Permits could not
reasonably be expected to have a Material Adverse Effect;
each of Parent Guarantor and the Subsidiaries has fulfilled
and performed in all material respects all its obligations
with respect to the Permits, and, to the knowledge of the
Company and Parent Guarantor, no event has occurred which
allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other
material impairment of the rights of the holder of any such
Permit, subject in each case to such qualification as may be
set forth in the Offering Memorandum and except to the extent
that any such revocation or termination, individually or in
the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
(q) Each of the Parent Guarantor and the
Subsidiaries maintains a system of internal accounting
controls sufficient to provide reasonable assurances that
(i) transactions of the Parent Guarantor and the Subsidiaries
are executed in accordance with management's general or
specific authorization; (ii) transactions of the Parent
Guarantor and the Subsidiaries are recorded as necessary to
permit preparation of financial statements in conformity with
GAAP and to maintain accountability for assets; (iii) access
to assets of the Parent Guarantor and the Subsidiaries is
permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability
for assets of the Parent Guarantor and the Subsidiaries is
compared with existing assets of the Parent Guarantor and the
Subsidiaries at reasonable intervals and appropriate action
is taken with respect to any differences.
(r) Neither the Parent Guarantor nor any Subsidiary
nor, to the knowledge of the Company or Parent Guarantor, any
employee or agent of the Parent Guarantor or any Subsidiary
has made any payment of funds or received or retained any
funds in violation of any law, rule or regulation, which
violation could reasonably be expected to have a Material
Adverse Effect.
<PAGE>
-18-
(s) Except as disclosed in the Offering Memorandum,
the Parent Guarantor and the Subsidiaries have filed all
necessary federal, state and foreign income and franchise tax
returns required to be filed (other than filings for which
extensions have been obtained or are being contested in good
faith), which returns are true and correct in all material
respects, and neither of the Parent Guarantor nor any
Subsidiary is in default in the payment of any taxes which
were payable pursuant to said returns or any assessments with
respect thereto (other than taxes being contested in good
faith), except where the failure to file such returns and
make such payments (whether or not being contested in good
faith) could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(t) No holder of any security of the Company or the
Parent Guarantor (other than holders of the Securities) has
any right to request or demand registration of any security
of the Company or the Parent Guarantor because of the
consummation of the transactions contemplated by the
Transaction Documents.
(u) Each of the Parent Guarantor and the
Subsidiaries owns, possesses, or possesses adequate rights to
use all patents, trademarks, trademark registrations, service
marks, service mark registrations, trade names, copyrights,
licenses, inventions, trade secrets and rights described in
the Offering Memorandum as being owned by it or necessary for
the conduct of its business, and neither the Company nor
Parent Guarantor has not received notice of any claim to the
contrary (a "Claim") or any challenge (a "Challenge") by any
other person to the rights of each of the Parent Guarantor
and the Subsidiaries with respect to the foregoing, except
for such Claims and Challenges which could not reasonably be
expected to have a Material Adverse Effect.
(v) Each of the Parent Guarantor and the
Subsidiaries is not and, upon sale of the Securities to be
issued and sold hereby in accordance herewith and the
application of the net proceeds to the Company of such sale
as described in the Offering Memorandum under the caption
"Use of Proceeds," will not be an "investment company" within
the meaning of the Investment Company Act of 1940, as
amended.
<PAGE>
-19-
(w) When the Securities are issued and delivered
pursuant to this Agreement, such Securities will not be of
the same class (within the meaning of Rule 144A(d)(3) under
the Act) as any security of the Parent Guarantor or the
Subsidiaries that is listed on a national securities exchange
registered under Section 6 of the Exchange Act or that is
quoted in a United States automated interdealer quotation
system.
(x) None of the Parent Guarantor, the Subsidiaries
nor any of their affiliates (as defined in Rule 501(b) of
Regulation D under the Act) has directly, or through any
agent (provided that no representation is made as to the
Initial Purchasers or any person acting on their behalf),
(i) sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any security (as defined
in the Act) which is or will be integrated with the offering
and sale of the Securities in a manner that would require the
registration of the Securities under the Act or (ii) engaged
in any form of general solicitation or general advertising
(within the meaning of Regulation D under the Act) in
connection with the offering of the Securities.
(y) Assuming (i) the representations and warranties
of the Initial Purchasers in Section 2 hereof are true and
correct in all material respects, (ii) each Initial Purchaser
complies with the covenants set forth in Section 2 hereof
(iii) compliance by each Initial Purchaser with the offering
and transfer procedures and restrictions described in the
Offering Memorandum, (iv) the accuracy of the representations
and warranties deemed to be made in the Offering Memorandum
by purchasers to whom the Initial Purchasers initially resell
Securities and (v) purchasers to whom the Initial Purchasers
initially resell Securities receive a copy of the Offering
Memorandum prior to such sale, the purchase and sale of the
Securities pursuant hereto (including the Initial Purchasers'
proposed offering of the Securities on the terms and in the
manner set forth in the Offering Memorandum and Section 2
hereof) do not require registration under the Act.
(z) The execution and delivery of this Agreement and
the other Transaction Documents and the sale of the
Securities to the Initial Purchasers by the Company and by
the Initial Purchasers to Eligible Purchasers in accordance
with the terms hereof will not result in any
<PAGE>
-20-
prohibited transaction within the meaning of Section 406 of
ERISA or Section 4975 of the Internal Revenue Code. The
representations made by the Company in the preceding sentence
are made in reliance upon and subject to the accuracy of, and
compliance with, the representations and covenants made or
deemed made by the Eligible Purchasers as set forth in the
Offering Memorandum under the section entitled "Transfer
Restrictions."
(aa) Except as disclosed or contemplated by the
Offering Memorandum, each of the Parent Guarantor and the
Subsidiaries is in compliance with, and not subject to any
liability under, any Canadian and United States applicable
federal, state, provincial, local, municipal and foreign
statute, regulation, law, rule, codes, ordinances, policy,
rule of common law, directives and orders relating to
pollution or to protection of public or employee health or
safety or to the environment, including, without limitation,
those that relate to any Hazardous Material (as defined
herein ("Environmental Laws"), except, in each case, where
noncompliance or liability, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse
Effect. The term "Hazardous Material" means any pollutant,
contaminant or waste, or any hazardous, dangerous, or toxic
chemical, material, waste, substance or constituent subject
to regulation under any Environmental Law.
(bb) Immediately after the consummation of the
purchase and sale of the Securities, the fair value and
present fair saleable value of the consolidated assets of the
Parent Guarantor will exceed the sum of its consolidated
stated liabilities and identified contingent liabilities; the
Parent Guarantor is not, nor will it be, after giving effect
to the consummation of such transactions, (i) left with
unreasonably small capital with which to carry on its
business as it is proposed to be conducted, (ii) unable to
pay its debts (contingent or otherwise) as they mature or
(iii) otherwise insolvent.
6. Indemnification and Contribution.
(a) The Company and the Parent Guarantor agree to jointly and
severally indemnify and hold harmless each Initial Purchaser and each
person, if any, who controls an Ini-
<PAGE>
-21-
tial Purchaser within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act from and against any and all losses, claims, damages,
liabilities and out-of-pocket expenses (including reasonable costs of
investigation) incurred by any such persons arising out of or based upon
any statement of a material fact contained in the Preliminary Offering
Memorandum or Offering Memorandum or in any amendment or supplement thereto
that was untrue or alleged to have been untrue when made therein, or
arising out of or based upon any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading, except insofar as such losses, claims, damages,
liabilities or expenses arise out of or are based upon any untrue statement
or omission or alleged untrue statement or omission which has been made
therein or omitted therefrom in reliance upon and in conformity with the
information relating to an Initial Purchaser furnished in writing to the
Company by an Initial Purchaser, through Salomon Brothers Inc, expressly
for use in connection therewith; provided, however, that the
indemnification contained in this paragraph (a) with respect to the
Preliminary Offering Memorandum shall not inure to the benefit of an
Initial Purchaser on account of any such loss, claim, damage, liability or
expense arising from the sale of the Securities by such Initial Purchaser
to any person if the untrue statement or alleged untrue statement or
omission or alleged omission of a material fact contained in the
Preliminary Offering Memorandum was corrected in the Offering Memorandum
and such Initial Purchaser sold Securities to that person without sending
or giving, at or prior to the written confirmation of such sale, a copy of
the Offering Memorandum (as then amended or supplemented). The foregoing
indemnity agreement shall be in addition to any liability which the Company
or the Parent Guarantor may otherwise have.
(b) If any action, suit or proceeding shall be brought against an
Initial Purchaser or any person who controls an Initial Purchaser in
respect of which indemnity may be sought against the Company and the Parent
Guarantor in accordance with this Section 6, such Initial Purchaser or any
such person who controls such Initial Purchaser shall promptly notify in
writing the Company, and the Company and the Parent Guarantor shall assume
the defense thereof, including the employment of counsel reasonably
acceptable to such Initial Purchaser or such person who controls such
Initial Purchaser and payment of all fees and expenses relating
<PAGE>
-22-
to the assumption of the defense by the Company and the Parent Guarantor.
An Initial Purchaser or any person who controls an Initial Purchaser shall
have the right to employ separate counsel in any such action, suit or
proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Initial Purchaser
or any such person who controls an Initial Purchaser unless (i) the Company
has agreed in writing to pay such fees and expenses, (ii) the Company has
failed to assume the defense and employ counsel on a timely basis or
(iii) the named parties to any such action, suit or proceeding (including
any impleaded parties) include both such Initial Purchaser or any such
person who controls an Initial Purchaser and the Company or the Parent
Guarantor and such Initial Purchaser or any such person who controls an
Initial Purchaser shall have been advised by its counsel that
representation of such indemnified party and the Company or the Parent
Guarantor by the same counsel would be inappropriate under applicable
standards of professional conduct (whether or not such representation by
the same counsel has been proposed) due to actual or potential differing
interests between them (in which case the Company shall not have the right
to assume the defense of such action, suit or proceeding (a "Conflicted
Action") on behalf of such Initial Purchaser or any such person who
controls an Initial Purchaser). It is understood, however, that the
Company and the Parent Guarantor shall, in connection with any such
Conflicted Action, be liable for the reasonable fees and expenses of a
single counsel (in addition to any local counsel) who shall represent
collectively the Initial Purchasers and each such person who controls an
Initial Purchaser, which firm shall be designated in writing by Salomon
Brothers Inc, and that all such reasonable fees and expenses shall be
reimbursed as incurred as provided in paragraph (a) hereof. The Company
and the Parent Guarantor shall not be liable for any settlement of any such
action, suit or proceeding effected without the written consent of the
Company, but if settled with such written consent, or if there be a final
judgment for the plaintiff in any such action, suit or proceeding, the
Company and the Parent Guarantor agree to jointly and severally indemnify
and hold harmless the Initial Purchasers, to the extent provided in
paragraph (a), and any person who controls an Initial Purchaser from and
against any loss, claim, damage, liability or expense by reason of such
settlement or judgment.
(c) Each Initial Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company, the Par-
<PAGE>
-23-
ent Guarantor, their respective directors and officers and any person who
controls the Company or the Parent Guarantor within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act (i) for any breach
of a representation, warranty or covenant herein and (ii) to the same
extent as the indemnity from the Company and the Parent Guarantor to the
Initial Purchasers set forth in paragraph (a) hereof, but only with respect
to information relating to such Initial Purchaser furnished in writing by
such Initial Purchaser expressly for use in the Preliminary Offering
Memorandum or Offering Memorandum or any amendment or supplement thereto.
If any action, suit or proceeding shall be brought against the Company or
the Parent Guarantor, any of their respective directors or officers or any
such controlling person based on the Preliminary Offering Memorandum or
Offering Memorandum, or any amendment or supplement thereto, and in respect
of which indemnity may be sought against an Initial Purchaser pursuant to
this paragraph (c), such Initial Purchaser shall have the rights and duties
given to the Company and the Parent Guarantor by paragraph (b) above
(except that if the Company or Parent Guarantor shall have assumed the
defense thereof, such Initial Purchaser shall not be required to do so, but
may employ separate counsel therein and participate in the defense thereof,
but the fees and expenses of such counsel shall be at such Initial
Purchaser's expense), and the Company, the Parent Guarantor, their
respective directors and officers and any such controlling person shall
have the rights and duties given to the Initial Purchasers by paragraph (b)
above. The foregoing indemnity agreement shall be in addition to any
liability which an Initial Purchaser may otherwise have.
(d) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities
or expenses (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Parent Guarantor on the
one hand and an Initial Purchaser on the other hand from the offering of
the Securities or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company and the Parent Guarantor
<PAGE>
-24-
on the one hand and an Initial Purchaser on the other in connection with
the statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Parent Guarantor on the one hand and an Initial Purchaser on the other
shall be deemed to be in the same proportion as the total net proceeds from
the offering (before deducting expenses) received by the Company bear to
the total discounts and commissions received by such Initial Purchaser, in
each case as set forth in the table on the cover page of the Offering
Memorandum. The relative fault of the Company and the Parent Guarantor on
the one hand and an Initial Purchaser on the other hand shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or the Parent
Guarantor on the one hand or by such Initial Purchaser on the other hand
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(e) The Company, the Parent Guarantor and the Initial Purchasers
agree that it would not be just and equitable if contribution pursuant to
this Section 6 were determined by a pro rata allocation or by any other
method of allocation that does not take account of the equitable
considerations referred to in paragraph (d) above. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages,
liabilities and expenses referred to in paragraph (d) above shall be deemed
to include, subject to the limitations set forth above, any legal or other
out-of-pocket expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit
or proceeding. Notwithstanding the provisions of this Section 6, no
Initial Purchaser shall be required to contribute any amount in excess of
the amount by which the total price of the Securities purchased by it
exceeds the amount of any damages which such Initial Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
<PAGE>
-25-
(f) Any losses, claims, damages, liabilities or expenses for which
an indemnified party is entitled to indemnification or contribution under
this Section 6 shall be paid by the indemnifying party to the indemnified
party as such losses, claims, damages, liabilities or expenses are
incurred. The indemnity and contribution agreements contained in this
Section 6 and the representations and warranties of the Company, the Parent
Guarantor and the Initial Purchasers set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of an Initial Purchaser, the Company or
the Parent Guarantor or any person who controls an Initial Purchaser, the
Company, the Parent Guarantor, their respective directors or officers or
any person controlling the Company or Parent Guarantor, (ii) acceptance of
any Securities and payment therefor hereunder and (iii) any termination of
this Agreement. A successor to an Initial Purchaser or any person who
controls an Initial Purchaser, or to the Company, the Parent Guarantor,
their respective directors or officers or any person controlling the
Company or Parent Guarantor, shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this
Section 6.
(g) No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or
threatened action, suit or proceeding in respect of which any indemnified
party is or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on
claims that are the subject matter of such action, suit or proceeding.
7. Conditions of the Initial Purchasers' Obligations. The
obligations of each Initial Purchaser to purchase and pay for the
Securities to be purchased by it on the Closing Date hereunder are subject
to the fulfillment, in such Initial Purchaser's sole discretion, of the
following conditions:
(a) At the time of execution of this Agreement and
on the Closing Date, no order or decree preventing the use of
the Offering Memorandum or any amendment or supplement
thereto, or any order asserting that the transactions
contemplated by this Agreement are subject to the
registration requirements of the Act shall have been issued
and no proceedings for those purposes shall have been
commenced or shall be pending or, to the
<PAGE>
-26-
knowledge of the Company and Parent Guarantor, threatened.
No order suspending the sale of the Securities in any
jurisdiction shall have been issued and no proceedings for
that purpose shall have been commenced or shall be pending
or, to the knowledge of the Company and Parent Guarantor,
threatened.
(b) Subsequent to the date hereof, (i) except as
disclosed or contemplated in the Offering Memorandum, there
shall not have occurred any material adverse change in the
condition (financial or other), business, prospects,
properties, assets, net worth or results of operations of the
Parent Guarantor and the Subsidiaries, taken as a whole,
which, in the opinion of the Initial Purchasers, would
materially adversely affect the market for the Securities,
and (ii) the Offering Memorandum shall not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances
under which they were made, not misleading, if amending or
supplementing the Offering Memorandum to correct any such
misstatement or omission could, in the sole judgment of the
Initial Purchasers, materially adversely affect the
marketability of the Securities.
(c) The Initial Purchasers shall have received on
the Closing Date an opinion of Tuke Yopp & Sweeney, PLC
counsel for the Company, dated the Closing Date and addressed
to the Initial Purchasers, in the form of Exhibit B hereto.
(d) The Initial Purchasers shall have received on
the Closing Date an opinion of Osler, Hoskin & Harcourt,
Canadian counsel for the Company, dated the Closing Date and
addressed to the Initial Purchasers, in the form of Exhibit C
hereto.
(e) The Initial Purchasers shall have received on
the Closing Date an opinion of Cahill Gordon & Reindel,
counsel for the Initial Purchasers, dated the Closing Date,
and addressed to the Initial Purchasers, with respect to such
matters as the Initial Purchasers may request.
(f) The Initial Purchasers shall have received on
the Closing Date an opinion of Davies, Ward & Beck, Canadian
counsel for the Initial Purchasers, dated the
<PAGE>
-27-
Closing Date and addressed to the Initial Purchasers, with
respect to such matters as the Initial Purchasers may
request.
(g) The Initial Purchasers shall have received "cold
comfort" letters addressed to the Initial Purchasers, and
dated the date hereof and the Closing Date, from Arthur
Andersen & Co. substantially in the forms heretofore approved
by the Initial Purchasers.
(h) (i) There shall not have been any change in the
capital stock of the Parent Guarantor or any Subsidiary nor
any material increase in the short-term or long-term debt of
the Parent Guarantor or any Subsidiary from that set forth or
contemplated in the Offering Memorandum; (ii) except as
disclosed or contemplated by the Offering Memorandum, the
Parent Guarantor and the Subsidiaries shall not have any
liabilities or obligations, direct or contingent (whether or
not in the ordinary course of business), that are material to
the Parent Guarantor and the Subsidiaries, taken as a whole;
(iii) all the representations and warranties of the Parent
Guarantor and the Company contained in this Agreement shall
be true and correct in all material respects on and as of the
date hereof and on and as of the Closing Date as if made on
and as of the Closing Date; and (iv) the Initial Purchasers
shall have received a certificate, dated the Closing Date and
signed by the chief executive officer and the chief
accounting officer of each of the Company and the Parent
Guarantor (or such other officers as are acceptable to the
Initial Purchasers), to the effect set forth in this
Section 7(h) and in Section 7(i) hereof.
(i) The Company and the Parent Guarantor shall not
have failed at or prior to the Closing Date to have performed
or complied with any of their respective agreements herein
contained and required to be performed or complied with by
them hereunder at or prior to the Closing Date.
