<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 28, 1998
REGISTRATION NO. 333-58837 AND 333-58837-01
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
INTERNATIONAL COMFORT PRODUCTS HOLDINGS, INC.
(Exact Name of Registrant As Specified In Its Charter)
---------------------
<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)
---------------------
INTERNATIONAL COMFORT PRODUCTS CORPORATION
(Exact Name of Registrant As Specified In Its Charter)
---------------------
<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
---------------------
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. [ ]
---------------------
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 AUGUST 28, 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 upon the terms and conditions described herein (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.
---------------------
THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL ARE FIRST BEING MAILED TO
HOLDERS OF OLD NOTES ON , 1998.
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER.
---------------------
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.
---------------------
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 (as defined on page 43) 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 in fully
registered form, registered in the name of a nominee of The Depository Trust
Company ("DTC"), as depository. The New Notes exchanged for Old Notes
represented by the Global Old Notes will be represented by one or more Global
New Notes in fully registered form and registered in the name of the nominee of
DTC. The Global New Notes will
2
<PAGE> 4
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 (as defined on page
35), 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 on page 57), 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. In the event of a Change in Control, there can be no assurance that
the Issuer or the Parent Guarantor would have sufficient funds to repurchase the
Notes. See "Risk Factors -- Consequences of Change of Control."
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 June 30, 1998, such subsidiaries had
$200.3 million of total liabilities, including $68.1 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
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;
(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; and
(iii) the Parent Guarantor's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1998 filed with the Commission on August
14, 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 Securities
Exchange Act of 1934 (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 for the six months ended June 30, 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. During the six months
ended June 30, 1998, the Company had operating revenue of $351.3 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.
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.
5
<PAGE> 7
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 (providing both higher priced main line HVAC
products distinguished by premium features and service and lower-priced entry
level HVAC products based on minimum energy efficiency standards targeted at the
low cost, entry-level market segment) to provide competitive 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. At this time the Company is not in the process of reviewing any
acquisition that is probable of occurring that would be material to the
Company's financial position or results of operations.
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
6
<PAGE> 8
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.
CORPORATE STRUCTURE
The chart below reflects the structure of the Parent Guarantor, the Issuer
and their principal operating subsidiaries.
(CORPORATE STRUCTURE CHART)
- ---------------
* All terms defined on page 34
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.
7
<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 upon the terms and conditions described
herein, 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 (as defined on page 44) 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
June 30, 1998, such subsidiaries had $200.3
million of total liabilities, including $68.1
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 on page 57),
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 on page 65), (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 six months ended June 30, 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 six months ended June 30, 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
---------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------- -----------------
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 $ 314.2 $ 351.3
Cost of Sales.................................... 522.3 467.4 517.8 503.7 247.9 275.0
------- ------- ------- ------- ------- -------
Gross Margin..................................... 112.9 65.4 124.1 127.0 66.3 76.3
Selling, General and Administrative Expenses..... 87.3 93.2 90.7 85.5 44.4 47.1
Asset Writedowns, Restructuring Costs and Other
Nonrecurring Charges........................... 8.0 15.5 -- -- -- --
------- ------- ------- ------- ------- -------
Operating Profit (Loss).......................... 17.6 (43.3) 33.4 41.5 21.9 29.2
------- ------- ------- ------- ------- -------
Financial Expenses
Interest expense............................... 20.2 21.7 19.4 18.2 9.6 9.5
Amortization of debt issuance costs............ 1.7 1.3 1.8 1.3 0.6 0.6
Refinancing costs.............................. -- -- -- -- -- 5.0
Write-off of debt issuance costs............... 1.2 2.1 0.6 -- -- --
------- ------- ------- ------- ------- -------
23.1 25.1 21.8 19.5 10.2 15.1
------- ------- ------- ------- ------- -------
Income (Loss) Before Income Taxes................ (5.5) (68.4) 11.6 22.0 11.7 14.1
Income Taxes..................................... 0.9 (12.8) -- -- -- --
------- ------- ------- ------- ------- -------
Income (Loss) From Continuing Operations......... (4.6) (81.2) 11.6 22.0 11.7 14.1
Loss From Discontinued Operations................ (2.9) (12.0) (3.1) -- -- --
------- ------- ------- ------- ------- -------
Net Income (Loss)................................ $ (7.5) $ (93.2) $ 8.5 $ 22.0 $ 11.7 $ 14.1
======= ======= ======= ======= ======= =======
OTHER DATA:
Capital Expenditures............................. $ 11.1 $ 24.5 $ 11.8 $ 8.5 $ 2.6 $ 6.6
Ratio of Earnings to Fixed Charges (1)........... 0.79x (1.50)x 1.49x 2.06x 2.08x 1.90x
STATEMENT OF INCOME DATA (U.S. GAAP):
Operating Revenue................................ $ 635.2 $ 532.8 $ 641.9 $ 630.7 $ 314.2 $ 351.3
Gross Margin..................................... 111.9 64.4 122.7 125.7 65.5 75.4
Income (Loss) From Continuing Operations......... (5.4) (75.7) 9.7 19.4 10.3 12.7
Income (Loss) Before Extraordinary Item.......... (10.3) (89.0) 6.6 19.4 10.3 12.7
Net Income (Loss)................................ (11.1) (89.9) 6.0 19.4 10.3 12.7
</TABLE>
13
<PAGE> 15
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------
AS AT DECEMBER 31, AS AT JUNE 30,
--------------------------------- ---------------
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 $126.3 $139.8
Total Assets........................................... 486.1 345.8 345.0 352.0 387.1 430.8
Total Debt............................................. 242.8 182.7 204.0 185.5 222.2 218.1
Shareholders' Equity................................... 110.3 18.5 28.8 51.5 41.7 79.9
BALANCE SHEET DATA (U.S. GAAP):
Working Capital........................................ $151.9 $ 57.7 $100.8 $135.3 $123.8 $138.9
Total Assets........................................... 433.7 347.7 351.8 358.7 394.9 439.1
Total Debt............................................. 181.8 176.7 204.0 185.5 222.2 218.1
Shareholders' Equity................................... 108.4 19.3 26.6 48.3 39.3 78.0
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
-------------------------
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1997(2) 1998(3)
------------ ----------
UNAUDITED
-------------------------
<S> <C> <C>
STATEMENT OF INCOME DATA:
Operating Revenue......................................... $655.7 $351.3
Cost of Sales............................................. 520.7 275.0
------ ------
Gross Margin.............................................. 135.0 76.3
Selling, General and Administrative Expenses.............. 90.3 47.1
------ ------
Operating Profit.......................................... 44.7 29.2
------ ------
Financial Expenses
Interest expense....................................... 18.5 9.1
Amortization of debt issuance costs.................... 1.0 0.5
Other.................................................. (0.1) --
------ ------
19.4 9.6
------ ------
Income Before Nonrecurring Charges Directly Attributable
to the Refinanced Debentures and Income Taxes.......... 25.3 19.6
Income Taxes.............................................. (0.4) --
------ ------
Income Before Nonrecurring Charges Directly Attributable
to the Refinanced Debentures........................... $ 24.9 $ 19.6
====== ======
OTHER DATA:
Capital Expenditures...................................... $ 9.6 $ 6.6
Ratio of Earnings to Fixed Charges(1)..................... 2.24x 2.92x
</TABLE>
- ---------------
(1) 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).
(2) 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.
(3) To give pro forma effect to the statement of income data for the six months
ended June 30, 1998 as though the offering of the Old Notes and the
application of the net proceeds had occurred on January 1, 1997.
14
<PAGE> 16
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 June 30, 1998, such subsidiaries had $200.3
million of total liabilities, including $68.1 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 June 30, 1998, the Parent Guarantor had $218.1 million of
consolidated indebtedness and $79.9 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
15
<PAGE> 17
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.
16
<PAGE> 18
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 Environmental 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,
17
<PAGE> 19
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. With respect to the agreement that
expires in September 1998, the Company believes that negotiations are proceeding
satisfactorily; however, no assurances can be given as to the ultimate outcome
of the negotiations. 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.
18
<PAGE> 20
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.
RISKS OF DOING BUSINESS IN FOREIGN JURISDICTIONS
One of the Company's strategies is to increase its sales outside the United
States and Canada. In 1997, approximately 4% of the Company's sales were derived
from international (non-Canadian and non-U.S.) operations and export sales,
which are subject in varying degrees to risks inherent in doing business abroad.
Such risks include the possibility of unfavorable circumstances arising from
host country laws or regulations. In addition, foreign operations include risks
of partial or total expropriation; currency exchange rate fluctuations and
restrictions on currency repatriation; significant taxation or tariff policies;
the disruption of operations from labor and political disturbances; insurrection
or war; and the requirements of partial local ownership of operations in certain
countries. In addition, inflation and rapid fluctuation in exchange rates have
had and may continue to have negative effects on certain foreign economies and,
if the Company were doing business in these countries, could have an adverse
impact on the Company's business, financial condition and results of operations.
At the present time, any such circumstances would not be expected to have a
material
19
<PAGE> 21
adverse effect upon the Company; however, this risk will increase as the Company
implements its strategy to increase sales outside the United States and Canada.
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.
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.
20
<PAGE> 22
CAPITALIZATION
The following table sets forth the consolidated historical cash and
short-term deposits and capitalization of the Company as of June 30, 1998. This
table should be read in conjunction with the Consolidated Financial Statements
of the Company and the notes thereto included elsewhere or incorporated by
reference in this Prospectus.
<TABLE>
<CAPTION>
AS AT
JUNE 30,
1998
----------
HISTORICAL
----------
(IN
MILLIONS)
<S> <C>
Cash and short-term deposits................................ $ 21.1
======
Debt(1):
Receivables Purchase Agreement............................ $ 32.0
Canadian Revolving Credit Facility........................ 9.2
8 5/8% Senior Notes due 2008.............................. 150.0
Term Bank Loan............................................ 25.0
Other..................................................... 1.9
------
Total Debt........................................ 218.1
Shareholders' Equity(2)..................................... 79.9
------
Total Capitalization.............................. $298.0
======
</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.
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 six months ended June 30, 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 six months ended June 30, 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
21
<PAGE> 23
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
-------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------- -----------------
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 $ 314.2 $ 351.3
Cost of Sales........................... 498.4 522.3 467.4 517.8 503.7 247.9 275.0
------- ------- ------- ------- ------- ------- -------
Gross Margin............................ 99.6 112.9 65.4 124.1 127.0 66.3 76.3
Selling, General and Administrative
Expenses.............................. 89.3 87.3 93.2 90.7 85.5 44.4 47.1
Asset Writedowns, Restructuring Costs
and Other Nonrecurring Charges........ 14.3 8.0 15.5 -- -- -- --
------- ------- ------- ------- ------- ------- -------
Operating Profit (Loss)................. (4.0) 17.6 (43.3) 33.4 41.5 21.9 29.2
------- ------- ------- ------- ------- ------- -------
Financial Expenses
Interest expense...................... 15.4 20.2 21.7 19.4 18.2 9.6 9.5
Amortization of debt issuance costs... 1.5 1.7 1.3 1.8 1.3 0.6 0.6
Refinancing costs..................... -- -- -- -- -- -- 5.0
Write-off of debt issuance costs...... 1.2 1.2 2.1 0.6 -- -- --
------- ------- ------- ------- ------- ------- -------
18.1 23.1 25.1 21.8 19.5 10.2 15.1
------- ------- ------- ------- ------- ------- -------
Income (Loss) Before Income Taxes....... (22.1) (5.5) (68.4) 11.6 22.0 11.7 14.1
Income Taxes............................ 4.3 0.9 (12.8) -- -- -- --
------- ------- ------- ------- ------- ------- -------
Income (Loss) From Continuing
Operations............................ (17.8) (4.6) (81.2) 11.6 22.0 11.7 14.1
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 $ 11.7 $ 14.1
======= ======= ======= ======= ======= ======= =======
Net Income (Loss) Per Ordinary Share
From Continuing Operations............ $ (0.87) $ (0.20) $ (2.09) $ 0.30 $ 0.56 $ 0.30 $ 0.35
======= ======= ======= ======= ======= ======= =======
After Discontinued Operations......... $ (1.00) $ (0.29) $ (2.40) $ 0.22 $ 0.56 $ 0.30 $ 0.35
======= ======= ======= ======= ======= ======= =======
Weighted Average Number of Ordinary
Shares Outstanding.................... 24.745 31.832 38.828 39.161 39.664 39.530 40.134
======= ======= ======= ======= ======= ======= =======
OTHER DATA:
Capital Expenditures.................... $ 9.7 $ 11.1 $ 24.5 $ 11.8 $ 8.5 $ 2.6 $ 6.6
Ratio of Earnings to Fixed Charges
(1)................................... (.07)x 0.79x (1.50)x 1.49x 2.06x 2.08x 1.90x
STATEMENT OF INCOME DATA (U.S. GAAP):
Operating Revenue....................... $ 598.0 $ 635.2 $ 532.8 $ 641.9 $ 630.7 $ 314.2 $ 351.3
Gross Margin............................ 98.6 111.9 64.4 122.7 125.7 65.5 75.4
Income (Loss) From Continuing
Operations............................ (19.2) (5.4) (75.7) 9.7 19.4 10.3 12.7
Income (Loss) Before Extraordinary
Item.................................. (23.0) (10.3) (89.0) 6.6 19.4 10.3 12.7
Net Income (Loss)....................... (23.8) (11.1) (89.9) 6.0 19.4 10.3 12.7
Basic Earnings (Loss) Per Share
From Continuing Operations............ $ (0.93) $ (0.23) $ (1.95) $ 0.25 $ 0.49 $ 0.26 $ 0.32
Before Extraordinary Item............. $ (1.08) $ (0.38) $ (2.29) $ 0.17 $ 0.49 $ 0.26 $ 0.32
Net Income (Loss)..................... $ (1.11) $ (0.41) $ (2.32) $ 0.15 $ 0.49 $ 0.26 $ 0.32
</TABLE>
22
<PAGE> 24
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------------------------------------
AS AT DECEMBER 31, AS AT JUNE 30,
----------------------------------------------- ------------------
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 $ 126.3 $ 139.8
Total Assets.......................... 490.2 486.1 345.8 345.0 352.0 387.1 430.8
Total Debt............................ 216.0 242.8 182.7 204.0 185.5 222.2 218.1
Shareholders' Equity.................. 119.5 110.3 18.5 28.8 51.5 41.7 79.9
BALANCE SHEET DATA (U.S. GAAP):
Working Capital....................... $ 166.0 $ 151.9 $ 57.7 $ 100.8 $ 135.3 $ 123.8 $ 138.9
Total Assets.......................... 498.5 433.7 347.7 351.8 358.7 394.9 439.1
Total Debt............................ 216.0 181.8 176.7 204.0 185.5 222.2 218.1
Shareholders' Equity.................. 121.7 108.4 19.3 26.6 48.3 39.3 78.0
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
-------------------------
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1997(2) 1998(3)
------------ ----------
UNAUDITED
-------------------------
<S> <C> <C>
STATEMENT OF INCOME DATA:
Operating Revenue......................................... $ 655.7 $ 351.3
Cost of Sales............................................. 520.7 275.0
------- -------
Gross Margin.............................................. 135.0 76.3
Selling, General and Administrative Expenses.............. 90.3 47.1
------- -------
Operating Profit.......................................... 44.7 29.2
------- -------
Financial Expenses
Interest expense........................................ 18.5 9.1
Amortization of debt issuance costs..................... 1.0 0.5
Other................................................... (0.1) --
------- -------
19.4 9.6
------- -------
Income Before Nonrecurring Charges Directly Attributable
to the Refinanced Debentures and Income Taxes........... 25.3 19.6
Income Taxes.............................................. (0.4) --
------- -------
Income Before Nonrecurring Charges Directly Attributable
to the Refinanced Debentures............................ $ 24.9 $ 19.6
======= =======
Income Before Nonrecurring Charges Directly Attributable
to the Refinanced Debentures Per Ordinary Share......... $ 0.63 $ 0.49
======= =======
Weighted Average Number of Ordinary Shares Outstanding.... 39.664 40.134
======= =======
OTHER DATA:
Capital Expenditures...................................... $ 9.6 $ 6.6
Ratio of Earnings to Fixed Charges(1)..................... 2.24x 2.92x
</TABLE>
- ---------------
(1) 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).
(2) 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.
(3) To give pro forma effect to the statement of income data for the six months
ended June 30, 1998 as though the offering of the Old Notes and the
application of the net proceeds had occurred on January 1, 1997.
23
<PAGE> 25
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. For the six months ended
June 30, 1998, the Company had operating revenue of $351.3 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.
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 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.
24
<PAGE> 26
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 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.
25
<PAGE> 27
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. The Company's "two-tier" market strategy
consists of offering (i) higher priced HVAC products distinguished by premium
features and service; and (ii) lower priced HVAC products based on minimum
energy efficiency standards targeted at the low cost, entry-level market. This
strategy enables the Company to offer various product brands of residential and
commercial products at different price points.
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.
The Company has a letter of intent to acquire 80% of a European HVAC equipment
manufacturer and has had discussions regarding acquiring varying percentages of
two other European HVAC equipment manufacturers. Although none of these
acquisitions would be material to the Company's current financial condition or
results of operations, they are integral parts of the Company's strategy to
increase international sales.
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"). At this time, the Company
is not in the process of reviewing any acquisition that is probable of occurring
that would be material to the Company's financial condition or results of
operations.
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 Company (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.
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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.
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
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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, as described above, currently is pursuing other opportunities for expansion
in Europe.
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.
This program includes being an ISO 9001 registered company utilizing "Lean
Thinking" techniques. These programs and philosophies allow the Company to
maintain consistent processes and procedures to ensure that quality standards
and goals are met. 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.
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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.
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.
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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), 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
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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 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.
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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).
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. With respect to the agreement that expires in September
1998, the Company believes that negotiations are proceeding satisfactorily;
however, no assurances can be given as to the ultimate outcome of the
negotiations. 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 has been 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 June 30, 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 has been 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
an unaffiliated 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. The third party has not
advanced any amounts pursuant to its guaranty of the Term Loan. 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> 37
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> 38
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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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 on page 39) 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
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<PAGE> 40
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 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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<PAGE> 41
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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<PAGE> 42
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 (as
defined on page 43) 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> 43
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> 44
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> 45
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 in the
paragraph 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 (as defined on page 65)
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 (as defined on page 66), 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
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<PAGE> 46
Taxes due pursuant to applicable law, certified copies of tax receipts
evidencing such payment by the Parent Guarantor.
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, Osler,
Hoskin & Harcourt, 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 (as defined on page 65) and to make
Asset Sales (as defined on
45
<PAGE> 47
page 57) 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 such purchase. Such restrictions and
the restrictions on transactions with Affiliates (as defined on page 56) may, in
certain circumstances, make more difficult or discourage any leveraged buyout of
the Issuer or any of its Subsidiaries (as defined on page 66) 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
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<PAGE> 48
(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 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
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<PAGE> 49
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 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
48
<PAGE> 50
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 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
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<PAGE> 51
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 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
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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 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
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(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 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
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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 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.
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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 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
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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 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.
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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.
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.
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"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 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
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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 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
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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 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.
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"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."
"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.
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"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 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
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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).
"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
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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.
(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
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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;
(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
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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.
"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
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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 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
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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 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
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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.
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
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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 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.
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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 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
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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 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 ADVI-
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SOR 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.
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.
72
<PAGE> 74
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.
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.
73
<PAGE> 75
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.
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.
74
<PAGE> 76
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
Notes to Pro Forma Selected Financial Data.................. F-4
HISTORICAL
Audited Financial Statements
Auditors' Report -- 1997.................................. F-5
Auditors' Report -- 1996 and 1995......................... F-6
Consolidated Statements of Income (Loss) and Deficit for
the years ended December 31, 1995, 1996 and 1997....... F-7
Consolidated Balance Sheets as at December 31, 1996 and
1997................................................... F-8
Consolidated Statements of Changes in Financial Position
for the years ended December 31, 1995, 1996 and 1997... F-9
Notes to Consolidated Financial Statements................ F-10
Unaudited Financial Statements
Consolidated Statements of Income for the three months
ended June 30, 1997 and 1998........................... F-32
Consolidated Statements of Income for the six months ended
June 30, 1997 and 1998................................. F-33
Consolidated Balance Sheets as at June 30, 1997 and 1998,
and December 31, 1997.................................. F-34
Consolidated Statements of Changes in Financial Position
for the six months ended June 30, 1997 and 1998........ F-35
Notes to Consolidated Financial Statements................ F-36
</TABLE>
F-1
<PAGE> 77
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 six months ended June 30,
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, 1997. 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. The pro forma
selected financial data should be read in connection with the consolidated
financial statements and notes thereto included herein.
F-2
<PAGE> 78
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 SIX MONTHS ENDED
FOR THE YEAR ENDED DECEMBER 31, 1997 JUNE 30, 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 $ 351.3 -- $ 351.3
Cost of Sales............. 503.7 17.0 -- 520.7 275.0 -- 275.0
-------- ----- ----- ------- ------- ----- -------
Gross Margin.............. 127.0 8.0 -- 135.0 76.3 -- 76.3
Selling, General and
Administrative
Expenses................ 85.5 4.5 $ 0.3 (a) 90.3 47.1 -- 47.1
-------- ----- ----- ------- ------- ----- -------
Operating Profit.......... 41.5 3.5 (0.3) 44.7 29.2 -- 29.2
-------- ----- ----- ------- ------- ----- -------
Financial Expenses
Interest expense........ 18.2 0.3 -- (b) 18.5 9.5 $(0.4)(f) 9.1
Amortization of debt
issuance costs....... 1.3 -- (0.3)(c) 1.0 0.6 (0.1)(g) 0.5
Refinancing costs....... -- -- -- -- 5.0 (5.0)(h) --
Other................... -- (0.5) 0.4 (d) (0.1) -- --
-------- ----- ----- ------- ------- ----- -------
19.5 (0.2) 0.1 19.4 15.1 (5.5) 9.6
-------- ----- ----- ------- ------- ----- -------
Income Before Nonrecurring
Charges Directly
Attributable to the
Refinanced Debentures
and Income Taxes........ 22.0 3.7 (0.4) 25.3 14.1 5.5 19.6
Income Taxes.............. -- (1.3) 0.9 (e) (0.4) -- -- --
-------- ----- ----- ------- ------- ----- -------
Income Before Nonrecurring
Charges Directly
Attributable to the
Refinanced Debentures... $ 22.0 $ 2.4 $ 0.5 $ 24.9 $ 14.1 $ 5.5 $ 19.6
======== ===== ===== ======= ======= ===== =======
Income Before Nonrecurring
Charges Directly
Attributable to the
Refinanced Debentures
Per Ordinary Share...... $ 0.56 $ 0.63 $ 0.35 $ 0.49
======== ======= ======= =======
Weighted Average Number of
Ordinary Shares (in
millions)............... 39.664 39.664 40.134 40.134
======== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE> 79
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"), offset
by imputed interest expense on the acquisition purchase price.
<TABLE>
<S> <C>
Reduced interest expense.................................... $ (1.2)
Interest expense on purchase price.......................... 1.2
-------
$ --
=======
</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
Refinanced Debentures.
(g) Reflects the reduced amortization of debt issuance costs under the Notes as
compared with the Refinanced Debentures.
<TABLE>
<S> <C>
Notes amortization.......................................... $ 0.2
Refinanced Debenture amortization........................... (0.3)
-------
$ (0.1)
=======
</TABLE>
(h) Reflects the elimination of the write-off of nonrecurring expenses
associated with the Refinanced Debentures.
NOTE The pro forma statement of income data does not include nonrecurring
expenses which were 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 ($5.0 at June 30, 1998).
F-4
<PAGE> 80
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 (except as to
Note 20, which is as of July 10, 1998)
Mississauga, Canada
F-5
<PAGE> 81
<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-6
<PAGE> 82
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-7
<PAGE> 83
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-8
<PAGE> 84
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-9
<PAGE> 85
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-10
<PAGE> 86
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-11
<PAGE> 87
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-12
<PAGE> 88
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-13
<PAGE> 89
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-14
<PAGE> 90
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-15
<PAGE> 91
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 $171.2
========== ====== ========== ====== ========== ======
</TABLE>
(ii) Employee Stock Option Plan
A maximum of 2,500,000 ordinary shares have been reserved for issuance to
officers and employees of the Company under the Employee Stock Option Plan. The
term of all options cannot exceed ten years from the date the option is granted
and are vested at an annual rate of 20% per year on a cumulative basis, except
in certain circumstances where the exercise of such options would be
accelerated.
The option exercise price is fixed by the Board of Directors at the time
each option is authorized and cannot be less than the weighted average sales
price per share on The Toronto Stock Exchange on the business day preceding the
date of authorization.
Changes in the share options outstanding from January 1, 1995 to December
31, 1997 are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Balance -- Beginning of the year...................... 1,281,400 776,000 1,720,000
Granted............................................... -- 1,000,000 770,000
Exercised............................................. -- -- (474,200)
Canceled.............................................. (515,400) (56,000) (56,000)
1990 LTIP units converted............................. 10,000 -- --
--------- --------- ---------
Balance -- End of the year............................ 776,000 1,720,000 1,959,800
========= ========= =========
</TABLE>
F-16
<PAGE> 92
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The details of the options outstanding at December 31, 1997, at each exercise
price are as follows:
<TABLE>
<CAPTION>
NUMBER
EXERCISE PRICE (CDN.$) 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-17
<PAGE> 93
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-18
<PAGE> 94
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-19
<PAGE> 95
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-20
<PAGE> 96
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-21
<PAGE> 97
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-22
<PAGE> 98
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-23
<PAGE> 99
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-24
<PAGE> 100
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-25
<PAGE> 101
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-26
<PAGE> 102
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-27
<PAGE> 103
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-28
<PAGE> 104
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) Under U.S. GAAP, the utilization of prior years' tax losses is included in
loss from continuing operations in 1995.
(5) In 1995, there were 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.
(3) Comprehensive income (loss), as defined by SFAS 130, for the Company
was $(89.8), $4.7 and $19.7 for the years ended December 31, 1995, 1996 and
1997, respectively.
F-29
<PAGE> 105
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 28.9
Other long-term liabilities............................... 4.2 5.1 9.0 12.6
Deficit................................................... (138.4) (116.4) (140.6) (119.6)
Shareholders' equity...................................... 28.8 51.5 26.6 48.3
</TABLE>
See Note 19(a) for a discussion of differences between Canadian and U.S. GAAP.
(d) There are differences between Canadian and U.S. GAAP in the presentation of
the Statement of Changes in Financial Position. The following discloses cash
flows information in accordance with SFAS 95:
<TABLE>
<CAPTION>
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Net cash provided by (used in) operating activities......... $70.3 $(0.7) $19.2
Net cash provided by (used in) investing activities......... (10.8) (3.7) 10.7
Net cash provided by (used in) financing activities......... (59.3) 9.0 (16.5)
----- ----- -----
Increase in cash and cash equivalents....................... 0.2 4.6 13.4
Cash and cash equivalents -- beginning of the year.......... 12.8 13.0 17.6
----- ----- -----
Cash and cash equivalents -- end of the year................ $13.0 $17.6 $31.0
===== ===== =====
</TABLE>
Non-cash transactions:
During 1996, the Company acquired Coastline and General for consideration
of the assumption of debt in the amount of $15.3.
20. SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARY
Effective May 13, 1998, International Comfort Products Holdings, Inc. ("ICP
Holdings"), a wholly owned subsidiary of the Company, issued $150 million of its
8 5/8% Senior Notes due 2008, for which a Registration Statement has been filed
under the Securities Act of 1933. CHL Holdings, Inc. ("CHL") is the predecessor
to ICP Holdings. CHL (prior to its merger with International Comfort Products
Corporation (USA)) was, and ICP Holdings, is a wholly-owned subsidiary of the
Company. Upon the Registration Statement being declared effective, ICP Holdings
would be subject to the reporting requirements under Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"). Because the Notes,
however, are fully and unconditionally guaranteed by the Company and management
has determined that such information is not material to the holders of the
Notes, the Company and ICP Holdings have filed with the Commission a request
that ICP Holdings be exempted from the reporting requirements of the Exchange
Act. Financial information relating to CHL (predecessor to ICP Holdings) is
presented herein in accordance with Staff Accounting Bulletin No. 53 as an
addition to the notes to the financial statements of the Company.
F-30
<PAGE> 106
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following reflects the summarized consolidated financial information of
CHL, a wholly-owned subsidiary of the Company (predecessor to ICP Holdings):
<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-31
<PAGE> 107
INTERNATIONAL COMFORT PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1998 -- UNAUDITED
(IN MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS) -- CANADIAN GAAP
<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
Operating Revenues.......................................... $177.6 $218.5
Cost of Sales............................................... 139.2 170.7
------ ------
Gross Margin................................................ 38.4 47.8
Selling, General and Administrative Expenses................ 22.9 26.9
------ ------
Operating Profit............................................ 15.5 20.9
------ ------
Financial Expenses
Interest expense.......................................... 4.9 5.0
Amortization of debt issuance costs....................... 0.3 0.3
Refinancing costs......................................... -- 5.0
------ ------
5.2 10.3
------ ------
Net Income.................................................. $ 10.3 $ 10.6
====== ======
Average number of shares (in millions)...................... 39.7 40.4
====== ======
Earnings Per Ordinary Share
Basic..................................................... $ 0.26 $ 0.26
Fully diluted............................................. $ 0.25 $ 0.25
====== ======
</TABLE>
see accompanying notes
F-32
<PAGE> 108
INTERNATIONAL COMFORT PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1998 -- UNAUDITED
(IN MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS) -- CANADIAN GAAP
<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
Operating Revenues.......................................... $314.2 $351.3
Cost of Sales............................................... 247.9 275.0
------ ------
Gross Margin................................................ 66.3 76.3
Selling, General and Administrative Expenses................ 44.4 47.1
------ ------
Operating Profit............................................ 21.9 29.2
------ ------
Financial Expenses
Interest expense.......................................... 9.6 9.5
Amortization of debt issuance costs....................... 0.6 0.6
Refinancing costs......................................... -- 5.0
------ ------
10.2 15.1
------ ------
Net Income.................................................. $ 11.7 $ 14.1
====== ======
Average number of shares (in millions)...................... 39.5 40.1
====== ======
Earnings Per Ordinary Share
Basic..................................................... $ 0.30 $ 0.35
Fully diluted............................................. $ 0.28 $ 0.34
====== ======
</TABLE>
see accompanying notes
F-33
<PAGE> 109
INTERNATIONAL COMFORT PRODUCTS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS OF U.S. DOLLARS) -- CANADIAN GAAP (UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30
---------------- DECEMBER 31,
1997 1998 1997
------ ------ ------------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and short-term deposits.............................. $ 17.7 $ 21.1 $ 31.0
Accounts receivable....................................... 113.4 140.5 96.5
Note receivable........................................... -- -- 7.7
Inventories............................................... 134.4 116.6 94.5
Prepaid expenses and other................................ 5.7 6.5 7.6
------ ------ ------
271.2 284.7 237.3
------ ------ ------
Fixed Assets
Property, plant and equipment............................. 213.7 228.7 214.3
Accumulated depreciation.................................. 119.6 127.7 120.7
------ ------ ------
94.1 101.0 93.6
------ ------ ------
Intangible Assets, net...................................... 9.2 30.9 11.0
Other Assets, net........................................... 12.6 14.2 10.1
------ ------ ------
$387.1 $430.8 $352.0
====== ====== ======
LIABILITIES
Current Liabilities
Short-term borrowings..................................... $ 57.2 $ 42.5 $ 19.7
Accounts payable.......................................... 50.3 60.8 44.8
Accrued liabilities....................................... 28.8 31.7 26.5
Product warranty.......................................... 8.6 9.7 9.5
Current portion of long-term debt......................... -- 0.2 0.2
------ ------ ------
144.9 144.9 100.7
Long-Term Debt.............................................. 165.0 175.4 165.6
Product Warranty............................................ 18.0 14.8 16.2
Other Long-Term Liabilities................................. 17.5 15.8 18.0
------ ------ ------
345.4 350.9 300.5
------ ------ ------
SHAREHOLDERS' EQUITY
Ordinary Shares............................................. 170.7 186.1 171.2
Deficit..................................................... (126.8) (102.3) (116.4)
Foreign Currency Translation Adjustment..................... (2.2) (3.9) (3.3)
------ ------ ------
41.7 79.9 51.5
------ ------ ------
$387.1 $430.8 $352.0
====== ====== ======
</TABLE>
see accompanying notes
F-34
<PAGE> 110
INTERNATIONAL COMFORT PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1998 -- UNAUDITED
(IN MILLIONS OF U.S. DOLLARS) -- CANADIAN GAAP
<TABLE>
<CAPTION>
CASH PROVIDED BY (USED FOR): 1997 1998
---------------------------- ------ ------
<S> <C> <C>
OPERATIONS
Net income.................................................. $ 11.7 $ 14.1
Items not involving current cash flows
Depreciation and amortization............................. 8.5 8.7
Refinancing costs......................................... -- 2.3
Changes in working capital
Accounts receivable....................................... (40.7) (29.5)
Inventories............................................... (34.4) (10.3)
Prepaid expenses and other................................ (0.5) 1.5
Accounts payable, accrued liabilities, and product
warranty............................................... 17.1 10.9
------ ------
(38.3) (2.3)
------ ------
INVESTING
Property, plant and equipment............................. (2.6) (6.6)
Acquisition of United Electric Company.................... -- (25.6)
Acquisition of Watsco Components.......................... -- (14.3)
Acquisition of distribution company....................... (1.8) --
Proceeds from sale of Coastline and factory branches...... 23.1 --
------ ------
18.7 (46.5)
------ ------
FINANCING
Long-term debt issued..................................... -- 150.0
Ordinary shares issued.................................... 1.5 14.9
Repayment of long-term debt............................... -- (140.2)
Refinancing costs......................................... -- (8.6)
------ ------
1.5 16.1
------ ------
Increase in Borrowings...................................... (18.1) (32.7)
Net Cash (Borrowings) -- Beginning of the Period.......... (21.4) 11.3
------ ------
Net Borrowings -- End of the Period....................... $(39.5) $(21.4)
====== ======
Represented by
Short-term borrowings.................................. $(57.2) $(42.5)
Less: Cash and short-term deposits..................... 17.7 21.1
------ ------
$(39.5) $(21.4)
====== ======
</TABLE>
see accompanying notes
F-35
<PAGE> 111
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1998 -- UNAUDITED
(IN MILLIONS OF DOLLARS) -- CANADIAN GAAP
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 accruals) necessary to present fairly the financial position as of
June 30, 1997 and 1998, the results of operations and changes in financial
position for the periods 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>
JUNE 30
---------------- DECEMBER 31,
1997 1998 1997
------ ------ ------------
<S> <C> <C> <C>
Finished goods................................. $ 98.0 $ 74.9 $ 58.8
Raw materials and work in process.............. 11.4 17.8 13.4
Service parts.................................. 25.0 23.9 22.3
------ ------ ------
$134.4 $116.6 $ 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 SIX MONTHS
ENDED ENDED
JUNE 30 JUNE 30
-------------- --------------
1997 1998 1997 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net income (as reported)........................... $10.3 $10.6 $11.7 $14.1
Accounting for income taxes........................ (.1) (.1) (.3) (.3)
Post-retirement benefits........................... (.6) (.4) (1.1) (1.1)
----- ----- ----- -----
Net income under U.S. GAAP......................... $ 9.6 $10.1 $10.3 $12.7
===== ===== ===== =====
Weighted average number of ordinary shares
outstanding during the period under U.S. GAAP (in
millions)
Basic............................................ 39.7 40.4 39.5 40.1
Diluted.......................................... 41.8 42.4 41.6 42.1
Net income per share under U.S. GAAP (in dollars)
Basic............................................ $0.24 $0.25 $0.26 $0.32
Diluted.......................................... $0.23 $0.24 $0.25 $0.31
</TABLE>
F-36
<PAGE> 112
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidated Balance Sheets:
<TABLE>
<CAPTION>
JUNE 30
---------------- DECEMBER 31,
1997 1998 1997
------ ------ ------------
<S> <C> <C> <C>
Total assets (as reported).................................. $387.1 $430.8 $352.0
Items increasing reported total assets
Deferred income taxes..................................... 3.7 3.7 3.5
Post-retirement and pension benefits...................... 4.1 4.6 3.2
------ ------ ------
Total assets -- U.S. GAAP................................... $394.9 $439.1 $358.7
====== ====== ======
Shareholders' equity (as reported).......................... 41.7 79.9 51.5
Items increasing (decreasing) reported shareholders' equity
Deferred income taxes.................................. 3.7 3.7 3.0
Post-retirement and pension benefits................... (6.1) (5.6) (6.2)
------ ------ ------
Shareholders' equity -- U.S. GAAP........................... $ 39.3 $ 78.0 $ 48.3
====== ====== ======
</TABLE>
Consolidated Cash Flows (U.S. GAAP):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
----------------
1997 1998
------ ------
<S> <C> <C>
Net cash used in operating activities..................... $(38.3) $ (2.3)
Net cash provided by (used in) investing activities....... 18.7 (32.2)
Net cash provided by financing activities................. 19.7 24.6
------ ------
Increase (decrease) in cash and cash equivalents.......... 0.1 (9.9)
Cash and cash equivalents -- beginning of the period...... 17.6 31.0
------ ------
Cash and cash equivalents -- end of the period............ $ 17.7 $ 21.1
====== ======
</TABLE>
Non-cash transactions:
In 1998, the Company acquired Watsco Components in exchange for the
issuance of ordinary shares in the amount of $14.3.
5. Summarized Financial Information
International Comfort Products Holdings, Inc. ("ICP Holdings") is a
wholly-owned subsidiary of the Company. ICP Holdings is the issuer of certain
securities as to which a registration statement now has been filed under the
Securities Act of 1933. Upon that registration statement being declared
effective, ICP Holdings would be subject to the reporting requirements under
Section 13 or 15 (d) of the Securities Exchange Act of 1934 (the "Exchange
Act"). Because these securities, however, are fully and unconditionally
guaranteed by the Company and management has determined that such information is
not material to the holder of such securities, the Company and ICP Holdings have
filed with the Commission a request that ICP Holdings be exempted from the
reporting requirements of the Exchange Act. Financial information relating to
ICP Holdings is presented herein in accordance with Staff Accounting Bulletin
No. 53 as an addition to the notes to the financial statements of the Company.
Summarized financial information for ICP Holdings is as follows:
F-37
<PAGE> 113
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Condensed Income Statement Information:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ ----------------
1997 1998 1997 1998
------- ------- ------ ------
<S> <C> <C> <C> <C>
Operating revenues..................... $165.9 $206.2 $292.1 $329.7
Gross margin........................... 35.0 43.6 61.4 69.5
Net income............................. 10.5 11.9 13.4 16.5
</TABLE>
Condensed Balance Sheet Information:
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1998 1997
-------- ------------
<S> <C> <C>
Current assets.......................................... $254.6 $207.3
Total assets............................................ 395.4 316.1
Current liabilities..................................... 134.8 94.2
Total liabilities....................................... 337.3 289.3
Shareholders' equity.................................... 58.1 26.8
</TABLE>
The agreements governing the terms of certain of the Company's debt contain
certain covenants which, among other things, place limitations on the ability of
subsidiaries of ICP Holdings to pay dividends and make other restricted
payments, as defined, to ICP Holdings. Pursuant to the terms of the most
restrictive covenant regarding restricted payments, as of June 30, 1998, $110
million of net assets of subsidiaries of ICP Holdings were not available for
payment of dividends to ICP Holdings.
F-38
<PAGE> 114
- ------------------------------------------------------
- ------------------------------------------------------
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........................... 15
Use of Proceeds........................ 20
Capitalization......................... 21
Selected Historical and Pro Forma
Consolidated Financial Data.......... 21
Business............................... 24
Description of Other Indebtedness...... 34
Purpose of the Exchange Offer.......... 35
Terms of the Exchange Offer............ 37
Description of Notes................... 43
Book Entry; Delivery and Form.......... 66
Certain U.S. Federal Tax
Considerations....................... 68
Certain Canadian Federal Income Tax
Considerations....................... 72
Legal Matters.......................... 72
Experts................................ 73
Available Information.................. 73
Plan of Distribution................... 74
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> 115
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> 116
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. filed as Exhibit 3(i).2/4.2 to the
Registrants' Registration Statement on Form S-4 (File No.
333-58837) filed with the Commission on July 10, 1998, and
incorporated herein by this reference.
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.
filed as Exhibit 3(ii).2/4.4 to the Registrants'
Registration Statement on Form S-4 (File No. 333-58837)
filed with the Commission on July 10, 1998, and incorporated
herein by this reference.
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 filed as Exhibit 4.5
to the Registrants' Registration Statement on Form S-4 (File
No. 333-58837) filed with the Commission on July 10, 1998,
and incorporated herein by this reference.
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")
filed as Exhibit 4.6 to the Registrants' Registration
Statement on Form S-4 (File No. 333-58837) filed with the
Commission on July 10, 1998, and incorporated herein by this
reference.
4.7 -- Registration Rights Agreement, dated as of May 13, 1998, by
and among the Issuer, the Parent Guarantor and the Initial
Purchasers filed as Exhibit 4.7 to the Registrants'
Registration Statement on Form S-4 (File No. 333-58837)
filed with the Commission on July 10, 1998, and incorporated
herein by this reference.
4.8 -- 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.
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).
</TABLE>
II-2
<PAGE> 117
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C> <C>
10.3 -- Receivables Purchase Agreement dated as of July 25, 1996
among ICP (USA), Inter-City Products Partner Corporation
("ICP-Partner") and ICP-Receivables.
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.
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.
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 Parent Guarantor'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.
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.
10.9 -- Loan and Security Agreement dated as of July 18, 1997
between ICP (USA) and NationsBank, N.A.
10.10 -- Amendment to Loan and Security Agreement made and entered
into as of February 24, 1998 between NationsBank, N.A. and
ICP (USA).
10.11 -- Second Amendment to Loan and Security Agreement made and
entered into as of May 13, 1998 between NationsBank, N.A.
and ICP (USA).
10.12 -- Credit Agreement made and entered into as of December 16,
1996 between Inter-City Products Corporation (Canada)
("ICP-Canada"), G.C. McDonald Supply Limited, the Lenders
named therein and General Electric Capital Canada Inc., as
agent.
10.13 -- First Amendment to Credit Agreement made and entered into as
of May 13, 1998 between ICP-Canada, G.C. McDonald Supply
Limited, the Lenders named therein and General Electric
Capital Canada Inc., as agent.
10.14 -- Second Amendment to Credit Agreement made and entered into
as of July 21, 1998 between ICP-Canada, G.C. McDonald Supply
Limited, the Lenders named therein and General Electric
Capital Canada Inc., as agent.
10.15 -- International Comfort Products Corporation Employee Stock
Option Plan filed as Exhibit 4.1 to the Parent Guarantor's
Registration Statement on Form S-8 filed with the Commission
on March 16, 1995, and incorporated herein by this
reference.
10.16 -- International Comfort Products Corporation Share
Compensation Arrangement for Non-Employee Directors filed as
Exhibit 10.3 to the Parent Guarantor'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 -- 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.
</TABLE>
II-3
<PAGE> 118
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C> <C>
10.18 -- 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.
10.19 -- International Comfort Products Corporation 1997 Long Term
Incentive Plan for Senior Management filed as Exhibit 10.6
to the Parent Guarantor'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 -- 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.
10.21 -- 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.
10.22 -- 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.
10.23 -- 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.
10.24 -- Termination Agreement with W. Michael Clevy filed as Exhibit
10.11 to the Parent Guarantor'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.
10.25 -- Termination Agreement with Stephen L. Clanton filed as
Exhibit 10.12 to the Parent Guarantor'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.
10.26 -- Termination Agreement with James L. Kirwan.*
10.27 -- Termination Agreement with Herman V. Kling.*
10.28 -- Change in Control Agreement with David P. Cain filed as
Exhibit 10.15 to the Parent Guarantor'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.
10.29 -- Change in Control Agreement with Francis C. Harrell.**
10.30 -- Change in Control Agreement with Robert C. Henningsen.**
10.31 -- Change in Control Agreement with Alexander T. Lim.**
10.32 -- Change in Control Agreement with Augusto H. Millan.**
10.33 -- Change in Control Agreement with H. David Tayler.**
10.34 -- Change in Control Agreement with James R. Wiese.**
10.35 -- International Comfort Products Corporation 1998 Stock Option
Plan filed as Exhibit 10.30 to the Registrants' Registration
Statement on Form S-4 (File No. 333-58837) filed with the
Commission on July 10, 1998, and incorporated herein by this
reference.
12.1 -- Computation of ratio of earnings to fixed charges.
21.1 -- Subsidiaries filed as Exhibit 21.1 to the Registrants'
Registration Statement on Form S-4 (File No. 333-58837)
filed with the Commission on July 10, 1998, and incorporated
herein by this reference.
</TABLE>
II-4
<PAGE> 119
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C> <C>
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
Issuer and the Parent Guarantor (included on the signature
pages at pages II-7 and II-8 to the Registrants'
Registration Statement on Form S-4 (File No. 333-58837)
filed with the Commission on July 10, 1998).
25.1 -- Form T-1 Statement of Eligibility and Qualification under
the Trust Indenture Act of 1939, as amended, of United
States Trust Company of New York, as Trustee filed as
Exhibit 25.1 to the Registrants' Registration Statement on
Form S-4 (File No. 333-58837) filed with the Commission on
July 10, 1998, and incorporated herein by this reference.
99.1 -- Form of Letter of Transmittal with respect to the Exchange
Offer filed as Exhibit 99.1 to the Registrants' Registration
Statement on Form S-4 (File No. 333-58837) filed with the
Commission on July 10, 1998, and incorporated herein by this
reference.
99.2 -- Form of Letter of Guaranteed Delivery filed as Exhibit 99.2
to the Registrants' Registration Statement on Form S-4 (File
No. 333-58837) filed with the Commission on July 10, 1998,
and incorporated herein by this reference.
99.3 -- Form of Letter to Brokers, Dealers filed as Exhibit 99.3 to
the Registrants' Registration Statement on Form S-4 (File
No. 333-58837) filed with the Commission on July 10, 1998,
and incorporated herein by this reference.
99.4 -- Form of Letter to Clients filed as Exhibit 99.4 to the
Registrants' Registration Statement on Form S-4 (File No.
333-58837) filed with the Commission on July 10, 1998, and
incorporated herein by this reference.
</TABLE>
- ---------------
* Document not filed because substantially identical to Exhibit 10.25
** Document not filed because substantially identical to Exhibit 10.28
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
II-5
<PAGE> 120
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 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> 121
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 26th day of August, 1998.
INTERNATIONAL COMFORT PRODUCTS
HOLDINGS, INC.
By: /s/ DAVID P. CAIN
------------------------------------
David P. Cain
Senior Vice President,
General Counsel and Secretary
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 26th day of August, 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>
* By David P. Cain pursuant to power of attorney set forth on Page II-7 to
Registration Statement on Form S-4 (File No. 333-58837) filed with the
Commission on July 10, 1998
II-7
<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 26th day of August, 1998.
INTERNATIONAL COMFORT PRODUCTS
CORPORATION
By: /s/ DAVID P. CAIN
------------------------------------
David P. Cain
Senior Vice President,
General Counsel and Secretary
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 26th day of August, 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)
/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>
* By David P. Cain pursuant to power of attorney set forth on Page II-8 to
Registration Statement on Form S-4 (File No. 333-58837) filed with the
Commission on July 10, 1998
II-8
<PAGE> 123
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. filed as Exhibit 3(i).2/4.2 to the
Registrants' Registration Statement on Form S-4 (File No.
333-58837) filed with the Commission on July 10, 1998, and
incorporated herein by this reference.
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.
filed as Exhibit 3(ii).2/4.4 to the Registrants'
Registration Statement on Form S-4 (File No. 333-58837)
filed with the Commission on July 10, 1998, and incorporated
herein by this reference.
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 filed as Exhibit 4.5
to the Registrants' Registration Statement on Form S-4 (File
No. 333-58837) filed with the Commission on July 10, 1998,
and incorporated herein by this reference.
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")
filed as Exhibit 4.6 to the Registrants' Registration
Statement on Form S-4 (File No. 333-58837) filed with the
Commission on July 10, 1998, and incorporated herein by this
reference.
4.7 -- Registration Rights Agreement, dated as of May 13, 1998, by
and among the Issuer, the Parent Guarantor and the Initial
Purchasers filed as Exhibit 4.7 to the Registrants'
Registration Statement on Form S-4 (File No. 333-58837)
filed with the Commission on July 10, 1998, and incorporated
herein by this reference.
4.8 -- 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.
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).
10.3 -- Receivables Purchase Agreement dated as of July 25, 1996
among ICP (USA), Inter-City Products Partner Corporation
("ICP-Partner") and ICP-Receivables.
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.
</TABLE>
II-9
<PAGE> 124
<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.
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 Parent Guarantor'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.
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.
10.9 -- Loan and Security Agreement dated as of July 18, 1997
between ICP (USA) and NationsBank, N.A.
10.10 -- Amendment to Loan and Security Agreement made and entered
into as of February 24, 1998 between NationsBank, N.A. and
ICP (USA).
10.11 -- Second Amendment to Loan and Security Agreement made and
entered into as of May 13, 1998 between NationsBank, N.A.
and ICP (USA).
10.12 -- Credit Agreement made and entered into as of December 16,
1996 between Inter-City Products Corporation (Canada)
("ICP-Canada"), G.C. McDonald Supply Limited, the Lenders
named therein and General Electric Capital Canada Inc., as
agent.
10.13 -- First Amendment to Credit Agreement made and entered into as
of May 13, 1998 between ICP-Canada, G.C. McDonald Supply
Limited, the Lenders named therein and General Electric
Capital Canada Inc., as agent.
10.14 -- Second Amendment to Credit Agreement made and entered into
as of July 21, 1998 between ICP-Canada, G.C. McDonald Supply
Limited, the Lenders named therein and General Electric
Capital Canada Inc., as agent.
10.15 -- International Comfort Products Corporation Employee Stock
Option Plan filed as Exhibit 4.1 to the Parent Guarantor's
Registration Statement on Form S-8 filed with the Commission
on March 16, 1995, and incorporated herein by this
reference.
10.16 -- International Comfort Products Corporation Share
Compensation Arrangement for Non-Employee Directors filed as
Exhibit 10.3 to the Parent Guarantor'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 -- 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.
10.18 -- 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-10
<PAGE> 125
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C> <C>
10.19 -- International Comfort Products Corporation 1997 Long Term
Incentive Plan for Senior Management filed as Exhibit 10.6
to the Parent Guarantor'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 -- 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.
10.21 -- 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.
10.22 -- 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.
10.23 -- 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.
10.24 -- Termination Agreement with W. Michael Clevy filed as Exhibit
10.11 to the Parent Guarantor'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.
10.25 -- Termination Agreement with Stephen L. Clanton filed as
Exhibit 10.12 to the Parent Guarantor'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.
10.26 -- Termination Agreement with James L. Kirwan.*
10.27 -- Termination Agreement with Herman V. Kling.*
10.28 -- Change in Control Agreement with David P. Cain filed as
Exhibit 10.15 to the Parent Guarantor'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.
10.29 -- Change in Control Agreement with Francis C. Harrell.**
10.30 -- Change in Control Agreement with Robert C. Henningsen.**
10.31 -- Change in Control Agreement with Alexander T. Lim.**
10.32 -- Change in Control Agreement with Augusto H. Millan.**
10.33 -- Change in Control Agreement with H. David Tayler.**
10.34 -- Change in Control Agreement with James R. Wiese.**
10.35 -- International Comfort Products Corporation 1998 Stock Option
Plan filed as Exhibit 10.30 to the Registrants' Registration
Statement on Form S-4 (File No. 333-58837) filed with the
Commission on July 10, 1998, and incorporated herein by this
reference.
12.1 -- Computation of ratio of earnings to fixed charges.
21.1 -- Subsidiaries filed as Exhibit 21.1 to the Registrants'
Registration Statement on Form S-4 (File No. 333-58837)
filed with the Commission on July 10, 1998, and incorporated
herein by this reference.
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.
</TABLE>
II-11
<PAGE> 126
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C> <C>
23.4 -- Consent of PricewaterhouseCoopers, Chartered Accountants.
24.1 -- Powers of Attorney of certain directors and officers of the
Issuer and the Parent Guarantor (included on the signature
pages at pages II-7 and II-8 to the Registrants'
Registration Statement on Form S-4 (File No. 333-58837)
filed with the Commission on July 10, 1998).
25.1 -- Form T-1 Statement of Eligibility and Qualification under
the Trust Indenture Act of 1939, as amended, of United
States Trust Company of New York, as Trustee filed as
Exhibit 25.1 to the Registrants' Registration Statement on
Form S-4 (File No. 333-58837) filed with the Commission on
July 10, 1998, and incorporated herein by this reference.
99.1 -- Form of Letter of Transmittal with respect to the Exchange
Offer filed as Exhibit 99.1 to the Registrants' Registration
Statement on Form S-4 (File No. 333-58837) filed with the
Commission on July 10, 1998, and incorporated herein by this
reference.
99.2 -- Form of Letter of Guaranteed Delivery filed as Exhibit 99.2
to the Registrants' Registration Statement on Form S-4 (File
No. 333-58837) filed with the Commission on July 10, 1998,
and incorporated herein by this reference.
99.3 -- Form of Letter to Brokers, Dealers filed as Exhibit 99.3 to
the Registrants' Registration Statement on Form S-4 (File
No. 333-58837) filed with the Commission on July 10, 1998,
and incorporated herein by this reference.
99.4 -- Form of Letter to Clients filed as Exhibit 99.4 to the
Registrants' Registration Statement on Form S-4 (File No.
333-58837) filed with the Commission on July 10, 1998, and
incorporated herein by this reference.
</TABLE>
- ---------------
* Document not filed because substantially identical to Exhibit 10.25
** Document not filed because substantially identical to Exhibit 10.28
II-12
<PAGE>
August 25, 1998
International Comfort Products Corporation
International Comfort Products Holdings, Inc.
501 Corporate Centre Drive
Suite 200
Franklin, Tennessee 37067
Re: Registration Statement on Form S-4 (File No. 333-58837)
Ladies and Gentlemen:
We have acted as United States counsel to International Comfort
Products Corporation, a Canadian corporation (the "Parent Guarantor"), and
International Comfort Products Holdings, Inc., a Delaware corporation (the
"Issuer"), in connection with the Registration Statement on Form S-4 (File
No. 333-58837) (the "Registration Statement") filed with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act"), relating to the proposed offer by the Issuer to exchange
its 8 5/8% Series B Senior Notes due 2008 (the "New Notes") for its
outstanding 8 5/8% Series A Senior Notes due 2008 (the "Old Notes"), of which
$150,000,000 aggregate principal amount is outstanding (the "Exchange
Offer").