(j) At the time of the execution of this Agreement,
the Company shall deliver in substantially final form to both
the Initial Purchasers and counsel to the Initial Purchasers
(i) the amendment to the Loan and Security Agreement dated as
of July 18, 1997 between International Comfort Products
Corporation (USA), the Borrower and NationsBank, N.A., the
Lender (the
<PAGE>
-28-
"NationsBank Amendment") and (ii) the amendment to the Credit
Agreement dated December 19, 1996 between International
Comfort Products Corporation (Canada), as the Borrower, G.C.
McDonald Supply Limited, as a Loan Party, the Lender or
Lenders named therein, and General Electric Capital Canada
Inc., as Agent (the "GECC Amendment", the NationsBank
Amendment and the GECC Amendment being collectively, the
"Amendments") and at or prior to the Closing Date, the
Company shall deliver an executed copy of each of the
Amendments (including copies of any related documents
executed in conjunction with the Amendments). Prior to the
Closing Date, there shall be no material changes from the
Amendments in draft form that were delivered to the Initial
Purchasers and counsel to the Initial Purchasers at the date
of the execution of this Agreement.
(k) At the time of the execution of this Agreement,
the Company shall deliver in substantially final form to the
Initial Purchasers and counsel to the Initial Purchasers (i)
the consent from SunTrust Bank, Nashville, N.A. related to
the Loan Agreement dated December 19, 1996, by and between
CHL Holdings, Inc., the Borrower, and SunTrust Bank,
Nashville, N.A., the lender, consenting to the merger of CHL
Holdings, Inc. and International Comfort Products
Corporations (USA) (the "SunTrust Consent") and (ii) the
consent from Emerson Electric Co. related to the Continuing
Guaranty dated December 19, 1996, by Emerson Electric Co. in
favor of SunTrust Bank, Nashville, N.A., consenting to the
merger of CHL Holdings, Inc. and International Comfort
Products Corporations (USA) (the "Emerson Consent", the
SunTrust Consent and the Emerson Consent being collectively,
the "Credit Consents") and at or prior to the Closing Date,
the Company shall deliver an executed copy of each of the
Credit Consents (including any related documentation executed
in conjunction with the Credit Consents) with no material
changes from the Credit Consents delivered to the Initial
Purchasers and counsel to the Initial Purchasers at the date
of the execution of this Agreement.
(l) There shall not have been any announcement by
any "nationally recognized statistical rating organization,"
as defined for purposes of Rule 436(g) under the Act, that
(i) it is downgrading its rating assigned to any class of
securities of the Company or the Parent Guarantor (including
the Securities), or (ii) it is re-
<PAGE>
-29-
viewing its ratings assigned to any class of securities of
the Company or the Parent Guarantor (including the
Securities) with a view to possible downgrading, with
negative implications or direction not determined.
(m) The Securities shall have been approved for
trading on PORTAL.
(n) The Company shall have taken all necessary acts
to repay all of the indebtedness for money borrowed of the
Subsidiaries indicated as being repaid in the Offering
Memorandum under the caption "Use of Proceeds".
(o) On the Closing Date, the Initial Purchasers
shall have received the Registration Rights Agreement
executed by the Company and the Parent Guarantor and such
agreement shall be in full force and effect at all times from
and after the Closing Date.
(p) The Company and the Parent Guarantor shall have
furnished or caused to be furnished to the Initial Purchasers
such further certificates and customary closing documents as
the Initial Purchasers shall have reasonably requested.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Initial Purchasers.
Any certificate or document signed by any officer of the Company or
the Parent Guarantor and delivered to the Initial Purchasers, or to counsel
for the Initial Purchasers, shall be deemed a representation and warranty
by the Company or the Parent Guarantor to the Initial Purchasers as to the
statements made therein.
8. Expenses.
(a) Whether or not the purchase and sale of the Securities
hereunder is consummated or this Agreement is terminated pursuant to
Section 9 hereof, the Company and the Parent Guarantor jointly and
severally agree to pay the following costs and expenses and all other costs
and expenses incident to the performance by them of their respective
obligations hereunder: (i) the printing or reproduction of the Preliminary
Offering Memorandum and the Offering Memorandum
<PAGE>
-30-
(including financial statements thereto), and each amendment or supplement
to any of them, this Agreement, the Registration Rights Agreement and the
Indenture; (ii) the delivery (including postage, air freight charges and
charges for counting and packaging) of such copies of the Offering
Memorandum, the Preliminary Offering Memorandum and all amendments or
supplements thereto as may be reasonably requested for use in connection
with the offering and sale of the Securities; (iii) the printing,
authentication, issuance and delivery of certificates for the Securities,
including any stamp taxes in connection with the original issuance and sale
of the Securities; (iv) the printing (or reproduction) and delivery of the
preliminary and supplemental Blue Sky Memoranda and all other agreements
and documents printed (or reproduced) and delivered in connection with the
offering of the Securities; (v) the application for quotation of the
Securities on PORTAL; (vi) the qualification of the Securities for offer
and sale under the securities or Blue Sky laws of the several states as
provided in Section 4(f) hereof (including the reasonable fees, expenses
and disbursements of counsel for the Initial Purchasers, limited up to the
initial $10,000 of such fees, expenses and disbursements, relating to the
preparation, printing or reproduction, and delivery of the preliminary and
supplemental Blue Sky Memoranda and such qualification); and (vii) the fees
and expenses of the Company's and the Parent Guarantor's accountants and
the fees and expenses of counsel (including local and special counsel) for
the Parent Guarantor and the Company, but in all events excluding the
attorneys' fees and expenses of the Initial Purchasers except for
attorney's fees, expenses and disbursements as described in clause (vi)
herein.
(b) If the purchase and sale of the Securities hereunder is not
consummated because any condition to the obligations of the Initial
Purchaser set forth in Section 7 hereof is not satisfied, because this
Agreement is terminated pursuant to Section 9(a) hereof or because of any
failure, refusal or inability on the part of the Company or the Parent
Guarantor to perform all obligations and satisfy all conditions on their
respective parts to be performed or satisfied hereunder other than by
reason of a default by an Initial Purchaser in payment for the Securities
on the Closing Date, the Company and the Parent Guarantor jointly and
severally agree to reimburse the Initial Purchasers promptly upon demand
for all reasonable out-of-pocket expenses (including reasonable fees and
disbursements of counsel) that shall have been incurred by them in
connection with the proposed
<PAGE>
-31-
purchase and sale of the Securities and the other transactions contemplated
hereby.
9. Termination of Agreement.
(a) This Agreement shall be subject to termination in the absolute
discretion of the Initial Purchasers, without liability on the part of the
Initial Purchasers to the Company and the Parent Guarantor, by notice to
the Company, if prior to the Closing Date, (i) trading in securities
generally on the Toronto Stock Exchange, New York Stock Exchange, American
Stock Exchange or the Nasdaq National Market shall have been suspended or
materially limited, (ii) a general moratorium on commercial banking
activities in Toronto shall have been declared by either Canadian or
Ontario authorities or in New York shall have been declared by either U.S.
Federal or New York state authorities or (iii) there shall have occurred
any outbreak or escalation of hostilities or other international or
domestic calamity, crisis or change in political, financial or economic
conditions, the effect of which on the financial markets of the United
States or Canada or the market for the Securities is such as to make it, in
the sole judgment of the Initial Purchasers, impracticable or inadvisable
to commence or continue the offering of the Securities on the terms set
forth on the cover page of the Offering Memorandum or to enforce contracts
for the resale of the Securities by the Initial Purchasers. Notice of
such termination may be given to the Company by telegram, telecopy or
telephone and shall be subsequently confirmed by letter.
(b) If any Initial Purchaser shall fail to purchase and pay for any
of the Securities agreed to be purchased by such Initial Purchaser
hereunder and such failure to purchase shall constitute a default in the
performance of its obligations under this Agreement, the remaining Initial
Purchaser(s) shall be obligated to take up and pay for the Securities which
the defaulting Initial Purchaser agreed but failed to purchase; provided,
however, that in the event that the aggregate principal amount of
Securities which the defaulting Initial Purchaser agreed but failed to
purchase shall exceed 10% of the aggregate principal amount of Securities
set forth in Schedule I hereto, the remaining Initial Purchaser shall have
the right to purchase all, but shall not be under any obligation to
purchase any, of the Securities, and if such non-defaulting Initial
Purchaser does not purchase all the Securities, this Agreement will
terminate without liability to the non-defaulting Initial Purchaser or the
Company and the Parent Guarantor. In the
<PAGE>
-32-
event of a default by any Initial Purchaser as set forth in this
Section 9(b), the Closing Date shall be postponed for such period, not
exceeding seven days, as the non-defaulting Initial Purchaser(s) shall
determine in order that the required changes in the Offering Memorandum or
in any other documents or arrangements may be effected. Nothing contained
in this Agreement shall relieve any defaulting Initial Purchaser of its
liability, if any, to the Company and the Parent Guarantor or the non-
defaulting Initial Purchaser(s) for damages occasioned by its default
hereunder.
10. Information Furnished by the Initial Purchasers. The
statements set forth in the stabilization legend on the inside front cover,
the last paragraph on the cover page and in the fifth paragraph under the
caption "Plan of Distribution" in the Preliminary Offering Memorandum and
Offering Memorandum, constitute the only information furnished by the
Initial Purchasers or as such information is referred to in Sections 5(b)
and 6 hereof.
11. Miscellaneous. Except as otherwise provided herein, notice
given pursuant to any provision of this Agreement shall be in writing and
shall be delivered (i) if to the Company and the Parent Guarantor, at 501
Corporate Centre Drive, Suite 200, Franklin, Tennessee 37067, Attention:
General Counsel, or (ii) if to the Initial Purchasers, to Salomon Brothers
Inc, Seven World Trade Center, New York, NY 10048, Attention: Manager,
Investment Banking Division.
This Agreement has been and is made solely for the benefit of the
Initial Purchasers, the Company and the Parent Guarantor, and their
respective directors, officers and the controlling persons referred to in
Section 6 hereof and their respective successors and assigns, to the extent
provided herein, and no other person shall acquire or have any right under
or by virtue of this Agreement. Neither the term "successor" nor the terms
"successors and assigns" as used in this Agreement shall include a
purchaser from an Initial Purchaser of any of the Securities in its status
as such purchaser.
12. Successors. This Agreement shall inure to the benefit of and
be binding upon the Initial Purchasers, the Company, the Parent Guarantor
and their respective successors and legal representatives, and nothing
expressed or mentioned in this Agreement is intended or shall be construed
to give any other person any legal or equitable right, remedy or claim
under or in respect of this Agreement, or any provisions herein
<PAGE>
-33-
contained; this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons
and for the benefit of no other person except that (i) the indemnities of
the Company and the Parent Guarantor contained in Section 6 of this
Agreement shall also be for the benefit of the directors, officers,
employees and agents and any person or persons who control the Initial
Purchasers within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act and (ii) the indemnities of the Initial
Purchasers contained in Section 6 of this Agreement shall also be for the
benefit of the directors, officers, employees and agents of any person or
persons who control the Company and the Parent Guarantor within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act. No
purchaser of Securities from any Initial Purchaser will be deemed a
successor because of such purchase.
13. No Waiver; Modifications in Writing. No failure or delay on
the part of the Company, the Parent Guarantor or the Initial Purchasers in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power
or remedy preclude any other or further exercise thereof or the exercise of
any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to
the Company, the Parent Guarantor or the Initial Purchasers at law or in
equity or otherwise. No waiver of or consent to any departure by the
Company, the Parent Guarantor or the Initial Purchasers from any provision
of this Agreement shall be effective unless signed in writing by the party
entitled to the benefit thereof; provided, however, that notice of any such
waiver shall be given to each party hereto as set forth below. Except as
otherwise provided herein, no amendment, modification or termination of any
provision of this Agreement shall be effective unless signed in writing by
or on behalf of each of the Company, the Parent Guarantor and the Initial
Purchasers. Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement,
and any consent to any departure by the Company, the Parent Guarantor or
the Initial Purchasers from the terms of any provision of this Agreement
shall be effective only in the specific instance and for the specific
purpose for which made or given. Except when notice is specifically
required by this Agreement, no notice to or demand on the Company and the
Parent Guarantor in any case shall entitle the Company and the Parent
Guarantor to any other or further notice or demand in similar or other
circumstances.
<PAGE>
-34-
14. Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto and supersedes all prior agreements,
understandings and arrangements, oral or written, among the parties hereto
with respect to the subject matter hereof.
15. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
17. Agent for Service; Submission to Jurisdiction; Waiver of
Immunities. By the execution and delivery of this Agreement, the Parent
Guarantor (i) acknowledges that it has, by separate written instrument,
designated and appointed Osler, Hoskin & Harcourt, 280 Park Avenue, Suite
30W, New York, N.Y. 10017 ("Osler") (and any successor entity), as its
authorized agent upon which process may be served in any suit or proceeding
arising out of or relating to this Agreement, the Guarantee, the
Registration Rights Agreement or the Indenture that may be instituted in
any federal or state court in the State of New York (the "New York Court")
or brought under federal or state securities laws, and acknowledge that
Osler has accepted such designation, (ii) submits to the jurisdiction of
any such court in any such suit or proceeding, and (iii) agrees that
service of process upon Osler and written notices of said service to the
Parent Guarantor in accordance with Section 11 shall be deemed in every
respect effective service of process upon the Parent Guarantor in any such
suit or proceeding. The Parent Guarantor further agrees to take any and
all action, including the execution and filing of any and all such
documents and instruments, as may be necessary to continue such designation
and appointment of Osler in full force and effect so long as any of the
Notes shall be outstanding; provided, however, that the Parent Guarantor
may, by written notice to the Initial Purchasers, designate such additional
or alternative agent for service of process under this Section 17 that
(i) maintains an office located in the Borough of Manhattan, City of New
York in the State of New York and (ii) is either (x) counsel for the Parent
Guarantor or (y) a corporate service company which acts as agent for
service of process for other persons in the ordinary course of its
business. Such written notice shall iden-
<PAGE>
-35-
tify the name of such agent for process and the address of the office of
such agent for process in the Borough of Manhattan, City of New York, State
of New York.
To the extent the Parent Guarantor has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid
of execution, execution or otherwise) with respect to itself or its
property, it hereby irrevocably waives such immunity in respect of its
obligations under the above-referenced documents, to the extent permitted
by law.
18. Judgment Currency. The Parent Guarantor shall indemnify each
Initial Purchaser, their respective affiliates, each person, if any, who
controls any of such parties within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act and each of their
respective officers, directors, general partners, employees and agents
against any loss incurred by such party as a result of any judgment or
order being given or made for any amount due under this Agreement and such
judgment or order being expressed and paid in a currency (the "Judgment
Currency") other than United States dollars and as a result of any
variation as between (i) the rate of exchange at which the United States
dollar amount is converted into the Judgment Currency for the purpose of
such judgment or order and (ii) the spot rate of exchange in The City of
New York at which such party on the date of payment of such judgment or
order is able to purchase United States dollars with the amount of the
Judgment Currency actually received by such party. The foregoing indemnity
shall continue in full force and effect notwithstanding any such judgment
or order as aforesaid. The term "spot rate of exchange" shall include any
premiums and costs of exchange payable in connection with the purchase of,
or conversion into, United States dollars.
19. Joint and Several Obligations. All of the obligations of the
Company and the Parent Guarantor hereunder shall be joint and several
obligations of each of them.
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Parent Guarantor and the Initial Purchasers.
Very truly yours,
INTERNATIONAL COMFORT PRODUCTS
HOLDINGS, INC.
By: /s/ David P. Cain
----------------------------
Name: David P. Cain
Title: Senior Vice President,
General Counsel and
Secretary
INTERNATIONAL COMFORT PRODUCTS
CORPORATION, as Parent Guar-
antor
By: /s/ David P. Cain
----------------------------
Name: David P. Cain
Title: Senior Vice President,
General Counsel and
Confirmed as of the date first
above mentioned.
SALOMON BROTHERS INC
By: /s/ Bruce Cummings
-------------------------
Name: Bruce Cummings
Title: Managing Director
CREDIT SUISSE FIRST BOSTON
CORPORATION
By: /s/ John Carrabino, Jr.
-------------------------
Name: John Carrabino, Jr.
Title: Managing Director
<PAGE>
FIRST UNION CAPITAL MARKETS, a
division of Wheat First
Securities, Inc.
By: /s/ Steven J. Taylor
-------------------------
Name: Steven J. Taylor
Title: Senior Director
<PAGE>
SCHEDULES AND EXHIBITS OMITTED
<PAGE>
- ---------------------------------------------------------------------------
8 5/8% SENIOR NOTES DUE 2008
REGISTRATION RIGHTS AGREEMENT
Dated May 13, 1998
by and among
INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC.,
INTERNATIONAL COMFORT PRODUCTS CORPORATION,
as Parent Guarantor
and
SALOMON BROTHERS INC,
CREDIT SUISSE FIRST BOSTON CORPORATION,
and
FIRST UNION CAPITAL MARKETS,
a division of Wheat First Securities, Inc.,
as Initial Purchasers
- ---------------------------------------------------------------------------<PAGE>
This Registration Rights Agreement is made and entered into this
13th day of May 1998, by and among International Comfort Products Holdings,
Inc., a Delaware corporation (the "COMPANY"), International Comfort
Products Corporation, a Canadian corporation organized under the laws of
Canada (the "PARENT GUARANTOR" and, together with the Company, the
"ISSUERS"), and Salomon Brothers Inc, Credit Suisse First Boston
Corporation and First Union Capital Markets, a division of Wheat First
Securities, Inc. (collectively, the "INITIAL PURCHASERS").
This Agreement is made pursuant to the Purchase Agreement, dated
May 8, 1998, among the Company, the Parent Guarantor and Initial Purchasers
(the "PURCHASE AGREEMENT"). In order to induce the Initial Purchasers to
enter into the Purchase Agreement, the Issuers have agreed to provide the
registration rights provided for in this Agreement to the Initial
Purchasers and their direct and indirect transferees. The execution and
delivery of this Agreement is a condition to the closing of the
transactions contemplated by the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
ADDITIONAL INTEREST: As defined in Section 4(a) hereof.
ADVICE: As defined in the last paragraph of Section 5 hereof.
AFFILIATE: With respect to any specified person, "Affiliate"
shall mean any other person directly or indirectly controlling or
controlled by or under direct or indirect common control with such
specified person. For the purposes of this definition, "control," when
used with respect to any person, means the power to direct the management
and policies of such person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise and the terms
"affiliated," controlling" and "controlled" have meanings correlative to
the foregoing.
<PAGE>
-2-
AGREEMENT: This Registration Rights Agreement, as the same may
be amended, supplemented or modified from time to time in accordance with
the terms hereof.
BUSINESS DAY: Any day except a Saturday, a Sunday or a day on
which banking institutions in New York, New York generally are required or
authorized by law or other government action to be closed.
COMPANY: As defined in the preamble hereof.
CONSUMMATE OR CONSUMMATE: When used to qualify the term
"Exchange Offer" shall mean validly and lawfully to issue and deliver the
Exchange Notes pursuant to the Exchange Offer for all Notes validly
tendered and not validly withdrawn pursuant thereto in accordance with the
terms of this Agreement.