In connection with this opinion letter, we have examined: the
Registration Statement, including the Prospectus which forms a part of the
Registration Statement, the Indenture dated as of May 13, 1998 (the
"Indenture"), among the Issuer, the Parent Guarantor and United States Trust
Company of New York, as trustee (the "Trustee"), the forms of Old Note and
New Note, each attached as an exhibit to the Indenture, and originals, or
copies certified or otherwise identified to our satisfaction, of such other
documents, records, instruments and certificates of public officials as we
have deemed necessary or appropriate to enable us to render this opinion
letter. In addition, we have assumed: (i) that all signatures are genuine,
(ii) that all documents submitted to us as originals are genuine, (iii) that
all copies submitted to us conform to the originals, (iv) that the Indenture
has been duly authorized, executed and delivered by each of the Parent
Guarantor and the Trustee and is a legal, valid, binding and enforceable
agreement of each of the Parent Guarantor and the Trustee and (v) that the
Old Notes and the guarantee endorsed thereon and created under the Indenture
(the "Old Guarantee") were duly and validly executed and delivered by the
Parent Guarantor and the Issuer and that the Old Notes were duly and validly
authenticated by the Trustee pursuant to the terms of the Indenture.
<PAGE>
International Comfort Products Corporation
International Comfort Products Holdings, Inc.
August 25, 1998
Page 2
Attorneys in our firm are members of the bar of the State of
Tennessee, and the opinion set forth below is restricted to matters
controlled by United States federal laws, the laws of the State of Tennessee
and the General Corporation Law of the State of Delaware.
Based on the foregoing, it is our opinion that, when (i) the
applicable provisions of the Act and such "Blue Sky" or other state
securities laws as may be applicable shall have been complied with and (ii)
New Notes with the guarantee of the Parent Guarantor endorsed thereon (the
"New Guarantee"), in the form included as an Exhibit to the Indenture, have
been duly executed and authenticated in accordance with the Indenture and
duly issued and delivered by the Issuer and the Parent Guarantor in exchange
for an equal principal amount of Old Notes and related Old Guarantee pursuant
to the terms of the Exchange Offer, such New Notes will constitute legal,
valid, binding and enforceable obligations of the Issuer, subject to (a)
limitations imposed by bankruptcy, reorganization, moratorium, insolvency,
fraudulent conveyance, fraudulent transfer, preferential transfer and other
laws of general application relating to or affecting the enforceability of
creditors' rights and to general principles of equity, including, without
limitation, laches and estoppel as equitable defenses, concepts of
materiality, reasonableness, good faith and fair dealing, and considerations
of impracticability or impossibility of performance and defenses based upon
unconscionability (regardless of whether such enforceability is considered or
applied in a proceeding in equity or at law) and (b) the qualification that
the remedies of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
We hereby consent to the filing of this opinion letter as an exhibit
to the Registration Statement and to the reference to our name under the
caption "Legal Matters" in the Registration Statement. In giving this
consent, we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Act or the rules and regulations
of the Commission thereunder.
Very truly yours,
TUKE YOPP & SWEENEY, PLC
/s/ Tuke Yopp & Sweeney, PLC
<PAGE>
Osler, Suite 1900
Hoskin & 333 - 7th Avenue S.W.
Harcourt Calgary, Alberta
Canada T2P 2Z1
Tel: (403) 260-7000
Fax: (403) 260-7024
WEB: www.osler.com
- -----------------------------------------------------------------------
Barristers & Solicitors * Patent & Trade-mark Agents
August 25, 1998
International Comfort Products Corporation
501 Corporate Centre Drive
Suite 200
Franklin, TN 37067
Ladies & Gentlemen:
We have acted as Canadian counsel to International Comfort Products
Corporation, a Canadian corporation (the "Company"), in connection with the
Registration Statement on Form S-4 (File No. 333-58837) (the "Registration
Statement") filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"),
relating to the proposed guarantee by the Company of the 8-5/8% Series B
Senior Notes due 2008 (the "New Notes") that are proposed to be offered by
the Company's subsidiary, International Comfort Products Holdings, Inc. (the
"Subsidiary") in exchange for the Subsidiary's outstanding 8-5/8% Series A
Senior Notes due 2008 (the "Old Notes"), of which $150,000,000 aggregate
principal amount is outstanding (the "Exchange Offer").
In connection with this opinion letter, we have examined: the Registration
Statement, including the Prospectus which forms a part of the Registration
Statement, the Indenture, dated as of May 13, 1998 (the "Indenture"), among
the Company, the Subsidiary and United States Trust Company of New York, as
trustee, the forms of Old Note and New Note (each of which bears the form of
the Company's guarantee thereof on the reverse side), each attached as an
exhibit to the Indenture, and originals, or copies certified or otherwise
identified to our satisfaction, of such other documents, records, instruments
and certificates of public officials as we have deemed necessary or
appropriate to enable us to render this opinion. In addition, we have
assumed: (i) that all signatures are genuine, (ii) that all documents
submitted to us as originals are genuine, (iii) that all copies submitted to
us conform to the originals, (iv) the Indenture has been duly authorized,
executed and delivered by each of the Trustee and the Subsidiary and is a
legal, valid, binding and enforceable agreement of each of the Trustee and
the Subsidiary and (v) the Old Notes and the guarantee endorsed thereon and
created under the Indenture (the "Old Guarantee") were duly and validly
executed and delivered by the Company and the Subsidiary and that the Old
Notes were duly and validly authenticated by the Trustee pursuant to the
terms of the Indenture.
<PAGE>
Osler,
Hoskin &
Harcourt
Page 2
We are solicitors qualified to practice law in the Provinces of Alberta and
Ontario and we express no opinions as to any laws or any matters governed by
any laws other than the laws of the Provinces of Alberta and Ontario and the
federal laws of Canada applicable therein.
On the basis of the foregoing and subject to the qualifications hereinafter
expressed, we are of the opinion that when New Notes with the guarantee of
the Company endorsed thereon (the "New Guarantee") have been duly executed
and authenticated in accordance with the provisions of the Indenture and duly
issued and delivered by the Company and the Subsidiary in exchange for an
equal principal amount of Old Notes and related Old Guarantee pursuant to the
terms of the Exchange Offer, such New Guarantee will be enforceable against
the Company in accordance with its terms.
The opinion set forth above is subject to the qualification that:
(i) enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium, arrangement or
winding-up laws or other similar laws affecting the
enforcement or creditors' rights generally;
(ii) enforceability may be limited by equitable principles,
including the principle that equitable remedies such as
specified performance and injunction may only be granted
in the discretion of the court; and
(iii) enforceability may be limited to the extent that amendments
to the obligations being guaranteed are considered so
material as to constitute new obligations or novations of
same.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the captions
"Description of Notes - Parent Guarantee" and "Legal Matters" in the
Registration Statement. In giving this consent, we do not hereby admit that
we are in the category of persons whose consent is required under Section 7
of the Act or the rules and regulations of the Commission thereunder.
Yours very truly,
/s/ Osler, Hoskin & Harcourt
<PAGE>
INTER-CITY PRODUCTS CORPORATION (USA)
INTER-CITY PRODUCTS RECEIVABLES MASTER TRUST
POOLING AND SERVICING AGREEMENT
dated as of July 25, 1996
among
INTER-CITY PRODUCTS RECEIVABLES COMPANY, L.P.,
as Transferor,
INTER-CITY PRODUCTS CORPORATION (USA)
as Servicer,
and
LASALLE NATIONAL BANK,
as Trustee
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
CONVEYANCE OF ASSETS
SECTION 2.1 Creation of the Trust; Conveyance of Certain Assets 1
SECTION 2.2 Acceptance by Trustee 2
SECTION 2.3 Representations and Warranties of Transferor
Relating to the Transferred Assets 3
SECTION 2.4 No Assumption of Obligations Relating to
Receivables, Related Transferred Assets or Contracts . 4
ARTICLE III
ADMINISTRATION AND SERVICING
SECTION 3.1 Acceptance of Appointment; Other Matters . . . . . . . . . 4
SECTION 3.2 Duties of Servicer and Transferor. . . . . . . . . . . . . 5
SECTION 3.3 Lockbox Accounts; Concentration Accounts . . . . . . . . . 9
SECTION 3.4 Servicing Compensation . . . . . . . . . . . . . . . . . .10
SECTION 3.5 Records of Servicer and Reports to be Prepared by
Servicer. . . . . . . . . . . . . . . . . . . . . . . . .11
SECTION 3.6 Monthly Servicer's Certificate . . . . . . . . . . . . . .13
SECTION 3.7 Servicing Report of Independent Public Accountants;
SEC Reports . . . . . . . . . . . . . . . . . . . . . . .13
SECTION 3.8 Rights of Trustee. . . . . . . . . . . . . . . . . . . . .14
SECTION 3.9 Ongoing Responsibilities of the Initial Servicer . . . . .16
SECTION 3.10 Further Action Evidencing Transfers. . . . . . . . . . . .17
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS; ALLOCATIONS
SECTION 4.1 Rights of Certificateholders . . . . . . . . . . . . . . .17
SECTION 4.2 Establishment of Transaction Accounts. . . . . . . . . . .18
SECTION 4.3 Trust-Level Calculations and Funds Allocations . . . . . .19
SECTION 4.4 Investment of Funds in Transaction Accounts. . . . . . . .19
SECTION 4.5 Attachment of Transaction Accounts . . . . . . . . . . . .20
ARTICLE V
DISTRIBUTIONS AND REPORTS
SECTION 5.1 Distributions. . . . . . . . . . . . . . . . . . . . . . .20
<PAGE>
ARTICLE VI
THE CERTIFICATES
SECTION 6.1 The Certificates . . . . . . . . . . . . . . . . . . . . .20
SECTION 6.2 Authentication of Certificates . . . . . . . . . . . . . .21
SECTION 6.3 Registration of Transfer and Exchange of
Certificates. . . . . . . . . . . . . . . . . . . . . . .21
SECTION 6.4 Mutilated, Destroyed, Lost or Stolen Certificates. . . . .24
SECTION 6.5 Persons Deemed Owners. . . . . . . . . . . . . . . . . . .24
SECTION 6.6 Appointment of Paying Agent. . . . . . . . . . . . . . . .25
SECTION 6.7 Access to List of Certificateholders' Names and
Addresses . . . . . . . . . . . . . . . . . . . . . . . .25
SECTION 6.8 Authenticating Agent . . . . . . . . . . . . . . . . . . .26
SECTION 6.9 Tax Treatment. . . . . . . . . . . . . . . . . . . . . . .27
SECTION 6.10 Issuance of Additional Series of Certificates. . . . . . .27
ARTICLE VII
TRANSFEROR
SECTION 7.1 Representations and Warranties of Transferor
Relating to Transferor and the Transaction Documents. . .30
SECTION 7.2 Covenants of Transferor. . . . . . . . . . . . . . . . . .33
SECTION 7.3 Indemnification by Transferor. . . . . . . . . . . . . . .38
ARTICLE VIII
SERVICER
SECTION 8.1 Representations and Warranties of Servicer . . . . . . . .40
SECTION 8.2 Covenants of Servicer. . . . . . . . . . . . . . . . . . .42
SECTION 8.3 Merger or Consolidation of, or Assumption of the
Obligations of, Servicer . . . . . . . . . . . . . . . . .43
SECTION 8.4 Indemnification by Servicer. . . . . . . . . . . . . . . .43
SECTION 8.5 Servicer Liability . . . . . . . . . . . . . . . . . . . .44
SECTION 8.6 Limitation on Liability of Servicer and Others . . . . . .44
ARTICLE IX
EARLY AMORTIZATION EVENTS; TERMINATION BY SELLERS
SECTION 9.1 Early Amortization Events. . . . . . . . . . . . . . . . .44
SECTION 9.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . .44
SECTION 9.3 Additional Rights Upon the Occurrence of Certain Events. .44
ARTICLE X
SERVICER DEFAULTS
SECTION 10.1 Servicer Defaults . . . . . . . . . . . . . . . . . . . .46
SECTION 10.2 Trustee to Act; Appointment of Successor. . . . . . . . .47
<PAGE>
SECTION 10.3 Notification of Servicer Default; Notification of
Appointment of Successor Servicer . . . . . . . . . . . .49
SECTION 10.4 Waiver of Servicer Defaults . . . . . . . . . . . . . . .49
ARTICLE XI
TRUSTEE
SECTION 11.1 Duties of Trustee . . . . . . . . . . . . . . . . . . . .50
SECTION 11.2 Certain Matters Affecting Trustee . . . . . . . . . . . .53
SECTION 11.3 Limitation on Liability of Trustee. . . . . . . . . . . .54
SECTION 11.4 Trustee May Deal with Other Parties . . . . . . . . . . .55
SECTION 11.5 Servicer To Pay Trustee's Fees and Expenses . . . . . . .56
SECTION 11.6 Eligibility Requirements for Trustee. . . . . . . . . . .56
SECTION 11.7 Resignation or Removal of Trustee . . . . . . . . . . . .57
SECTION 11.8 Successor Trustee . . . . . . . . . . . . . . . . . . . .57
SECTION 11.9 Merger or Consolidation of Trustee. . . . . . . . . . . .58
SECTION 11.10 Appointment of Co-Trustee or Separate Trustee. . . . . .58
SECTION 11.11 Tax Returns. . . . . . . . . . . . . . . . . . . . . . .60
SECTION 11.12 Trustee May Enforce Claims Without Possession of
Certificates . . . . . . . . . . . . . . . . . . . . . .60
SECTION 11.13 Suits for Enforcement. . . . . . . . . . . . . . . . . .60
SECTION 11.14 Rights of Required Investors To Direct Trustee . . . . .60
SECTION 11.15 Representations and Warranties of Trustee. . . . . . . .61
SECTION 11.16 Maintenance of Office or Agency. . . . . . . . . . . . .61
ARTICLE XII
TERMINATION
SECTION 12.1 Termination of Trust. . . . . . . . . . . . . . . . . . .61
SECTION 12.2 Final Distribution. . . . . . . . . . . . . . . . . . . .62
SECTION 12.3 Rights Upon Termination of the Trust. . . . . . . . . . .63
SECTION 12.4 Optional Repurchase of Investor Interests . . . . . . . .63
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1 Amendment, Waiver, Etc. . . . . . . . . . . . . . . . . .64
SECTION 13.2 Actions by Certificateholders . . . . . . . . . . . . . .66
SECTION 13.3 Limitation on Rights of Certificateholders. . . . . . . .66
SECTION 13.4 Governing Law . . . . . . . . . . . . . . . . . . . . . .67
SECTION 13.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . .68
SECTION 13.6 Severability of Provisions. . . . . . . . . . . . . . . .68
SECTION 13.7 Certificates Nonassessable and Fully Paid . . . . . . . .68
SECTION 13.8 Nonpetition Covenant. . . . . . . . . . . . . . . . . . .68
SECTION 13.9 No Waiver; Cumulative Remedies. . . . . . . . . . . . . .69
SECTION 13.10 Counterparts . . . . . . . . . . . . . . . . . . . . . .69
<PAGE>
SECTION 13.11 Third-Party Beneficiaries. . . . . . . . . . . . . . . .69
SECTION 13.12 Integration. . . . . . . . . . . . . . . . . . . . . . .69
SECTION 13.13 Binding Effect; Assignability; Survival of Provisions. .69
SECTION 13.14 Recourse to Transferor . . . . . . . . . . . . . . . . .70
SECTION 13.15 Recourse to Transferred Assets . . . . . . . . . . . . .70
SECTION 13.16 Submission to Jurisdiction . . . . . . . . . . . . . . .70
SECTION 13.17 Waiver of Jury Trial . . . . . . . . . . . . . . . . . .70
<PAGE>
EXHIBITS
EXHIBIT A Form of Lockbox Account Letter Agreement
EXHIBIT B [Reserved]
EXHIBIT C Form of Monthly Servicer's Certificate
EXHIBIT D Semi-Annual Agreed-Upon Procedures
EXHIBIT E Form of Transferor Certificate
EXHIBIT F Form of Quarterly Servicer's Certificate
EXHIBIT G Form of Credit and Collection Policy
EXHIBIT H Form of Distributor Agreement
SCHEDULES
SCHEDULE 1 Account Banks - Lockbox Banks
APPENDIX
APPENDIX A Definitions
<PAGE>
This POOLING AND SERVICING AGREEMENT, dated as of July 25, 1996
(this "Agreement"), is made among INTER-CITY PRODUCTS RECEIVABLES COMPANY,
L.P., a Tennessee limited partnership ("Transferor"), INTER-CITY PRODUCTS
CORPORATION (USA), a Delaware corporation (the "Initial Servicer"), and
LASALLE NATIONAL BANK, a national banking association, as Trustee.
ARTICLE I
DEFINITIONS
SECTION 2.1 Definitions. Capitalized terms used in this
Agreement have the meanings that Appendix A assigns to them, and this
Agreement shall be interpreted in accordance with Part B of Appendix A.
ARTICLE II
CONVEYANCE OF ASSETS
SECTION 2.1 Creation of the Trust; Conveyance of Certain Assets.
(a) Transferor hereby transfers, assigns, sets over, grants and otherwise
conveys to Trustee, in its capacity as representative of the
Certificateholders, without recourse (except as expressly provided
herein), all of its right, title and interest in, to and under, (i) all
Receivables that have been or are hereafter transferred (whether by sale
or contribution) by the Sellers to Transferor, (ii) all Related Assets,
(iii) all of Transferor's rights under the Seller Transaction Documents
(the property described in clauses (ii) and (iii) being called the
"Related Transferred Assets"), (iv) all funds from time to time on deposit
in each of the Transaction Accounts (including funds deposited in a
Transaction Account in connection with the issuance of any prefunded
Series) and all funds from time to time on deposit in each of the Bank
Accounts representing Collections on, or other proceeds of, the foregoing
and, in each case, all certificates and instruments, if any, from time to
time evidencing such funds, all investments made with such funds, all
claims thereunder or in connection therewith and all interest, dividends,
monies, instruments, securities and other property from time to time
received, receivable or otherwise distributed in respect of or in exchange
for any or all of the foregoing and (v) all moneys due or to become due
and all amounts received or receivable with respect to any of the
foregoing and all proceeds of the foregoing. Such property, whether now
existing or hereafter acquired, shall constitute the assets of the Trust
(collectively, the "Transferred Assets"). The foregoing transfer,
assignment, setover, grant and conveyance to the Trust shall be made to
Trustee, on behalf of the Trust, and each reference in this Agreement to
such transfer, assignment, setover and conveyance shall be construed
accordingly.
(b) In connection with the transfer described in subsection (a),
Transferor and Servicer shall record and file or cause to be recorded and
filed, as an expense of Servicer paid out of the Servicing Fee, Public
Notices with respect to the Transferred Assets meeting the requirements
of applicable law in such manner and in such jurisdictions as are
necessary to perfect the transfer
<PAGE>
and assignment of the Transferred Assets to the Trust. In connection with
the transfer described in subsection (a), Transferor and Servicer further
agree to deliver to Trustee each Transferred Asset (including any original
documents or instruments included in the Transferred Assets as are
necessary to effect such transfer) in which the transfer of an interest
is perfected under the UCC or otherwise by possession. Transferor or
Servicer shall deliver each such Transferred Asset to Trustee, at the
expense of Servicer paid out of the Servicing Fee, immediately upon the
transfer of any such Transferred Asset to Trustee pursuant to subsection
(a).
(c) In connection with the transfer described above in subsection
(a), Servicer shall, on behalf of Transferor, as an expense of Servicer
paid out of the Servicing Fee, on or prior to the First Issuance Date,
mark the master data processing records evidencing the Receivables with
the following legend:
"THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD TO INTER-CITY
PRODUCTS RECEIVABLES COMPANY, L.P. ("TRANSFEROR") PURSUANT TO A
RECEIVABLES PURCHASE AGREEMENT, DATED AS OF JULY 25, 1996, AMONG
INTER-CITY PRODUCTS CORPORATION (USA) ("PARENT") AND CERTAIN
SUBSIDIARIES OF THE PARENT, AS SELLERS, AND TRANSFEROR, AS BUYER;
AND SUCH RECEIVABLES HAVE BEEN TRANSFERRED TO THE INTER-CITY
PRODUCTS RECEIVABLES MASTER TRUST PURSUANT TO A POOLING AND
SERVICING AGREEMENT, DATED AS OF THE SAME DATE, AMONG THE
TRANSFEROR, PARENT, AS SERVICER, AND LASALLE NATIONAL BANK, AS
TRUSTEE."
(d) Upon the request of Transferor, Trustee will cause
Certificates in authorized denominations evidencing the entire interest
in the Trust to be duly authenticated and delivered to or upon the order
of Transferor pursuant to Section 6.2. Pursuant to the Transferor
Certificate, Transferor shall be entitled to receive current and deferred
transfer payments at the times and in the amounts specified in the various
Supplements executed from time to time.
(e) If the transfer, assignment, set-over, grant and conveyance
described in subsection (a) of this Section 2.1 are deemed to create a
security interest in the property described therein, Transferor hereby
grants to the Trustee, for the benefit of the Trustee and the
Certificateholders, a security interest in that property (which shall be
deemed to be a first priority perfected security interest and shall secure
Transferor's obligations under the Transaction Documents and the
Certificates), and agrees that this Agreement shall constitute a security
agreement under applicable law.
SECTION 2.2 Acceptance by Trustee. Trustee hereby acknowledges
its acceptance on behalf of the Trust of all right, title and interest to
the Transferred Assets and declares that it shall maintain such right,
title and interest, upon the trust herein set forth, for the benefit of
all Certificateholders, on the terms and subject to the conditions
hereinafter set forth.
-2-
<PAGE>
SECTION 2.3 Representations and Warranties of Transferor Relating
to the Transferred Assets.
(a) Representations and Warranties. At the time that any
Receivable or other Transferred Asset is transferred by Transferor to the
Trust, Transferor hereby represents and warrants that:
(i) Quality of Title. (A) Immediately before each
transfer to be made by Transferor hereunder, each Receivable and
other Transferred Asset that was then to be transferred to the
Trust hereunder was owned by Transferor free and clear of any
Adverse Claim (other than any Permitted Adverse Claim); and,
within two Business Days after the First Issuance Date,
Transferor and Servicer made, or caused to be made, all filings
and took all other action under applicable law in each relevant
jurisdiction in order to protect and perfect the Trust's interest
in such Receivables and such Transferred Assets against all
creditors of, and purchasers from, Transferor and the Sellers.
(B) Each transfer of Receivables and other Transferred
Assets by Transferor to the Trust pursuant to this Agreement
constitutes a valid transfer and assignment to the Trustee of all
right, title and interest of Transferor in such Receivables and
other Transferred Assets, free and clear of any Adverse Claim
(other than any Permitted Adverse Claim), and constitutes either
an absolute transfer of such property to the Trust or a grant of
a first priority perfected security interest in such property to
the Trust. Whenever the Trust accepts a transfer of a Receivable
or other Transferred Asset hereunder, it shall have acquired a
valid and perfected first priority security interest in such
Receivable or other Transferred Asset free and clear of any
Adverse Claim (other than any Permitted Adverse Claim).
(C) No effective Public Notice that covers all or part
of any Transferred Asset is on file in any recording office
except such as may be filed (i) in favor of the Transferor in
accordance with the Contracts, (ii) in favor of Transferor
pursuant to the Purchase Agreement and (iii) in favor of the
Trustee, for the benefit of the Investor Certificateholders, in
accordance with this Agreement. No Public Notice relating to
perfection that covers any inventory of such Seller that might
give rise to Receivables is on file in any recording office
except for (so long as an Intercreditor Agreement is in effect)
Public Notice in favor of creditors of such Seller bound by such
Intercreditor Agreement.
(D) No acquisition of any Receivable or other
Transferred Asset by Transferor or the Trust constitutes a
fraudulent transfer or fraudulent conveyance under the
Bankruptcy Code or applicable state bankruptcy or insolvency laws
or is otherwise void or voidable or subject to subordination
under similar laws or principles or for any other reason.
(ii) Approvals. With respect to each Receivable and
other Transferred Asset, all consents, licenses, approvals or
authorizations of, or notices to or registrations, declarations
or filings with, any Governmental Authority or other Person
required to be obtained, effected or made by the Sellers,
Servicer or Transferor in connection with the
-3-
<PAGE>
conveyance of the Receivable and other Transferred Asset by the
Sellers to Transferor, or by Transferor to the Trust, have been
duly obtained, effected or given and are in full force and
effect.
(iii) Eligible Receivables. (A) On the date on which
the applicable Seller transfers a Receivable to Transferor, and
Transferor transfers such Receivable to the Trust, unless
otherwise identified by Servicer in the Daily Report for such
date, such Receivable is an Eligible Receivable, and (B) on the
date of each Daily Report or Monthly Report that identifies a
Receivable as an Eligible Receivable, such Receivable is an
Eligible Receivable.
(b) Notice of Breach. The representations and warranties set
forth in subsection (a) shall survive the transfer of the Receivables and
the other Transferred Assets to the Trust. Upon discovery by Transferor,
Servicer or Trustee of a breach of any of the representations and
warranties set forth in subsection (a), the party discovering the breach
shall give written notice to the other parties to this Agreement and each
Required Person within three Business Days following the discovery;
provided, however, that if such breach arises from a Seller's failure to
perform its obligations under the Purchase Agreement and such failure is
of the type that may be cured by settlement of a Seller Noncomplying
Receivables Adjustment or Seller Dilution Adjustment under Sections 3.1
and 3.5 of the Purchase Agreement, and such settlement shall have (in
fact) been made within the time limit specified therein, then no breach
shall be deemed to have occurred under this Agreement. Trustee's
obligations in respect of discovering any breach are limited as provided
in Section 11.2(h).
SECTION 2.4 No Assumption of Obligations Relating to Receivables,
Related Transferred Assets or Contracts. The transfer, assignment, set
over, grant and conveyance described in Section 2.1 does not constitute
and is not intended to result in a creation or an assumption by the Trust,
Trustee or any Investor Certificateholder of any obligation of Servicer,
Transferor, the applicable Seller or any other Person in connection with
the Receivables or the Related Transferred Assets or under the related
Contracts or any other agreement or instrument relating thereto. None of
Trustee, the Trust or any Investor Certificateholder shall have any
obligation or liability to any Obligor.
ARTICLE III
ADMINISTRATION AND SERVICING
SECTION 3.1 Acceptance of Appointment; Other Matters.
(a) Designation of Servicer. The servicing, administering and
collection of the Receivables and the Related Transferred Assets shall be
conducted by the Person designated as Servicer hereunder from time to time
in accordance with this Section. Until Trustee gives a Termination Notice
to the Initial Servicer pursuant to Section 10.1, the Initial Servicer is
designated (and agrees to act) as Servicer.
-4-
<PAGE>
(b) Delegation of Certain Servicing Activities. In the ordinary
course of business, Servicer may at any time delegate its duties hereunder
with respect to the Receivables and the Related Transferred Assets to any
Person. Each Person to whom any such duties are delegated in accordance
with this Section is called a "Sub-Servicer". Notwithstanding any such
delegation, Servicer shall remain liable for the performance of all duties
and obligations of Servicer pursuant to the terms of this Agreement and
the other Transaction Documents. The fees and expenses of any Sub-
Servicers shall be as agreed between Servicer and the Sub-Servicers from
time to time and none of the Trust, Trustee or any Certificateholder shall
have any responsibility therefor. Upon any termination of a Servicer
pursuant to Section 10.1, all Sub-Servicers designated pursuant to this
subsection by such Servicer shall automatically also be terminated.