CONSUMMATION DATE: The date that is 20 Business Days
immediately following the date that the Exchange Registration Statement
shall have been declared effective by the SEC (or such later date as shall
be required by applicable law).
EFFECTIVENESS PERIOD: As defined in Section 3(a) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC pursuant thereto.
EXCHANGE DATE: As defined in Section 2(d) hereof.
EXCHANGE NOTES: The 8 5/8% Senior Notes due 2008, Series B, of
the Company, guaranteed on a senior basis by the Parent Guarantor, that are
identical to the Notes in all material respects, except that the provisions
regarding restrictions on transfer shall be modified, as appropriate, and
the issuance thereof pursuant to the Exchange Offer shall have been
registered pursuant to an effective Registration Statement in compliance
with the Securities Act.
EXCHANGE OFFER: An offer to issue, in exchange for any and all
of the Notes, a like aggregate principal amount of Exchange Notes, which
offer shall be made by the Company pursuant to Section 2 hereof.
EXCHANGE REGISTRATION STATEMENT: As defined in Section 2(a)
hereof.
<PAGE>
-3-
INDEMNIFIED PERSON: As defined in Section 7(a) hereof.
INDENTURE: The Indenture, dated as of May 13, 1998, among the
Issuers and United States Trust Company of New York, as trustee thereunder,
pursuant to which the Notes are issued, as amended or supplemented from
time to time in accordance with the terms thereof.
INITIAL PURCHASERS: As defined in the preamble hereof.
ISSUE DATE: As defined in Section 2(a).
ISSUERS: As defined in the preamble hereof.
NOTES: The 8 5/8% Senior Notes due 2008, Series A, of the
Company, guaranteed on a senior basis by the Parent Guarantor, issued
pursuant to the Indenture.
PARENT GUARANTOR: As defined in the preamble hereof.
PARTICIPATING BROKER-DEALER: As defined in Section 2(e) hereof.
PRIVATE EXCHANGE: As defined in Section 2(c) hereof.
PRIVATE EXCHANGE NOTES: As defined in Section 2(c) hereof.
PROSPECTUS: The prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated
pursuant to the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any
portion of the Notes, Exchange Notes or Private Exchange Notes covered by
such Registration Statement, and all other amendments and supplements to
any such prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference, if
any, in such prospectus.
REGISTRATION DEFAULT: As defined in Section 4(a) hereof.
REGISTRATION STATEMENT: Any registration statement of the
Company and the Parent Guarantor that covers any of the Notes, Exchange
Notes or Private Exchange Notes pursuant to the provisions of this
<PAGE>
-4-
Agreement, including the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by
reference or deemed to be incorporated by reference, if any, in such
registration statement.
RULE 144: Rule 144 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC as a replacement
thereto having substantially the same effect as such Rule.
RULE 144A: Rule 144A promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC as a replacement
thereto having substantially the same effect as such Rule.
RULE 158: Rule 158 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC as a replacement
thereto having substantially the same effect as such Rule.
RULE 174: Rule 174 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC as a replacement
thereto having substantially the same effect as such Rule.
RULE 415: Rule 415 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC as a replacement
thereto having substantially the same effect as such Rule.
RULE 424: Rule 424 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC as a replacement
thereto having substantially the same effect as such Rule.
SEC: The Securities and Exchange Commission.
<PAGE>
-5-
SECURITIES ACT: The Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
SHELF REGISTRATION: As defined in Section 3 hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 3 hereof.
SPECIAL COUNSEL: Cahill Gordon & Reindel, special counsel to the
holders of Transfer Restricted Securities, Davies, Ward & Beck, special
Canadian counsel to the holders of Transfer Restricted Securities or such
other counsel as shall be agreed upon by the Issuers and holders of a
majority in aggregate principal amount of Transfer Restricted Securities,
the expenses of which holders of Transfer Restricted Securities will be
reimbursed by the Issuer pursuant to Section 6.
TIA: The Trust Indenture Act of 1939, as amended.
TRANSFER RESTRICTED SECURITIES: The Notes, upon original
issuance thereof, and at all times subsequent thereto, each Exchange Note
as to which Section 3(a)(iii) hereof is applicable upon original issuance
and at all times subsequent thereto and each Private Exchange Note upon
original issuance thereof and at all times subsequent thereto, until in the
case of any such Note, Exchange Note or Private Exchange Note, as the case
may be, the earliest to occur of (i) the date on which any such Note has
been exchanged by a person other than a Participating Broker-Dealer for an
Exchange Note (other than with respect to an Exchange Note as to which
Section 3(a)(iii) hereof applies) pursuant to the Exchange Offer, (ii) with
respect to Exchange Notes received by Participating Broker-Dealers in the
Exchange Offer, the earlier of (x) the date on which such Exchange Note has
been sold by such Participating Broker-Dealer by means of the Prospectus
contained in the Exchange Registration Statement and (y) the date on which
the Exchange Registration Statement has been effective under the Securities
Act for a period of 6 months after the Consummation Date, (iii) a Shelf
Registration Statement covering such Note, Exchange Note or Private
Exchange Note has been declared effective by the SEC and such Note,
Exchange Note or Private Exchange Note, as the case may be, has been
disposed of in accordance with such effective Shelf Registration
Statement, (iv) the date on which such Note, Exchange Note or Private
Exchange Note, as the case may be, is distributed to the public pursuant to
Rule 144 (or any similar provisions then in effect) or is saleable pursuant
to Rule 144(k) promulgated by the SEC pursuant to the Securities Act or (v)
<PAGE>
-6-
the date on which such Note, Exchange Note or Private Exchange Note, as the
case may be, ceases to be outstanding for purposes of the Indenture or any
other indenture under which such Exchange Note or Private Exchange Note was
issued.
TRUSTEE: The trustee under the Indenture.
UNDERWRITTEN REGISTRATIONS OR UNDERWRITTEN OFFERING: A
registration in connection with which securities are sold to an underwriter
for reoffering to the public pursuant to an effective Registration
Statement.
2. EXCHANGE OFFER
(a) To the extent not prohibited by any applicable law or
applicable interpretation of the staff of the SEC, the Issuers shall (A)
prepare and, on or prior to 60 days after the date of original issuance of
the Notes (the "ISSUE DATE"), file with the SEC a Registration Statement
under the Securities Act with respect to an offer by the Company to the
holders of the Notes to issue and deliver to such holders, in exchange for
Notes, a like principal amount of Exchange Notes, (B) use their best
efforts to cause the Registration Statement relating to the Exchange Offer
to be declared effective by the SEC under the Securities Act on or prior to
120 days after the Issue Date, and (C) commence the Exchange Offer and use
their best efforts to issue, on or prior to the Consummation Date, the
Exchange Notes. The offer and sale of the Exchange Notes pursuant to the
Exchange Offer shall be registered pursuant to the Securities Act on the
appropriate form (the "EXCHANGE REGISTRATION STATEMENT") and duly
registered or qualified under all applicable state securities or Blue Sky
laws and will comply with all applicable tender offer rules and regulations
under the Exchange Act and state securities or Blue Sky laws. The Exchange
Offer shall not be subject to any condition, other than that the Exchange
Offer does not violate any applicable law or interpretation of the staff of
the SEC. Upon consummation of the Exchange Offer in accordance with this
Section 2, the Issuers shall have no further registration obligations other
than with respect to (i) Private Exchange Notes, (ii) Exchange Notes held
by Participating Broker-Dealers and (iii) Notes or Exchange Notes as to
which Section 3(a)(iii) hereof applies. No securities shall be included in
the Exchange Registration Statement other than the Exchange Notes.
<PAGE>
-7-
(b) The Issuers may require each holder of Notes as a
condition to its participation in the Exchange Offer to represent to the
Issuers and their counsel in writing (which may be contained in the
applicable letter of transmittal) that at the time of the consummation of
the Exchange Offer (i) any Exchange Notes received by such holder will be
acquired in the ordinary course of its business, (ii) such holder will have
no arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange
Notes and (iii) such holder is not an Affiliate of an Issuer, or if it is
an Affiliate of an Issuer, it will comply with the registration and
prospectus delivery requirements of the Securities Act, to the extent
applicable.
(c) If, prior to consummation of the Exchange Offer, any of
the Initial Purchasers holds any Notes acquired by it and having, or which
are reasonably likely to be determined to have, the status of an unsold
allotment in the initial distribution, or any other holder of Notes is not
entitled to participate in the Exchange Offer, the Company upon the request
of such Initial Purchaser or any such holder shall, simultaneously with the
delivery of the Exchange Notes in the Exchange Offer, issue and deliver to
such Initial Purchaser and any such holder, in exchange (the "PRIVATE
EXCHANGE") for such Notes held by such Initial Purchaser and any such
holder, a like principal amount of debt securities of the Company,
guaranteed by the Parent Guarantor on a senior basis, that are identical in
all material respects to the Exchange Notes (the "PRIVATE EXCHANGE NOTES")
(and which are issued pursuant to the same indenture as the Exchange
Notes). The Private Exchange Notes shall bear the same CUSIP number as the
Exchange Notes.
(d) Unless the Exchange Offer would not be permitted by any
applicable law or interpretation of the staff of the SEC, the Company shall
mail the Exchange Offer Prospectus and appropriate accompanying documents,
including appropriate letters of transmittal, to each holder of Notes
providing, in addition to such other disclosures as are required by
applicable law:
(i) that the Exchange Offer is being made pursuant to this
Agreement and that all Notes validly tendered will be accepted
for exchange;
(ii) the date of acceptance for exchange (the "EXCHANGE DATE"),
which date shall in no event be later than the Consummation Date
<PAGE>
-8-
(unless otherwise required by applicable law);
(iii) that holders of Notes electing to have a Note exchanged
pursuant to the Exchange Offer will be required to surrender such
Note, together with the enclosed letters of transmittal, to the
institution and at the address (located in the Borough of
Manhattan, The City of New York) specified in the notice prior to
the close of business on the Exchange Date; and
(iv) that holders of Notes that do not tender all such
securities pursuant to the Exchange Offer may no longer have any
registration rights hereunder with respect to Notes not tendered.
Promptly after the Exchange Date, the Company shall:
(i) accept for exchange all Notes or portions thereof validly
tendered and not validly withdrawn pursuant to the
Exchange Offer or the Private Exchange; and
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Notes or portions thereof so accepted for
exchange by the Company, and issue, cause the Trustee
under the Indenture (or the indenture pursuant to which
the Exchange Notes are issued) to authenticate, and mail
to each holder of Notes, Exchange Notes equal in principal
amount to the principal amount of the Notes surrendered by
such holder.
(e) The Issuers and the Initial Purchasers acknowledge that
the staff of the SEC has taken the position that any broker-dealer that
owns Exchange Notes that were received by such broker-dealer for its own
account in the Exchange Offer (a "PARTICIPATING BROKER-DEALER") may be
deemed to be an "underwriter" within the meaning of the Securities Act and
must deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes (other than a resale of
an unsold allotment resulting from the original offering of the Notes).
The Issuers and the Initial Purchasers also acknowledge that it
is the SEC staff's position that if the Prospectus contained in the
Exchange Registration Statement includes a plan of distribution containing
<PAGE>
-9-
a statement to the above effect and the means by which Participating
Broker-Dealers may resell the Exchange Notes, without naming the
Participating Broker-Dealers or specifying the amount of Exchange Notes
owned by them, such Prospectus may be delivered by Participating
Broker-Dealers to satisfy their prospectus delivery obligations under the
Securities Act in connection with resales of Exchange Notes for their own
accounts, so long as the Prospectus otherwise meets the requirements of the
Securities Act.
In light of the foregoing, if requested by a Participating
Broker-Dealer, the Issuers agree (x) to use their best efforts to keep the
Exchange Registration Statement continuously effective for a period of up
to 6 months or such earlier date as each Participating Broker-Dealer shall
have notified the Company in writing that such Participating Broker-Dealer
has resold all Exchange Notes acquired in the Exchange Offer, (y) to comply
with the provisions of Section 5 of this Agreement, as they relate to the
Exchange Offer and the Exchange Registration Statement, and (z) to deliver
to such Participating Broker-Dealer a "cold comfort" letter of the
independent public accountants of the Issuers and a legal opinion as to
matters reasonably requested by such Participating Broker-Dealer relating
to the Exchange Registration Statement and the related Prospectus and any
amendments or supplements thereto.
(f) The Initial Purchasers shall have no liability to any
Participating Broker-Dealer with respect to any request made pursuant to
Section 2(e).
(g) Interest on the Exchange Notes and the Private Exchange
Notes will accrue from the last interest payment date on which interest was
paid on the Notes surrendered in exchange therefor or, if no interest has
been paid on the Notes, from the date of the original issuance of the
Notes.
(h) The Exchange Notes and the Private Exchange Notes may be
issued under (i) the Indenture or (ii) an indenture identical in all
material respects to the Indenture, which in either event shall provide
that the Exchange Notes shall not be subject to the transfer restrictions
set forth in the Indenture. The Indenture or such indenture shall provide
that the Exchange Notes, the Private Exchange Notes and the Notes shall
vote and consent together on all matters as one class and that neither the
Exchange Notes, the Private Exchange Notes nor the Notes will have the
right to vote or consent as a separate class on any matter.
<PAGE>
-10-
3. SHELF REGISTRATION
(a) If (i) the Company is not permitted to consummate the
Exchange Offer because the Exchange Offer is not permitted by any
applicable law or applicable interpretation of the staff of the SEC or (ii)
the Company has not consummated the Exchange Offer within 150 days of the
Issue Date or (iii) any holder of a Note notifies the Company on or prior
to the Exchange Date that (A) due to a change in law or policy it is not
entitled to participate in the Exchange Offer, (B) due to a change in law
or policy it may not resell the Exchange Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and the
Prospectus contained in the Exchange Registration Statement is not
appropriate or available for such resales by such holder or (C) it is a
broker-dealer that owns Notes (including an Initial Purchaser that holds
Notes as part of an unsold allotment from the original offering of the
Notes) acquired directly from an Issuer or an Affiliate of an Issuer or
(iv) any holder of Private Exchange Notes so requests within 120 days after
the consummation of the Private Exchange (each such event referred to in
clauses (i) through (iv), a "SHELF FILING EVENT"), the Issuers shall cause
to be filed with the SEC pursuant to Rule 415 a shelf registration
statement (the "SHELF REGISTRATION STATEMENT") prior to the later of (x) 60
days after the Issue Date and (y) 30 days after the occurrence of such
Shelf Filing Event, relating to all Transfer Restricted Securities (the
"SHELF REGISTRATION") the holders of which have provided the information
required pursuant to Section 3(b) hereof, and shall use their best efforts
to have the Shelf Registration Statement declared effective by the SEC on
or prior to the later of (i) 120 days after the Issue Date and (ii) 60 days
after the occurrence of such Shelf Filing Event. In such circumstances,
the Issuers shall use their best efforts to keep the Shelf Registration
Statement continuously effective under the Securities Act, until (A) 24
months following the date on which the Shelf Registration Statement was
initially declared effective or (B) if sooner, the date immediately
following the date that all Transfer Restricted Securities covered by the
Shelf Registration Statement have been sold pursuant thereto (the
"EFFECTIVENESS PERIOD"); PROVIDED that the Effectiveness Period shall be
extended to the extent required to permit dealers to comply with the
applicable prospectus delivery requirements of Rule 174 and as otherwise
provided herein.
<PAGE>
-11-
(b) No holder of Transfer Restricted Securities may include
any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such holder furnishes
to the Company in writing, within 30 days after receipt of a request
therefor, such information as the Company may reasonably request for use in
connection with any Shelf Registration Statement or Prospectus or
preliminary prospectus included therein. No holder of Transfer Restricted
Securities shall be entitled to Additional Interest pursuant to Section 4
hereof unless and until such holder shall have provided all such reasonably
requested information. Each holder of Transfer Restricted Securities as to
which any Shelf Registration Statement is being effected agrees to furnish
promptly to the Company all information required to be disclosed in order
to make the information previously furnished to the Company by such holder
not materially misleading.
4. ADDITIONAL INTEREST
(a) The parties hereto agree that the holders of Transfer
Restricted Securities will suffer damages if the Issuers fail to fulfill
their obligations pursuant to Section 2 or Section 3, as applicable, and
that it would not be feasible to ascertain the extent of such damages.
Accordingly, in the event that (i) the applicable Registration Statement is
not filed with the SEC on or prior to the date specified herein for such
filing, (ii) the applicable Registration Statement has not been declared
effective by the SEC on or prior to the date specified herein for such
effectiveness after such obligation arises, (iii) if the Exchange Offer is
required to be Consummated hereunder, the Company has not exchanged
Exchange Notes for all Notes validly tendered and not validly withdrawn in
accordance with the terms of the Exchange Offer by the Consummation Date or
(iv) the applicable Registration Statement is filed and declared effective
but shall thereafter cease to be effective without being succeeded
immediately by any additional Registration Statement covering the Notes,
the Exchange Notes or the Private Exchange Notes, as the case may be, which
has been filed and declared effective (each such event referred to in
clauses (i) through (iv), a "REGISTRATION DEFAULT"), then the interest rate
on Transfer Restricted Securities will increase ("ADDITIONAL INTEREST"),
with respect to the first 90-day period immediately following the
occurrence of such Registration Default, by 0.50% per annum and will
increase by an additional 0.50% per annum with respect to each subsequent
90-day period until such Registration Default has been cured, up to a
<PAGE>
-12-
maximum amount of 1.50% per annum with respect to all Registration
Defaults. Following the cure of a Registration Default, the accrual of
Additional Interest with respect to such Registration Default will cease
and upon the cure of all Registration Defaults the interest rate will
revert to the original rate.
(b) The Company shall notify the Trustee and paying agent
under the Indenture (or the trustee and paying agent under such other
indenture under which the Transfer Restricted Securities are issued)
immediately upon the happening of each and every Registration Default. The
Company shall pay the Additional Interest due on the Transfer Restricted
Securities by depositing with the paying agent (which shall not be the
Company for these purposes) for the Transfer Restricted Securities, in
trust, for the benefit of the holders thereof, prior to 11:00 A.M. on the
next interest payment date specified by the Indenture (or such other
indenture), sums sufficient to pay the Additional Interest then due. The
Additional Interest due shall be payable on each interest payment date
specified by the Indenture (or such other indenture) to the record holder
entitled to receive the interest payment to be made on such date. Each
obligation to pay Additional Interest shall be deemed to accrue from and
including the applicable Registration Default.
(c) The parties hereto agree that the Additional Interest
provided for in this Section 4 constitutes a reasonable estimate of the
damages that will be suffered by holders of Transfer Restricted Securities
by reason of the happening of any Registration Default.
5. REGISTRATION PROCEDURES
In connection with the Issuers' registration obligations
hereunder, the Issuers shall effect such registrations on the appropriate
form available for the sale of the Notes, the Exchange Notes or Private
Exchange Notes, as applicable, to (i) in the case of the Exchange Offer,
permit the exchange of Exchange Notes for Notes in the Exchange Offer and,
if applicable, resales of Exchange Notes by Participating Broker-Dealers
and (ii) in the case of a Shelf Registration, permit the sale of the
applicable Transfer Restricted Securities in accordance with the method or
methods of disposition thereof specified by the holders of such Transfer
Restricted Securities, and pursuant thereto the Issuers shall as
expeditiously as possible:
<PAGE>
-13-
(a) In the case of a Shelf Registration, a reasonable period
of time prior to the initial filing of a Shelf Registration Statement or
Prospectus and a reasonable period of time prior to the filing of any
amendment or supplement thereto (including any document that would be
incorporated or deemed to be incorporated therein by reference), furnish to
the holders of the Transfer Restricted Securities included in such Shelf
Registration Statement, their Special Counsel and the managing
underwriters, if any, copies of all such documents proposed to be filed,
which documents (other than those incorporated or deemed to be incorporated
by reference) will be subject to the review of such holders, their Special
Counsel and such underwriters, if any, and cause the officers and directors
of the Issuers, counsel to the Issuers and independent certified public
accountants to the Issuers to respond to such reasonable inquiries as shall
be necessary, in the opinion of respective counsel to such holders and such
underwriters, to conduct a reasonable investigation within the meaning of
the Securities Act; PROVIDED that the Issuers shall not be deemed to have
kept a Shelf Registration Statement effective during the applicable period
if any of them voluntarily takes or fails to take any reasonable action
that results in holders of the Transfer Restricted Securities covered
thereby not being able to sell such Transfer Restricted Securities pursuant
to Federal securities laws during that period (and the time period during
which such Shelf Registration Statement is required to remain effective
hereunder shall be extended by the number of days during which such holders
of Transfer Restricted Securities are not able to sell such Transfer
Restricted Securities). The Issuers shall not file any such Shelf
Registration Statement or related Prospectus or any amendments or
supplements thereto which the holders of a majority of the Transfer
Restricted Securities included in such Shelf Registration Statement shall
reasonably object on a timely basis;
(b) Prepare and file with the SEC such amendments, including
post-effective amendments, to each Registration Statement as may be
necessary to keep such Registration Statement continuously effective for
the applicable time period required hereunder; cause the related Prospectus
to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424; and comply with the
provisions of the Securities Act and the Exchange Act with respect to the
<PAGE>
-14-
disposition of all securities covered by such Registration Statement during
such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such Registration Statement as so amended or
in such Prospectus as so supplemented;
(c) Notify the holders of Transfer Restricted Securities to be
sold or, in the case of an Exchange Offer, tendered for, their Special
Counsel and the managing underwriters, if any, promptly, and (if requested
by any such person), confirm such notice in writing, (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment is
proposed to be filed, and (B) with respect to a Registration Statement or
any post-effective amendment, when the same has become effective, (ii) of
any request by the SEC or any other Federal or state governmental authority
for amendments or supplements to a Registration Statement or related
Prospectus or for additional information, (iii) of the issuance by the SEC,
any state securities commission, any other governmental agency or any court
of any stop order, order or injunction suspending or enjoining the use of a
Prospectus or the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (iv) of the receipt by the
Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Notes, Exchange
Notes or Private Exchange Notes for sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose, and (v) its
knowledge of the happening of any event or information becoming known that
makes any statement made in a Registration Statement or related Prospectus
or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in such Registration Statement, Prospectus or documents so that it
will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, not misleading, and that in the case of a Prospectus,
it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading;
<PAGE>
-15-
(d) Use their best efforts to avoid the issuance of or, if
issued, obtain the withdrawal of any order enjoining or suspending the use
of a Prospectus or the effectiveness of a Registration Statement or the
lifting of any suspension of the qualification (or exemption from
qualification) of any of the Notes, Exchange Notes or Private Exchange
Notes for sale in any jurisdiction, at the earliest practicable moment;
(e) If a Shelf Registration Statement is filed pursuant to
Section 3 hereof and if requested by the managing underwriters, if any, or
the holders of a majority in aggregate principal amount of the Transfer
Restricted Securities being sold pursuant to such Shelf Registration
Statement, (i) promptly incorporate in a Prospectus supplement or post-
effective amendment such information as the managing underwriters, if any,
and such holders reasonably believe should be included therein, and (ii)
make all required filings of such Prospectus supplement or such
post-effective amendment under the Securities Act as soon as practicable
after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment;
PROVIDED, HOWEVER, that the Issuers shall not be required to take any
action pursuant to this Section 5(e) that would, in the opinion of counsel
for the Issuers, violate applicable law;
(f) Upon written request to the Company, furnish to each
holder of Notes, Exchange Notes or Private Exchange Notes to be exchanged
or sold pursuant to a Registration Statement, their Special Counsel and
each managing underwriter, if any, without charge, at least one conformed
copy of such Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or deemed to
be incorporated therein by reference, and all exhibits to the extent
requested (including those previously furnished or incorporated by
reference) as soon as practicable after the filing of such documents with
the SEC;
(g) Deliver to each holder of Notes, Exchange Notes or Private
Exchange Notes to be exchanged or sold pursuant to a Registration
Statement, their Special Counsel, and the underwriters, if any, without
charge, as many copies of the Prospectus (including each form of
prospectus) and each
<PAGE>
-16-
amendment or supplement thereto as such persons reasonably request; and the
Issuers hereby consent to the use of such Prospectus and each amendment or
supplement thereto by each of the selling holders of Transfer Restricted
Securities and the underwriters, if any, in connection with the offering
and sale of the Transfer Restricted Securities covered by such Prospectus
and any amendment or supplement thereto;
(h) Prior to any public offering of Notes, Exchange Notes or
Private Exchange Notes, use their best efforts to register or qualify or
cooperate with the holders of Notes, Exchange Notes or Private Exchange
Notes to be sold or tendered for, the underwriters, if any, and their
respective counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Notes, Exchange
Notes or Private Exchange Notes for offer and sale under the securities or
Blue Sky laws of such jurisdictions within the United States as any such
holder or underwriter reasonably requests in writing; keep each such
registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective
hereunder and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Notes, Exchange Notes
or Private Exchange Notes covered by the applicable Registration Statement;
PROVIDED, HOWEVER, that the Issuers shall not be required to (i) qualify
generally to do business in any jurisdiction where they are not then so
qualified or (ii) take any action which would subject them to general
service of process or to taxation in any jurisdiction where they are not so
subject;
(i) In connection with any sale or transfer of Transfer
Restricted Securities that will result in such securities no longer being
Transfer Restricted Securities, cooperate with the holders thereof and the
managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities to be
sold, which certificates shall not bear any restrictive legends and shall
be in a form eligible for deposit with The Depository Trust Company and to
enable such Transfer Restricted Securities to be in such denominations and
registered in such names as the managing underwriters, if any, or such
holders may request at least two Business Days prior to any sale of
Transfer Restricted Securities;
<PAGE>
-17-
(j) Upon the occurrence of any event contemplated by Section
5(c)(v), as promptly as practicable, prepare a supplement or amendment,
including, if appropriate, a post-effective amendment, to each Registration
Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file
any other required document so that, as thereafter delivered, such
Prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading;
(k) Prior to the effective date of the Exchange Registration
Statement, to provide a CUSIP number for the Exchange Notes (and Private
Exchange Notes if applicable);
(l) If a Shelf Registration Statement is filed pursuant to
Section 3 hereof, enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten
offerings) and take all such other reasonable actions in connection
therewith (including those reasonably requested by the managing
underwriters, if any, or the holders of a majority in aggregate principal
amount of the Transfer Restricted Securities being sold) in order to
expedite or facilitate the disposition of such Transfer Restricted
Securities, and, whether or not an underwriting agreement is entered into
and whether or not the registration is an underwritten registration, (i)
make such representations and warranties to the holders of such Transfer
Restricted Securities and the underwriters, if any, with respect to the
business of the Company and its subsidiaries (including with respect to
businesses or assets acquired or to be acquired by any of them), and the
Shelf Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each
case, in form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings, and confirm the same if and when
requested; (ii) obtain opinions of counsel to the Issuers and updates
thereof (which counsel and opinions (in form, scope and substance) shall be
<PAGE>
-18-
reasonably satisfactory to the managing underwriters, if any, and Special
Counsel to the holders of the Transfer Restricted Securities being sold),
addressed to each selling holder of Transfer Restricted Securities and each
of the underwriters, if any, covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as may
be reasonably requested by such Special Counsel and underwriters; (iii) use
their best efforts to obtain customary "cold comfort" letters and updates
thereof from the independent certified public accountants of the Company
(and, if necessary, any other independent certified public accountants of
any subsidiary of the Company or of any business acquired by the Company
for which financial statements and financial data is, or is required to be,
included in the Shelf Registration Statement), addressed (where reasonably
possible) to each selling holder of Transfer Restricted Securities and each
of the underwriters, if any, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort" letters
in connection with underwritten offerings; (iv) if an underwriting
agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable to the selling holders and the
underwriters, if any, than those set forth in Section 7 hereof (or such
other provisions and procedures acceptable to holders of a majority in
aggregate principal amount of Transfer Restricted Securities covered by
such Shelf Registration Statement and the managing underwriters, if any);
and (v) deliver such documents and certificates as may be reasonably
requested by the holders of a majority in aggregate principal amount of the
Transfer Restricted Securities being sold, their Special Counsel and the
managing underwriters, if any, to evidence the continued validity of the
representations and warranties made pursuant to clause (i) above and to
evidence compliance with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Issuers;
(m) In the case of a Shelf Registration, make available for
inspection by a representative of the holders of Transfer Restricted
Securities being sold, any underwriter participating in any such
disposition of Transfer Restricted Securities, and any attorney, consultant
or accountant retained by such selling holders or underwriter, at the
<PAGE>
-19-
offices where normally kept, during reasonable business hours, all
financial and other records, pertinent corporate documents and properties
of the Company, the Parent Guarantor and their subsidiaries (including with
respect to businesses and assets acquired or to be acquired to the extent
that such information is available to the Company or Parent Guarantor), and
cause the officers, directors, agents and employees of the Company, the
Parent Guarantor and their subsidiaries (including with respect to
businesses and assets acquired or to be acquired to the extent that such
information is available to the Company or Parent Guarantor) to supply all
information in each case reasonably requested by any such representative,
underwriter, attorney, consultant or accountant in connection with such
Shelf Registration; PROVIDED, HOWEVER, that such persons shall first agree
in writing with the Company or Parent Guarantor, as the case may be, that
any information that is reasonably and in good faith designated by the
Company or Parent Guarantor, as the case may be, in writing as confidential
at the time of delivery of such information shall be kept confidential by
such persons, unless (i) disclosure of such information is required by
court or administrative order or is necessary to respond to inquiries of
regulatory authorities, (ii) disclosure of such information is required by
law (including any disclosure requirements pursuant to Federal securities
laws in connection with the filing of the Shelf Registration Statement or
the use of any Prospectus), (iii) such information becomes generally
available to the public other than as a result of a disclosure or failure
to safeguard such information by such person or (iv) such information
becomes available to such person from a source other than the Company, the
Parent Guarantor and their subsidiaries and such source is not bound by a
confidentiality agreement; and PROVIDED, FURTHER, that the foregoing
inspection and information gathering shall be coordinated by one counsel
designated by and on behalf of such other persons;
(n) Provide an indenture trustee for the Notes and/or the
Exchange Notes and Private Exchange Notes, as the case may be, and cause an
indenture to be qualified under the TIA not later than the effective date
of the first Registration Statement relating to the Notes and/or the
Exchange Notes and Private Exchange Notes, as the case may be; and if such
indenture shall be the Indenture, in connection therewith, cooperate with <PAGE>
-20-
the Trustee and the holders of the Notes and/or the Exchange Notes and
Private Exchange Notes, to effect such changes to the Indenture as may be
required for the Indenture to be so qualified in accordance with the terms
of the TIA; and execute, and use its reasonable efforts to cause the
Trustee to execute, all customary documents as may be required to effect
such changes, and all other forms and documents required to be filed with
the SEC to enable the Indenture to be so qualified in a timely manner;
(o) Comply with all applicable rules and regulations of the
SEC and make generally available to their securityholders earning
statements satisfying the provisions of Section 11(a) of the Securities Act
and Rule 158, no later than 45 days after the end of any 12-month period
(or 90 days after the end of any 12-month period if such period is a fiscal
year) (i) commencing at the end of any fiscal quarter in which Transfer
Restricted Securities are sold to underwriters in a firm commitment or
reasonable efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter after the effective date of a Registration Statement, which
statement shall cover said period, consistent with the requirements of Rule
158; and
(p) Cooperate with each seller of Transfer Restricted
Securities covered by any Registration Statement and each underwriter, if
any, participating in the disposition of such Transfer Restricted
Securities and their respective counsel in connection with any filings
required to be made with the National Association of Securities Dealers,
Inc.
(q) Use their best efforts to cause the Exchange Notes, if
issued, to be listed on the New York Stock Exchange on or prior to the
consummation of the Exchange Offer.
The Issuers may require a holder of Transfer Restricted
Securities to be included in a Registration Statement to furnish to the
Issuers such information regarding the distribution of such Transfer
Restricted Securities as is required by law to be disclosed in such
Registration Statement and the Issuers may exclude from such Registration
Statement the Transfer Restricted Securities of any holder who unreasonably
<PAGE>
-21-
fails to furnish such information within a reasonable time after receiving
such request.
If any such Registration Statement refers to any holder by name
or otherwise as the holder of any securities of an Issuer, then such holder
shall have the right to require (i) the insertion therein of language, in
form and substance reasonably satisfactory to such holder, to the effect
that the holding by such holder of such securities is not to be construed
as a recommendation by such holder of the investment quality of the
Issuers' securities covered thereby and that such holding does not imply
that such holder will assist in meeting any future financial requirements
of the Issuers, or (ii) in the event that such reference to such holder by
name or otherwise is not required by the Securities Act, the deletion of
the reference to such holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
In the case of a Shelf Registration pursuant to Section 3 hereof,
each holder of Transfer Restricted Securities agrees by acquisition of such
Transfer Restricted Securities that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
5(c)(ii), 5(c)(iii), 5(c)(iv) or 5(c)(v) hereof, such holder will forthwith
discontinue disposition of such Transfer Restricted Securities covered by
such Registration Statement or Prospectus until such holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by
Section 5(j) hereof, or until it is advised in writing (the "ADVICE") by
the Company that the use of the applicable Prospectus may be resumed, and,
in either case, has received copies of any additional or supplemental
filings that are incorporated or deemed to be incorporated by reference in
such Prospectus. If the Company shall give any such notice, the
Effectiveness Period shall be extended by the number of days during such
period from and including the date of the giving of such notice to and
including the date when each holder of Transfer Restricted Securities
covered by such Registration Statement shall have received (x) the copies
of the supplemented or amended Prospectus contemplated by Section 5(j)
hereof or (y) the Advice, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus.
<PAGE>
-22-
6. REGISTRATION EXPENSES
All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers shall be borne by the Issuers
whether or not any Registration Statement is filed or becomes effective and
whether or not any Notes, Exchange Notes or Private Exchange Notes are
issued or sold pursuant to any Registration Statement. The fees and
expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without
limitation, fees and expenses (A) with respect to filings required to be
made with the National Association of Securities Dealers, Inc. and (B) in
compliance with securities or Blue Sky laws), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Notes, Exchange Notes and Private Exchange Notes in a form eligible for
deposit with The Depository Trust Company and of printing Prospectuses),
(iii) reasonable fees and disbursements of counsel, including, but not
limited to, Canadian counsel, for the Issuers and the Special Counsel;
PROVIDED, HOWEVER, such fees and disbursements for Special Counsel shall be
limited to such fees and disbursements associated with a Shelf
Registration, (iv) fees and disbursements of all independent certified
public accountants referred to in Section 2(e) and Section 5(l)(iii) hereof
(including, without limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance), (v) if
required, the reasonable fees and expenses of any "qualified independent
underwriter" and its counsel, and (vi) fees and expenses of all other
persons retained by the Issuers. In addition, the Issuers shall pay their
internal expenses (including, without limitation, all salaries and expenses
of their respective officers and employees performing legal or accounting
duties), the expense of any annual audit, and the fees and expenses
incurred in connection with the listing of the Notes, Exchange Notes or
Private Exchange Notes to be registered on any securities exchange.
Notwithstanding the foregoing or anything in this Agreement to the
contrary, each holder of Transfer Restricted Securities shall pay all
underwriting discounts and commissions of any underwriters with respect to
any Notes, Exchange Notes or Private Exchange Notes sold by it.
7. INDEMNIFICATION
(a) The Issuers agree, jointly and severally, to indemnify and
hold harmless (i) each Initial Purchaser, each holder of Notes, Exchange
Notes and Private Exchange Notes and each Participating Broker-Dealer, (ii)
<PAGE>
-23-
each person, if any, who controls (within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act) any of the foregoing (any of the
persons referred to in this clause (ii) being hereinafter referred to as a
"controlling person"), and (iii) the respective officers, directors,
partners, employees, representatives and agents of the Initial Purchasers,
each holder of Notes, Exchange Notes and Private Exchange Notes, each
Participating Broker-Dealer and any controlling person (any person referred
to in clause (i), (ii) or (iii) may hereinafter be referred to as an
"INDEMNIFIED PERSON"), from and against any and all losses, claims,
damages, liabilities and judgments arising out of or relating to any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus or preliminary prospectus or in any
amendment or supplement thereto, or arising out of or relating to any
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein (in the case
of any Prospectus or preliminary prospectus or supplement thereto, in light
of the circumstances under which they were made) not misleading, except
insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement
or omission based upon information relating to any Indemnified Person
furnished in writing to the Issuers by or on behalf of such Indemnified
Person expressly for use therein; PROVIDED that the foregoing indemnity
with respect to any preliminary prospectus shall not inure to the benefit
of any Indemnified Person from whom the person asserting such losses,
claims, damages, liabilities and judgments purchased securities if such
untrue statement or omission or alleged untrue statement or omission made
in such preliminary prospectus is eliminated or remedied in the Prospectus
and a copy of the Prospectus shall not have been furnished to such person
in a timely manner due to the wrongful action or wrongful inaction of such
Indemnified Person.
(b) In case any action shall be brought against any
Indemnified Person, based upon any Registration Statement or any such
Prospectus or preliminary prospectus or any amendment or supplement thereto
and with respect to which indemnity may be sought against the Issuers
hereunder, such Indemnified Person shall promptly notify the Issuers in
writing and the Company shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Person
and payment of all fees and expenses. Any Indemnified Person shall have
the right to employ separate counsel in any such action and participate in
<PAGE>
-24-
the defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person, unless (i) the employment of such
counsel shall have been specifically authorized in writing by the Issuers,
(ii) the Company shall have failed to assume the defense and employ counsel
or pay all such fees and expenses or (iii) the named parties to any such
action (including any impleaded parties) include both such Indemnified
Person and an Issuer and such Indemnified Person shall have been advised by
counsel that there may be one or more legal defenses available to it which
are different from or additional to those available to any such Issuer (in
which case the Company shall not have the right to assume the defense of
such action on behalf of such Indemnified Person, it being understood,
however, that the Issuers shall not, in connection with any one such action
or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all such
Indemnified Persons, which firm shall be designated in writing by such
Indemnified Persons, and that all such reasonable fees and expenses shall
be reimbursed as they are incurred). The Issuers shall not be liable for
any settlement of any such action effected without their written consent
but if settled with the written consent of the Issuers, the Issuers agree,
jointly and severally, to indemnify and hold harmless each Indemnified
Person from and against any loss or liability by reason of such settlement.