(c) Termination. The designation of Servicer (and each Sub-
Servicer) under this Agreement shall automatically terminate upon
termination of the Trust pursuant to Section 12.1.
(d) Resignation of Servicer. The Initial Servicer shall not
resign as Servicer unless it determines that (i) the performance of its
duties is no longer permissible under applicable law and (ii) there is no
reasonable action that it could take to make the performance of its duties
permissible under applicable law. If the Initial Servicer determines that
it must resign for the reasons stated above, it shall, prior to the
tendering of its resignation, deliver to Trustee an Opinion of Counsel
confirming the satisfaction of the conditions set forth in the preceding
sentence. No resignation by the Initial Servicer shall become effective
until Trustee or another Successor Servicer shall have assumed the
responsibilities and obligations of Servicer in accordance with Section
10.2. Trustee shall give prompt notice to the Rating Agencies and each
Required Person of the appointment of any Successor Servicer.
SECTION 3.2 Duties of Servicer and Transferor.
(a) Duties of Servicer in General. Servicer shall service the
Receivables and the Related Transferred Assets and, subject to the terms
and provisions of this Agreement, shall have full power and authority,
acting alone or through any Sub-Servicer, to do any and all things in
connection with such servicing that it may deem necessary or appropriate.
Trustee shall execute and deliver to Servicer any powers of attorney or
other instruments or documents that are prepared by Servicer and stated
in an Officer's Certificate to be, and shall furnish Servicer with any
documents in its possession, necessary or appropriate to enable Servicer
to carry out its servicing duties. Servicer shall exercise at least the
same care and apply the same policies with respect to the collection and
servicing of the Receivables and the Related Transferred Assets that it
would exercise and apply if it owned such Receivables and Related
Transferred Assets, all in substantial compliance with applicable law and
in accordance with the applicable Credit and Collection Policy
substantially in the form of Exhibit G.
Servicer shall take or cause to be taken (and shall cause each
Sub-Servicer (if any) to take or cause to be taken) all such actions as
Servicer deems necessary or appropriate to collect each Receivable and
Related Transferred Asset, all in accordance with applicable law and the
applicable Credit and Collection Policy.
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Without limiting the generality of the foregoing and subject to
the next preceding paragraph and Section 10.1, Servicer or its designee
is hereby authorized and empowered, unless such power and authority is
revoked by Trustee on account of the occurrence of a Servicer Default, (i)
to instruct Trustee to make withdrawals and payments from the Transaction
Accounts as set forth in this Agreement, (ii) to execute and deliver, on
behalf of the Trust for the benefit of the Certificateholders, any and all
instruments of satisfaction or cancellation, or of partial or full release
or discharge, and all other comparable instruments, with respect to the
Receivables and the Related Transferred Assets, (iii) to make any filings,
reports, notices, applications and registrations with, and to seek any
consents or authorizations from, the Securities and Exchange Commission
and any state securities authority on behalf of the Trust as may be
necessary or appropriate to comply with any Federal or state securities
laws or reporting requirements or other laws or regulations, and (iv) to
the extent permitted under and in compliance with the Credit and
Collection Policy and with all applicable laws, rules, regulations,
judgments, orders and decrees of courts and other Governmental Authorities
(whether Federal, state, local or foreign) and all other tribunals, to
commence or settle collection proceedings with respect to the Receivables
and otherwise to enforce the rights and interests of the Trust and the
Certificateholders in, to and under the Receivables or Related Transferred
Assets (as applicable).
Notwithstanding anything to the contrary in this Section 3.2(a),
the Servicer may not take any action on behalf of Trustee or demand any
power of attorney from Trustee, without Trustee's prior written consent,
which would have the effect under this Agreement or any of the other
Transaction Documents, of (i) increasing Trustee's duties, obligations or
liabilities; (ii) decreasing Trustee's indemnities, immunities,
compensation or rights to reimbursement (as to the amount, timing or
priority of payment, or otherwise), (iii) joining Trustee to any
litigation, (iv) impeding the Trustee's right to enforce the obligations
of Servicer, ICP or any Seller, or (v) waiving any default in the full and
timely payment to LaSalle National Bank for services rendered as Trustee,
Successor Servicer, Paying Agent or Transfer Agent and Registrar of any
fees, expenses or other amounts due to it.
(b) Identification and Transfer of Collections. Servicer shall
cause Collections and all other Transferred Assets that consist of cash
or cash equivalents to be deposited into the Bank Accounts and the
Transaction Accounts pursuant to the terms and provisions of Section 3.3
and Article IV. Following notification from any Seller to Servicer or
discovery by Servicer that collections of any receivable or other asset
that is not a Collection of a Receivable or any other Transferred Asset
have been deposited into a Bank Account or any Transaction Accounts,
Servicer shall cause all such collections to be segregated, apart and in
different accounts, from the Bank Accounts and the Transaction Accounts.
Servicer and, to the extent applicable, Trustee shall hold all such funds
in trust, separate and apart from such Person's other funds. On each
Business Day, after such misdirected collections have been reasonably
identified by Servicer to Trustee, Servicer shall instruct Trustee to, and
Trustee shall, turn over to the appropriate Lockbox Bank, applicable
Seller or other applicable Related Person (or their designees) all such
misdirected collections less all reasonable and appropriate out-of-pocket
costs and expenses, if any, incurred by Servicer or the Trustee in
collecting and otherwise administering such amounts.
Following notification from a Lockbox Bank that any item has been
returned or is uncollected and that such Lockbox Bank has not been
otherwise reimbursed pursuant to the terms
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of the applicable Lockbox Agreement for any amounts it credited to the
relevant Lockbox Account (and then transferred to the Master Collection
Account), Servicer shall instruct Trustee to, and Trustee shall, turn over
to such Lockbox Bank Collections in such amount from Collections on
deposit in the Master Collection Account (unless the applicable Seller has
not made any payment required pursuant to Section 3.1(a) of the
Receivables Purchase Agreement, in which case such amounts shall be
retained by Trustee to the extent necessary to satisfy such payment
obligation).
(c) Modification of Receivables, Etc. So long as no Servicer
Default shall have occurred and be continuing, Servicer may adjust, and
may permit each Sub-Servicer to adjust, in accordance with Sections
3.2(a), and 3.2(k) and the applicable Credit and Collection Policy, the
Unpaid Balance of any Receivable, or otherwise modify the terms of any
Receivable or amend, modify or waive any term or condition of any Contract
related thereto, all as it may determine to be appropriate to maximize
collection thereof. Servicer shall, or shall cause the applicable Sub-
Servicer to, write off Receivables from time to time in accordance with
the applicable Credit and Collection Policy.
(d) Documents and Records. At any time when the Initial Servicer
is not the Servicer, Transferor, to the extent that it is entitled to do
so under the Purchase Agreement, shall, upon the request of the then-
acting Servicer, cause the applicable Seller to deliver to Servicer, and
Servicer shall hold in trust for Transferor and Trustee in accordance with
their respective interests, all Records that evidence or relate to the
Receivables and other Transferred Assets of the applicable Seller.
(e) Certain Duties to the Sellers. Servicer, if other than the
Initial Servicer, shall, as soon as practicable after a demand by any
Seller, deliver to such Seller all documents, instruments and records in
its possession that evidence or relate to accounts receivable of such
Seller or other Related Persons that are not Receivables or other
Transferred Assets, and copies of all documents, instruments and records
in its possession that evidence or relate to Receivables and other
Transferred Assets.
(f) Identification of Eligible Receivables and Dilution. The
Initial Servicer will (i) establish and maintain such procedures as are
necessary for determining no less frequently than each Business Day
whether each Receivable qualifies as an Eligible Receivable and whether
any Dilution has occurred, and for identifying, on any Business Day, all
Receivables that are not Eligible Receivables, and (ii) include in each
Daily Report information that shows whether, and to what extent, the
Receivables described in such Daily Report are Eligible Receivables and
whether, and to what extent, any Dilution has occurred.
(g) Authorization to Act as Transferor's Agent. Without limiting
the generality of subsection (a), Transferor hereby appoints Servicer,
subject to the terms and conditions of the Transaction Documents, as its
agent for the following purposes: (i) specifying accounts to which
payments are to be made to Transferor, (ii) making transfers among, and
deposits to and withdrawals from, all deposit accounts of Transferor for
the purposes described in the Transaction Documents, and (iii) arranging
payment by Transferor of all fees, expenses and other amounts payable by
Transferor pursuant to the Transaction Documents. Transferor
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irrevocably agrees that (A) it shall be bound by all actions taken by
Servicer pursuant to the preceding sentence, and (B) Trustee and the banks
holding all deposit accounts of Transferor are entitled to accept
submissions, determinations, selections, specifications, transfers,
deposits and withdrawal requests, and payments from Servicer on behalf of
Transferor.
(h) Grant of Power of Attorney. Transferor and Trustee hereby
each grant to Servicer a power of attorney, with full power of
substitution, to take in the name of Transferor and Trustee all steps that
are necessary or appropriate to endorse, negotiate, deposit or otherwise
realize on any writing of any kind held or transmitted by Transferor or
transmitted or received by Trustee (whether or not from Transferor) in
connection with any Receivable or Related Transferred Asset; provide,
however, that without Trustee's prior written consent, Servicer may not
take any action pursuant to this Section 3.2(h) that would have the effect
of joining Trustee to any litigation. The power of attorney that
Transferor and Trustee have granted to Servicer may be revoked by Trustee,
and shall be revoked by Transferor, on the date on which Trustee shall be
entitled to exercise the powers granted to Trustee pursuant to Section
3.8(b). In exercising its power granted hereby, Servicer shall take
directions from Trustee, if any, arising out of the exercise of the rights
granted under Section 11.14.
(i) Turnover of Collections. If Servicer, Transferor or any of
their respective agents or representatives shall at any time receive any
cash, checks or other payments constituting Collections, such recipient
shall segregate such payments and hold such payments in trust for Trustee
and shall, promptly upon receipt (and in any event within one Business Day
following receipt), remit all such cash, checks and other payments, duly
endorsed or with duly executed instruments of transfer, if applicable, to
a Bank Account or the Master Collection Account.
(j) Quarterly Statement as to Compliance. Servicer will deliver
to Trustee, each Rating Agency and each Required Person no later than 45
days after the end of each fiscal quarter (commencing with the fiscal
quarter ended September 30, 1996), an Officer's Certificate, substantially
in the form of Exhibit F, stating, as to each signer thereof, that (i) a
review of the activities of the Servicer during the preceding fiscal
quarter and of performance under this Agreement has been made under such
officer's supervision and (ii) to the best of such officer's knowledge,
based on such review, the Servicer has fulfilled all its obligations under
this Agreement throughout such quarter, or, if there has been a default
in the fulfillment of any such obligation, specifying each such default
known to such officer and the nature and status thereof and remedies
therefor being pursued.
(k) Discretionary Returns. The Servicer will not, and will not
permit any Seller to, allow any Discretionary Returns, unless Servicer or
such Seller has deposited into the Master Collection Account in connection
with such termination an amount of funds sufficient to ensure that the
aggregate Unpaid Balance of the Receivables held by the Trust (after
adjustment for the impact of any Discretionary Returns) is at least equal
to the aggregate Required Receivables (after adjustment for the impact of
any Discretionary Returns) for all Series. The Servicer will not, and
will not permit any Seller to, exercise its right under a Distributor
Agreement to terminate a Distributor, unless Servicer or such Seller has
deposited into the Master Collection Account in connection with such
termination an amount of funds sufficient to ensure that the aggregate
Unpaid Balance of the Receivables held by the Trust is at least equal to
the aggregate
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Required Receivables (after adjustment thereof to reflect the amount (the
"Terminated Distributor Amount") of Receivables owing by such Distributor
which are no long Eligible Receivables as a result of such termination)
for all Series. Each such deposit of funds shall be deemed to be
Collections with respect to the Receivables which are the subject of such
Discretionary Returns or Distributor termination. The amounts of any
Discretionary Returns and any Terminated Distributor Amounts which are
permitted pursuant to this Section 3.2(k) are referred to herein as
"Permitted Inventory Discretionary Returns."
SECTION 3.3 Lockbox Accounts; Concentration Accounts. (a) Each
Lockbox Account shall be subject to a Lockbox Agreement substantially in
the form of Exhibit A (or such other form as is acceptable to the
Trustee). Unless instructed otherwise by the Trustee, each Lockbox Bank
shall be instructed by Servicer to remit, on a daily basis (but subject
to the Lockbox Bank's customary funds availability schedule), all amounts
deposited in the Lockbox Accounts maintained with it to a Concentration
Account or the Master Collection Account. Any Concentration Account shall
be maintained in the name of Trustee on behalf of the Trust pursuant to
a Concentration Account Agreement substantially in the form of Exhibit B
(or such other form acceptable to the Trustee). Except as provided in this
Agreement and the applicable Account Agreements, none of any Seller,
Transferor, Servicer, or any Person claiming by, through or under any
Seller, Transferor or Servicer shall have any control over the use of, or
any right to withdraw any item or amount from, any Bank Account. Servicer
and Trustee are each hereby irrevocably authorized and empowered, as
Transferor's attorney-in-fact, to endorse any item deposited in a lockbox
or presented for deposit in any Bank Account requiring the endorsement of
Transferor, which authorization is coupled with an interest and is
irrevocable. Each Bank Account shall be an Eligible Deposit Account.
(b) Servicer shall instruct (or shall cause the applicable Seller
to instruct) all Obligors to make all payments due to Transferor or the
applicable Seller relating to or constituting Collections (or any proceeds
thereof) (i) to lockboxes maintained at the Lockbox Banks for deposit in
a Lockbox Account or a Concentration Account or (ii) directly to a Lockbox
Account. If Transferor or the applicable Seller receives any Collections
or any other payment of proceeds of any Transferred Asset, Servicer shall
cause such recipient to (x) segregate such payment and hold it in trust
for the benefit of Trustee, and (y) as soon as practicable, but no later
than the first Business Day following receipt of such item by such Person,
deposit such payment in a Bank Account or the Master Collection Account.
Servicer shall, and shall cause Transferor and the applicable Seller to,
use best efforts to prevent the deposit of any amounts other than
Collections in any Bank Account. If Servicer is notified by the applicable
Seller that any amount other than Collections has been deposited in any
Bank Account, Servicer shall promptly instruct the appropriate Account
Bank and Trustee to segregate such amount, and shall direct such Account
Bank or Trustee (as appropriate) to turn over such amounts to the
applicable Seller or other Related Person (or their designees) to whom
such amounts are owed (unless the applicable Seller has not made any
payment required pursuant to Section 3.1(a) of the Receivables Purchase
Agreement, in which case such amounts shall be retained by Trustee to the
extent necessary to satisfy such payment obligation).
(c)(i) Servicer may, from time to time after the First Issuance
Date, designate a new account as a Bank Account, and such account shall
become a Bank Account (and the bank at
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which such account is maintained shall become a Lockbox Bank or a
Concentration Account Bank for purposes of this Agreement); provided that
(x) Trustee and each Required Person shall have received not less than
five Business Days' prior written notice of the account and/or the bank
that are proposed to be added as a Bank Account or an Account Bank (as
applicable), (y) not less than five Business Days prior to the effective
date of any such proposed addition, Trustee and each Required Person shall
have received (A) counterparts of a Lockbox Agreement or a Concentration
Account Agreement, as applicable, with each new Account Bank, duly
executed by such new Account Bank and all other parties thereto and (B)
copies of all other agreements and documents signed by the new Account
Bank or such other parties with respect to any new Bank Account, and (z)
such designation is made with the consent of each Required Person.
(ii) Servicer may, from time to time after the First Issuance
Date, terminate an account as a Bank Account or a bank as an Account Bank;
provided that (x) no such termination shall occur unless Trustee and each
Required Person shall have received not less than five Business Days'
prior written notice of the account and/or the bank that are proposed to
be terminated as a Bank Account or an Account Bank (as applicable) and,
not less than five Business Days prior to the effective date of any such
proposed termination, Trustee and each Required Person shall have received
counterparts of an agreement, duly executed by the applicable Account Bank
and reasonably satisfactory in form and substance to Trustee and each
Required Person, pursuant to which such Account Bank agrees that, if it
receives any funds or items that constitute Collections on or after the
effective date of the termination of the applicable Bank Account or the
effective date of its termination as an Account Bank (as the case may be),
such Account Bank or former Account Bank (as applicable) shall cause such
funds and items to be delivered in the form received to another lockbox
or transferred to another Bank Account or the Master Collection Account
promptly after such Account Bank or former Account Bank (as applicable)
discovers that it has received any such funds or items, and (y)
notwithstanding clause (x), Transferor and Servicer may at any time
establish alternative collection procedures that do not require the use
of Lockbox Accounts with the consent of each Required Person and upon
satisfaction of the Modification Condition.
(d) Servicer shall instruct each Concentration Account Bank (if
any), to transfer on a daily basis (subject to such Concentration Account
Bank's customary funds availability schedule) in same day funds to the
Master Collection Account all collected funds on deposit in the
Concentration Account maintained with such Concentration Account Bank. All
such transfers shall be made in accordance with the relevant Concentration
Account Agreement.
SECTION 3.4 Servicing Compensation. As full compensation for its
servicing activities hereunder and under any Supplement, and as
reimbursement for any expense incurred by it in connection therewith,
Servicer shall be entitled to receive a monthly servicing fee (the
"Servicing Fee") in respect of each Series, payable in arrears on each
Distribution Date in respect of each Distribution Period (or portion
thereof) during which that Series is outstanding. The Servicing Fee in
respect of any Series shall be payable solely as provided in the related
Supplement.
Unless otherwise provided in the applicable Supplement, the
Servicing Fee payable for any Distribution Period with respect to any
Series shall be equal to one-twelfth of the product
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of (a) 1% multiplied by (b) the aggregate Unpaid Balance of the
Receivables as measured on the first Business Day of that Distribution
Period multiplied by (c) the applicable Series Collection Allocation
Percentage. The fees, costs and expenses of Trustee, the Paying Agent, any
authenticating agent, the Lockbox Banks, the Concentration Account Banks
and the Transfer Agent and Registrar, and certain other costs and expenses
payable from the Servicing Fee pursuant to other provisions of this
Agreement, and all other fees and expenses that are not expressly stated
in this Agreement or any Series Supplement to be payable by the Trust or
Transferor, other than Federal, state, local and foreign income and
franchise taxes, if any, or any interest or penalties with respect
thereto, of the Trust, shall be paid out of the Servicing Fee and shall
be paid by Servicer from the funds that constitute the Servicing Fee.
SECTION 3.5 Records of Servicer and Reports to be Prepared by
Servicer.
(a) Keeping of Records and Books of Account. Servicer shall
maintain at all times accurate and complete books, records and accounts
relating to the Receivables, other Transferred Assets and Contracts of
each Seller and all Collections thereon in which timely entries shall be
made. Servicer shall, or shall cause each Sub-Servicer to, maintain and
implement administrative and operating procedures (including an ability
to generate duplicates of Records evidencing Receivables and the other
Transferred Assets in the event of the destruction of the originals
thereof), and shall keep and maintain all documents, books, records and
other information that Servicer deems reasonably necessary for the
collection of all Receivables and Related Transferred Assets. Upon the
request of the Trustee or any Required Person after the occurrence and
continuance of a Servicer Default, the Servicer will deliver copies of all
books and records maintained pursuant to this Section 3.5(a) to such
Trustee or Required Person.
(b) Receivables Reviews. Subject to the last proviso to the next
sentence, the Servicer, any Sub-Servicer and Transferor shall, during
regular business hours upon not less than two Business Days' prior notice,
permit the Trustee (or such other Person whom the Trustee may designate
from time to time), any Required Person or their respective agents or
representatives (including certified public accountants or other
auditors), as an expense of the Servicer paid out of the Servicing Fee,
(i) to examine and make copies of and abstracts from, and to conduct
accounting reviews of, all Records in the possession or under the control
of any Origination and Servicing Party, including the related Contracts
and purchase orders, invoices and other agreements related thereto, and
(ii) to visit the offices and properties of any Origination and Servicing
Party for the purpose of examining such materials described in clause (i)
above, and to discuss matters relating to the Receivables or the Related
Transferred Assets or the performance by any Origination and Servicing
Party of their respective obligations under any Transaction Document with
any Authorized Officer of any Origination and Servicing Party or
Transferor (as applicable) or, with employees of such Origination and
Servicing Party having knowledge of such matters. The Trustee or any
Required Person may conduct, or cause their respective agents or
representatives to conduct, reviews of the types described in this
paragraph (b) (each such review, a "Receivables Review") whenever the
Trustee or any Required Person, in its reasonable judgment, deems any such
review appropriate, and the Trustee shall conduct, or cause its agents or
representatives to conduct, such a review if requested by any Required
Person; provided that, prior to the occurrence and continuance of an Early
Amortization Event or an Unmatured Early Amortization Event or during the
period in which the most recent
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quarterly servicing report delivered pursuant to Section 3.7 discloses a
material exception, the Trustee and each Required Person shall have the
right to request a Receivables Review not more than three times in the
aggregate in any calendar year for any Origination and Servicing Party,
each such Receivables Review to be an expense of the Servicer paid out of
the Servicing Fee; and provided, further, that, (A) after the occurrence
and during the continuance of a Early Amortization Event or an Unmatured
Early Amortization Event or during the period in which the most recent
quarterly servicing report delivered pursuant to Section 3.7 discloses a
material exception, such Receivables Reviews shall be conducted during
regular business hours upon not less than two Business Days' prior notice,
and (B) after the occurrence and during the continuance of a Early
Amortization Event or an Unmatured Early Amortization Event or during the
period in which the most recent quarterly servicing report delivered
pursuant to Section 3.7 discloses a material exception, there shall be no
limitation on the number of Receivables Reviews that are conducted by or
on behalf of the Trustee or any Required Person and all such Receivables
Reviews shall be an expense of the Servicer paid out of the Servicing Fee.
Transferor hereby irrevocably authorizes the Trustee, for the
benefit of the Certificateholders, to exercise its rights under Section
6.1(c) of the Purchase Agreement. Any Receivables Reviews that the
Trustee conducts pursuant to Section 6.1(c) of the Purchase Agreement,
under such authorization, shall be conducted concurrently with the
Receivables Reviews with respect to the related Seller that the Trustee
conducts pursuant to this Section 3.5(b). Prior to the occurrence and
continuance of a Early Amortization Event or an Unmatured Early
Amortization Event, the Trustee may conduct no more than three separate
reviews in the aggregate in any calendar year per Origination and
Servicing Party for all reviews conducted pursuant to this Section 3.5(b)
and Section 6.1(c) of the Purchase Agreement. Transferor hereby agrees
that it shall not exercise its rights to conduct any Receivables Review
pursuant to Section 6.1(c) of the Purchase Agreement unless the Trustee,
as the assignee of Transferor pursuant to Section 2.1(a)(iii) hereof,
shall, at the direction of any Required Person, have given its prior
written consent to Transferor's conducting such review; provided that, as
between Transferor and the Trustee, Transferor hereby agrees that it shall
not request the right to conduct, on its own behalf and for its own
benefit, the first Receivables Review in any calendar year. If the
Trustee consents to the conduct of any second Receivables Review by
Transferor pursuant to Section 6.1(c) of the Purchase Agreement, then such
review by Transferor shall be an expense of the Servicer paid out of the
Servicing Fee.
The Trustee shall not be responsible for failing to conduct a
Receivables Review meeting the conditions of this Section 3.5(b) as a
result of any breach of this Section 3.5(b) by any Origination and
Servicing Party.
(c) Daily Reports. Prior to 11:00 a.m., New York City time, on
each Business Day, Servicer shall prepare and deliver to Trustee (and each
Required Person upon its request) a report relating to each outstanding
Series, substantially in the form specified by the applicable Supplement
or in such other form as is reasonably acceptable to Trustee and Servicer
(each such report being a "Daily Report") setting out, among other things,
the Base Amount and Series Collection Allocation Percentage for that
Series as of the end of business on the preceding Business Day.
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(d) Monthly Report. Prior to 11:00 a.m., New York City time, on
each Report Date, Servicer shall prepare and deliver to Trustee, the
Rating Agencies and each Required Person a report relating to each
outstanding Series, substantially in the form specified by the applicable
Supplement or in such other form as is reasonably acceptable to Trustee
and Servicer (each such report being a "Monthly Report").
(e) Notice of Seller Change Events; Supplements to Monthly
Reports. Section 1.7 of the Purchase Agreement describes circumstances
under which additional Sellers may be added to the Program (such event
being a "Seller Change Event"). Such Section of the Purchase Agreement
requires ICP to give written notice to Transferor of the occurrence of a
Seller Change Event not less than 30 days prior to the occurrence thereof,
and Transferor hereby agrees to give prompt written notice of its receipt
of any such notice to Trustee, the Rating Agencies and each Required
Person. If the notice is given to Trustee, within five Business Days after
the receipt of the notice by Trustee (or such later date, as specified in
the notice, on which the applicable Seller Change Event shall become
effective), Servicer shall deliver to Trustee and the Rating Agencies a
supplement to the Monthly Report then in effect for each outstanding
Series, which supplement shall show the calculation (complete with the
historical and/or pro forma receivables data necessary to do such
calculation) of (A) the Required Receivables and the applicable reserve
ratios (as described in each Supplement) to reflect the addition of
accounts receivable originated by any Person that is being added to the
Program as a Seller, and (B) the Loss Discount and the Purchase Discount
for any such Person that is being added to the Program as a Seller. For
purposes of all calculations hereunder and under the Purchase Agreement,
the Required Receivables, such reserve ratios and (if applicable) the Loss
Discount and the Purchase Discount for the relevant Person shown in such
supplement shall supersede and/or supplement the calculation of such items
in the then outstanding Monthly Report, effective as of the fifth Business
Day following Trustee's receipt of such notice (or such later date, as
specified in such notice, on which the applicable Seller Change Event
shall become effective).
SECTION 3.6 Monthly Servicer's Certificate. On each Report Date,
Servicer shall deliver to Trustee, the Paying Agent, Transferor, the
Rating Agencies and each Required Person a certificate of an Authorized
Officer of Servicer substantially in the form of Exhibit C, with such
additions as may be required by any Supplement.
SECTION 3.7 Servicing Report of Independent Public Accountants;
SEC Reports. (a)(i) On or before 45 days after the end of each fiscal
semi-annual period of Transferor beginning with Transferor's fiscal semi-
annual period ending December 31, 1996, Servicer shall, as an expense of
Servicer paid out of the Servicing Fee, cause Coopers & Lybrand L.L.P. or
another firm of independent certified public accountants that is generally
recognized as being among the "big six" (which may also render other
services to Servicer, the Sellers or Transferor) to furnish a report to
Trustee, Servicer, Transferor and each Required Person (which report shall
be addressed to Trustee and each Required Person and shall relate to
Transferor's most recently ended fiscal semi-annual period). The
accountants' report shall set forth the results of their performance of
the procedures described in Exhibit D with respect to the Monthly Reports
and Daily Reports delivered to Trustee pursuant to Section 3.5 during the
prior semi-annual period.
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(ii) Each accountants' report shall state that the accountants
have compared the amounts contained in the Monthly Reports and a
reasonable sample randomly selected from all Daily Reports delivered to
Trustee during the period covered by the report with the records
(including computer records) from which the amounts were derived and that,
on the basis of such comparison, the amounts are in agreement with the
documents and records, except for such exceptions as they believe to be
immaterial and such other exceptions as shall be set forth in the report.