No Issuer shall, without the prior written consent of each Indemnified
Person, effect any settlement of any pending or threatened proceeding in
respect of which any Indemnified Person is a party and indemnity could have
been sought hereunder by such Indemnified Person, unless such settlement
includes an unconditional release of such Indemnified Person from all
liability on claims that are the subject matter of such proceeding.
(c) In connection with any Registration Statement pursuant to
which a holder of Transfer Restricted Securities offers or sells Transfer
Restricted Securities, such holder agrees, severally and not jointly, to
indemnify and hold harmless the Issuers, their respective directors and
officers and any person controlling an Issuer within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, to the same
extent as the foregoing indemnity from the Issuers to each Indemnified
Person but only with respect to information relating to such holder
furnished in writing by or on behalf of such holder expressly for use in
<PAGE>
-25-
such Registration Statement. In any such case in which any action shall be
brought against an Issuer, any director or officer of an Issuer or any
person controlling an Issuer based on such Registration Statement and in
respect of which indemnity may be sought against a holder of Transfer
Restricted Securities, such holder shall have the rights and duties given
to the Issuers (except that if an Issuer shall have assumed the defense
thereof, such holder shall not be required to do so, but may employ
separate counsel therein and participate in the defense thereof but the
fees and expenses of such counsel shall be at the expense of such holder),
and the Issuers, their respective directors and officers and any person
controlling an Issuer shall have the rights and duties given to the
Indemnified Persons by Section 7(b) hereof.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to herein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and judgments (i) in
such proportion as is appropriate to reflect the relative benefits received
by each indemnifying party on the one hand and the indemnified party on the
other hand from the offering of the Notes, the Exchange Notes or the
Private Exchange Notes, as the case may be (it being expressly understood
and agreed that the relative benefits received by the Issuers from the
offering of the Notes, Exchange Notes or Private Exchange Notes, as the
case may be, shall be the amount of the net proceeds received by the
Company from the sale of the Notes to the Initial Purchasers), or (ii) if
the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of
each indemnifying party on the one hand and the indemnified party on the
other hand in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or judgments, as well as any
other relevant equitable considerations. The relative fault of the each
indemnifying party on the one hand the indemnified party on the other hand
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by an indemnifying party or
such indemnified party and the parties' relative intent, knowledge, access
<PAGE>
-26-
to information and opportunity to correct or prevent such statement or
omission.
The Issuers and the Initial Purchasers agree that it would not be
just and equitable if contribution pursuant to this Section 7(d) were
determined by pro rata allocation (even if the Indemnified Person were
treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages,
liabilities or judgments referred to in the immediately preceding paragraph
shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, no Indemnified Person
shall be required to contribute any amount in excess of the amount by which
the net profits received by it in connection with the sale of the Notes,
Exchange Notes or Private Exchange Notes contemplated by this Agreement
exceeds the amount of any damages which such Indemnified Person has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The Indemnified Person's obligations
to contribute pursuant to this Section 7(d) are several in proportion to
the respective amount of Notes, Exchange Notes or Private Exchange Notes
included in any such Registration Statement by each Indemnified Person and
not joint.
8. RULES 144 AND 144A
Each of Issuers shall use its best efforts to file the reports
required to be filed by it under the Securities Act and the Exchange Act in
a timely manner and, if at any time it is not required to file such reports
but in the past had been required to or did file such reports, it will,
upon the request of any holder of Transfer Restricted Securities, make
available other information as required by, and so long as necessary to
permit, sales of its Transfer Restricted Securities pursuant to Rule 144A.
Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to
require an Issuer to register any of its securities pursuant to the
Exchange Act.
<PAGE>
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9. UNDERWRITTEN REGISTRATIONS
If any of the Transfer Restricted Securities covered by any Shelf
Registration are to be sold in an underwritten offering, the investment
banker or investment bankers and manager or managers that will administer
the offering will be selected by the holders of a majority in aggregate
principal amount of such Transfer Restricted Securities included in such
offering, subject to the consent of the Company (which will not be
unreasonably withheld or delayed).
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such Transfer Restricted
Securities on the basis reasonably provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
10. MISCELLANEOUS
(a) REMEDIES. In the event of a breach by an Issuer or by a
holder of Notes, Exchange Notes or Private Exchange Notes of any of its
obligations under this Agreement, each holder of Notes, Exchange Notes or
Private Exchange Notes and each Issuer, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement.
Subject to Section 4 hereof, the Issuers and each holder of Notes, Exchange
Notes and Private Exchange Notes agree that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach of any of
the provisions of this Agreement and each hereby further agrees that, in
the event of any action for specific performance in respect of such breach,
it shall waive the defense that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Issuers will not enter
into any agreement with respect to their securities that is inconsistent
with the rights granted to the holders of Notes, Exchange Notes and Private
Exchange Notes and Indemnified Persons in this Agreement or otherwise
conflicts with the provisions hereof. Without the written consent of the
holders of a majority in aggregate principal amount of the outstanding
Transfer Restricted Securities, the Issuers shall not grant to any person
any rights which conflict with or are inconsistent with the provisions of
this Agreement.
<PAGE>
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(c) NO PIGGYBACK ON REGISTRATIONS. The Issuers shall not
grant to any of their securityholders (other than the holders of Transfer
Restricted Securities in such capacity) the right to include any of their
securities in any Registration Statement other than Transfer Restricted
Securities.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given, otherwise than with the prior written consent of
the holders of not less than a majority of the then outstanding aggregate
principal amount of Transfer Restricted Securities; PROVIDED, HOWEVER,
that, for the purposes of this Agreement, Transfer Restricted Securities
that are owned, directly or indirectly, by the Issuers or any of their
Affiliates are not deemed outstanding. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of holders of Transfer
Restricted Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other holders of Transfer Restricted Securities may be given by
holders of a majority in aggregate principal amount of the Transfer
Restricted Securities being sold by such holders pursuant to such
Registration Statement; PROVIDED, HOWEVER, that the provisions of this
sentence may not be amended, modified or supplemented except in accordance
with the provisions of the immediately preceding sentence. Notwithstanding
the foregoing, no amendment, modification, supplement, waiver or consent
with respect to Section 7 shall be made or given otherwise than with the
prior written consent of each Indemnified Person affected thereby.
(e) NOTICES. All notices and other communications provided
for herein shall be made in writing by hand-delivery, next-day air courier,
certified first-class mail, return receipt requested, telex or telecopier:
(i) if to the Issuers, as provided in the Purchase Agreement,
<PAGE>
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(ii) if to the Initial Purchasers, as provided in the Purchase
Agreement, or
(iii) if to any other person who is then the registered holder
of Notes, Exchange Notes or Private Exchange Notes, to
the address of such holder as it appears in the register
therefor of the Company.
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given: when delivered by
hand, if personally delivered; one business day after being timely
delivered to a next-day air courier; five business days after being
deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; and when receipt is acknowledged by the recipient's telecopier
machine, if telecopied.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the benefit of and be binding upon the successors and permitted assigns of
each of the parties and shall inure to the benefit of each holder of Notes,
Exchange Notes and Private Exchange Notes. The Issuers may not assign any
of their rights or obligations hereunder without the prior written consent
of each holder of Transfer Restricted Securities and each Indemnified
Person other than in connection with a merger of, or sale of all or
substantially all of, the Parent Guarantor's assets permitted by and in
conformity with the requirements of the Indenture. Notwithstanding the
foregoing, no successor or assignee of an Issuer shall have any of the
rights granted under this Agreement until such person shall acknowledge its
rights and obligations hereunder by a signed written statement of such
person's acceptance of such rights and obligations.
(g) COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and, all
of which taken together shall constitute one and the same Agreement.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK.
(i) AGENT FOR SERVICE; Submission to Jurisdiction; Waiver of
Immunities. By the execution and delivery of this Agreement, the Parent
Guarantor (i) acknowledges that it has, by separate written instrument,
<PAGE>
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designated and appointed Osler, Hoskin & Harcourt, 280 Park Avenue, Suite
30W, New York, NY 10017 ("OSLER") (and any successor entity), as its
authorized agent upon which process may be served in any suit or proceeding
arising out of or relating to this Agreement, the Guarantee, the
Registration Rights Agreement or the Indenture that may be instituted in
any federal or state court in the State of New York (the "NEW YORK COURT")
or brought under federal or state securities laws, and acknowledges that
Osler has accepted such designation, (ii) submits to the jurisdiction of
any such court in any such suit or proceeding, and (iii) agrees that
service of process upon Osler and written notices of said service to the
Parent Guarantor in accordance with Section 12 shall be deemed in every
respect effective service of process upon the Parent Guarantor in any such
suit or proceeding. The Parent Guarantor further agrees to take any and
all action, including the execution and filing of any and all such
documents and instruments, as may be necessary to continue such designation
and appointment of Osler in full force and effect so long as any of the
Notes shall be outstanding; PROVIDED, HOWEVER, that the Parent Guarantor
may, by written notice to the Initial Purchasers, designate such additional
or alternative agent for service of process under this Section 19 that
(i) maintains an office located in the Borough of Manhattan, City of New
York in the State of New York and (ii) is either (x) counsel for the Parent
Guarantor or (y) a corporate service company which acts as agent for
service of process for other persons in the ordinary course of its
business. Such written notice shall identify the name of such agent for
process and the address of the office of such agent for process in the
Borough of Manhattan, City of New York, State of New York.
To the extent the Parent Guarantor has or hereafter may acquire
any immunity from jurisdiction of any court or from any legal process
(whether through service of notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to
itself or its property, it hereby irrevocably waives such immunity in
respect of its obligations under the above-referenced documents, to the
extent permitted by law.
(j) JUDGMENT CURRENCY. The Parent Guarantor shall indemnify
each Initial Purchaser, their respective affiliates, each person, if any,
who controls any of such parties within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act and each of their
<PAGE>
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respective officers, directors, general partners, employees and agents
against any loss incurred by such party as a result of any judgment or
order being given or made for any amount due under this Agreement and such
judgment or order being expressed and paid in a currency (the "JUDGMENT
CURRENCY") other than United States dollars and as a result of any
variation as between (i) the rate of exchange at which the United States
dollar amount is converted into the Judgment Currency for the purpose of
such judgment or order and (ii) the spot rate of exchange in The City of
New York at which such party on the date of payment of such judgment or
order is able to purchase United States dollars with the amount of the
Judgment Currency actually received by such party. The foregoing indemnity
shall continue in full force and effect notwithstanding any such judgment
or order as aforesaid. The term "spot rate of exchange" shall include any
premiums and costs of exchange payable in connection with the purchase of,
or conversion into, United States dollars.
(k) JOINT AND SEVERAL OBLIGATIONS. All of the obligations of
the Issuers hereunder shall be joint and several obligations of each of
them.
(l) SEVERABILITY. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder
of the terms, provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their reasonable efforts
to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(m) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. All references made in this Agreement to "Section" and
<PAGE>
-32-
"paragraph" refer to such Section or paragraph of this Agreement, unless
expressly stated otherwise.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration
Rights Agreement to be duly executed as of the date first written above.
INTERNATIONAL COMFORT PRODUCTS
HOLDINGS, INC.
By: /s/ Stephen L. Clanton
-------------------------------
Name: Stephen L. Clanton
-----------------------------
Title: Senior Vice President, Chief
Financial Officer and Treasurer
----------------------------
INTERNATIONAL COMFORT PRODUCTS
CORPORATION, as Parent Guarantor
By: /s/ W. Michael Clevy
-------------------------------
Name: W. Michael Clevy
-----------------------------
Title: Chief Executive Officer and
President
----------------------------
SALOMON BROTHERS INC, as Initial Purchaser
By: /s/ Bruce Cummings
-------------------------------
Name: Bruce Cummings
-----------------------------
Title: Managing Director
----------------------------
CREDIT SUISSE FIRST BOSTON CORPORATION, as Initial Purchaser
By: /s/ M. Rod Rivera
-------------------------------
Name: M. Rod Rivera
-----------------------------
Title: Director
----------------------------
<PAGE>
FIRST UNION CAPITAL MARKETS, a division of Wheat
First Securities, Inc., as Initial Purchaser
By: /s/ Kevin Smith
-------------------------------
Name: Kevin Smith
-----------------------------
Title: Vice President
----------------------------
<PAGE>
INTERNATIONAL COMFORT PRODUCTS CORPORATION
1998 STOCK OPTION PLAN
PURPOSE OF THE PLAN
This Stock Option Plan (the "Plan") is intended to promote the interests
of International Comfort Products Corporation (the "Company") and its
shareholders by encouraging employees who the Company's Board of Directors
feel will be responsible for the future growth and continued development of
the Company and its Subsidiaries, as hereinafter defined, to own, and to
increase their ownership of, the Company's stock, thereby giving them, as
shareholders, an increased personal interest in, and a greater concern for,
the Company's continued success and progress.
STATEMENT OF THE PLAN
1. NAME. The Plan shall be known as the International Comfort
Products Corporation 1998 Stock Option Plan.
2. DEFINITION OF TERMS. In addition to words and terms that may
be defined elsewhere in the Plan, the following words and terms as used in
the Plan shall have the following meanings unless the context or use fairly
indicates another or different meaning or intent, which definitions shall be
equally applicable to both the singular and plural forms of such words and
terms:
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended from time to time.
"Incentive Option" shall mean an option which qualifies as an incentive
stock option within the meaning of section 422 of the Code.
"Nonqualified Option" shall mean an option which does not qualify under
section 422 of the Code as an incentive stock option.
"Ordinary Shares" shall mean the no par value ordinary shares of the
Company.
"Outstanding Issue" means, at any time, the number of Ordinary Shares
outstanding on a non-diluted basis.
"Participant" shall mean an employee of the Company or any of its
Subsidiaries to whom an option is granted under the Plan.
"Subsidiary" shall mean any corporation which at the time qualifies as
a subsidiary of the Company under the definition of "subsidiary corporation"
contained in section 424(f) of the Code.
3. ADMINISTRATION. The Plan shall be administered by the Board's
Compensation and Pension Committee (the "Committee"), which shall consist of
not less than two members. The Committee shall be appointed by the Board
from its membership. Members of the Committee shall not be eligible to
participate in the Plan.
The Committee may interpret the Plan, prescribe, amend, and rescind any
rules and regulations necessary or appropriate for the administration of the
Plan, and make such other determinations and take such other action as it
deems necessary or desirable for the administration of the Plan and the
protection of the Company except as otherwise reserved to the Board or the
shareholders of the Company. Without limiting the generality of the
foregoing, the Committee, in its discretion, may treat all or any part of any
period during which a Participant is on military duty or on an approved leave
of absence from the Company or a Subsidiary as a period of employment of such
<PAGE>
Participant by the Company or Subsidiary, as the case may be, for purposes of
accrual of the Participant's rights under the option. Any interpretation,
determination, or other action made or taken by the Committee shall be final,
binding, and conclusive.
No member of the Committee shall be liable for any action taken or
omitted or determination made in good faith with respect to the Plan or any
option granted under the Plan.
4. SHARES SUBJECT TO PLAN. Options may be granted by the Company
from time to time to purchase up to an aggregate of 1,500,000 Ordinary
Shares, subject to adjustment as provided in section 9. If any option
granted under the Plan shall terminate, expire, or, with the consent of the
Participant, be cancelled as to any shares, new options may thereafter be
granted covering any such shares.
5. ELIGIBILITY. Options may be granted to those employees of the
Company (including officers, whether or not they are directors) who have and
exercise key management functions and responsibilities for the Company or any
Subsidiary. The granting of an option to any employee shall neither entitle
such employee to, nor disqualify such employee from, participation in any
other grant of options.
6. GRANT OF OPTIONS. The Committee shall have the authority,
subject to the terms of the Plan, to: (a) determine and designate from time
to time those employees of the Company or any Subsidiary to whom options are
to be granted and the number of shares to be optioned to each such employee,
provided that no director of the Company who is not also an employee of the
Company or of a Subsidiary shall be entitled to receive any option under the
Plan; (b) authorize the granting of Incentive Options, Nonqualified Options,
or combinations of Incentive Options and Nonqualified Options; and to
require, if it so determines, that if an Incentive Option and a Nonqualified
Option are granted to the same Participant, then to the extent one option is
exercised the other option shall not be exercised and shall terminate; (c)
determine the number of shares subject to each option; and (d) determine the
schedule and duration of the exercise period for any option. The date of
grant of an option under the Plan will be the date on which the option is
awarded by the Committee.
7. TERMS AND CONDITIONS OF OPTIONS. Each option granted under
the Plan shall be evidenced by an agreement, in a form approved by the
Committee, and shall be subject to the terms and conditions contained in
sections 7.1 through 7.8 and to such other terms and conditions as the
Committee may deem appropriate and which are in compliance with applicable
laws and the rules and regulations of the stock exchanges on which the
Ordinary Shares are listed from time to time; provided, however, that no
Incentive Option shall be subject to any condition that is inconsistent with
the provisions of section 422 of the Code. In the event that any condition
imposed hereunder on an Incentive Option is at any time determined by the
Internal Revenue Service or a court of competent jurisdiction to be
inconsistent with section 422 of the Code, then each Incentive Option shall
be deemed to have been granted without such condition but shall continue in
effect under such remaining terms and conditions as may be applicable as if
the invalid condition had not been included.
7.1 OPTION PERIOD. Each option agreement shall specify the
period during which the option thereunder is exercisable (which shall not
exceed ten (10) years from the date of grant) and shall provide that the
option shall expire at the end of such period.
7.2 OPTION PRICE. The option price per share shall be
determined by the Committee at the time any option is granted, and shall not
be less than one hundred percent (100%) of the fair market value of the
Ordinary Shares subject to the option, which shall be equal to the closing
market price of the Ordinary Shares on The Toronto Stock Exchange on the last
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<PAGE>
trading day preceding the date of the grant. In the event the Ordinary
Shares are not listed on The Toronto Stock Exchange, the option price shall
be determined based upon the trading prices of the Ordinary Shares on any
Canadian or U. S. stock exchange on which the Ordinary Shares are then
listed. Such price shall be subject to adjustment as provided in section 9.
7.3 NONTRANSFERABILITY. The options granted hereunder shall
not be transferable by the Participant otherwise than by will or the laws of
descent and distribution, and shall not be exercisable by anyone other than
the Participant during his lifetime.
7.4 TEN PERCENT SHAREHOLDERS. Incentive Options shall not be
granted to any employee who, immediately before the option is granted, owns
stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of its parent or
Subsidiaries; provided, however, that this prohibition shall not apply if at
the time such option is granted the option price is at least one hundred ten
percent (110%) of the fair market value of the Ordinary Shares and such
option is not exercisable after the expiration of five (5) years from the
date such option is granted.
7.5 FIVE PERCENT RESTRICTION. The number of Ordinary Shares
reserved for issuance to any one person pursuant to options granted under the
Plan or otherwise shall not exceed 5% of the Outstanding Issue.
7.6 ANNUAL LIMITATION. The aggregate fair market value
(determined as of the time the option is granted) of the stock with respect
to which Incentive Options are exercisable for the first time by any
individual during any calendar year (under the Plan as well as any other plan
of the Company and any parent and Subsidiary of the Company) shall not exceed
One Hundred Thousand Dollars ($100,000). Notwithstanding the limitation set
forth in the preceding sentence, no employee may be granted options for more
than Three Hundred Thousand (300,000) Ordinary Shares during any fiscal year
of the Company.
7.7 TERMINATION OF EMPLOYMENT. If any Participant shall cease to
be an employee of either the Company, a parent, or Subsidiary of the Company,
or a corporation or a parent or subsidiary corporation of such corporation
issuing or assuming a stock option in a transaction to which section 424(a)
of the Code applies, except when such cessation of employment is caused by
the death or disability of the Participant, the options granted to such
Participant shall terminate on the earlier of (a) the passage of three months
after the date of termination of his or her employment, or (b) the expiration
dates. For purposes of this section 7.7, employment shall be considered as
continuing uninterrupted during any bona fide leave of absence (such as those
attributable to illness, military obligations or governmental service)
provided that the period of such leave does not exceed 90 days or, if longer,
any period during which such Participant's right to reemployment is
guaranteed by statute or contract. A bona fide leave of absence with the
written approval of the Committee shall not be considered an interruption of
employment under this section 7.7, provided that such written approval
contractually obligates the Company, a parent or Subsidiary of the Company to
continue the employment of the Participant after the approved period of
absence. Incentive Options granted under the Plan shall not be affected by
any change of employment within or among the Company, a parent or Subsidiary
of the Company, so long as the Participant continues to be an employee of the
Company, a parent or Subsidiary of the Company. If a Participant ceases to
be employed by the Company, a parent or Subsidiary of the Company by reason
of his or her death, any Incentive Option owned by such Participant may be
exercised, to the extent otherwise exercisable on the date of death, by the
estate, personal representative or beneficiary who has acquired the Incentive
Option by will or by the laws of descent and distribution, until the earlier
of (i) the specified expiration date of the Incentive Option, or (ii) 180
days from the date of the Participant's death. If a Participant ceases to be
employed by the Company, a parent or Subsidiary of the Company by reason of
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<PAGE>
his or her disability, such Participant shall have the right to exercise any
Incentive Option held by him or her on the date of termination of employment,
to the extent of the number of shares with respect to which he or she could
have exercised it on that date, until the earlier of (i) the specified
expiration date of the Incentive Option, or (ii) one year from the date of
the termination of the Participant's employment. For purposes of the Plan,
the term "disability" shall mean "permanent and total disability" as defined
in Section 22(e)(3) of the Code or any successor statute. Nothing in the
Plan shall be construed as imposing any obligation on the Company to continue
the employment of any Participant.
7.8 PERIOD OF EXERCISE OF OPTIONS. Any option granted hereunder,
may, prior to its expiration or termination, be exercised from time to time,
in whole or in part, up to the total number of shares with respect to which
it shall have then become exercisable. An option granted hereunder shall
become exercisable in such installments as are specified in the option
agreement, the rate of which shall not be at a rate exceeding the following
schedule:
(a) After one year from the date the option is granted, it may
be exercised as to not more than thirty-three and 1/3 percent (33-1/3%)
of the shares covered thereunder.
(b) After two years from the date the option is granted, it may
be exercised as to not more than an additional thirty-three and 1/3
percent (33-1/3%), or a total of sixty-six and 2/3 percent (66-2/3%),
of the shares covered thereunder.
(c) After three years from the date the option is granted it
may be exercised as to all of the shares covered thereunder.
8. EXERCISE OF OPTION. The exercise of any option under the Plan
shall be subject to the provisions of sections 8.1 through 8.3.
8.1 METHOD OF EXERCISING OPTION. Any option granted hereunder
may be exercised by the Participant by delivering to the Company at its main
office (attention of its Secretary) written notice of the number of shares
with respect to which the option rights are being exercised and by paying the
purchase price of the shares purchased in full, in exchange for the issuance
and delivery of a certificate therefore to or on the order of the
Participant, subject to the provisions of section 7.6 when applicable.
8.2 PAYMENT OF PURCHASE PRICE. The purchase price of the shares
as to which an option is exercised shall be paid in full to the Company at
the time of exercise.
8.3 WITHHOLDING. The Company's obligation to deliver shares on
the exercise of any option shall be subject to satisfaction of any applicable
United States or Canadian federal, state, provincial and local tax
withholding requirements.
9. CAPITAL ADJUSTMENTS. The number and price of Ordinary
Shares covered by each option and the total number of shares that may be
optioned and sold under the Plan shall be proportionately adjusted to reflect
any stock dividend, stock split or share combination of the Ordinary Shares
or any recapitalization of the Company. In the event of any merger,
consolidation, reorganization, liquidation or dissolution of the Company, or
any exchange of shares involving the Ordinary Shares, any option granted
under the Plan shall automatically be deemed to pertain to the securities and
other property to which a holder of the number of Ordinary Shares covered by
the option would have been entitled to receive in connection with any such
event. The Committee shall have the sole discretion to make all
interpretations and determinations required under this section to the extent
it deems equitable and appropriate.
-4-
<PAGE>
10. RESERVATION AND DELIVERY OF SHARES. The Company, during the
term of any options granted hereunder, will at all times reserve and keep
available, and will seek to obtain from any regulatory body having
jurisdiction any requisite authority in order to issue and sell, such number
of Ordinary Shares as shall be sufficient to satisfy the requirements of the
options granted under the Plan. If in the opinion of its counsel, the
issuance or sale of any shares of its stock hereunder shall not be lawful for
any reason, including the inability of the Company to obtain from any
regulatory body having jurisdiction authority deemed by such counsel to be
necessary for such issuance or sale, the Company shall not be obligated to
issue or sell any such shares.
11. EVENT OF DEFEASANCE. Any options granted hereunder are
specifically made subject to defeasance by the failure of the shareholders of
the Company to approve the Plan within a period of twelve months from the
date the Plan is adopted by the Board.
12. COMPLIANCE WITH LAWS. No options shall be granted and no
Ordinary Shares shall be issued or sold upon the exercise of any option
unless and until the then applicable requirements of Canadian and United
States securities laws and the rules and regulations of applicable securities
regulatory authorities and any other regulatory agencies and laws having
jurisdiction over or applicability to the Company, and the rules and
regulations of any stock exchange on which the Ordinary Shares may be listed,
shall have been fully complied with and satisfied. With respect to U. S.
Participants, upon the exercise of an option at a time when there is not in
effect under the Securities Act of 1933, a current registration statement
relating to the Ordinary Shares to be received upon such exercise, the U. S.
Participant shall represent and warrant in writing to the Company that the
shares purchased are being acquired for investment and not with a view to the
distribution thereof and shall agree to the imposition of a legend on the
certificate or certificates representing said shares evidencing the
restrictions on transfer under the Securities Act of 1933 and the issuance of
stop-transfer instructions by the Company to its transfer agent with respect
thereto.
13. ADDITIONAL APPROVALS. This Plan shall be subject to acceptance by
The Toronto Stock Exchange in compliance with all conditions imposed by The
Toronto Stock Exchange. Any options granted prior to such acceptance shall
be conditional upon such acceptance being given and any conditions complied
with and no such options may be exercised unless such acceptance is given and
such conditions are complied with .
14. NO RIGHTS AS SHAREHOLDER. A Participant shall not have any
rights as a shareholder with respect to any shares covered by any option
granted hereunder until the issuance of such shares pursuant to the terms of
this Plan. No adjustment shall be made on the issuance of a stock
certificate to a Participant as to any dividends or other rights for which
the record date occurred prior to the issuance of such certificate.
15. INDEMNIFICATION AND EXCULPATION. Each person who is or shall
have been a member of the Board or of the Committee shall be indemnified and
held harmless by the Company against and from any and all loss, cost,
liability, or expense that may be imposed upon or reasonably incurred by
him/her in connection with or resulting from any claim, action, suit, or
proceeding to which he/she may be or become involved by reason of any action
taken or failure to act under the Plan and against and from any and all
amounts paid by him/her in settlement thereof (with the Company's written
approval) or paid by him/her in satisfaction of a judgment in any such
action, suit, or proceeding, except a judgment in favor of the Company based
upon a finding of his lack of good faith; subject, however, to the condition
that upon the institution of any claim, action, suit, or proceeding against
him/her, he/she shall in writing give the Company an opportunity, at its
expense, to handle and defend the same before he/she undertakes to handle and
defend it on his/her own behalf. The foregoing right of indemnification
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<PAGE>
shall not be exclusive of any other right to which such person may be
entitled as a matter of law or otherwise, or any power that the Company may
have to indemnify him/her or hold him/her harmless. Each member of the Board
or of the Committee, and each officer and employee of the Company shall be
fully justified in relying or acting in good faith upon any information
furnished in connection with the administration of the Plan by any
appropriate person or persons other than himself/herself. In no event shall
any person who is or shall have been a member of the Board or of the
Committee, or an officer or employee of the Company, be held liable for any
determination made, or other action taken, or any omission to act in reliance
upon any such information as referred to in the preceding sentence, or for
any action (including the furnishing of information) taken or any omission to
act, when any such determination, action, or omission is made in good faith.
16. USE OF PROCEEDS. Proceeds from the sale of stock pursuant to
options granted under the Plan shall constitute general funds of the Company.
17. AMENDMENT AND DISCONTINUANCE. The Board may terminate or
amend the Plan in any respect at any time, provided that (a) no action of the
Board or the shareholders may alter or impair a Participant's rights under
any outstanding option without the Participant's consent, (b) without the
approval of the shareholders, the total number of shares that may be optioned
and sold under the Plan may not be increased (except by adjustment pursuant
to section 9), the provisions of section 5 regarding eligibility may not be
modified, the price at which shares may be purchased pursuant to options
granted hereunder may not be reduced (except by adjustment pursuant to
section 9), the expiration date of the Plan may not be extended, and the
provisions of this section 17 may not be changed, and (c) any such amendment
to this Plan is subject to the approval of The Toronto Stock Exchange or such
other stock exchanges on which the Ordinary Shares may be listed from time to
time and may require the approval of the Company's shareholders.
18. TERM OF PLAN. Subject to the provisions of section 11, the
Plan shall be effective as of the date of the adoption of the Plan by the
Board and shall expire on December 31, 2007 (except as to options outstanding
on that date), and no option shall be granted under the Plan on or after such
expiration date.
19. GENERAL. Except as the same may be governed by the Code and
any applicable United States federal securities laws, the Plan and any
options granted hereunder shall be governed by and construed in accordance
with the laws of the Province of Ontario and the federal laws of Canada
applicable therein. As herein used, the singular number shall include the
plural, the plural the singular, and the use of any gender shall be
applicable to all genders, unless the context or use shall fairly require a
different construction. Section or paragraph headings are employed herein
solely for convenience of reference, and such headings shall not affect the
validity, meaning, or enforceability of any provision of the Plan. All
references herein to "section" or "paragraph" shall mean the appropriately
numbered section or paragraph of the Plan except where reference is made to
the Code of any other specified law or instrument.
-6-
<PAGE>
EXHIBIT 12.1
INTERNATIONAL COMFORT PRODUCTS CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in Millions of U.S. Dollars, Except Ratios)
<TABLE>
<CAPTION>
--------------- --------------------------------
Three Months
Ended March 31, Year Ended December 31,
--------------- --------------------------------
1997 1998 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income (loss) before
income taxes $ 1.4 $ 3.5 $ (5.5) $ (68.4) $ 11.6 $ 22.0
Add:
Interest expense 4.7 4.5 20.2 21.7 19.4 18.2
Amortization of debt
issuance costs 0.3 0.3 1.7 1.3 1.8 1.3
Write-off of debt
issuance costs - - 1.2 2.1 0.6 -
Rental expense
representative
of interest(a) 0.3 0.3 2.6 2.3 2.0 1.3
---- ---- ---- ----- ----- -----
Total Earnings $ 6.7 $ 8.6 $ 20.2 $ (41.0) $ 35.4 $ 42.8
==== ==== ==== ===== ===== =====
FIXED CHARGES
Interest expense 4.7 4.5 20.2 21.7 19.4 18.2
Amortization of debt
issuance costs 0.3 0.3 1.7 1.3 1.8 1.3
Write-off of debt
issuance costs - - 1.2 2.1 0.6 -
Rental expense
representative
of interest(a) 0.3 0.3 2.6 2.3 2.0 1.3
---- ---- ---- ----- ----- -----
Total Fixed Charges $ 5.3 $ 5.1 $ 25.7 $ 27.4 $ 23.8 $ 20.8
==== ==== ==== ===== ===== =====
Ratio of Earnings to
Fixed Charges 1.26 1.68 0.79 (1.50) 1.49 2.06
</TABLE>
- ----------------
(a) The amounts shown above for rental expense represent that portion of
rental expense deemed by the Company to be representative of interest.
<PAGE>
Subsidiaries of International Comfort Products Corporation<F1>
State or other Jurisdiction
Name of Incorporation or Organization
- ---------------------------------------------------------------------------
ICP Property and Casualty Corporation British Columbia, Canada
International Comfort Products
Holdings, Inc. Delaware, USA
International Comfort Products
Corporation (Canada) Canada
ICP International Holdings, Inc. Cayman Islands, B.W.I.
International Comfort Products
Corporation (USA)<F2> Delaware, USA
G.C. McDonald Supply Limited<F3> Ontario, Canada
M.T.R. Controls Ltd.<F3> British Columbia, Canada
M.T.R. Controls (Manitoba) Ltd.<F3> Manitoba, Canada
HAVE Wholesale Ltd.<F3> Canada
Fast Parts de Mexico S.A. de C.V.<F4> Mexico
United Electric Company<F5> Delaware, USA
ICP Petroleum, Inc.<F5> Delaware, USA
Tempstar Distributing, Inc.<F5> Delaware, USA
Fast Parts do Brasil Ltda<F5> Brazil
Industrias HVH, S.A.<F5> Spain
Inter-City Products Partner
Corporation<F5> Delaware, USA
Fast Components Corp<F5> Delaware, USA
Continental VAV, Inc.<F6> Texas
United Electric Company, L.P.<F7> Texas
Inter-City Products Receivables
Company, L.P.<F8> Tennessee, USA
[FN]
<F1>
All subsidiaries are wholly-owned unless otherwise indicated.
<F2>
Subsidiary of International Comfort Products Holdings, Inc.
<F3>
Subsidiaries of International Comfort Products Corporation (Canada).
<F4>
Subsidiary of ICP International Holdings, Inc.
<F5>
Subsidiary of International Comfort Products Corporation (USA).
<F6>
Subsidiary of United Electric Company.
<F7>
General Partner is Continental VAV, Inc.; limited partner is
United Electric Company.
<F8>
General Partner is Inter-City Products Partner Corporation;
limited partner is International Comfort Products Corporation (USA).
</FN>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
--------
-------------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I. R. S. Employer
if not a U. S. national bank) Identification No.)
114 West 47th Street 10036-1532
New York, New York (Zip Code)
(Address of principal
executive offices)
-------------------------
International Comfort Products Holdings, Inc.
(Exact name of OBLIGOR as specified in its charter)
Delaware 62-1744926
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
Suite 200, 501 Corporate Centre Drive 37067
Franklin, Tennessee (Zip code)
(Address of principal executive offices)
-------------------------
International Comfort Products Corporation
(Exact name of OBLIGOR as specified in its charter)
Canada 98-0045209
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
66th Floor, 1 First Canadian Place M5X 1B8
Toronto, Ontario, Canada (Zip code)
(Address of principal executive offices)
-------------------------
8-5/8% Senior Notes due 2008, Series B
(Title of the indenture securities)
<PAGE>
- 2 -
GENERAL
1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Reserve Bank of New York (2nd District),
New York, New York (Board of Governors of the Federal
Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH THE OBLIGOR
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
International Comfort Products Holdings, Inc. and International
Comfort Products Corporation currently are not in default.
Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13,
14 and 15 of Form T-1 are not required under General Instruction B.
16. LIST OF EXHIBITS
T-1.1 -- Organization Certificate, as amended, issued by the State
of New York Banking Department to transact business as a
Trust Company, is incorporated by reference to Exhibit
T-1.1 to Form T-1 filed on September 15, 1995 with the
Commission pursuant to the Trust Indenture Act of 1939, as
amended by the Trust Indenture Reform Act of 1990
(Registration No. 33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE>
- 3 -
16. LIST OF EXHIBITS
(CONT'D)
T-1.4 -- The By-Laws of United States Trust Company of New York, as
amended, is incorporated by reference to Exhibit T-1.4 to
Form T-1 filed on September 15, 1995 with the Commission
pursuant to the Trust Indenture Act of 1939, as amended by
the Trust Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of
the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee
pursuant to law or the requirements of its supervising or
examining authority.
NOTE
As of July 3, 1998, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States
Trust Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information
to be furnished by the obligor and the trustee disclaims responsibility for
the accuracy or completeness of such information.
-------------------------
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, United States Trust Company of New York, a corporation organized
and existing under the laws of the State of New York, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New
York, on the 3rd day of July 1998.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /S/ Cynthia Chaney
-----------------------------
Cynthia Chaney
Assistant Vice President
<PAGE>
Exhibit T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of
1939, as amended by the Trust Indenture Reform Act of 1990, and subject to
the limitations set forth therein, United States Trust Company of New York
("U.S. Trust") hereby consents that reports of examinations of U.S. Trust
by Federal, State, Territorial or District authorities may be furnished by
such authorities to the Securities and Exchange Commission upon request
therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
/s/Gerard F. Ganey
-----------------------
By: Gerard F. Ganey
Senior Vice President
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
MARCH 31, 1998
----------------
($ IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
------
Cash and Due from Banks $ 303,692
Short-Term Investments 325,044
Securities, Available for Sale 650,954
Loans 1,717,101
Less: Allowance for Credit Losses 16,546
----------
Net Loans 1,700,555
Premises and Equipment 58,868
Other Assets 120,865
----------
TOTAL ASSETS $ 3,159,978
==========
LIABILITIES
-----------
Deposits:
Non-Interest Bearing $ 602,769
Interest Bearing 1,955,571
----------
Total Deposits 2,558,340
Short-Term Credit Facilities 293,185
Accounts Payable and
Accrued Liabilities 136,396
----------
TOTAL LIABILITIES $ 2,987,921
==========
STOCKHOLDER'S EQUITY
--------------------
Common Stock 14,995
Capital Surplus 49,541
Retained Earnings 105,214
Unrealized Gains on Securities
Available for Sale
(Net of Taxes) 2,307
----------
TOTAL STOCKHOLDER'S EQUITY 172,057
----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 3,159,978
==========
</TABLE>
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named
bank do hereby declare that this Statement of Condition has been prepared
in conformance with the instructions issued by the appropriate regulatory
authority and is true to the best of my knowledge and belief.