Except as provided otherwise in a Supplement, a copy of the report may be
obtained by any Investor Certificateholder by a request in writing to
Trustee addressed to the Corporate Trust Office.
(b) Promptly and in any event within two Business Days after the
filing of such reports (if any) with the Securities and Exchange
Commission, ICP shall provide the Trustee, each of the Rating Agencies and
each Required Person with copies of each Quarterly Report on Form 10-Q,
Annual Report on Form 10-K and Report of Form 8-K of ICP. If ICP ceases
to be required to file such reports, or if for any other reason such
reports are not filed, with the Securities and Exchange Commission, ICP
shall provide the Trustee, each of the Rating Agencies and each Required
Person (x) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of ICP, copies of the unaudited consolidated
balance sheets of ICP and its consolidated Subsidiaries as at the end of
the fiscal quarter and the related unaudited statements of earnings and
cash flows, in each case for the fiscal quarter and for the period from
the beginning of the fiscal year through the end of such fiscal quarter,
prepared in accordance with GAAP consistently applied throughout the
periods reflected therein and certified (subject to year end adjustments
and the omission of footnotes) by the chief financial officer or chief
accounting officer of ICP and (y) as soon as possible and in any event
within 90 days after the end of each fiscal year of ICP, a copy of the
audited consolidated balance sheet of ICP and its consolidated
Subsidiaries as at the end of the fiscal year and the related statements
of earnings, stockholders' equity and cash flows of ICP and its
consolidated Subsidiaries for the fiscal year, setting forth in each case
in comparative form for the corresponding figures for the preceding fiscal
year and prepared in accordance with GAAP consistently applied throughout
the periods reflected therein, certified, without Impermissible
Qualification, by Coopers & Lybrand L.L.P. (or another firm of independent
certified public accountants that is generally recognized as being among
the "big six" as shall be selected by ICP (which may also render other
services to Servicer, the Sellers or Transferor).
(c) Promptly upon the receipt thereof, ICP shall provide the
Trustee, each of the Rating Agencies and each Required Person with copies
of all "management letters" received by ICP or any of its Subsidiaries
from their independent accountants.
SECTION 3.8 Rights of Trustee. (a) Trustee has the exclusive
dominion and control over the Bank Accounts, and Transferor shall take any
action that Trustee may reasonably request to effect or evidence such
dominion and control. At any time following the occurrence of a Servicer
Default, Trustee is hereby authorized to give notice to the Account Banks,
as provided in the Account Agreements, of the revocation of Servicer's
authority to give instructions or take any other actions with respect to
the Bank Accounts that Servicer would otherwise be authorized to give or
to take.
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(b) At any time following the designation of a Servicer other
than the Initial Servicer:
(i) Trustee may direct any Obligors of Receivables to
pay all amounts payable under any Receivable or any Related
Transferred Assets directly to Trustee or its designee; provided
that Trustee shall provide the applicable Seller with a copy of
such notice at least one Business Day prior to sending it to any
Obligor and consult in good faith with the applicable Seller as
to the text of the notice.
(ii) Trustee may direct any Seller to make payment of
all amounts payable to Transferor under any Transaction Document
to which the Seller is a party directly to Trustee or its
designee.
(iii) Transferor and Servicer shall, at Trustee's
request and as an expense of Servicer paid out of the Servicing
Fee, give notice of the Trust's ownership of the Receivables and
the other Transferred Assets to each Obligor and direct that
payments be made directly to Trustee or its designee.
(iv) Transferor shall, and shall cause the Sellers to,
at Trustee's request, (A) assemble all of the Records that are
necessary or appropriate to collect the Receivables and other
Transferred Assets, and shall make the same available to Trustee
at one or more places selected by Trustee or its designee, (B)
segregate all cash, checks and other payments received by it from
time to time constituting Collections in a manner acceptable to
Trustee and shall, promptly upon receipt (and, subject to Section
3.2(i), in no event later than the first Business Day following
receipt), remit all such cash, checks and other payments, duly
endorsed or with duly executed instruments of transfer, if
applicable, to a Bank Account or the Master Collection Account
and (C) permit, upon not less than two Business Days' prior
written notice, any Successor Servicer and its agents, employees
and assignees access to their respective facilities and their
respective Records (including computer programs, tapes and disks,
and purchase orders, invoices and other agreements related to the
Receivables and the Related Transferred Assets).
(c) Each of Transferor and Servicer hereby authorizes Trustee,
from time to time after the designation of a Servicer other than the
Initial Servicer, to take any and all steps in Transferor's name and on
behalf of Transferor and Servicer that are necessary or appropriate, in
the reasonable determination of Trustee, to collect all amounts due under
any and all Receivables or other Transferred Assets, including endorsing
the name of Transferor or the applicable Seller on checks and other
instruments representing Collections and enforcing such Receivables and
the other Transferred Assets.
(d) Transferor hereby irrevocably appoints Trustee to act as
Transferor's attorney-in-fact, with full authority in the place and stead
of Transferor and in the name of Transferor or otherwise, from time to
time after the designation of a Servicer other than the Initial Servicer,
to take (subject to Section 11.14 hereof) any action and to execute any
instrument or document that Trustee, in its reasonable determination, may
deem necessary to accomplish the purposes of this Agreement, including:
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(i) to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for moneys
due and to become due under or in respect of any Receivable or
any Related Transferred Asset;
(ii) to receive, endorse and collect any drafts or
other instruments, documents and chattel paper, in connection
with clause (i);
(iii) to file any claims or take any action or
institute any proceedings that Trustee in its reasonable
determination may deem necessary or appropriate for the
collection of any of the Receivables or any other Transferred
Asset or otherwise to enforce the rights of Trustee and the
Certificateholders with respect to any of the Receivables or any
other Transferred Asset; and
(iv) to perform the affirmative obligations of
Transferor under any Transaction Document.
Transferor hereby acknowledges, consents and agrees that the power of
attorney granted pursuant to this Section is irrevocable and coupled with
an interest.
SECTION 3.9 Ongoing Responsibilities of the Initial Servicer.
Anything herein to the contrary notwithstanding:
(a) If at any time the Initial Servicer shall not be
Servicer, the Initial Servicer shall deliver all Collections
received or deemed received by it or its Subsidiaries to Trustee
no later than one Business Day after receipt or deemed receipt
thereof and Trustee shall distribute such Collections to the same
extent as if such Collections had actually been received from the
related Obligor on the applicable dates. So long as the Initial
Servicer or any of its Subsidiaries shall hold any Collections or
deemed Collections required to be paid to Trustee, each of them
shall hold such amounts in trust (and separate and apart from its
own funds) and shall clearly mark its records to reflect such
trust. The Initial Servicer hereby grants to Trustee an
irrevocable power of attorney, with full power of substitution,
coupled with an interest, upon the occurrence of a Servicer
Default, to take in the name of the Initial Servicer all steps
necessary or appropriate to endorse, negotiate or otherwise
realize on any writing or other right of any kind held or
transmitted by the Initial Servicer or transmitted and received
by Trustee (whether or not from the Initial Servicer) in
connection with any Receivable or other Transferred Asset.
(b) In addition, if at any time the Initial Servicer
shall not be Servicer, the Initial Servicer shall act (if the
Successor Servicer so requests) as the data processing agent of
Servicer and, in such capacity, the Initial Servicer shall
conduct (and shall cause any other necessary Persons to conduct)
the data processing functions of the administration of the
Receivables, the other Transferred Assets and the Collections
thereon in substantially the same way that the Initial Servicer
(or its Sub-Servicers) conducted such data processing functions
while the Initial Servicer acted as Servicer. The Initial
Servicer
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and each such other Person shall be entitled to reasonable
compensation for such service to be paid from the Servicing Fee.
(c) Notwithstanding any termination of the Initial
Servicer as Servicer hereunder, the Initial Servicer shall
continue to indemnify Trustee on the terms set out in Section
11.5 with respect to circumstances existing, or actions taken or
omitted, prior to such termination.
SECTION 3.10 Further Action Evidencing Transfers. Servicer shall
cause all Public Notices and any other necessary documents relating to the
right, title and interest of Trustee in, to and under the Transferred
Assets to be promptly recorded, registered and filed, and at all times to
be kept recorded, registered and filed, all in such manner and in such
places as may be required by law fully to preserve, maintain and protect
the right, title and interest of Trustee hereunder in and to all property
comprising the Transferred Assets. Servicer shall deliver to Trustee
file-stamped copies of, or filing receipts for, any document recorded,
registered or filed as provided above, as soon as available following such
recording, registration or filing. Transferor shall cooperate fully with
Servicer in connection with the obligations set forth above and will
execute any and all documents that are reasonably required to fulfill the
intent of this section.
If Transferor or Servicer fails to perform any of its agreements
or obligations under any Transaction Document and does not remedy such
failure within the applicable cure period, if any, then Trustee or its
designee may (but shall not be required to) itself perform, or cause
performance of, such agreement or obligation, and the reasonable expenses
of Trustee or its designee incurred in connection therewith shall be
payable by Servicer as provided in Section 11.5 and (if applicable) by
Transferor as provided in Section 7.3.
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS; ALLOCATIONS
SECTION 4.1 Rights of Certificateholders. Each Series of
Investor Certificates shall collectively represent a fractional undivided
beneficial interest (as to any Series, the "Series Interest") in the
Trust, and the amount of that undivided beneficial interest shall equal
the Series Collection Allocation Percentage for that Series from time to
time. Each Certificate within a Series shall represent a partial ownership
interest in the related Series Interest, representing the right to
receive, to the extent necessary to make the required payments with
respect to that Certificate at the times and in the amounts specified in
this Article IV and in the related Supplement, the portion of Collections
allocable to Investor Certificateholders of such Series pursuant to this
Agreement and such Supplement and funds on deposit in the Transaction
Accounts allocable to Investor Certificateholders of such Series. Unless
the applicable Supplement provides otherwise, the Investor Certificates
of any Series or class shall not represent any interest in any funds
allocable to any other Series. The Transferor Certificate shall represent
an interest in the Trust (the "Transferor Interest") consisting of the
right to receive
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current and deferred transfer payments in respect of the various Series
outstanding from time to time at the times and in the amounts specified
in the related Supplements.
SECTION 4.2 Establishment of Transaction Accounts. (a) On or
prior to the date of this Agreement, Trustee has established, and until
the Trust is terminated Trustee shall (except as expressly permitted or
required below) maintain, in the name of Trustee and for the benefit of
the Certificateholders, the following accounts:
(i account no. 67-7584-70-8, which shall be called the
"Master Collection Account" and into which all Collections and
all other Transferred Assets consisting of cash or cash
equivalents shall be transferred on a daily basis from the Bank
Accounts;
(ii account no. 67-7584-71-6, which shall be called the
"Carrying Cost Account" and into which funds shall be allocated
from time to time to cover Carrying Costs of each Series
(including interest payable on, and the Servicing Fee allocated
to, each Series);
(iii account no. 67-7584-72-4, which shall be called
the "Equalization Account" and into which funds may from time to
time be transferred from the Master Collection Account to
compensate for fluctuations in the Base Amounts for the
outstanding Series; and
(iv account no. 67-7584-73-2, which shall be called the
"Principal Funding Account" and into which funds will from time
to time be transferred in anticipation of distributions to
Investor Certificateholders on account of their respective
principal investments.
(b In addition, if an Early Amortization Period occurs with
respect to any Series, Trustee shall establish an additional account which
shall be called the "Holdback Account" and into which funds that would
otherwise be remitted by Trustee to the Transferor in respect of the
Transferor Certificate will be deposited to the extent so provided in the
related Supplement.
(c The Master Collection Account, the Carrying Cost Account, the
Equalization Account, the Principal Funding Account, any Holdback Account
and any additional accounts required by any Supplement to be established
(unless otherwise indicated in such Supplement) are collectively called
the "Transaction Accounts." Each of the Transaction Accounts shall be
established and maintained as a segregated trust account maintained at a
bank with a long-term senior unsecured debt rating of at least "A" and
shall bear a designation clearly indicating that funds deposited therein
are held for the benefit of the Certificateholders. If any Transaction
Account ceases to be a segregated trust account maintained at a bank with
a long-term senior unsecured debt rating of at least "A", Servicer shall
cause Trustee to open a substitute Transaction Account that is a
segregated trust account maintained at a bank with a long-term senior
unsecured debt rating of at least "A" and transfer the funds in the
existing Transaction Account to the substitute Transaction Account, and
thereafter all references in any Transaction
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Document to the original Transaction Account shall be deemed instead to
refer to the substitute Transaction Account.
(d The Master Collection Account, the Carrying Cost Account, the
Equalization Account, the Principal Funding Account and any Holdback
Account shall be held by Trustee for the benefit of all
Certificateholders. However, there shall be established within each of the
Carrying Cost Account, the Equalization Account, the Principal Funding
Account and any Holdback Account an administrative sub-account for each
outstanding Series. Funds allocated to the Carrying Cost Account, the
Equalization Account, the Principal Funding Account and any Holdback
Account pursuant to any Supplement shall be allocated to the applicable
Series' sub-account and shall be available solely to the holders of the
Certificates in that Series, except to the extent that such funds are
subsequently reallocated to another Series, or to the Transferor, in
accordance with the terms of the applicable Supplement and this Agreement.
Any additional Transaction Accounts established pursuant to any Supplement
shall be held by Trustee for the benefit of only the related Series.
(e Trustee shall possess (for its benefit and for the benefit
of the Certificateholders) all right, title and interest in and to all
funds on deposit from time to time in each of the Transaction Accounts and
in all proceeds thereof. The Transaction Accounts shall be under the sole
dominion and control of Trustee for the benefit of the applicable
Certificateholders. Each of Servicer and Trustee agrees that it shall
have no right of setoff against, and no right otherwise to deduct from,
any funds held in any of the Transaction Accounts or the Bank Accounts for
any amount owed to it by the Trust, any party hereto or any
Certificateholder unless such right to deduct is expressly provided for
in a Transaction Document.
SECTION 4.3 Trust-Level Calculations and Funds Allocations.
(a Allocation of Daily Collections. On each Business Day,
Servicer shall determine the amount of collected funds received in the
Master Collection Account (other than funds that are required to be
returned to Related Persons (or their designees) or Lockbox Banks pursuant
to Sections 3.2(b) and 3.3(b)) since the preceding Business Day and shall
allocate to each outstanding Series a share of such funds in an amount
equal to the product of the applicable Series Collection Allocation
Percentage and the amount of such funds. The portion of such funds
allocated to any Series shall be further allocated and otherwise dealt
with in accordance with the terms of the related Supplement. In addition,
funds initially allocated to a Series on any Business Day that are
designated as Shared Investor Collections shall be reallocated to other
Series pro rata based upon the respective Shortfalls (if any) of the other
Series.
(b Allocation of Write-Offs and Dilution. In each Monthly Report
relating to a Series that is in an Early Amortization Period, Servicer
shall calculate the amount of (i) Write-Offs (net of Recoveries) and (ii)
Dilutions as to which no settlement payment has been made pursuant to
Section 3.3 of the Purchase Agreement, in each case during the related
Calculation Period (or the portion of that Calculation Period falling in
the Early Amortization Period) and shall allocate to such Series a portion
of the amounts referred to in clauses (i) and (ii) equal to the product
of each such amount and the related Series Loss Allocation Percentage.
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SECTION 4.4 Investment of Funds in Transaction Accounts. On any
day when funds on deposit in any Transaction Account exceed $10,000 (after
giving effect to the allocations of such funds required by this Article
IV and the various Supplements), and at such other times as investment is
practicable, Trustee, at the direction of Servicer, shall invest and
reinvest monies on deposit in such Transaction Account (in the name of
Trustee) in such Eligible Investments as are specified in a notice from
Servicer, subject to the restrictions set forth hereinafter. All Eligible
Investments made from funds in any Transaction Account, and the interest,
dividends and income received thereon and therefrom and the net proceeds
realized on the sale thereof, shall be deposited in such Transaction
Account. All Eligible Investments in each Transaction Account shall mature
not later than the next succeeding Distribution Date (or such other date
or dates as may be specified in the applicable Supplement). Trustee may
liquidate an Eligible Investment prior to maturity if such liquidation
would not result in a loss of all or part of the principal portion of such
Eligible Investment or if, prior to the maturity of such Eligible
Investment, a default occurs in the payment of principal, interest or any
other amount with respect to such Eligible Investment. In the absence of
negligence of Trustee or willful misconduct by Trustee, Trustee shall have
no liability in connection with investment losses incurred on Eligible
Investments. It is intended for income tax purposes that the income earned
through investment of funds in the Transaction Accounts shall be treated
as income of Transferor.
SECTION 4.5 Attachment of Transaction Accounts. If Trustee
receives written notice that any Transaction Account has or will become
subject to any writ, judgment, warrant of attachment, execution or similar
process, Trustee shall (notwithstanding any other provision of the
Transaction Documents) promptly notify Transferor, Servicer and the
Certificateholders thereof, and shall not deposit or transfer funds into
such Transaction Account but shall cause funds otherwise required to be
deposited into such Transaction Account to be held in another account
pending distribution of such funds in the manner required by the
Transaction Documents.
ARTICLE V
DISTRIBUTIONS AND REPORTS
SECTION 5.1 Distributions. DISTRIBUTIONS SHALL BE MADE, AND
REPORTS SHALL BE PROVIDED, TO CERTIFICATEHOLDERS AS SET FORTH IN THE
APPLICABLE SUPPLEMENT.
ARTICLE VI
THE CERTIFICATES
SECTION 6.1 The Certificates. The Investor Certificates in each
Series shall be substantially in the forms contemplated by the Supplements
pursuant to which the Investor Certificates are issued, and the Transferor
Certificate shall be substantially in the form of Exhibit
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E. Upon issuance, all Certificates shall be executed and delivered by
Transferor to Trustee for authentication and redelivery as provided in
Sections 6.2 and 6.10. Except to the extent provided otherwise in an
applicable Supplement, Investor Certificates shall be issued in minimum
denominations of $1,000,000 and in integral multiples of $100,000 and
shall not be subdivided for resale into Certificates smaller than a
Certificate, the initial offering price for which would have been at least
$1,000,000.
Notwithstanding any other provision of this Agreement, unless
otherwise specified in the applicable Supplement or on the face of any
Certificate, no transfer, assignment or other conveyance of, or sale of
any interest in a Certificate shall be made unless, after giving effect
thereto, there shall be no more than 20 Private Holders of Subject
Instruments, as reasonably determined by the Transferor. Any attempted
transfer, assignment, conveyance, participation or subdivision in
contravention of the preceding restrictions, as reasonably determined by
the Transferor, shall be void ab initio and the purported transferor,
seller or subdivider of such Certificate shall continue to be treated as
the Certificateholder of any such Certificate (or interest therein) for
all purposes of this Agreement.
Each Certificate shall be issued as a Definitive Certificate and
shall be executed by manual or facsimile signature on behalf of Transferor
by its President or any Vice President or by any attorney-in-fact duly
authorized to execute the Definitive Certificate on behalf of any such
officer. The Definitive Certificates shall be authenticated on behalf of
the Trust by manual signature of a duly authorized signatory of Trustee.
Definitive Certificates bearing the manual or facsimile signature of the
individual who was, at the time when the signature was affixed, authorized
to sign on behalf of Transferor or the Trust (as applicable) shall be
valid and binding, notwithstanding that the individuals or any of them
ceased to be so authorized prior to the authentication and delivery of the
Definitive Certificates or does not hold such office on the date of
issuance of such Definitive Certificates. No Definitive Certificates shall
be entitled to any benefit under this Agreement, or be valid for any
purpose, unless there appears on the Definitive Certificate a certificate
of authentication substantially in the form provided for herein executed
by or on behalf of Trustee by the manual signature of a duly authorized
signatory, and the certificate of authentication upon any Definitive
Certificate shall be conclusive evidence, and the only evidence, that the
Definitive Certificate has been duly authenticated and delivered hereunder
and is entitled to the benefits of this Agreement. Except as otherwise
provided in the applicable Supplement, all Definitive Certificates shall
be dated the date of their authentication.
SECTION 6.2 Authentication of Certificates. Contemporaneously
with the initial assignment and transfer of Receivables and other
Transferred Assets to the Trust, Trustee shall authenticate and deliver
the Transferor Certificate to Transferor. On each Issuance Date, upon the
order of Transferor, Trustee shall authenticate and deliver to Transferor
the Series of Certificates that are to be issued originally on such
Issuance Date pursuant to the applicable Supplement.
SECTION 6.3 Registration of Transfer and Exchange of
Certificates. (a) Trustee, as agent for Transferor, shall keep, or shall
cause to be kept, at the office or agency to be maintained in accordance
with the provisions of Section 11.16, a register in written form or
capable of being converted into written form within a reasonable time (the
"Certificate Register")
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in which, subject to such reasonable regulations as it may prescribe, a
transfer agent and registrar (which may be Trustee) (the "Transfer Agent
and Registrar") shall provide for the registration of the Certificates,
transfers and exchanges of the Certificates and the allocation of payments
as herein provided. Transferor hereby appoints Trustee as the initial
Transfer Agent and Registrar.
Transferor, or Trustee as agent for Transferor, may revoke the
appointment as Transfer Agent and Registrar and remove the then-acting
Transfer Agent and Registrar if Trustee or Transferor (as applicable)
determines in its sole discretion that the then-acting Transfer Agent and
Registrar has failed to perform its obligations under this Agreement in
any material respect. The then-acting Transfer Agent and Registrar shall
be permitted to resign as Transfer Agent and Registrar upon 30 days' prior
written notice to Trustee, Transferor, Servicer and each Required Person;
provided that such resignation shall not be effective and the then-acting
Transfer Agent and Registrar shall continue to perform its duties as
Transfer Agent and Registrar until Trustee has appointed a successor
Transfer Agent and Registrar reasonably acceptable to Transferor and the
Person so appointed has given Trustee written notice that it accepts the
appointment. The provisions of Sections 11.1 through 11.5 shall apply to
the Transfer Agent and Registrar as if all references to "Trustee" in the
applicable provisions of Sections 11.1 through 11.5 were references to the
Transfer Agent and Registrar.
It is intended that the registration of Certificates that is
described in this Section comply with the registration requirements
contained in Section 163 of the Internal Revenue Code.
(b) No transfer of all or any part of the Transferor Certificate
shall be made unless (i) Transferor shall have given the Rating Agencies,
Trustee and each Required Person prior written notice of the proposed
transfer, (ii) the Modification Condition shall have been satisfied in
connection with the proposed transfer and (iii) Transferor shall have
delivered to Trustee, the Rating Agencies, and each Required Person a Tax
Opinion for each outstanding Series of Investor Certificates.
(c) Subject to the requirements of subsection (e), if
applicable, having been fulfilled, upon surrender for registration of
transfer of any Certificate, and, in the case of Investor Certificates,
at any office or agency of the Transfer Agent and Registrar maintained for
such purpose, Transferor shall execute, and Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or
more new Certificates of the appropriate class and Series that are in
authorized denominations of like aggregate fractional interest in the
related Series Interest that bear numbers that are not contemporaneously
outstanding.
At the option of an Investor Certificateholder, its Investor
Certificates may be exchanged for other Investor Certificates of the same
class and Series (and bearing the same interest rate as the Investor
Certificate surrendered for registration of exchange) of authorized
denominations of like aggregate fractional interests in the related Series
Interest and bearing numbers that are not contemporaneously outstanding,
upon surrender of the Investor Certificates to be exchanged at any such
office or agency. Whenever any Investor Certificates are so surrendered
for exchange, Transferor shall execute, and Trustee shall authenticate and
deliver, the appropriate number of Investor Certificates of the class and
Series that the Investor Certificateholder making
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the exchange is entitled to receive. Every Investor Certificate presented
or surrendered for registration of transfer or exchange shall be
accompanied by a written instrument of transfer in a form satisfactory to
Trustee or the Transfer Agent and Registrar duly executed by the
Certificateholder thereof or his attorney-in-fact duly authorized in a
writing delivered to the Transfer Agent and Registrar.
No service charge shall be made for any registration of transfer
or exchange of Certificates, but the Transfer Agent and Registrar may
require the Certificateholder to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Investor
Certificates.
All Certificates surrendered for registration of transfer and
exchange shall be canceled and disposed of in a manner satisfactory to
Trustee.
The Investor Certificateholders may, with the consent of the
Agent, provide notice to the Trustee as to whom and in what manner payment
should be made in respect of the Investor Certificates held by such
Investor Certificateholders and the Trustee shall make payment of amounts
to which such Investor Certificateholder is entitled in such manner.
(d) Certificates may be surrendered for registration of transfer
or exchange at the office of the Transfer Agent and Registrar designated
in Section 13.6.
(e) Unless otherwise provided in the applicable Supplement,
Certificateholders holding Definitive Certificates shall not sell,
transfer or otherwise dispose of the Certificates unless the sale,
transfer or disposition is being made pursuant to an exemption from the
registration requirements of the Securities Act and applicable state
securities laws and, prior to the proposed sale, transfer or disposition,
the Certificateholder and the proposed transferee each provide Trustee and
Transferor with representations and, if requested by Trustee or
Transferor, an Opinion of Counsel concerning the proposed sale, transfer
or disposition and the availability of the exemption.
(f) The Investor Certificates shall bear such restrictive
legends as shall be set forth in the applicable Supplements.
(g) No transfer of a Certificate shall be made unless the
Trustee and the Transfer Agent and Registrar shall have received either
(i) a representation letter from the proposed transferee of such
Certificate to the effect that such proposed transferee is not an employee
benefit plan subject to the fiduciary responsibility provisions of ERISA,
or Section 4975 of the Code, or a Person acting on behalf of any such plan
or using the assets of any such plan or if the proposed transferee is an
insurance company, a representation that the proposed transferee is an
insurance company which is purchasing such certificates with funds
contained in an "insurance company general account" (as such term is
defined in section v(e) of prohibited transaction class exemption 95-60
("ptce 95-60")) and that the purchase and holding of such certificates are
covered under ptce 95-60, which representation letter shall not be an
expense of the Trust, Trustee, the Transfer Agent and Registrar, the
Servicer or the Transferor or (ii) in the case of any such certificate
presented for registration in
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the name of an employee benefit plan subject to the fiduciary
responsibility provisions of ERISA, or Section 4975 of the Internal
Revenue Code (or comparable provisions of any subsequent enactments), or
a trustee of any such plan or any other Person who is using the assets of
any such plan to effect such acquisition, an opinion of counsel, in form
and substance reasonably satisfactory to, and addressed and delivered to,
the Trustee, the Transfer Agent and Registrar and the Transferor, to the
effect that the purchase or holding of such Certificate will not result
in the assets of the Trust estate being deemed to be "plan assets" and
subject to the fiduciary responsibility provisions of ERISA or the
prohibited transaction provisions of the Internal Revenue Code, will not
constitute or result in a prohibited transaction within the meaning of
Section 406 or Section 407 of ERISA or Section 4975 of the Internal
Revenue Code, and will not subject the Trust, the Trustee, the Transfer
Agent and Registrar, the Servicer or the Transferor to any obligation or
liability (including obligations or liability under ERISA or Section 4975
of the Internal Revenue Code) in addition to those explicitly undertaken
in this Trust Agreement which opinion of counsel shall not be an expense
of the Trust, the Trustee, the Transfer Agent and Registrar, the Servicer
or the Transferor.
SECTION 6.4 Mutilated, Destroyed, Lost or Stolen Certificates.