/S/ Richard E. Brinkmann, SVP & Controller
May 6, 1998
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC.
LETTER OF TRANSMITTAL
8-5/8% SERIES A SENIOR NOTES DUE 2008
TO: UNITED STATES TRUST COMPANY, THE EXCHANGE AGENT
By Registered or Certified Mail: By Hand or Courier before 4:30 p.m.:
United States Trust Company of United States Trust Company of
New York New York
P.O. Box 843 Cooper Station 111 Broadway
New York, New York 10276 New York, New York 10006
Attention: Corporate Trust Services Attention: Lower Level Corporate
Trust Window
By Facsimile: By Hand after 4:30 p.m. (on the
Expiration Date Only) and By
Overnight Courier:
United States Trust Company of United States Trust Company of
New York New York
(212) 780-0592 770 Broadway, 13th Floor
Attention: Customer Service New York, New York 10003
Confirm by telephone: (800) 548-6565
Delivery of this instrument to an address other than as set forth above
or transmission of instructions via a facsimile number other than the one
listed above will not constitute a valid delivery. The instructions
accompanying this Letter of Transmittal should be read carefully before this
Letter of Transmittal is completed.
The undersigned acknowledges that the undersigned has received the
Prospectus, dated , 1998, (the "Prospectus"), of International
Comfort Products Holdings, Inc. (the "Company") and International Comfort
Products Corporation (the "Parent Guarantor") and this Letter of Transmittal
(the "Letter of Transmittal"), which together constitute the Company's offer
(the "Exchange Offer") to exchange $1,000 principal amount of its 8-5/8%
Series B Senior Notes due 2008 (the "New Notes"), which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant
to a Registration Statement of which the Prospectus is a part, for each
$1,000 principal amount of its outstanding 8-5/8% Series A Senior Notes due
2008 (the "Old Notes"), of which $150,000,000 aggregate principal amount is
outstanding. Other capitalized terms used but not defined herein have the
meanings given to them in the Prospectus.
<PAGE>
This Letter of Transmittal is to be used by holders of Old Notes (i) if
certificate(s) representing the Old Notes are to be physically delivered
herewith, or (ii) if tender of Old Notes is to be made by book-entry transfer
to the Exchange Agent's account at The Depository Trust Company ("DTC"),
pursuant to the procedures discussed in the Prospectus under the caption
"Terms Of The Exchange Offer -- Procedures for Tendering" by any financial
institution that is a participant in DTC and whose name appears on a security
position listing as the owner of Old Notes or (iii) if tender of Old Notes is
to be made according to the guaranteed delivery procedures discussed in the
Prospectus under the caption "Terms Of The Exchange Offer -- Guaranteed
Delivery Procedures." DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE
DELIVERY TO THE EXCHANGE AGENT.
The term "holder" with respect to Old Notes in the Exchange Offer means
any person (i) in whose name Old Notes are registered on the books of the
Company or any other person who has obtained a properly completed bond power
from the registered holder, or (ii) whose Old Notes are held of record by DTC
and who desires to deliver such Old Notes by book-entry transfer at DTC. The
undersigned has completed, executed and delivered this Letter of Transmittal
to indicate the action the undersigned desires to take with respect to the
Exchange Offer. Holders of Old Notes who wish to tender their Old Notes must
complete this Letter of Transmittal in its entirety.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE CHECKING ANY
BOX BELOW.
- ---------------------------------------------------------------------------
DESCRIPTION OF 8-5/8% SERIES A SENIOR NOTES DUE 2008 ("OLD NOTES") TENDERED
HEREWITH:
PRINCIPAL AGGREGATE PRINCIPAL
AMOUNT TENDERED AMOUNT
(MUST BE IN REPRESENTED BY
INTEGRAL CERTIFICATE(S)
NAME(S) AND ADDRESS(ES) MULTIPLE OF (PLEASE FILL IN
OF REGISTERED HOLDER(S) $1,000*) CERTIFICATE NUMBERS*)
- ---------------------- --------------- ---------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
TOTAL:
-----------------------
<PAGE>
*Need not be completed if Old Notes are being tendered by book-entry
transfer. Unless indicated in the column labeled "Principal Amount Tendered,"
any tendering holder of Old Notes will be deemed to have tendered the entire
aggregate principal amount in the column labeled "Aggregate Principal Amount
Represented by Certificate(s)." The minimum permitted tender is $1,000 in
principal amount of Old Notes. All other tenders must be in integral
multiples of $1,000.
If the space provided above is inadequate, list the principal amounts
represented by certificate(s) of Old Notes on a separate signed schedule and
affix the list to this Letter of Transmittal.
- ----------------------------------------------------------------------------
LADIES AND GENTLEMEN:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of Old Notes
indicated above. Subject to and effective upon the acceptance for exchange of
the principal amount of Old Notes tendered in accordance with this Letter of
Transmittal, the undersigned sells, assigns and transfers to, or upon the
order of, the Company all right, title and interest in and to the Old Notes
tendered hereby. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as its agent and attorney-in-fact (with full knowledge
that the Exchange Agent also acts as the agent of the Company) with respect
to the tendered Old Notes with full power of substitution to (i) deliver
certificate(s) for such Old Notes to the Company, or transfer ownership of
such Old Notes on the account books maintained by DTC, and deliver all
accompanying evidences of transfer and authenticity to, or upon the order of,
the Company; and (ii) present such Old Notes for transfer on the books of the
Company and receive all benefits and otherwise exercise all rights of
beneficial ownership of such Old Notes, all in accordance with the terms of
the Exchange Offer. The power of attorney granted in this paragraph shall be
deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claim, when such Old Notes are acquired by the
Company. THE UNDERSIGNED HEREBY FURTHER REPRESENTS THAT ANY NEW NOTES
ACQUIRED IN EXCHANGE FOR OLD NOTES TENDERED HEREBY WILL HAVE BEEN ACQUIRED IN
THE ORDINARY COURSE OF BUSINESS OF THE HOLDER RECEIVING SUCH NEW NOTES,
WHETHER OR NOT THE UNDERSIGNED, THAT NEITHER THE HOLDER NOR ANY SUCH OTHER
PERSON HAS AN ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN
THE DISTRIBUTION OF SUCH NEW NOTES AND THAT NEITHER THE HOLDER NOR ANY SUCH
OTHER PERSON IS AN "AFFILIATE," AS DEFINED UNDER RULE 405 OF THE SECURITIES
ACT, OF THE COMPANY. If the
<PAGE>
undersigned is not a broker-dealer, the undersigned represents that it is not
engaged in, and does not intend to engage in, a distribution of New Notes. If
the undersigned is a broker-dealer that will receive New Notes, it represents
that the Old Notes to be exchanged for New Notes were acquired as a result of
market-making activities or other trading activities and not acquired
directly from the Company, and it acknowledges that it will deliver a
prospectus in connection with any resale of such New Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. The undersigned will, upon request, execute and deliver any
additional documents deemed by the Exchange Agent or the Company to be
necessary or desirable to complete the assignment, transfer and purchase of
the Old Notes tendered hereby.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Old Notes when, as and if the Company has given
oral or written notice thereof to the Exchange Agent.
If any tendered Old Notes are not accepted for exchange pursuant to the
Exchange Offer for any reason, the certificate(s) for any such unaccepted Old
Notes will be returned (except as noted below with respect to tenders through
DTC), without expense, to the undersigned at the address shown below or at a
different address as may be indicated herein under the caption "Special
Payment Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns. The undersigned understands that
tenders of Old Notes pursuant to the procedures discussed under the caption
"Terms Of The Exchange Offer -- Procedures for Tendering" in the Prospectus
and in the instructions hereto will constitute a binding agreement between
the undersigned and the Company in accordance with the terms and subject to
the conditions of the Exchange Offer.
Unless otherwise indicated herein under the caption "Special Payment
Instructions," please issue the certificate(s) representing the New Notes
issued in exchange for the Old Notes accepted for exchange and return any Old
Notes not tendered or not exchanged, in the name(s) of the undersigned (or in
either such event in the case of Old Notes tendered by DTC, by credit to the
undersigned's account at DTC). Similarly, unless otherwise indicated herein
under the caption "Special Delivery Instructions," please send the
certificate(s) representing the New Notes issued in exchange for the Old
Notes accepted for exchange and any certificate(s) for Old Notes not tendered
or not exchanged (and accompanying documents, as appropriate) to the
undersigned at the address shown above in the box entitled "Description of 8-
5/8% Series A Senior Notes due 2008", unless, in either event, tender is
being made through DTC. In the event that both "Special Payment Instructions"
and "Special Delivery Instructions" are completed, please issue the
certificate(s) representing the New Notes issued in exchange for the Old
Notes accepted for exchange and return any Old Notes not tendered or not
exchanged in the name(s) of, and send such certificate(s) to, the person(s)
so indicated. The undersigned recognizes that,
<PAGE>
notwithstanding any information provided herein under the captions "Special
Payment Instructions" and "Special Delivery Instructions," the Company has no
obligation to transfer any Old Notes from the name of the registered
holder(s) thereof if the Company does not accept for exchange any of the Old
Notes so tendered.
Holders of Old Notes who wish to tender their Old Notes and (i) whose
Old Notes are not immediately available, or (ii) who, prior to the Expiration
Date, cannot deliver their Old Notes, this Letter of Transmittal or any other
documents required hereby to the Exchange Agent or cannot complete the
procedure for book-entry transfer, may tender their Old Notes according to
the guaranteed delivery procedures discussed in the Prospectus under the
caption "Terms Of The Exchange Offer -- Guaranteed Delivery Procedures." See
Instruction 1 regarding the completion of this Letter of Transmittal printed
below.
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 7)
To be completed ONLY if certificate(s) for Old Notes in a principal
amount not tendered or not accepted for exchange, or New Notes issued in
exchange for Old Notes accepted for exchange, are to be issued in the name of
someone other than the undersigned, or if the Old Notes tendered by
book-entry transfer that are not accepted for exchange are to be credited to
an account maintained at DTC other than the account indicated below from
which the Old Notes were tendered.
ISSUE CERTIFICATE(S) TO:
Name:
-----------------------------------------------------------------------
(Please Print)
Address:
-------------------------------------------------------------------
-------------------------------------------------------------------
(Include Zip Code)
Social Security
or Employer Identification Number:
--------------------------
Credit unexchanged Old Notes delivered by book-entry transfer to an
account maintained at DTC other than the account indicated below from which
the Old Notes were tendered.
Book-entry Transfer Facility
Account Number, if applicable:
------------------------------
<PAGE>
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5)
To be completed ONLY if certificate(s) for Old Notes in a principal
amount not tendered or not accepted for exchange, or New Notes issued in
exchange for Old Notes accepted for exchange, are to be sent to someone other
than the undersigned, or to the undersigned at an address other than that
shown above.
SEND TO :
Name:
-----------------------------------------------------------------------
(Please Print)
Address:
-------------------------------------------------------------------
-------------------------------------------------------------------
(Include Zip Code)
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY DTC TO THE
EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
--------------------------------------------
DTC Book-Entry Account No.:
-----------------------------------------------
Transaction Code No.:
-----------------------------------------------------
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT
AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):
-------------------------------------------
Window Ticket Number (if any):
---------------------------------------------
Date of Execution of Notice
of Guaranteed Delivery:
----------------------------------------------------
Name of Institution
that guaranteed delivery:
--------------------------------------------------
<PAGE>
IF DELIVERY BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number:
--------------------------------------------
Transaction Code Number:
-----------------------------------
[ ] CHECK HERE IF THE UNDERSIGNED IS A BROKER-DEALER AND WISHES TO
RECEIVE TEN (10) ADDITIONAL COPIES OF THE PROSPECTUS AND TEN (10)
COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
-----------------------------------------------------------------------
(Please Print)
Address:
-------------------------------------------------------------------
-------------------------------------------------------------------
(Include Zip Code)
<PAGE>
PLEASE SIGN HERE WHETHER OR NOT OLD NOTES ARE BEING PHYSICALLY TENDERED
HEREBY.
- ---------------------------------------------------------
SIGNATURE(S) OF HOLDER(S)
OR AUTHORIZED SIGNATORY
Date:
----------------------------------------------------
Area Code and Telephone Number:
--------------------------
The above lines must be signed by the holder(s) of Old Notes as their name(s)
appear(s) on the Old Notes or, if the Old Notes are tendered by a participant
in DTC, as such participant's name appears on a security position listing as
the owner of the Old Notes, or by person(s) authorized to become holder(s) by
a properly completed bond power from the holder(s), a copy of which must be
transmitted with this Letter of Transmittal. If Old Notes to which this
Letter of Transmittal relates are held of record by two or more joint
holders, then all such holders must sign this Letter of Transmittal. If
signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, such person must (i) set forth his or
her full title below and (ii) unless waived by the Company, submit evidence
satisfactory to the Company of such person's authority so to act. See
Instruction 4 regarding the completion of this Letter of Transmittal printed
below.
Name(s):
--------------------------------------------------------------------
(Please Print)
Capacity:
-------------------------------------------------------------------
Address:
-------------------------------------------------------------------
-------------------------------------------------------------------
(Include Zip Code)
SIGNATURE(S) GUARANTEED BY AN ELIGIBLE INSTITUTION:
(IF REQUIRED BY INSTRUCTION 4)
- ----------------------------------------------------------------------------
(Name of Firm)
- ----------------------------------------------------------------------------
(Authorized Signature)
- ----------------------------------------------------------------------------
(Title)
Date: , 1998
--------------------
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES. The
tendered Old Notes (or a confirmation of a book-entry transfer into the
Exchange Agent's account at DTC of all Old Notes delivered electronically),
as well as a properly completed and duly executed copy of this Letter of
Transmittal or facsimile hereof and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent at its address
set forth herein prior to 5:00 P.M., New York City time, on the Expiration
Date. The method of delivery of the tendered Old Notes, this Letter of
Transmittal and all other required documents to the Exchange Agent is at the
election and risk of the holder of such Old Notes and, except as otherwise
provided below, the delivery will be deemed made only when actually received
or confirmed by the Exchange Agent. Instead of delivery by mail, it is
recommended that a holder of Old Notes use an overnight or hand-delivery
service. In all cases, sufficient time should be allowed to assure timely
delivery. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE
COMPANY.
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available or (ii) who, prior to 5:00 P.M., New York City
time, on the Expiration Date, cannot deliver their Old Notes, this Letter of
Transmittal or any other documents required hereby to the Exchange Agent or
cannot complete the procedure for book-entry transfer, must tender their Old
Notes according to the guaranteed delivery procedures set forth in the
Prospectus. Pursuant to such procedures: (i) such tender must be made by or
through a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., a commercial bank or trust
company having an office or correspondent in the United States or an
institution that falls within the definition of "Eligible Guarantor
Institution" contained in Rule 17Ad-15 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended
(each, an "Eligible Institution"); (ii) prior to 5:00 P.M., New York City
time, on the Expiration Date, the Exchange Agent must have received from the
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Old Notes and the
principal amount of Old Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within three (3) New York Stock Exchange
trading days after the date of execution of the Notice of Guaranteed
Delivery, this Letter of Transmittal (or facsimile hereof) together with the
certificate(s) representing the Old Notes to be tendered in proper form for
transfer (or a confirmation of electronic delivery of book-entry transfer
into the Exchange Agent's account at DTC) and any other required documents
will be deposited by the Eligible Institution with the Exchange Agent; and
(iii) such properly completed and executed Letter of Transmittal (or
facsimile hereof), as well as all other documents required by this Letter of
Transmittal and the certificate(s) representing all tendered Old Notes in
proper form for transfer (or a confirmation of electronic delivery of
book-entry transfer into the Exchange Agent's account at DTC), must be
received by the Exchange Agent within three (3) New York Stock Exchange
trading days after the date of execution of the Notice of Guaranteed
Delivery, all as provided in the Prospectus under the caption "Terms Of The
Exchange Offer -- Guaranteed Delivery
<PAGE>
Procedures." Any holder of Old Notes who wishes to tender such holder's Old
Notes pursuant to the guaranteed delivery procedures described above must
ensure that the Exchange Agent receives the Notice of Guaranteed Delivery
prior to 5:00 P.M., New York City time, on the Expiration Date. Upon request
to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to
holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Old Notes and withdrawal of tendered Old
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding on all parties. The Company reserves
the absolute right to reject any and all Old Notes not properly tendered or
any Old Notes the Company's acceptance of which would, in the opinion of
counsel for the Company, be unlawful. The Company also reserves the right to
waive any defects or irregularities or conditions of tender as to the
Exchange Offer and/or particular Old Notes. The Company's interpretation of
the terms and conditions of the Exchange Offer (including the instructions in
this Letter of Transmittal) will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
must be cured within such time as the Company shall determine. None of the
Company, the Exchange Agent nor any other person shall be under any duty to
give notification of defects or irregularities with respect to tenders of Old
Notes, nor shall any of them incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such defects or irregularities have been cured or waived. Any Old Notes
received by the Exchange Agent that are not properly tendered and as to which
any defects or irregularities have not been cured or waived will be returned
by the Exchange Agent to the tendering holder(s) of Old Notes, unless
otherwise provided in this Letter of Transmittal, as soon as practicable
following the Expiration Date.
2. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any tendering
holder whose Old Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated herein for further
instructions.
3. PARTIAL TENDERS. Tenders of Old Notes will be accepted only
in integral multiples of $1,000. If less than the entire principal amount of
any Old Note is tendered, the tendering holder should fill in the principal
amount tendered in the last column of the table entitled "Description of 8-
5/8% Series A Senior Notes due 2008 Tendered Herewith" above. The entire
principal amount of Old Notes delivered to the Exchange Agent will be deemed
to have been tendered unless otherwise indicated. If the entire principal
amount of all Old Notes is not tendered, then Old Notes for the principal
amount of Old Notes not tendered and a certificate or certificates
representing New Notes issued in exchange for any Old Notes accepted will be
sent to the holder at such holder's registered address, unless a different
address is provided in the appropriate box on this Letter of Transmittal, or
credited to an appropriate account at DTC, if applicable, promptly after the
Old Notes are accepted for exchange.
<PAGE>
4. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or
facsimile hereof) is signed by the record holder(s) of the Old Notes tendered
hereby, the signature must correspond with the name(s) as written on the face
of the Old Notes or, if the Old Notes are tendered by a participant in DTC,
as such participant's name appears on a security position listing as the
owner of the Old Notes, without alteration, enlargement or any change
whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
holder(s) of the Old Notes tendered hereby and the certificate or
certificates for New Notes issued in exchange therefor are to be issued (or
any untendered principal amount of Old Notes is to be reissued) to such
holder(s), such holder(s) need not and should not endorse any tendered Old
Notes, nor provide a separate bond power. In any other case, such holder(s)
must either properly endorse the Old Notes tendered or transmit a properly
completed separate bond power with this Letter of Transmittal, with the
signatures on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a
person other than the holder(s) of the Old Notes tendered hereby, such Old
Notes must be endorsed or accompanied by appropriate bond powers signed as
the name(s) of the registered holder(s) appear(s) on the Old Notes, with the
signatures on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing and,
unless waived by the Company, evidence satisfactory to the Company of their
authority so to act must be submitted with this Letter of Transmittal.
Except as otherwise provided below, all signatures on this Letter of
Transmittal (or facsimile hereof) must be guaranteed by an Eligible
Institution. Signatures on this Letter of Transmittal need not be guaranteed
if (i) this Letter of Transmittal is signed by the holder(s) of the Old Notes
tendered herewith (which term, for these purposes, includes any participant
in DTC whose name appears on a security position listing as the holder of
such Old Notes) and such holder(s) have not completed the box set forth
herein entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions"; or (ii) such Old Notes are tendered for the account
of an Eligible Institution.
5. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. Tendering holders
should indicate, in the applicable box or boxes, the name and address to which
New Notes or substitute Old Notes for principal amounts not tendered or not
accepted for exchange are to be issued or sent, if different from the name
and address of the person signing this Letter of Transmittal (or in the case
of tender of Old Notes through DTC, if different from DTC). In the case of
issuance
<PAGE>
in a different name, the taxpayer identification or social security number of
the person named also must be indicated.
6. TAX IDENTIFICATION NUMBER. Federal income tax law requires that
a holder whose offered Old Notes are accepted for exchange must provide the
Company (as payor) with such holder's correct Taxpayer Identification Number
(the "TIN"), which, in the case of an exchanging holder who is an individual,
is his or her Social Security number. If the Company is not provided with the
correct TIN or an adequate basis for exemption, such holder may be subject to
a $50 penalty imposed by the Internal Revenue Service (the "IRS"). In
addition, delivery to such holder of New Notes may be subject to backup
withholding in an amount equal to 31% of the gross proceeds resulting from
the Exchange Offer. If withholding results in an overpayment of taxes, a
refund may be obtained from the IRS by the holder. Exempt holders (including,
among others, all corporations and certain foreign individuals) are not
subject to these backup withholding and reporting requirements. SEE
INSTRUCTIONS TO THE ENCLOSED GUIDELINES OF CERTIFICATE OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth below,
certifying that the TIN provided is correct (or that such holder is awaiting
a TIN) and that (i) the holder is exempt from backup withholding; (ii) the
holder has not been notified by the IRS that such holder is subject to backup
withholding as a result of a failure to report all interest or dividends; or
(iii) the IRS has notified the holder that such holder is no longer subject
to backup withholding. In order to satisfy the Exchange Agent that a foreign
individual qualifies as an exempt recipient, such holder must submit a
statement signed under penalty of perjury attesting to such exempt status.
Such statements may be obtained from the Exchange Agent. If the Old Notes are
in more than one name or are not in the name of the actual owner, consult the
Form W-9 for information on which TIN to report. If a tendering holder does
not provide such holder's TIN to the Company within sixty (60) days, backup
withholding will begin and continue until such TIN is furnished to the
Company.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if
any, applicable to the exchange of Old Notes pursuant to the Exchange Offer.
If, however, the certificate(s) representing New Notes or Old Notes for
principal amounts not tendered or accepted for exchange are to be delivered
to, or are to be registered or issued in the name of, any person other than
the holder(s) of the tendered Old Notes, or if tendered Old Notes are
registered in the name of any person other than the person signing this
Letter of Transmittal, or if a transfer tax is imposed for any reason other
than the exchange of Old Notes pursuant to the Exchange Offer, then the
amount of any such transfer taxes (whether imposed on the holder(s) or on any
other person(s)) will be payable by the tendering holder(s). If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted
with this Letter of Transmittal, the amount of such transfer taxes will be
billed directly to such tendering holder(s).
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
<PAGE>
8. WAIVER OF CONDITIONS. The Company reserves the absolute right
to amend, waive or modify specified conditions in the Exchange Offer in the
case of any Old Notes tendered.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance and requests for additional copies of the Prospectus
or this Letter of Transmittal may be directed to the Exchange Agent at the
address specified above. A holder of Old Notes may also contact such holder's
broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Exchange Offer.
- ----------------------------------------------------------------------------
(DO NOT WRITE IN SPACE BELOW)
CERTIFICATE(S) OLD NOTES OLD NOTES
SURRENDERED TENDERED ACCEPTED
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
DELIVERY
PREPARED BY CHECKED BY DATE
- ----------------------------------------------------------------------------
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 6)
PAYOR'S NAME: INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC.
- ---------------------------------------------------------------------------
PART 1: PLEASE PROVIDE YOUR TIN IN BELOW AND CERTIFY BY SIGNING AND
DATING SUBSTITUTE FORM W-9:
DEPARTMENT OF THE TREASURY EMPLOYER
IDENTIFICATION NUMBER OR
SOCIAL SECURITY NUMBER:
----------------------------------------------------
INTERNAL REVENUE SERVICE
CERTIFICATION
Under the penalties of perjury, I certify that:
1. The number shown on this form is my correct taxpayer
identification number (or I am waiting for a number to be issued to me), and
2. I am not subject to backup withholding because: (a) I am exempt
from backup withholding, or (b) I have not been notified by the Internal
Revenue Service that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the IRS has notified me
that I am no longer subject to backup withholding.
Certification Instructions: You must cross out item 2 above if you have
been notified by the Internal Revenue Service that you are currently subject
to backup withholding because of under-reporting interest or dividends on
your tax return.
Name:
-----------------------------------------------------------------------
(Please Print)
Address:
-------------------------------------------------------------------
-------------------------------------------------------------------
(Include Zip Code)
Signature:
------------------------------------------------------------------
Date: , 1998
---------------------
<PAGE>
PART 2: AWAITING TAXPAYER IDENTIFICATION NUMBER
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
ARE AWAITING A TAXPAYER IDENTIFICATION NUMBER
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered
an application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that, notwithstanding that I have completed this Certificate of
Awaiting Taxpayer Identification Number, all reportable payments made to me
prior to the time I provide the US Depositary with a properly certified
taxpayer identification number will be subject to a 31% back-up withholding
tax.
Signature:
------------------------------------------------------------------
Date: , 1998
---------------------
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
8-5/8% SERIES A SENIOR NOTES DUE 2008
OF
INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC.
This form or one substantially equivalent hereto must be used to accept
the Exchange Offer of International Comfort Products Holdings, Inc. (the
"Company") made pursuant to the Prospectus dated , 1998 (the
"Prospectus") if certificate(s) for the 8-5/8% Series A Senior Notes due 2008
(the "Old Notes") of the Company are not immediately available or if, prior
to 5:00 P.M., New York City time, on the Expiration Date (as defined in the
Prospectus), the Old Notes, the Letter of Transmittal or any other documents
required thereby cannot be delivered to the Exchange Agent or the procedure
for book-entry transfer cannot be completed. Such form may be delivered by
hand or transmitted by facsimile transmission, overnight courier or mail to
the Exchange Agent. Capitalized terms used by not defined herein have the
meanings given to them in the Prospectus.
TO: UNITED STATES TRUST COMPANY, THE EXCHANGE AGENT
By Registered or Certified Mail: By Hand or Courier before 4:30 p.m.:
United States Trust Company of United States Trust Company of
New York New York
P.O. Box 843 Cooper Station 111 Broadway
New York, New York 10276 New York, New York 10006
Attention: Corporate Trust Services Attention: Lower Level Corporate
Trust Window
By Facsimile: By Hand after 4:30 p.m. (on the
Expiration Date Only) and By
Overnight Courier:
United States Trust Company of United States Trust Company of
New York New York
(212) 780-0592 770 Broadway, 13th Floor
Attention: Customer Service New York, New York 10003
Confirm by telephone: (800) 548-6565
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS
VIA FACSIMILE, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID
DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal to be used to tender Old Notes is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided on the
Letter of Transmittal.
<PAGE>
LADIES AND GENTLEMEN:
The undersigned hereby tenders to International Comfort Products
Holdings, Inc., a Delaware corporation (the "Company"), upon the terms and
subject to the conditions set forth in the Prospectus and the Letter of
Transmittal (which together constitute the "Exchange Offer"), receipt of
which is hereby acknowledged, the principal amount of Old Notes pursuant to
the guaranteed delivery procedures discussed in the Prospectus under the
caption "Terms Of The Exchange Offer -- Guaranteed Delivery Procedures."
NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW.
Principal Amount(s) Name(s) of
of Old Notes Record Holder(s)
- ----------------------------------------------------------------------------
(Please Print)
Address:
-------------------------------------------------------------------
-------------------------------------------------------------------
(Include Zip Code)
Signature:
------------------------------------------------------------------
Date: , 1998
---------------------
Certificate Nos. (if available):
--------------------------
If Old Notes will be
delivered by book-entry
transfer at The Depository
Trust Company ("DTC"),
Depository Account No.:
-----------------------------------
This Notice of Guaranteed Delivery must be signed by the holder(s) of
Old Notes exactly as such holder(s)' name(s) appear(s) on certificate(s) for
Old Notes or on a security position listing as the owner of the Old Notes, or
by person(s) authorized to become holder(s) by endorsements and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person must provide the following information:
<PAGE>
Name(s):
--------------------------------------------------------------------
(Please Print)
Capacity:
-------------------------------------------------------------------
Address:
-------------------------------------------------------------------
-------------------------------------------------------------------
(Include Zip Code)
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the
United States or an "Eligible Guarantor Institution" within the meaning of
Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), hereby guarantees that delivery to the Exchange Agent of
certificate(s) for the Old Notes tendered hereby, in proper form for transfer
(or confirmation of electronic delivery of book-entry transfer of such Old
Notes into the Exchange Agent's account at DTC, pursuant to the procedures
for book-entry transfer set forth in the Prospectus), with delivery of a
properly completed and duly executed Letter of Transmittal (or manually
signed facsimile thereof) with any required signature guarantees and any
other required documents, will be received by the Exchange Agent at one of
its addresses set forth above within three (3) New York Stock Exchange
trading days after the date of execution of the Notice of Guaranteed
Delivery.
- ----------------------------------------------------------------------------
(Name of Firm)
- ----------------------------------------------------------------------------
(Authorized Signature)
- ----------------------------------------------------------------------------
(Title)
Date: , 1998
--------------------
Address:
-------------------------------------------------------------------
-------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number:
------------------
NOTE: DO NOT SEND OLD NOTES WITH THIS FORM. OLD NOTES SHOULD BE SENT WITH A
COMPLETED LETTER OF TRANSMITTAL SO THAT THEY ARE RECEIVED BY THE EXCHANGE
AGENT WITHIN THREE (3) NEW YORK STOCK EXCHANGE TRADING DAYS AFTER THE DATE OF
EXECUTION OF THE NOTICE OF GUARANTEED DELIVERY.
<PAGE>
EXHIBIT 99.3
INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC.
OFFER TO EXCHANGE ITS
8-5/8% SERIES B SENIOR NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OF ITS OUTSTANDING
8-5/8% SERIES A SENIOR NOTES DUE 2008
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1998, UNLESS THE OFFER IS
EXTENDED.
, 1998
To Brokers, Dealers, Commercial
Banks, Trust Companies and
Other Nominees:
We are enclosing the material listed below relating to the offer of
International Comfort Products Holdings, Inc., a Delaware corporation (the
"Company"), to exchange $1,000 principal amount of its 8-5/8% Series B Senior
Notes due 2008 (the "New Notes"), which have been registered under the
Securities Act of 1933, as amended, pursuant to a registration statement, for
each $1,000 principal amount of its 8-5/8% Series A Senior Notes due 2008
(the "Old Notes"), of which $150,000,000 aggregate principal amount is
outstanding, upon the terms and subject to the conditions set forth in the
Prospectus, dated , 1998 (the "Prospectus") and in the related
Letter of Transmittal (which together constitute the "Exchange Offer"). THE
EXCHANGE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF OLD NOTES BEING
TENDERED. The Exchange Offer is, however, subject to other conditions. See
the information in the Prospectus under the caption "Terms Of The Exchange
Offer -- Conditions."
We are asking you to contact your clients for whom you hold Old Notes
registered in your name (or in the name of your nominee) or who hold Old
Notes registered in their own names. Please bring the Exchange Offer to their
attention as promptly as possible.
For your information and for forwarding to your clients, we are
enclosing the following documents:
1. The Prospectus, dated , 1998;
2. The Letter of Transmittal for your use and for the information of
your clients;
3. The Notice of Guaranteed Delivery to be used to accept the
Exchange Offer if the Old Notes are not immediately available or
if the Old Notes and all other required documents cannot be
<PAGE>
delivered to the Exchange Agent, United States Trust Company, by
the Expiration Date (as defined in the Prospectus) or if the
procedure for book-entry transfer cannot be completed on a timely
basis; and
4. A form of letter which may be sent to your clients for whose
account you hold Old Notes registered in your name or the name of
your nominee, with space provided for obtaining such clients'
instructions with regard to the Exchange Offer.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1998, UNLESS THE EXCHANGE OFFER IS EXTENDED BY THE
COMPANY.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Exchange Agent and the certificate(s) representing the Old Notes should be
delivered to the Exchange Agent, all in accordance with the instructions set
forth in the Letter of Transmittal and the Prospectus.
If holders of Old Notes wish to tender, but it is impracticable for them
to forward their certificates for Old Notes prior to the expiration of the
Exchange Offer or to comply with the book-entry transfer procedures on a
timely basis, a tender may be effected by following the guaranteed delivery
procedures discussed in the Prospectus under the caption "Terms Of The
Exchange Offer -- Guaranteed Delivery Procedures."
Any questions or requests for assistance or additional copies of the
enclosed materials may be directed to United States Trust Company, the
Exchange Agent, at the address and telephone number set forth below:
By Registered or Certified Mail: By Hand or Courier before 4:30 p.m.:
United States Trust Company of United States Trust Company of
New York New York
P.O. Box 843 Cooper Station 111 Broadway
New York, New York 10276 New York, New York 10006
Attention: Corporate Trust Services Attention: Lower Level Corporate
Trust Window
By Facsimile: By Hand after 4:30 p.m. (on the
Expiration Date Only) and By
Overnight Courier:
United States Trust Company of United States Trust Company of
New York New York
(212) 780-0592 770 Broadway, 13th Floor
Attention: Customer Service New York, New York 10003
Confirm by telephone: (800) 548-6565
Very truly yours,
INTERNATIONAL COMFORT
PRODUCTS HOLDINGS, INC.
<PAGE>
EXHIBIT 99.4
INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC.
OFFER TO EXCHANGE ITS
8-5/8% SERIES B SENIOR NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OF ITS OUTSTANDING
8-5/8% SERIES A SENIOR NOTES DUE 2008
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1998, UNLESS THE OFFER IS
EXTENDED.
, 1998
To Our Clients:
Enclosed for your consideration are the Prospectus, dated ,
1998 (the "Prospectus"), and the related Letter of Transmittal (which
together constitute the "Exchange Offer") setting forth an offer by
International Comfort Products Holdings, Inc., a Delaware corporation (the
"Company"), to exchange $1,000 principal amount of its 8-5/8% Series B Senior
Notes due 2008 (the "New Notes"), which have been registered under the
Securities Act of 1933, as amended, pursuant to a registration statement, for
each $1,000 principal amount of its 8-5/8% Series A Senior Notes due 2008
(the "Old Notes"), of which $150,000,000 principal amount is outstanding,
upon the terms and subject to the conditions set forth in the Prospectus.
WE ARE THE HOLDER OF RECORD OF OLD NOTES FOR YOUR ACCOUNT. A TENDER OF
SUCH OLD NOTES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER OLD NOTES HELD BY US FOR
YOUR ACCOUNT. We request instructions as to whether you wish us to tender any
or all of the Old Notes held by us for your account, upon the terms and
subject to the conditions set forth in the Prospectus and the Letter of
Transmittal.
Your attention is directed to the following:
(1) The Exchange Offer is for any and all outstanding Old Notes.
(2) The Exchange Offer is not conditioned upon any minimum number of
Old Notes being tendered.
<PAGE>
(3) The Exchange Offer is subject to certain conditions discussed in
the Prospectus under the caption "Terms Of The Exchange Offer --
Conditions."
(4) The Exchange Offer and withdrawal rights will expire at 5:00
p.m., New York City time, on , 1998, unless the
Exchange Offer is extended. Your instructions to us should be
forwarded to us in ample time to permit us to submit a tender on
your behalf.
(5) Any transfer taxes applicable to the exchange of Old Notes
pursuant to the Exchange Offer will be paid by the Company,
except as otherwise provided in Instruction 7 of the Letter of
Transmittal.
If you wish to have us tender any or all of your Old Notes held by us for
your account upon the terms and subject to the conditions set forth in the
Exchange Offer, please so instruct us by completing, executing, detaching and
returning to us the instruction form on the detachable part hereof.
<PAGE>
INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC.
INSTRUCTIONS WITH RESPECT TO
OFFER TO EXCHANGE ITS
8-5/8% SERIES B SENIOR NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OF ITS OUTSTANDING
8-5/8% SERIES A SENIOR NOTES DUE 2008
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.
NEW YORK CITY TIME, ON , 1998, UNLESS THE OFFER IS
EXTENDED.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Prospectus, dated ,1998, and the related Letter of Transmittal
(which together constitute the "Exchange Offer") in connection with the offer
by International Comfort Products Holdings, Inc., a Delaware corporation (the
"Company"), to exchange $1,000 principal amount of its 8-5/8% Series B Senior
Notes due 2008 (the "New Notes"), which have been registered under the
Securities Act of 1933, as amended, pursuant to a registration statement, for
each $1,000 principal amount of its 8-5/8% Series A Senior Notes due 2008
(the "Old Notes"), of which $150,000,000 aggregate principal amount is
outstanding, upon the terms and subject to the conditions set forth in the
Prospectus.
This will instruct you to tender the Old Notes indicated below held by
you for the account of the undersigned, pursuant to the terms and conditions
set forth in the Prospectus and the related Letter of Transmittal. (Check
one).
[ ] Please tender my Old Notes held by you for my account. If I do
not wish to tender all of the Old Notes held by you for my
account, I have identified on a signed schedule attached hereto
the number of Old Notes that I do not wish to be tendered.
[ ] Please do not tender any Old Notes held by you for my account.
Signature:
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Printed Name:
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Date: , 1998
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Area Code and Telephone Number:
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Unless a specific contrary instruction is given in the space provided,
your signature(s) hereon shall constitute an instruction to us to tender all
Old Notes.