If (a) any mutilated Certificate is surrendered to the Transfer Agent and
Registrar, or the Transfer Agent and Registrar receives evidence to its
satisfaction of the destruction, loss or theft of any Certificate and (b)
there is delivered to the Transfer Agent and Registrar and Trustee such
security or indemnity as may be required by them and Transferor to hold
each of them, the Trust and Transferor harmless, then, in the absence of
notice to Trustee that such Certificate has been acquired by a bona fide
purchaser, Transferor shall execute and, upon the request of Transferor,
Trustee shall authenticate and deliver, in exchange for or in lieu of any
such mutilated, destroyed, lost or stolen Certificate, a new Certificate
of like class, Series, tenor, terms and principal amount and bearing a
number that is not contemporaneously outstanding. In connection with the
issuance of any new Certificate under this section, Trustee or the
Transfer Agent and Registrar may require the payment by the
Certificateholder of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the reasonable fees and expenses of Trustee and
Transfer Agent and Registrar) connected therewith. Any duplicate
Certificate issued pursuant to this section shall constitute conclusive
and indefeasible evidence of ownership of an interest in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed
Certificate shall be enforceable by anyone, and shall be entitled to all
the benefits of this Agreement equally and proportionately with any and
all Certificates of the same class and Series that are duly issued
hereunder.
SECTION 6.5 Persons Deemed Owners. Prior to due presentation of
a Certificate for registration of transfer, Transferor, Trustee, the
Paying Agent, the Transfer Agent and Registrar and any agent of any of
them may treat the Person in whose name any Certificate is registered as
the owner of such Certificate for the purpose of receiving distributions
pursuant to Article V and for all other purposes whatsoever, and none of
Transferor, Trustee, the Paying Agent, the Transfer Agent and Registrar
or any agent of any of them shall be affected by any notice to the
contrary; provided that, in determining whether the Holders of the
requisite principal amount or stated amount (as applicable) of
Certificates have given any request, demand,
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authorization, direction, notice, consent or waiver hereunder,
Certificates owned by Transferor, Servicer or any Affiliate thereof shall
be disregarded and deemed not to be outstanding, except that, in
determining whether Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Certificates that Trustee knows to be so owned shall be so disregarded.
Certificates so owned that have been pledged in good faith shall not be
disregarded and may be regarded as outstanding if the pledgee establishes
to the satisfaction of Trustee the pledgee's right so to act with respect
to such Certificates and that the pledgee is not Transferor, Servicer or
an Affiliate thereof.
SECTION 6.6 Appointment of Paying Agent. The Paying Agent
initially shall be Trustee. Trustee hereby appoints the Paying Agent as
its agent to make distributions to Certificateholders pursuant to the
applicable Supplements and to report the amounts of the distributions to
Trustee. Any Paying Agent shall have the revocable power to withdraw funds
from the Master Collection Account for the purpose of making the
distributions. Trustee or, at any time when Trustee is also the Paying
Agent, Trustee may revoke such power of the Paying Agent and remove the
Paying Agent if Trustee (as applicable) determines in its sole discretion
that the Paying Agent shall have failed to perform its obligations under
this Agreement in any material respect. The Paying Agent shall be
permitted to resign as Paying Agent upon 30 days' prior written notice to
Trustee, Transferor, Servicer, Rating Agencies and the Investor
Certificateholders. Any resignation or removal of the Paying Agent, and
appointment of a successor Paying Agent, shall not become effective until
the appointment has been accepted by the successor Paying Agent. If no
successor Paying Agent shall have been appointed and shall have accepted
appointment within 30 days after the giving of the notice of resignation,
the resigning Paying Agent may petition any court of competent
jurisdiction to appoint a successor Paying Agent. In the event that
Trustee shall no longer be the Paying Agent, Trustee shall appoint a
successor Paying Agent (which shall be a bank or trust company) reasonably
acceptable to each Required Person, which appointment shall be effective
on the date on which the Person so appointed gives Certificateholders
written notice that it accepts the appointment and on which each Required
Person gives written consent to such appointment. Trustee shall cause the
successor Paying Agent or any additional Paying Agent appointed by Trustee
to execute and deliver to Trustee an instrument in which it shall agree
with Trustee that, as Paying Agent, it will hold all sums, if any, held
for payment to the Certificateholders in trust for the benefit of the
Certificateholders entitled thereto until the sums shall be paid to the
Certificateholders. The Paying Agent shall return all unclaimed funds to
Trustee, and upon removal of a Paying Agent such Paying Agent shall also
return all funds in its possession to Trustee. The provisions of
Sections 11.1 through 11.5 shall apply to the Paying Agent as if all
references in the applicable provisions thereof to "Trustee" were
references to the Paying Agent.
SECTION 6.7 Access to List of Certificateholders' Names and
Addresses. Trustee will furnish or cause to be furnished by the Transfer
Agent and Registrar to Transferor, Servicer, any Seller or the Paying
Agent, within two Business Days after receipt by Trustee of a written
request therefor from Servicer or the Paying Agent, a list in the form
Servicer or the Paying Agent may reasonably require of the names and
addresses of the Certificateholders as of the most recent Distribution
Date. If any Holder or group of Holders of Investor Certificates in any
Series evidencing not less than 10% of the aggregate unpaid principal
amount of the Series (the "Applicant") applies in writing to Trustee, and
the application states that the Applicant desires to communicate with
other Certificateholders with respect to their rights under this
Agreement, any Supplement or the Certificates and is accompanied by a copy
of the communication that the Applicant proposes to transmit, then
Trustee, after having been adequately indemnified by the
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Applicant for its costs and expenses, shall afford or shall cause the
Transfer Agent and Registrar to afford the Applicant access during normal
business hours to the most recent list of Certificateholders held by
Trustee, within five Business Days after the receipt of the application
and indemnification. The list shall be as of a date no more than 45 days
prior to the date of receipt of the Applicant's request.
Every Certificateholder, by receiving and holding a Certificate,
agrees with Trustee that neither Trustee, the Transfer Agent and
Registrar, Transferor, Servicer, any Seller nor any of their respective
agents shall be held accountable by reason of the disclosure of any
information as to the names and addresses of the Certificateholders
hereunder, regardless of the sources from which the information was
derived.
SECTION 6.8 Authenticating Agent. (a) Trustee may appoint one
or more authenticating agents with respect to the Certificates that shall
be authorized to act on behalf of Trustee in authenticating the
Certificates in connection with the issuance, delivery, registration of
transfer, exchange or repayment of the Certificates. Either Trustee or the
authenticating agent, if any, then appointed and acting on behalf of
Trustee shall authenticate the Certificates. Whenever reference is made
in this Agreement to the authentication of Certificates by Trustee or
Trustee's certificate of authentication, such reference shall be deemed
to include authentication on behalf of Trustee by an authenticating agent
and a certificate of authentication executed on behalf of Trustee by an
authenticating agent. Each authenticating agent must be acceptable to
Transferor.
(b) Any institution succeeding to the corporate agency business
of an authenticating agent shall continue to be an authenticating agent
without the execution or filing of any document or any further act on the
part of Trustee, the authenticating agent or any other Person.
(c) An authenticating agent may at any time resign by giving
written notice of resignation to Trustee and Transferor. Trustee may at
any time terminate the agency of an authenticating agent by giving notice
of termination to the authenticating agent and Transferor. Upon receiving
a notice of resignation or upon a termination, or in case at any time an
authenticating agent shall cease to be acceptable to Trustee or
Transferor, Trustee may promptly appoint a successor authenticating agent.
Any successor authenticating agent, upon acceptance of its appointment,
shall become vested with all the rights, powers and duties of its
predecessor, with like effect as if originally named as an authenticating
agent. No successor authenticating agent shall be appointed unless
acceptable to Trustee and Transferor.
(d) Servicer agrees to pay to each authenticating agent (if
any), as an expense of Servicer paid out of the Servicing Fee, reasonable
compensation from time to time for services performed under this section.
(e) The provisions of Sections 11.1, 11.2, 11.3 and 11.4 shall
be applicable to any authenticating agent as if the references in the
applicable provisions thereof to "Trustee" were references to the
authenticating agent.
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(f) Pursuant to an appointment made under this section, the
Certificates may have endorsed thereon, in lieu of Trustee's certificate
of authentication, an alternate certificate of authentication in
substantially the following form:
"This is one of the Certificates described in the Supplement dated
as of __________ ___, 199_.
LASALLE NATIONAL BANK, as Trustee
By:_________________________
as Authenticating Agent
for Trustee,
By:_________________________
Authorized Officer."
SECTION 6.9 Tax Treatment. It is the intent of Transferor and
the Investor Certificateholders that, for purposes of Federal, state and
local income and franchise taxes and other taxes measured by or imposed
on income, the Investor Certificates will be treated as evidence of
indebtedness secured by the Transferred Assets and the Trust will not be
characterized as an association or publicly traded partnership taxable as
a corporation. Transferor, by entering into this Agreement, and each
Investor Certificateholder, by its acceptance of its Investor Certificate,
agrees to treat the Investor Certificates as indebtedness (or, if so
provided in the applicable Supplement, an interest in a partnership) for
purposes of Federal, state and local income and franchise taxes and any
other taxes measured by or imposed on income. The provisions of this
Agreement and all related Transaction Documents shall be construed to
further these intentions of the parties. In accordance with the foregoing,
Transferor agrees that it will report its income for purposes of Federal,
state and local income or franchise taxes, and any other taxes measured
by or imposed on income, on the basis that it is the owner of the
Receivables. Except to the extent otherwise required by applicable law or
any Governmental Authority, Trustee hereby agrees to treat the Trust as
a security device only, and shall not file tax returns or obtain an
employer identification number on behalf of the Trust.
SECTION 6.10 Issuance of Additional Series of Certificates. (a)
Transferor may from time to time issue and direct Trustee to authenticate
one or more classes of any newly issued Series of Investor Certificates
(a "New Issuance") if (i) each Required Person shall have given their
prior written consent, and (ii) each Rating Agency after notice of such
contemplated issuance of additional series of Certificates, shall have
confirmed the initial rating of the then-issued and outstanding series of
Certificates that were rated by such Rating Agency. In addition, to the
extent permitted for any Series of Investor Certificates as specified in
the related
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Supplement, the Investor Certificateholders of the Series may tender their
Investor Certificates to Trustee, and Transferor may allocate a portion
of the Transferor Interest pursuant to the terms and conditions set forth
in the Supplement, in exchange for one or more newly issued Series of
Investor Certificates (an "Investor Exchange"). New Issuances and Investor
Exchanges collectively are referred to as "Issuances".
(b) Transferor may direct Trustee to authenticate an Issuance
by notifying Trustee, in writing, at least five Business Days (or such
shorter period as shall be acceptable to Trustee) in advance (an "Issuance
Notice") of the date upon which the Issuance is to occur (an "Issuance
Date"). Any Issuance Notice shall state the designation of any Series to
be issued on the Issuance Date and, with respect to each class or Series:
(i) its initial invested amount (or the method for calculating the initial
invested amount) and (ii) its interest rate (or the method for allocating
interest payments or other cash flows to the Series), if any, with respect
to the Series.
(c) On the Issuance Date, Transferor shall deliver to Trustee
for authentication under Section 6.2, and Trustee shall authenticate and
deliver any such class or classes of Series of Investor Certificates only
upon delivery to it (and, in the case of item (iv) below, each Rating
Agency and each Required Person) of the following:
(i) a Supplement satisfying the criteria set forth in
subsection (d) and in form reasonably satisfactory to Trustee
executed by Transferor and Servicer and specifying the principal
terms of the Series;
(ii) a Tax Opinion for each outstanding Series of
Investor Certificates with respect to such Issuance;
(iii) evidence that the Modification Condition has been
satisfied with respect to such Issuance (unless such Issuance
occurs on the First Issuance Date);
(iv) for any Issuance occurring after the First
Issuance Date, an Officer's Certificate of Transferor that on the
Issuance Date, after giving effect to the Issuance (and the
repayment, on the date of the Issuance Date, of any existing
Investor Certificates with funds (including proceeds of sale of
the new Series) on deposit in the Principal Funding Account), any
requirements set out in the Supplement with respect to any then-
outstanding Series with respect to the amount of Certificates
that may not, by their terms, be transferred has been satisfied;
(v) an Officer's Certificate of Servicer stating that
no Early Amortization Event or Unmatured Early Amortization Event
has occurred and is continuing and that there is not a
substantial likelihood that the Issuance would result in an Early
Amortization Event or an Unmatured Early Amortization Event at
any time in the future;
(vi) in the case of an Investor Exchange, any Investor
Certificates that are being exchanged in connection therewith;
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(vii) any other documents, certificates and Opinions
of Counsel as may be required by the applicable Supplement; and
(viii) an Officer's Certificate of Servicer to the
effect that all conditions specified in clauses (i) through (ix)
of this subsection (c) have been satisfied.
Upon satisfaction or waiver of the conditions for any Issuance, Trustee
shall cancel any Investor Certificates that are to be cancelled in
connection with such Issuance and issue, as provided above, the new Series
of Investor Certificates dated the Issuance Date. Any such Series of
Investor Certificates shall be substantially in the form specified in the
related Supplement and shall bear, upon its face, the designation for the
Series to which it belongs, as selected by Transferor. There is no limit
to the number of Issuances that may be made under this Agreement.
(d) In conjunction with an Issuance, the parties hereto shall
execute a Supplement, which shall specify the relevant terms with respect
to any newly issued Series of Investor Certificates, which may include:
(i) its name or designation, (ii) the initial invested amount or the
method of calculating the initial invested amount, (iii) the applicable
interest rate (or formula for the determination thereof), (iv) the
Issuance Date, (v) the rating agency or agencies rating the Series, if
any, (vi) the interest payment date or dates and the date or dates from
which interest shall accrue, (vii) the method of allocating Collections
with respect to Receivables for the Series and, if applicable, with
respect to any paired Series and the method by which the principal amount
of Investor Certificates of the Series shall amortize or accrue and the
method for allocating write-offs, (viii) the names of any accounts to be
used by the Series and the terms governing the operation of any such
account, (ix) the base rate applicable to the Series, (x) the terms on
which the Certificates of the Series may be repurchased or remarketed to
other investors, (xi) any deposit into any account provided for the
Series, (xii) the number of classes of the Series, and if more than one
class, the rights and priorities of each class, (xiii) whether any fees,
breakage payments or early termination payments will be included in the
funds available to be paid for the Series, (xiv) the subordination of the
Series to any other Series, (xv) whether the Series will be a part of a
group or subject to being paired with any other Series, (xvi) whether the
Series will be prefunded and (xvii) any other relevant terms of the
Series. The terms of the Supplement may modify or amend the terms of this
Agreement or the Purchase Agreement (including the related definitions)
solely as applied to the new Series.
(e) Except as specified in any Supplement for the related
Series, all Investor Certificates of any Series shall rank pari passu and
be equally and ratably entitled as provided herein to the benefits hereof
without preference, priority or distinction on account of the actual time
or times of authentication and delivery, all in accordance with the terms
and provisions of this Agreement and the related Supplement.
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ARTICLE VII
TRANSFEROR
SECTION 7.1 Representations and Warranties of Transferor Relating
to Transferor and the Transaction Documents. On the date hereof and on
each Issuance Date, Transferor hereby represents and warrants for the
benefit of the Trustee and the Certificateholders that:
(a) Organization and Good Standing. Transferor is a
limited liability company duly organized and validly existing and
in good standing under the laws of its jurisdiction of
organization and has all necessary corporate power and authority
to acquire, own and transfer the Receivables and the Related
Transferred Assets.
(b) Due Qualification. Transferor is duly qualified to
do business and is in good standing as a foreign limited
liability company (or is exempt from such requirements), and has
obtained all necessary licenses and approvals, in all
jurisdictions in which the ownership or lease of property or the
conduct of its business requires qualification, licenses or
approvals.
(c) Power and Authority. Transferor has (i) all
necessary organizational power and authority to execute, deliver
and perform its obligations under this Agreement and the other
Transaction Documents to which it is a party.
(d) Binding Obligations. This Agreement constitutes,
and each other Transaction Document to which Transferor is a
party when executed and delivered will constitute, a legal, valid
and binding obligation of Transferor, enforceable against it in
accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity, regardless of
whether enforceability is considered in a proceeding in equity or
at law.
(e) Authorization; No Conflict or Violation. The
execution, delivery and performance of, and the consummation of
the transactions contemplated by, this Agreement and the other
Transaction Documents to be signed by Transferor and the
fulfillment of the terms hereof and thereof have been duly
authorized by all necessary action and will not (i) conflict
with, violate, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of
time or both) a default under, (A) its certificate of formation
or limited liability company agreement or (B) any indenture, loan
agreement, mortgage, deed of trust or other material agreement or
instrument to which Transferor is a party or by which it or any
of its properties is bound, (ii) result in the creation or
imposition of any Adverse Claim upon any of its properties
pursuant to the terms of any such contract, indenture, loan
agreement, mortgage, deed of trust, or other agreement or
instrument, other than this Agreement and the other Transaction
Documents, or (iii) conflict with or violate any federal, state,
local or foreign law or any decision, decree, order, rule or
regulation applicable to it or any of its properties of any court
or of any federal, state, local or foreign regulatory body,
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administrative agency or other governmental instrumentality
having jurisdiction over it or any of its properties.
(f) Litigation and Other Proceedings. (i) There is no
action, suit, proceeding or investigation pending or, to the best
knowledge of Transferor, threatened against it before any court,
regulatory body, arbitrator, administrative agency or other
tribunal or governmental instrumentality and (ii) it is not
subject to any order, judgment, decree, injunction, stipulation
or consent order of or with any court or other government
authority that, in the case of clauses (i) and (ii), (A) asserts
the invalidity of this Agreement or any other Transaction
Document, (B) seeks to prevent the transfer of any Receivables or
Related Transferred Assets to the Trust, the issuance of the
Certificates or the consummation of any of the transactions
contemplated by this Agreement or any other Transaction Document,
(C) seeks any determination or ruling that would materially and
adversely affect the performance by Transferor of its obligations
under this Agreement or any other Transaction Document or the
validity or enforceability of this Agreement or any other
Transaction Document, (D) seeks to affect materially and
adversely the income tax attributes of the transfers hereunder or
the Trust under the United States Federal income tax system or
any state income tax system or (E) individually or in the
aggregate for all such actions, suits, proceedings and
investigations would have a reasonable likelihood of having a
Material Adverse Effect.
(g) Third Party Approvals. All authorizations, consents,
orders and approvals of, or other action by, any Governmental
Authority or other third party that are required to be obtained
by Transferor, and all notices to and filings with any
Governmental Authority or other third party, that are required to
be made by it, in the case of each of the foregoing in connection
with the transfer of Receivables and Related Transferred Assets
to the Trust or the execution, delivery and performance by it of
this Agreement and any other Transaction Documents to which it is
a party and the consummation of the transactions contemplated by
this Agreement, have been obtained or made and are in full force
and effect, except where the failure to obtain or make any such
authorization, consent, order, approval, notice or filing,
individually or in the aggregate for all such failures, would not
have a substantial likelihood of having a Material Adverse
Effect.
(h) Offices. Transferor's principal place of business
and chief executive office is, and since the date of its
organization has been, located at the address set forth under
Transferor's signature hereto (or at such other locations,
notified to Servicer and Trustee in accordance with Section
7.2(c), in jurisdictions where all action required by Section
7.2(c) has been taken and completed).
(i) Account Banks. The names and addresses of all the
Account Banks are specified in Schedule 1 or, after the First
Issuance Date, have been provided by Servicer to Trustee pursuant
to Section 3.3(c), and the account numbers of the Bank Accounts
at such Account Banks have been specified in a letter provided on
or prior to the First Issuance Date to Trustee or, after the
First Issuance Date, have been provided by Servicer to Trustee
pursuant to Section 3.3(c). The Account Agreements to which
Transferor is a party constitute the legal, valid and binding
obligations of the parties
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thereto enforceable against such parties in accordance with their
respective terms subject to applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting
creditors' rights generally and general equitable principles.
(j) Investment Company Act. Transferor is not, and is
not controlled by, an "investment company" registered or required
to be registered under the Investment Company Act of 1940, as
amended.
(k) Bulk Sales Act. No transaction contemplated by this
Agreement or any other Transaction Document requires compliance
with, or will be subject to avoidance under, by bulk sales act or
similar law.
(l) Margin Regulations. No use of any funds obtained
by Transferor under this Agreement will conflict with or
contravene any of Regulations G, T, U and X promulgated by the
Federal Reserve Board from time to time.
(m) Compliance with Applicable Laws. Transferor is in
compliance with requirements of all applicable laws, rules,
regulations and orders of all Governmental Authorities (federal,
state, local or foreign, and including environmental laws), a
violation of any of which, individually or in the aggregate for
all such violations, would have a substantial likelihood of
having a Material Adverse Effect.
(n) Taxes. Transferor has filed or caused to be filed
all tax returns and reports required by law to have been filed by
it and has paid all taxes, assessments and governmental charges
thereby shown to be owing, except any such taxes, assessments or
charges (i) that are being contested in good faith, (ii) for
which adequate reserves in accordance with GAAP shall have been
set aside on its books and (iii) with respect to which no Adverse
Claim, except Permitted Adverse Claims, has been imposed upon any
Receivables or Transferred Assets.
(o) Transferor will not incur any material indirect
or overhead expenses for items shared between Transferor and any
Affiliate that are not reflected in the Servicing Fee, other than
shared items of expenses not reflected in the Servicing Fee, such
as legal, auditing and other professional services, that will be
allocated to the extent practical on the basis of actual use or
the value of services rendered, and otherwise on a basis
reasonably related to the actual use or the value of services
rendered.
(p) Transferor will account for and manage its
liabilities separately from those of every other Affiliate,
including payment of all payroll and administrative expenses and
taxes (other than taxes that are determined or required to be
determined on a consolidated or combined basis) from its own
assets.
(q) Transferor will conduct its business at an office
segregated from the offices of each of its Affiliates, which
office of Transferor may consist of office space shared with an
Affiliate, a portion of which is allocated solely to Transferor.
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(r) Transferor will maintain corporate or company
records, books of account and stationery separate from those of
every Affiliate.
(s) Transferor's assets will be maintained in a
manner that facilitates their identification and segregation from
those of any Affiliate.
(t) Transferor will not, directly or indirectly, be
named and shall not enter into an agreement to be named as a
direct or contingent beneficiary or loss payee on any insurance
policy with respect to any loss relating to the property of any
Affiliate.
(u) any transaction between Transferor and any
Affiliate will be the type of transaction which would be entered
into by a prudent Person in the position of Transferor with an
Affiliate, and will be on terms that are at least as favorable as
may be obtained from a Person that is not an Affiliate.
(v) neither Transferor nor any Affiliate will be or
will hold itself out to be responsible for the debts of the
other.
(w) Transferor will operate, conduct its business and
otherwise act in a manner that is consistent with the factual
assumptions in each legal opinion delivered in connection with
any Series.
The representations and warranties set forth in this section shall
survive the transfer and assignment of the Receivables and the other
Transferred Assets to the Trust. Upon discovery by Transferor, Servicer
or Trustee of a breach of any of the foregoing representations and
warranties, the party discovering the breach shall give written notice to
the other parties to this Agreement within two Business Days following the
discovery; provided, however, that if such breach arises from a Seller's
failure to perform its obligations under the Purchase Agreement and such
failure is of the type that may be cured by settlement of a Seller
Noncomplying Receivables Adjustment or Seller Dilution Adjustment under
Sections 3.1 and 3.5 of the Purchase Agreement, and such settlement shall
have (in fact) been made within the time limit specified under such
sections, then no breach shall be deemed to have occurred under this
Agreement. Trustee's obligations in respect of discovering any breach are
limited as provided in Section 11.2(g).
SECTION 7.2 Covenants of Transferor. So long as any Investor
Certificates remain outstanding (other than any Investor Certificates
payment for which has been duly provided for in accordance with this
Agreement), Transferor shall, unless each Required Person shall otherwise
consent in writing:
(a) Compliance with Laws, Etc. Comply in all material
respects with all applicable laws, rules, regulations, judgments,
decrees and orders (including those relating to the Receivables,
the Related Transferred Assets, the funds in the Transaction
Accounts and the related Contracts and any other agreements
related thereto), in each case to the extent the failure to
comply, individually or in the aggregate for all such failures,
would have a substantial likelihood of having a Material Adverse
Effect.
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(b) Preservation of Organizational Existence. Preserve
and maintain its status and existence as a limited liability
company, rights, franchises and privileges in the jurisdiction of
its organization, and qualify and remain qualified in good
standing as a foreign limited liability company in each
jurisdiction where the failure to preserve and maintain such
existence, rights, franchises, privileges and qualifications
would have a substantial likelihood of having a Material Adverse
Effect.
(c) Location of Offices. Keep its principal place of
business and chief executive office at the address referred to in
Section 7.1(h) or, upon not less than 30 days' (or such shorter
number of days as is acceptable to the Servicer and Trustee)
prior written notice given by Transferor to Servicer and Trustee,
at such other location in a jurisdiction where all action
required pursuant to Section 3.10 shall have been taken and
completed. Transferor will at all times maintain its principal
place of business and chief executive offices within the United
States of America.
(d) Reporting Requirements of Transferor. Furnish to
Trustee, the Investor Certificateholders and the Rating Agencies:
(i) Early Amortization Events. As soon as
possible, and in any event within two Business Days after
an Authorized Officer of Transferor has obtained
knowledge of the occurrence of any Early Amortization
Event or any Unmatured Early Amortization Event, a
written statement of an Authorized Officer of Transferor
describing the event and the action that Transferor
proposes to take with respect thereto, in each case in
reasonable detail,
(ii) Material Adverse Effect. As soon as
possible and in any event within two Business Days after
an Authorized Officer of Transferor has knowledge
thereof, written notice that describes in reasonable
detail any Adverse Claim, other than any Permitted
Adverse Claim, against the Transferred Assets or any
other event or occurrence that, individually or in the
aggregate for all such events or occurrences, has had,
or would have a substantial likelihood of having, in the
reasonable, good faith judgment of Transferor, a Material
Adverse Effect,
(iii) Proceedings. As soon as possible and in
any event within two Business Days after an Authorized
Officer of Transferor has knowledge thereof, written
notice of (A) any litigation, investigation or proceeding
of the type described in Section 7.1(f) not previously
disclosed to Trustee and (B) any material adverse
development that has occurred with respect to any such
previously disclosed litigation, investigation or
proceeding,
(iv) Other. Promptly, from time to time, any
other information, documents, records or reports
respecting the Receivables or the Related Transferred
Assets or any other information respecting the condition
or operations, financial or otherwise, of Transferor, in
each case as Trustee or a Required Person may from time
to time reasonably request in order to protect the
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interests of Trustee, the Trust or the Investor
Certificateholders under or as contemplated by this
Agreement.
(e) Adverse Claims. Except for any conveyances under the
Transaction Documents, not permit to exist any Adverse Claim
(other than Permitted Adverse Claims) to or in favor of any
Person upon or with respect to, or cause to be filed any
financing statement or equivalent document relating to perfection
that covers, any Transferred Asset or any interest therein.
Transferor shall defend the right, title and interest of the
Trust in, to and under the Transferred Assets, whether now
existing or hereafter created, against all claims of third
parties claiming through or under Transferor.
(f) Extension or Amendment of Receivables; Change in
Credit and Collection Policy or Contracts. Not (i) extend, amend
or otherwise modify the terms of any Receivable or Contract
(except as permitted by the Credit and Collection Policy) in a
manner that would have a material adverse effect on the Investor
Certificateholders, or (ii) permit any Seller to make any change
in its Credit and Collection Policy that would have a material
adverse effect on the Investor Certificateholders; provided that
Transferor or Servicer, as applicable, may change the terms and
provisions of the Credit and Collection Policy if the change is
made with the prior written approval of each Required Person, and
the Modification Condition is satisfied with respect thereto.
(g) Mergers, Acquisitions, Sales, Etc. Not:
(i) (A) be a party to any merger or
consolidation, or directly or indirectly purchase or
otherwise acquire all or substantially all of the assets
or any stock of any class of, or any partnership or joint
venture interest in, any other Person, or (B) except
pursuant to the Transaction Documents, directly or
indirectly, sell, transfer, assign, convey, lease, pledge
or grant a security interest in, whether in one
transaction or in a series of transactions, all or any
part of its assets, or sell or assign with or without
recourse any Receivables or Related Transferred Assets
(other than as provided in the Transaction Documents);
(ii) except as contemplated in the Purchase
Agreement in connection with Transferor's purchases of
Receivables and Related Assets from the Sellers, (A)
make, incur or suffer to exist an investment in, equity
contribution to, or payment obligation in respect of the
deferred purchase price of property or services from, any
Person, or (B) make any loan or advance to any Person
other than for reasonable and customary operating
expenses; or
(iii) create any direct or indirect Subsidiary
or otherwise acquire direct or indirect ownership of any
equity interests in any other Person.
(h) Change in Name. Not change its corporate name or the
name under or by which it does business, or permit any Seller to
change its corporate name or the name under or by which it does
business, unless prior to the change in name, Transferor (i)
shall have given the Servicer and the Trustee 30 days' prior
written notice thereof, (ii)
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shall have received written consent from the Trustee (at the
direction of the Required Persons) and (iii) shall have filed (or
shall have caused to be filed) any Public Notices as Servicer or
Trustee determines may be necessary to continue the perfection of
the Trust's interest in the Receivables, the Related Transferred
Assets and the proceeds thereof.
(i) Amendment of Certificate of Formation or Limited
Liability Company Agreement; Change in Business. Not amend its
certificate of formation or its limited liability company
agreement, or engage in any business other than as contemplated
by the Transaction Documents, unless (i) the Modification
Condition has been satisfied in connection with the amendment or
change in Transferor's business and (ii) Transferor shall have
received the written consent of the Trustee (at the direction of
the Required Persons).
(j) Amendments to Purchase Agreement. The Transferor
will not (i) cancel or terminate the Purchase Agreement or
consent to or accept any cancellation or termination thereof,
(ii) amend or otherwise modify any term or condition of the
Purchase Agreement or give any consent, waiver or approval
thereunder, (iii) waive any default under or breach of the
Purchase Agreement or (iv) take any other action under the
Purchase Agreement not required by the terms thereof.
(k) Enforcement of Transaction Documents. Perform all
its obligations under and otherwise comply with the Transaction
Documents and will enforce the covenants and agreements of each
of the Sellers in the Purchase Agreements and the other
Transaction Documents to which Transferor is a party, unless
instructed otherwise by Trustee or by Trustee at the direction of
the Required Persons in connection with the exercise of the
Trustee's rights pursuant to its security interest in
Transferor's right, title and interest in, to and under the
Transaction Documents to which Transferor is a party.
(l) Other Indebtedness. Not (i) create, incur or permit
to exist any Indebtedness, Guaranty or liability or (ii) cause or
permit to be issued for its account any letters of credit or
bankers' acceptances, except for (A) Indebtedness incurred
pursuant to the Buyer Notes, (B) other liabilities specifically
permitted to be created, incurred or owed by Transferor pursuant
to or in connection with the Transaction Documents, (C)
liabilities for reasonable and customary operating expenses in an
aggregate amount that do not exceed $10,000 in any of its fiscal
quarters, and (D) other liabilities for expenses that are owed to
a Related Person, the payment of which are subordinate to
obligations of Transferor under the Transaction Documents and
which subordination is evidenced by a written agreement
containing provisions substantially similar to the provisions of
the Buyer Notes.
(m) Separate Organization Existence. Hereby acknowledge
that Trustee and the Investor Certificateholders are, and will
be, entering into the transactions contemplated by the
Transaction Documents in reliance upon Transferor's identity as
a legal entity separate from any Seller, Servicer and any other
Person. Therefore, from and after the First Issuance Date,
Transferor shall take all reasonable steps to maintain its
existence
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as an organization separate and apart from Servicer, each Seller
and any other Related Person. Without limiting the generality of
the foregoing, Transferor shall take such actions as shall be
reasonably required in order that:
(i) Transferor will not incur any material
indirect or overhead expenses for items shared between
Transferor and any Related Person that are not reflected
in the Servicing Fee, other than shared items of expenses
not reflected in the Servicing Fee, such as legal,
auditing and other professional services, that will be
allocated to the extent practical on the basis of actual
use or the value of services rendered, and otherwise on
a basis reasonably related to the actual use or the value
of services rendered, it being understood that ICP will
pay all expenses owing by Transferor or any Related
Person relating to the preparation, negotiation,
execution and delivery of the Transaction Documents,
including, without limitation, legal, commitment, agency
and other fees.
(ii) Transferor will account for and manage its
liabilities separately from those of every other Related
Person, including payment of all payroll and
administrative expenses and taxes (other than taxes that
are determined or required to be determined on a
consolidated or combined basis) from its own assets.
(iii) Transferor will conduct its business at
an office segregated from the offices of each Related
Person, which office of Transferor may consist of office
space shared with a Related Person, a portion of which
is allocated solely to Transferor.
(iv) Transferor will maintain corporate or
company records, books of account and stationery separate
from those of every Related Person.
(v) Any annual financial statements of any
Related Person that are made publicly available and which
are consolidated to include Transferor will contain
footnotes stating that ICP and certain other Subsidiaries
of ICP have sold Receivables and indicating that the
assets of Transferor will not be available to ICP or such
Subsidiaries unless Transferor's liabilities have been
paid in full.
(vi) Transferor's assets will be maintained in
a manner that facilitates their identification and
segregation from those of any Related Person.
(vii) Transferor shall not, directly or
indirectly, be named and shall not enter into an
agreement to be named as a direct or contingent
beneficiary or loss payee on any insurance policy with
respect to any loss relating to the property of a Related
Person.
(viii) Any transaction between Transferor and
any Related Person will be the type of transaction which
would be entered into by a prudent Person in the position
of Transferor with a Related Person, and will be on terms
that are at
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least as favorable as may be obtained from a Person that
is not a Related Person (it being understood and agreed
that the transactions contemplated in the Transaction
Documents meet the requirements of this clause).
(ix) Neither Transferor nor any Related Person
will be or will hold itself out to be responsible for the
debts of the other.
(x) Transferor will operate, conduct its
business and otherwise act in a manner that is consistent
with the factual assumptions in each Bankruptcy Opinion
delivered in connection with any Series.
(n) Taxes. File or cause to be filed, and cause each
Person with whom it shares consolidated tax liability to file,
all Federal, state and local tax returns that are required to be
filed by it and pay or cause to be paid all taxes shown to be due
and payable on such returns or on any assessments received by it,
other than any taxes or assessments, the validity of which are
being contested in good faith by appropriate proceedings and with
respect to which Transferor shall have set aside adequate
reserves on its books in accordance with GAAP and which
proceedings would not have a substantial likelihood of having a
Material Adverse Effect.
(o) Maximum Exposure Amount. Not permit the aggregate
outstanding principal amount of the Buyer Notes to exceed the
Maximum Exposure Amount.
The covenants set forth in this section shall survive the transfer
and assignment of the Receivables and the other Transferred Assets to the
Trust. Upon discovery by Transferor, Servicer or Trustee of a breach of
any of the foregoing covenants, the party discovering the breach shall
give written notice to the other parties to this Agreement within two
Business Days following such discovery; provided, however that if such
breach arises from a Seller's failure to perform its obligations under the
Purchase Agreement and such failure is of the type that may be cured by
settlement of a Seller Noncomplying Receivables Adjustment or Seller
Dilution Adjustment under Sections 3.1 and 3.5 of the Purchase Agreement,
and such settlement shall have (in fact) been made within the time limit
specified under such sections, then no breach shall be deemed to have
occurred under this Agreement. Trustee's obligation in respect of
discovering any breach are limited as provided in Section 11.2(g).
SECTION 7.3 Indemnification by Transferor. (a) Without limiting
any other rights which any Indemnified Party may have hereunder or under
applicable law, Transferor hereby agrees to indemnify and hold harmless
the Trust, Trustee and each Certificateholder and each of the successors,
permitted transferees and assigns of any such Person and all officers,
directors, shareholders, controlling Persons, employees, affiliates and
agents of any of the foregoing (each of the foregoing Persons being
individually called an "Indemnified Party"), forthwith on demand, from and
against any and all damages, losses, claims (whether on account of
settlement or otherwise, and whether or not the relevant Indemnified Party
is a party to any action or proceeding that gives rise to any Indemnified
Losses (as defined below)), judgments, liabilities and related reasonable
costs and expenses (including reasonable attorneys' fees and
disbursements) (all of the foregoing being collectively called
"Indemnified Losses") awarded
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against or incurred by any of them that arise out of or relate to
Transferor's performance of, or failure to perform, any of its obligations
under or in connection with this Agreement, any other Transaction Document
or any of the transactions contemplated herein or therein or the use of
proceeds herefrom or therefrom.
Notwithstanding the foregoing (and with respect to clause (b)
below, without prejudice to the rights that the Trustee may have pursuant
to the other provisions of this Agreement or the provisions of any of the
other Transaction Documents), in no event shall any Indemnified Party be
indemnified against any Indemnified Losses (a) resulting from gross
negligence or willful misconduct on the part of such Indemnified Party (or
the gross negligence or willful misconduct on the part of any of such
Indemnified Party's officers, directors, employees, affiliates or agents),
(b) to the extent the same include Indemnified Losses in respect of
Receivables and reimbursement therefor that would constitute credit
recourse to Transferor for the amount of any Receivable or Related
Transferred Asset not paid by the related Obligor, (c) to the extent such
Indemnified Losses are or result from lost profits, or (d) to the extent
such Indemnified Losses are or result from taxes asserted with respect to
(i) distributions on the Investor Certificates (other than any withholding
taxes, if and to the extent that (A) such withholding taxes should have
been (but in fact were not) withheld and paid over by the Trust to the
relevant taxing authority, (B) such taxing authority asserts a claim for
such withholding taxes against the Trust or the Transferor, and (C) the
assets of the Trust are insufficient to satisfy such claim at the time a
final determination is made that such withholding taxes are due and
payable) and (ii) federal or other income taxes on or measured by the net
income of such Indemnified Party.
If for any reason the indemnification provided in this Section is
unavailable to an Indemnified Party or is insufficient to hold it
harmless, then Transferor shall contribute to the amount paid by the
Indemnified Party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect not only the relative
benefits received by such Indemnified Party on the one hand and Transferor
on the other hand, but also the relative fault of such Indemnified Party
(if any) and Transferor and any other relevant equitable consideration.
Notwithstanding any provisions contained in any Transaction
Document to the contrary, Transferor shall not, and shall not be obligated
to, pay any amount pursuant to this Section unless and to the extent that
the Transferor has funds available to pay such amounts or funds are
allocated thereafter to the Transferor pursuant to the provisions of a
Supplement governing the allocation of funds in the Master Collection
Account. Any amount which Transferor does not pay pursuant to the
operation of the preceding sentence shall not constitute a claim (as
defined in Sec. 101 of the Bankruptcy Code) against or organizational
obligation of Transferor for any such insufficiency.
In addition, Transferor agrees to indemnify Trustee and each of
its successors, permitted transferees and assigns, officers, directors,
shareholders, employees, affiliates and agents, and hold them harmless
against, any and all losses, liabilities, damages, claims or expenses
incurred by any of them in connection with the Transaction Documents or
in the exercise or performance of any of the powers or duties of Trustee
hereunder.
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(b) Transferor shall be liable to all creditors of the Trust for
all liabilities of the Trust to the same extent as it would be if the
Trust constituted a partnership under the Delaware Revised Uniform Limited
Partnership Act and Transferor were a general partner thereof (to the
extent Transferred Assets remaining after Investor Certificateholders have
been paid in full are insufficient to pay such losses, claims, damages or
liabilities). Notwithstanding anything to the contrary herein, any such
creditor shall be a third party beneficiary of this Section 7.3. Nothing
in this provision shall be construed as waiving any rights or claims
(including rights of recoupment or subrogation) which the Transferor may
have against any third party under this Agreement or applicable laws.
ARTICLE VIII
SERVICER
SECTION 8.1 Representations and Warranties of Servicer. On the
date hereof and on each Issuance Date, Servicer hereby makes, and any
Successor Servicer (other than Trustee automatically appointed as
Successor Servicer pursuant to Section 10.2) also shall be deemed to make
by its acceptance of its appointment hereunder, the following
representations and warranties for the benefit of Trustee and the
Certificateholders:
(a) Organization and Good Standing. Servicer is a
corporation duly organized and validly existing and in good
standing under the laws of its jurisdiction of incorporation and
has all necessary corporate power and authority to own its
properties and to conduct its business as the properties
presently are owned and as the business presently is conducted.
(b) Due Qualification. Servicer is duly qualified to do
business and is in good standing as a foreign corporation (or is
exempt from such requirements), and has obtained all necessary
licenses and approvals, in all jurisdictions in which the
servicing of the Receivables and the Related Transferred Assets
as required by this Agreement requires qualification, licenses or
approvals.
(c) Power and Authority. Servicer has all necessary
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and the other Transaction
Documents to which it is a party.
(d) Binding Obligations. This Agreement constitutes, and
each other Transaction Document to which Servicer is a party when
executed and delivered will constitute, a legal, valid and
binding obligation of Servicer, enforceable against it in
accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity, regardless of
whether enforceability is considered in a proceeding in equity or
at law.
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(e) Authorization; No Conflict or Violation. The
execution and delivery by Servicer of this Agreement and the
other Transaction Documents to which it is a party, the
performance by it of its obligations hereunder and thereunder and
the fulfillment by it of the terms hereof and thereof that are
applicable to it have been duly authorized by all necessary
action and will not (i) conflict with, violate, result in any
breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time or both) a default under, (A)
its Certificate of Incorporation or Bylaws or (B) any indenture,
loan agreement, mortgage, deed of trust, or other material
agreement or instrument to which it is a party or by which it or
any of its properties is bound (excluding any such agreement that
is terminated on or before the First Issuance Date or under which
Servicer has obtained all necessary consents) or (ii) conflict
with or violate any federal, state, local or foreign law or any
decision, decree, order, rule or regulation applicable to it or
any of its properties of any court or of any federal, state,
local or foreign regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over it or any
of its properties.
(f) Approvals. All authorizations, consents, orders and
approvals of, or other action by, any Governmental Authority that
are required to be obtained by Servicer, and all notices to and
filings with any Governmental Authority or other Person that are
required to be made by it, in the case of each of the foregoing
in connection with the execution, delivery and performance by it
of this Agreement and any other Transaction Documents to which it
is a party and the consummation of the transactions contemplated
by this Agreement, have been obtained or made and are in full
force and effect (other than the filing of the UCC financing
statements referred to in Section 2.3(a)(ii)(A), all of which, at
the time required in Section 2.3(a)(ii)(A), will be duly made),
except where the failure to obtain or make such authorization,
consent, order, approval, notice or filing, individually or in
the aggregate for all such failures, would not have a substantial
likelihood of having a Material Adverse Effect.
(g) Litigation and Other Proceedings. (i) There is no
action, suit, proceeding or investigation pending or, to the best
knowledge of Servicer, threatened against it before any court,
regulatory body, arbitrator, administrative agency or other
tribunal or governmental instrumentality and (ii) it is not
subject to any order, judgment, decree, injunction, stipulation
or consent order of or with any court or other government
authority that, in the case of clauses (i) and (ii), (A) seeks to
affect adversely the income tax attributes of the transfers
hereunder or the Trust under the United States federal income tax
system or any state income tax system or (B) individually or in
the aggregate for all such actions, suits, proceedings and
investigations would have a reasonable likelihood of having a
Material Adverse Effect.
(h) [Reserved.]
(i) In addition to the servicing reports required to
be delivered pursuant to Section 3.7(a), on or before 60 days
after the end of the third fiscal quarter in 1996, Servicer
shall, as an expense of Servicer paid out of the Servicing Fee,
cause Coopers & Lybrand L.L.P. or another firm of independent
certified public accountants that is
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generally recognized as being among the "big six" (which may also
render other services to Servicer, the Sellers or Transferor) to
furnish a report to Trustee, Servicer and Transferor (which
report shall be addressed to Trustee and the Purchasers and shall
relate to the period from the Closing Date to the last day of the
most recently ended fiscal quarter). The accountant's report
shall set forth the results of its performance of the procedures
described in Exhibit D hereof with respect to the Monthly Reports
and Daily Reports delivered to Trustee pursuant to Section 3.5
during the period covered by such accountant's report.
(j) The accountant's report described in clause (i)
shall state that the accountant has compared the amounts
contained in the Monthly Reports and a sample randomly selected
from all Daily Reports delivered to Trustee during the period
covered by the report with the records (including computer
records) from which the amounts were derived and that, on the
basis of such comparison, the amounts are in agreement with the
documents and records, except for such exceptions as it believes
to be immaterial and such other exceptions as shall be set forth
in the report. A copy of the report may be obtained by a Holder
by a request in writing to Trustee addressed to the Corporate
Trust Center.
The representations and warranties set forth in this section shall
survive the transfer and assignment of the Receivables and the other
Transferred Assets to the Trust. Upon discovery by Transferor, Servicer
or Trustee of a breach of any of the foregoing representations and
warranties, the party discovering the breach shall give written notice to
the other parties to this Agreement and each Required Person within three
Business Days following the discovery. Trustee's obligations in respect
of discovering any breach are limited as provided in Section 11.2(g).
SECTION 8.2 Covenants of Servicer. So long as any Investor
Certificates remain outstanding (other than any Investor Certificates
payment for which has been duly provided for in accordance with this
Agreement), Servicer shall:
(a) Compliance with Laws, Etc. Maintain in effect all
qualifications required under applicable law in order to service
properly the Receivables and shall comply with all applicable
laws, rules, regulations, judgments, decrees and orders.
(b) Preservation of Corporate Existence. Preserve and
maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and qualify
and remain qualified in good standing as a foreign corporation in
each jurisdiction in which the ownership or lease of property or
the conduct of its business requires such qualification, licenses
or approvals.
(c) Notice. As soon as possible (and in any event within
two Business Days after an Authorized Officer has knowledge
thereof), furnish to Transferor, Trustee, the Investor
Certificateholders and the Rating Agencies notice of any of the
events described in clauses (i), (ii) and (iii) of Section
7.2(d).
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(d) Location of Offices. Maintain at all times its
principal place of business and chief executive office in the
United States of America.
The covenants set forth in this section shall survive the transfer and
assignment of the Transferred Assets to the Trust. Upon discovery by
Transferor, Servicer or Trustee of a breach of any of the foregoing
covenants, the party discovering the breach shall give written notice to
the other parties to this Agreement and each Required Person within two
Business Days following the discovery. Trustee's obligations in respect
of discovering any breach are limited as provided in Section 11.2(g).
SECTION 8.3 Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. Servicer shall not consolidate with or merge
into any other Person or convey, transfer or sell all or substantially all
of its properties and assets to any Person, unless (a) Servicer is the
surviving entity or, if it is not the surviving entity, the Person formed
by the consolidation or into which Servicer is merged or the Person that
acquires by conveyance, transfer or sale all or substantially all of the
properties and assets of Servicer shall be a corporation organized and
existing under the laws of the United States of America or any State
thereof or the District of Columbia and such corporation shall expressly
assume, by an agreement supplemental hereto, executed and delivered to
Trustee and in form and substance satisfactory to Trustee, the performance
of every covenant and obligation of Servicer hereunder and under the other
Transaction Documents to which Servicer is a party, and (b) Servicer shall
have delivered to Trustee and each Required Person an Officer's
Certificate stating that the consolidation, merger, conveyance, transfer
or sale and the supplemental agreement comply with this Section and an
Opinion of Counsel stating that the supplemental agreement is a valid and
binding obligation of the surviving entity enforceable against it in
accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and by general
principles of equity.
SECTION 8.4 Indemnification by Servicer. Servicer hereby agrees
to indemnify each Indemnified Party forthwith on demand, from and against
any and all Indemnified Losses awarded against or incurred by any of them
that arise out of or relate to Servicer's performance of, or failure to
perform, any of its obligations under or in connection with any
Transaction Document.
Notwithstanding the foregoing (and with respect to clause (b)
below, without prejudice to the rights that such Indemnified Party may
have pursuant to the other provisions of this Agreement or the provisions
of any of the other Transaction Documents), in no event shall any
Indemnified Party be indemnified against any Indemnified Losses (a)
resulting from gross negligence or willful misconduct on the part of such
Indemnified Party (or the gross negligence or willful misconduct on the
part of any of such Indemnified Party's officers, directors, employees,
affiliates or agents), (b) to the extent the same includes Indemnified
Losses in respect of Receivables and reimbursement therefor that would
constitute credit recourse to Servicer for the amount of any Receivable
or Related Transferred Asset not paid by the related Obligor, (c) to the
extent such Indemnified Losses are or result from lost profits (other than
breakage payments or early termination payments), or (d) to the extent
such Indemnified Losses are or result from taxes (including interest and
penalties thereon) asserted with respect to (i)
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distributions on the Investor Certificates or (ii) federal or other income
taxes on or measured by the net income of such Indemnified Party and costs
and expenses in defending against the same.
If for any reason the indemnification provided in this section is
unavailable to an Indemnified Party or is insufficient to hold it
harmless, then Servicer shall contribute to the amount paid by such
Indemnified Party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect not only the relative
benefits received by such Indemnified Party on the one hand and Servicer
on the other hand, but also the relative fault of such Indemnified Party
(if any) and Servicer and any other relevant equitable consideration.
SECTION 8.5 Servicer Liability. Servicer shall be liable in
accordance with this Agreement only to the extent of the obligations
specifically undertaken by Servicer in such capacity herein and as set
forth herein.
SECTION 8.6 Limitation on Liability of Servicer and Others.
Servicer shall not be under any obligation to appear in, prosecute or
defend any legal action that is not incidental to its duties to service
the Receivables in accordance with this Agreement or any Supplement that
in its reasonable opinion may involve it in any expense or liability.
Servicer may, in its sole discretion, undertake any legal action relating
to the servicing, collection or administration of Receivables and Related
Transferred Assets that it may reasonably deem necessary or appropriate
for the benefit of the Certificateholders with respect to this Agreement
and the rights and duties of the parties hereto and the interests of the
Certificateholders hereunder.
ARTICLE IX
EARLY AMORTIZATION EVENTS; TERMINATION BY SELLERS
SECTION 9.1 Early Amortization Events. The Early Amortization
Events with respect to each Series shall be specified in the related
Supplement.
SECTION 9.2 Remedies. Upon the occurrence of an Early
Amortization Event, Trustee shall have, in addition to all other rights
and remedies available to Trustee under this Agreement or otherwise, (a)
the right to apply Collections as provided herein, and (b) all rights and
remedies provided under all other applicable laws, which rights, in the
case of each and all of the foregoing, shall be cumulative. Trustee shall
exercise the rights at the direction of the Investor Certificateholders
pursuant to (and subject to the limitations specified in) Section 11.14.
SECTION 9.3 Additional Rights Upon the Occurrence of Certain
Events. (a) If a Bankruptcy Event shall occur with respect to
Transferor, this Agreement (other than this Section 9.3) and the Trust
shall be deemed to have terminated on the day of the Bankruptcy Event.
Within seven Business Days of the date of written notice to Trustee of the
Bankruptcy Event, Trustee shall:
(i) publish a notice in an Authorized Newspaper that a
Bankruptcy Event has occurred with respect to Transferor, that
the Trust has terminated, and that Trustee
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intends to sell, dispose of or otherwise liquidate the
Receivables and the Related Transferred Assets pursuant to this
Agreement in a commercially reasonable manner and on commercially
reasonable terms, which shall include the solicitation of
competitive bids (a "Disposition"), and
(ii) send written notice to the Investor
Certificateholders describing the provisions of this section and
requesting each Investor Certificateholder to advise Trustee in
writing whether (A) it wishes Trustee to instruct Servicer not to
effectuate a Disposition, (B) it refuses to advise Trustee as to
the specific action Trustee shall instruct Servicer to take or
(C) it wishes Servicer to effect a Disposition.
If, after 60 days from the day notice pursuant to subsection
(a)(i) is first published (the "Publication Date"), Trustee shall not have
received the written instruction described in subsection (a)(ii)(A) from
Holders representing at least a majority in interest within the meaning
of Internal Revenue Service Revenue Procedure 94-46 (or subsequent
authority promulgated by the Internal Revenue Service), determined as if
the Trust were classified as a partnership for Federal income tax purposes
(a "majority in interest"), of all outstanding Series of Investor
Certificates, Trustee shall instruct Servicer to effectuate a Disposition,
and Servicer shall proceed to consummate a Disposition. If, however,
Holders representing at least a majority of interest of all Series of
Investor Certificates instruct Trustee not to effectuate a Disposition,
the Trust shall be reconstituted and continue pursuant to the terms of
this Agreement.
(b) Notwithstanding the termination of this Agreement and the
Trust pursuant to subsection (a), the proceeds from any Disposition of the
Receivables and the Related Transferred Assets pursuant to subsection (a)
shall be treated as Collections on the Receivables and shall be allocated
and deposited in accordance with the provisions of Article IV.
(c) Trustee may appoint an agent or agents to assist with its
responsibilities pursuant to this section with respect to competitive
bids.
(d) Transferor or any of its Affiliates shall be permitted to bid
for the Receivables and the Related Transferred Assets. Trustee may obtain
a prior determination from any bankruptcy trustee, receiver or liquidator
that the terms and manner of any proposed Disposition are commercially
reasonable.
(e) Notwithstanding the termination of this Agreement and the
Trust pursuant to subsection (a), Trustee shall continue to have the
rights described in Section 9.2 and Article XI, and be subject to
direction on terms consistent with those set out in Section 11.14, pending
the completion of any Disposition and/or the reconstitution of the Trust.
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ARTICLE X
SERVICER DEFAULTS
SECTION 10.1 Servicer Defaults. Any of the following events
shall constitute a "Servicer Default":
(a) any failure by Servicer to take any action that it
is required to take in its capacity as Servicer to make any
payment, transfer or deposit required by any Transaction Document
or to give instructions or to give notice to Trustee to make such
payment, transfer or deposit, which failure continues unremedied
for three Business Days,
(b) failure on the part of Servicer duly to observe or
perform any other covenants or agreements of Servicer set forth
in this Agreement or any other Transaction Document, which
failure continues unremedied for a period of 25 Business Days
after the date on which written notice of the failure, requiring
the same to be remedied, shall have been given to Servicer by
Trustee, or to Servicer and Trustee by any Investor
Certificateholder,
(c) Servicer shall assign its duties under this
Agreement, except as permitted by Sections 3.1(b) and 8.3,
(d) any representation, warranty or certification made
by Servicer in any Transaction Document or in any certificate or
other document or instrument delivered pursuant to any
Transaction Document shall prove to have been incorrect when made
or delivered, and continues to be incorrect in any material
respect for a period of 15 Business Days after the date on which
written notice of such failure, requiring the same to be
remedied, shall have been given to Servicer by the Trustee, or to
the Servicer and Trustee by any Investor Certificateholder, or
(e) any Bankruptcy Event shall occur with respect to
Servicer.
In the event of any Servicer Default, so long as such Servicer Default
shall not have been remedied, Trustee (at the direction of the Required
Investors), by notice then given in writing to Servicer (a "Termination
Notice"), shall terminate all the rights and obligations (other than
obligations of such Servicer under Sections 8.4 and 11.5) of Servicer as
Servicer under this Agreement and in and to the Receivables, the Related
Transferred Assets and the proceeds thereof.
As soon as possible, and in any event within two Business Days,
after an Authorized Officer of Servicer has obtained knowledge of the
occurrence of any Servicer Default, Servicer shall furnish Transferor,
Trustee, each Required Person and the Rating Agencies, and Trustee shall
promptly furnish each other Investor Certificateholder, notice of such
Servicer Default.
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SECTION 10.2 Trustee to Act; Appointment of Successor. (a) On
and after Servicer's receipt of a Termination Notice pursuant to Section
10.1, Servicer shall continue to perform all servicing functions under
this Agreement until the date specified in the Termination Notice or
otherwise specified by Trustee in writing or, if no such date is specified
in the Termination Notice, or otherwise specified by Trustee, until a date
mutually agreed upon by Servicer and Trustee. Trustee shall, as promptly
as possible after the giving of a Termination Notice, nominate an Eligible
Servicer as successor servicer (the "Successor Servicer"); provided that
(i) in so appointing any Successor Servicer, Trustee shall give due
consideration to any Successor Servicer proposed by any Required Person,
(ii) such Successor Servicer is approved by the Required Persons and (iii)
such Successor Servicer shall accept its appointment by a written
assumption in a form acceptable to Trustee and each Required Person. Any
Person who is nominated to be a Successor Servicer shall accept its
appointment by a written assumption in form and substance acceptable to
Trustee. In the event that a Successor Servicer has not been appointed or
has not accepted its appointment at the time when Servicer ceases to act
as Servicer, Trustee without further action shall automatically be
appointed the Successor Servicer. Trustee may delegate any of its
servicing obligations to an affiliate or agent in accordance with Section
3.1(b). If Trustee is prohibited by applicable law from performing the
duties of Servicer hereunder, Trustee may appoint, or may petition a court
of competent jurisdiction to appoint, a Successor Servicer hereunder.
Trustee shall give prompt notice to the Rating Agencies and each Investor
Certificateholder upon the appointment of a Successor Servicer.
(b) After Servicer's receipt of a Termination Notice, and on the
date that a Successor Servicer shall have been appointed by Trustee and
shall have accepted the appointment pursuant to subsection (a), all
authority and power of Servicer under this Agreement shall pass to and be
vested in the Successor Servicer (a "Service Transfer"); and, without
limitation, Trustee is hereby authorized and empowered to execute and
deliver, on behalf of Servicer, as attorney-in-fact or otherwise, all
documents and instruments, and to do and accomplish all other acts or
things that Trustee reasonably determines are necessary or appropriate to
effect the purposes of the Service Transfer. Upon the appointment of the
Successor Servicer and its acceptance thereof, Servicer agrees that it
will terminate its activities as Servicer hereunder in a manner that
Trustee indicates will facilitate the transition of the performance of
such activities to the Successor Servicer. Servicer agrees that it shall
use best efforts to assist the Successor Servicer in assuming the
obligations to service and administer the Receivables and the Related
Transferred Assets, on the terms and subject to the conditions set forth
herein, and to effect the termination of the responsibilities and rights
of Servicer to conduct servicing hereunder, including the transfer to such
Successor Servicer of all authority of Servicer to service the Receivables
and Related Transferred Assets provided for under this Agreement and all
authority over all cash amounts that shall thereafter be received with
respect to the Receivables or the Related Transferred Assets. Servicer
shall, within five Business Days after the designation of a Successor
Servicer, transfer its electronic records (and any related software and
software licenses, appropriately assigned and prepaid) relating to the
Receivables, the related Contracts and the Related Transferred Assets to
the Successor Servicer in such electronic form as the Successor Servicer
may reasonably request and shall promptly transfer to the Successor
Servicer all other records, correspondence and documents necessary for the
continued servicing of the
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Receivables and the Related Transferred Assets in the manner and at such
times as the Successor Servicer shall request. To the extent that
compliance with this Section shall require ICP or any Servicer to disclose
to the Successor Servicer information of any kind that ICP deems to be
confidential, prior to the transfer contemplated by the preceding sentence
the Successor Servicer shall be required to enter into a reasonable
confidentiality agreement which shall permit it to carry out its duties
in the best interests of the Investor Certificateholders. All reasonable
costs and expenses (including attorneys' fees and disbursements) incurred
in connection with transferring the Receivables, the Related Transferred
Assets and all related Records (including the related Contracts) to the
Successor Servicer and amending this Agreement and the other Transaction
Documents to reflect such succession as Servicer pursuant to this Section
(including a one time up front payment payable on the first Distribution
Date following the appointment of such Successor Servicer as negotiated
between the Trustee and the Successor Servicer as reasonable compensation
for assuming the responsibilities of the Successor Servicer in an amount
not to exceed $150,000) shall be paid by the predecessor Servicer (or, if
Trustee serves as Successor Servicer on an interim basis, the preceding
Servicer) within 15 days after presentation of reasonable documentation
of the costs and expenses; provided that if the predecessor Servicer or
preceding Servicer, as the case may be, fails to make such payment within
such time, Transferor shall make such payment within five days thereafter.
(c) Upon its appointment and acceptance thereof, the Successor
Servicer shall be the successor in all respects to Servicer with respect
to servicing functions under this Agreement and shall be subject to all
the responsibilities and duties relating thereto placed on Servicer by the
terms and provisions hereof (and shall carry out such responsibilities and
duties in accordance with standards of reasonable commercial prudence),
and all references in this Agreement to Servicer shall be deemed to refer
to the Successor Servicer.
(d) All authority and power granted to Servicer or the Successor
Servicer under this Agreement shall automatically cease and terminate upon
termination of the Trust pursuant to Section 12.1, and shall pass to and
be vested in Transferor and, without limitation, Transferor is hereby
authorized and empowered, on and after the effective date of such
termination, to execute and deliver, on behalf of the Servicer or the
Successor Servicer, as attorney-in-fact or otherwise, all documents and
other instruments and to do and accomplish all other acts or things that
Transferor reasonably determines are necessary or appropriate to effect
the purposes of such transfer of servicing rights. The Servicer or
Successor Servicer agrees to cooperate with Transferor in effecting the
termination of the responsibilities and rights of the Servicer or
Successor Servicer to conduct servicing of the Receivables and the Related
Transferred Assets. The Servicer or Successor Servicer shall, within five
Business Days after such termination, transfer its electronic records
relating to the Receivables and the Related Transferred Assets to
Transferor in such electronic form as Transferor may reasonably request
and shall transfer all other records, correspondence and documents
relating to the Receivables and the Related Transferred Assets to
Transferor in the manner and at such times as Transferor shall reasonably
request. To the extent that compliance with this Section shall require the
Servicer or Successor Servicer to disclose to Transferor information of
any kind that the Servicer or Successor Servicer deems to be confidential,
Transferor shall be required to enter into such customary licensing and
confidentiality agreements as the Servicer or Successor Servicer shall
deem necessary to protect
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its interests. All reasonable costs and expenses (including attorneys'
fees and disbursements) incurred by Trustee, in its capacity as Successor
Servicer (including a one time up front payment payable on the first
Distribution Date following the appointment of Trustee as Successor
Servicer as determined by the Trustee as reasonable compensation for
assuming the responsibilities of Successor Servicer in an amount not to
exceed $150,000), in connection with the termination shall be paid by
Transferor within 15 days after presentation of reasonable documentation
of the costs and expenses. The Trustee may reserve and withhold from
distributions to the Transferor such amounts as it reasonably determines
may be required for the payment of such costs and expenses.
Notwithstanding any provisions contained in any Transaction
Document to the contrary, Transferor shall not, and shall not be obligated
to, pay any amount pursuant to this Section unless funds are allocated for
such payment pursuant to the provisions of a Supplement governing the
allocation of funds in the Master Collection Account. Any amount which
Transferor does not pay pursuant to the operation of the preceding
sentence shall not constitute a claim (as defined in Sec. 101 of the
Bankruptcy Code) against or company obligation of Transferor for any such
insufficiency.
(e) To the extent that this Agreement or any other
Transaction Document requires the Servicer to obtain information from
another Person or to cause another Person to act or abstain from acting,
such provision shall be construed only to require a Successor Servicer to
use reasonable efforts to obtain information from another Person or to
cause another Person to act or abstain from acting.
SECTION 10.3 Notification of Servicer Default; Notification of
Appointment of Successor Servicer. Within two Business Days after an
Authorized Officer of Servicer becomes aware of any Servicer Default,
Servicer shall give written notice thereof to Transferor, Trustee, each
Required Person and the Rating Agencies, and Trustee shall, promptly upon
receipt of the written notice, give notice to the other Investor
Certificateholders at their respective addresses appearing in the
Certificate Register. Upon any termination or appointment of a Successor
Servicer pursuant to this Article X, Trustee shall give prompt written
notice thereof to the Investor Certificateholders at their respective
addresses appearing in the Certificate Register and to the Rating
Agencies.
SECTION 10.4 Waiver of Servicer Defaults. The Required Investors
may, on behalf of the Transferor and all the Holders of each Series, waive
in writing any Servicer Default hereunder and its consequences (other than
a continuing failure to pay fees or expenses owing to the Trustee) and
shall provide a copy of such written waiver to the Rating Agencies. Upon
any such waiver of a Servicer Default, such Servicer Default shall cease
to exist, and shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other
Servicer Default or impair any right consequent thereon except to the
extent expressly so waived.
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ARTICLE XI
TRUSTEE
SECTION 11.1 Duties of Trustee. Trustee shall have no duty
(unless it is specifically identified in this Agreement). (a) Trustee
undertakes to perform the duties and only the duties as are specifically
set forth in this Agreement. The provisions of this Article XI shall apply
to Trustee solely in its capacity as Trustee, and not to Trustee in its
capacity as Servicer if it is acting as Servicer. Following the occurrence
of a Servicer Default of which a Responsible Officer has actual knowledge,
Trustee shall exercise such of the rights and powers vested in it by this
Agreement 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 or her own affairs; provided that if Trustee shall assume
the duties of Servicer pursuant to Section 10.2, Trustee in performing the
duties shall use the degree of skill and attention customarily exercised
by a servicer with respect to trade receivables that it services for
itself or others. Trustee shall have no power to create, assume or incur
indebtedness or other liabilities in the name of the Trust other than as
contemplated in, or incidental to the performance of its duties under, the
Transaction Documents.
(b) Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments
furnished to Trustee that are specifically required to be furnished to the
Trustee pursuant to any provision of this Agreement, shall examine them
to determine whether they are substantially in the form required by this
Agreement. Trustee shall give written notice to the Person who furnished
any item of the type listed in the preceding sentence of any lack of
substantial conformity of any such item to the applicable requirements of
this Agreement. In addition, Trustee shall give prompt written notice to
the Investor Certificateholders of any lack of substantial conformity of
any such instrument to the applicable requirements of this Agreement
discovered by Trustee that would entitle a specified percentage of the
Investor Certificateholders or the Holders of any Series of Certificates
or any Required Person to take any action pursuant to this Agreement.
Within two Business Days of its receipt of any Monthly Report, Trustee
shall verify the mathematical computations contained therein (based upon
an examination of the face of the Monthly Report) and shall notify
Servicer, the Required Persons and each of the Rating Agencies of the
accuracy of such computations or of any discrepancies therein (provided
that the rounding of numbers will not constitute a discrepancy), whereupon
Servicer shall deliver to the Required Persons and the Rating Agencies
within five Business Days thereafter a certificate describing the nature
and cause of such discrepancies and the action that Servicer proposes to
take with respect thereto. During the first week of each year, Trustee
shall provide the Rating Agencies and each Required Person with a
certificate, signed by a Responsible Officer, to the effect that Trustee
is not aware of any Early Amortization Event (or, if it is aware of any
Early Amortization Event, specifying the nature of that event).
(c) Subject to subsection (a), no provision of this Agreement
shall be construed to relieve Trustee from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct;
provided that:
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(i) Trustee shall not be liable for an error of judgment
made in good faith by a Responsible Officer or Responsible
Officers of Trustee, unless it shall be proved that Trustee was
negligent in ascertaining the pertinent facts,
(ii) Trustee shall not be liable with respect to any
action taken, suffered or omitted to be taken by it in good faith
in accordance with the direction (as applicable) of any Required
Person or the Required Series Holders relating to the time,
method and place of conducting any proceeding for any remedy
available to Trustee, or exercising any trust or power conferred
upon Trustee, under this Agreement,
(iii) Trustee shall not be charged with knowledge of (A)
any failure by Servicer to comply with the obligations of
Servicer referred to in subsections (a), (b) or (c) of Section
10.1, (B) any breach of the representations and warranties of
Transferor set forth in Section 2.3 or 7.1 or the representations
and warranties of Servicer set forth in Section 8.1, (C) any
breach of the covenants of Transferor set forth in Section 7.2 or
the covenants of Servicer set forth in Section 8.2 or (D) the
ownership of any Certificate for purposes of Section 6.5, in each
case unless a Responsible Officer of Trustee obtains actual
knowledge of the matter or Trustee receives written notice of the
matter from Servicer or from any Holder,
(iv) the duties and obligations of Trustee shall be
determined solely by the express provisions of this Agreement,
Trustee shall not be liable except for the performance of the
duties and obligations that specifically shall be set forth in
this Agreement, no implied covenants or obligations shall be read
into this Agreement against Trustee and, in the absence of bad
faith on the part of Trustee, Trustee may conclusively rely on
the truth of the statements and the correctness of the opinions
expressed in any certificates or opinions that are furnished to
Trustee and that conform to the requirements of this Agreement,
and
(v) without limiting the generality of this section or
Section 11.2, Trustee shall have no duty (A) to see to any
recording, filing, or depositing of this Agreement or any
agreement referred to herein or any financing statement
evidencing a security interest in the Receivables or the Related
Transferred Assets, or to see to the maintenance of any such
recording or filing or depositing or to any rerecording, refiling
or redepositing of any thereof (except that Trustee (x) shall
note in its records the date of filing of each Public Notice
identified to it in writing as having been filed in connection
with the Transaction Documents, or filed in connection with a
predecessor receivables securitization and amended and/or
assigned in connection with the Transaction Documents, and naming
Trustee as secured party or assignee of the secured party (y)
shall, unless it shall have received an Opinion of Counsel to the
effect that no such filing is necessary to continue the
perfection of Transferor's or Trustee's interests in the
Receivables and the Related Assets, cause continuation statements
to be filed with respect to each such Public Notice that is a UCC
financing statement not less than four years and six months and
not more than five years after (1) its filing date and (2) the
date of filing of any prior continuation statement and (z) shall,
unless it shall have received an Opinion
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of Counsel to the effect that no such filing is necessary to
continue the perfection of Transferor's or Trustee's interests in
the Receivables and the Related Assets, cause appropriate Public
Notices that are not UCC financing statements to be filed to
continue the perfection of Transferor's or Trustee's interests in
the Receivables and the Related Assets within the requisite time
periods), (B) to see to the payment or discharge of any tax,
assessment, or other governmental charge or any Adverse Claim or
encumbrance of any kind owing with respect to, assessed or levied
against, any part of the Trust, (C) to confirm or verify the
contents of any reports or certificates of Servicer delivered to
Trustee pursuant to this Agreement that are believed by Trustee
to be genuine and to have been signed or presented by the proper
party or parties or (D) to ascertain or inquire as to the
performance or observance of any of Transferor's or Servicer's
representations, warranties or covenants or Servicer's duties and
obligations as Servicer.
(d) Trustee shall not be required to expend or risk its own funds
or otherwise incur financial liability in the performance of any of its
duties hereunder or in the exercise of any of its rights or powers, if
Trustee reasonably believes that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it,
and none of the provisions contained in this Agreement shall in any event
require Trustee to perform, or be responsible for the manner of
performance of, any obligations of Servicer under this Agreement except
during the time, if any, that Trustee shall be the successor to, and be
vested with the rights, duties, powers and privileges of, Servicer in
accordance with the terms of this Agreement
Notwithstanding the foregoing, as Successor Servicer, Trustee
shall have no liability arising out of or resulting from any act, omission
or breach of this Agreement and of any other Transaction Document of the
terminated Servicer, Transferor or any Seller. The Successor Servicer
shall have no liability to any Certificateholder, Trustee, or to any other
Person, for any costs, expenses, losses, damages, claims and liabilities
arising out of or resulting from delays of the terminated Servicer,
Transferor, or any Seller in transmitting Records to the Successor
Servicer, permitting inspection of Records or facilities, or for any other
costs, expenses, losses, damages, claims and liabilities incurred in the
servicing transition.
(e) Except for actions expressly authorized by this Agreement,
Trustee shall take no action reasonably likely to impair the interests of
the Trust in any Transferred Asset now existing or hereafter created or
to impair the value of any Transferred Asset now existing or hereafter
created.
(f) Except to the extent expressly provided otherwise in this
Agreement, Trustee shall have no power to vary the Transferred Assets.
(g) In the event that the Paying Agent or the Transfer Agent and
Registrar shall fail to perform any obligation, duty or agreement in the
manner or on the day on which such obligation, duty or agreement is
required to be performed by the Paying Agent or the Transfer Agent and
Registrar, as the case may be, under this Agreement, Trustee shall be
obligated, promptly upon its actual knowledge thereof, to perform the
obligation, duty or agreement in the manner so required.
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SECTION 11.2 Certain Matters Affecting Trustee. Except as
otherwise provided in Section 11.1:
(a) Trustee may rely on and shall be protected in acting
on, or in refraining from acting in accordance with, any
resolution, Officer's Certificate, opinion of counsel,
certificate of auditors or any other certificate, statement,
instrument, instruction, opinion, report, notice, request,
consent, order, appraisal, bond or other paper or document and
any information contained therein believed by it to be genuine
and to have been signed or presented to it pursuant to this
Agreement by the proper party or parties including, but not
limited to, reports and records required by Article III,
(b) Trustee may consult with counsel and any opinion of
counsel rendered by counsel reasonably satisfactory to Transferor
shall be full and complete authorization and protection in
respect of any action taken or permitted or omitted by it
hereunder in good faith and in accordance with such opinion of
counsel,
(c) Trustee (including in its role as Successor
Servicer, if it ever acts in that capacity) shall be under no
obligation to exercise any of the rights or powers vested in it
by this Agreement, or to institute, conduct or defend any
litigation or other proceeding hereunder or in relation hereto,
at the request, order or direction of any of the
Certificateholders, pursuant to the provisions of this Agreement,
unless such Certificateholders shall have offered to Trustee
reasonable security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby; provided
that nothing contained herein shall relieve Trustee of the
obligations, upon the occurrence and continuance of a Servicer
Default that has not been cured, to exercise such of the rights
and powers vested in it by this Agreement and to 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 or her own affairs,
(d) Trustee shall not be personally liable for any
action taken, permitted or omitted by it in good faith and
believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Agreement,
(e) Trustee shall not be bound to make any investigation
into the facts of matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent,
order, approval, bond or other paper or document, unless
requested in writing to do so by the Required Investors; provided
that if the payment within a reasonable time to Trustee of the
costs, expenses, or liabilities likely to be incurred by it in
connection with making such investigation shall be, in the
opinion of Trustee, not reasonably assured to Trustee by the
security afforded to it by the terms of this Agreement, Trustee
may require reasonable indemnity from the Required Investors
against such cost, expense, or liability as a condition to
proceeding with the investigation. The reasonable expense of
every examination shall be paid by Servicer or, if paid by
Trustee, shall be reimbursed by Servicer upon demand or
Transferor if Servicer fails to make such payment,
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(f) Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by
or through agents, representatives, attorneys or a custodian, and
Trustee shall not be responsible for any misconduct or negligence
on the part of any agent, representative, attorney or custodian
appointed with due care by it hereunder,
(g) except as may be required by Sections 11.1(b) and
11.1(c)(v) hereof, Trustee shall not be required to make any
initial or periodic examination of any documents or records
related to the Transferred Assets for the purpose of establishing
the presence or absence of defects or for any other purpose,
(h) whether or not therein expressly so provided, every
provision of this Agreement relating to the conduct or affecting
the liability of or affording protection to Trustee shall be
subject to the provisions of this section,
(i) Trustee shall have no liability with respect to the
acts or omissions of Servicer (except and to the extent Servicer
is Trustee), including, but not limited to, acts or omissions in
connection with: (A) the servicing, management or administration
of the Receivables or the Related Transferred Assets, (B)
calculations made by Servicer whether or not reported to Trustee,
and (C) deposits into or withdrawals from any Bank Accounts or
Transaction Accounts established pursuant to the terms of this
Agreement, and
(j) in the event that Trustee is also acting as Paying
Agent or Transfer Agent and Registrar hereunder, the rights and
protections afforded to Trustee pursuant to this Article XI shall
also be afforded to Trustee acting as Paying Agent or as Transfer
Agent and Registrar.
SECTION 11.3 Limitation on Liability of Trustee. Trustee shall
at no time have any responsibility or liability for or with respect to the
correctness of the recitals contained herein or in the Certificates (other
than the certificate of authentication on the Certificates). Except as set
forth in Section 11.15, Trustee makes no representations as to the
validity or sufficiency of this Agreement, any Supplement, the
Certificates (other than the certificate of authentication on the
Certificates) any other Transaction Document or any Transferred Asset or
related document. Trustee shall not be accountable for the use or
application (i) by Transferor of any of the Certificates or of the
proceeds of such Certificates, or (ii) for the use or application of any
funds paid to Transferor or to Servicer (other than to Trustee in its
capacity as Servicer) in respect of the Transferred Assets or deposited
by Servicer in or withdrawn by Servicer from the Bank Accounts, the
Transaction Accounts or any other accounts hereafter established to
effectuate the transactions contemplated herein or in the other
Transaction Documents and in accordance with the terms hereof or thereof.
Except as provided in Section 11.1(c)(v), Trustee shall at no time
have any responsibility or liability for or with respect to the legality,
validity, or enforceability of any ownership or security interest in any
Transferred Asset, or the perfection or priority of such a security
interest or the maintenance of any such perfection or priority, or for the
generation of the payments to
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be distributed to Certificateholders under this Agreement, including: (a)
the existence and substance of any Transferred Asset or any related Record
or any computer or other record thereof, (b) the validity of the transfer
of any Transferred Asset to the Trust or of any preceding or intervening
transfer, (c) the performance or enforcement of any Transferred Asset, (d)
the compliance by Transferor or Servicer with any warranty or
representation made under this Agreement or in any other Transaction
Document and the accuracy of any such warranty or representation prior to
Trustee's receipt of actual notice of any noncompliance therewith or any
breach thereof, (e) any investment of monies pursuant to Section 4.4 or
any loss resulting therefrom, (f) the acts or omissions of Transferor,
Servicer or any Obligor, (g) any action of Servicer taken in the name of
Trustee, or (h) any action by Trustee taken at the instruction of
Servicer; provided that the foregoing shall not relieve Trustee of its
obligation to perform its duties (including but not limited to its duties,
if any, to act as Servicer in accordance with Section 10.2) under the
Agreement in accordance with the terms hereof.
Except with respect to a claim based on the failure of Trustee to
perform its duties under this Agreement or based on Trustee's negligence
or willful misconduct, no recourse shall be had against Trustee in its
individual capacity for any claim (a "Non-Recourse Claim") based on any
provision of this Agreement, any other Transaction Document, the
Certificates, any Transferred Asset or any assignment thereof. Trustee
shall not have any personal obligation, liability, or duty whatsoever to
any Certificateholder or any other Person with respect to any Non-Recourse
Claim, and any such claim shall be asserted solely against the Trust or
any indemnitor who shall furnish indemnity to the Trust or Trustee as
provided in this Agreement.
SECTION 11.4 Trustee May Deal with Other Parties. Subject to any
restrictions that may otherwise be imposed by Section 406 of ERISA or
Section 4975(e) of the Internal Revenue Code, Trustee in its individual
or any other capacity may deal with the other parties hereto (other than
Transferor) and their respective affiliates, with the same rights as it
would have if it were not Trustee.
SECTION 11.5 Servicer To Pay Trustee's Fees and Expenses. (a)
To the extent not paid by Servicer to Trustee from funds constituting the
Servicing Fee, Servicer covenants and agrees to pay to Trustee from time
to time, and Trustee shall be entitled to receive, such reasonable
compensation as is agreed upon in writing between Trustee and Servicer
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered
by it in connection with the Transaction Documents and in the exercise and
performance of any of the powers and duties hereunder of Trustee, and
Servicer will pay or reimburse Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by Trustee in
accordance with any of the provisions of the Transaction Documents to
which it is a party (including the reasonable fees and expenses of its
agents, any co-Trustee and counsel) except any expense, disbursement or
advance that may arise from Trustee's negligence or willful misconduct.
(b) In addition, Servicer agrees to indemnify Trustee from, and
hold it harmless against, any and all losses, liabilities, damages, claims
or expenses incurred by Trustee in connection with the Transaction
Documents or in the exercise or performance of any of the powers or duties
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of Trustee hereunder, other than those resulting from the negligence or
willful misconduct of Trustee.
(c) If Trustee is appointed Successor Servicer pursuant to
Section 10.2, the provisions of this section shall not apply to expenses,
disbursements and advances made or incurred by Trustee in its capacity as
Successor Servicer, which shall be paid out of the Servicing Fee.
Servicer's covenant to pay the fees, expenses, disbursements and advances
provided for in this section shall survive the resignation or removal of
Trustee and the termination of this Agreement.
(d) Trustee shall look solely to Servicer for payment of amounts
described in this Section 11.5, and Trustee shall have no claim for
payment of such amounts against Transferor or the Transferred Assets.
SECTION 11.6 Eligibility Requirements for Trustee. Trustee
hereunder shall at all times: (a) be (i) a banking institution organized
under the laws of the United States, (ii) a member bank of the Federal
Reserve System or (iii) any other banking institution or trust company,
incorporated and doing business under the laws of any State or of the
United States, a substantial portion of the business of which consists of
receiving deposits or exercising fiduciary powers similar to those
permitted to national banks under the authority of the Comptroller of the
Currency, and that is supervised and examined by a state or federal
authority having supervision over banks, (b) have, in the case of an
entity that is subject to risk-based capital adequacy requirements, risk-
based capital of at least $250,000,000 or, in the case of an entity that
is not subject to risk-based capital adequacy requirements, a combined
capital and surplus of at least $250,000,000 and (c) have an unsecured
long-term debt rating of at least "A" or its equivalent from each Rating
Agency. If such corporation or association publishes reports of condition
at least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then, for the purpose of this section,
the combined capital and surplus of the corporation or association shall
be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time Trustee shall
cease to be eligible in accordance with the provisions of this section,
Trustee shall resign immediately in the manner and with the effect
specified in Section 11.7.
SECTION 11.7 Resignation or Removal of Trustee. (a) Trustee may
at any time (a) resign and be discharged from its obligations hereunder
by giving 30 days' prior written notice thereof to Transferor, Servicer,
the Rating Agencies, the Investor Certificateholders and the Required
Persons or (b) be removed and discharged from its obligations hereunder
by the Required Persons giving 10 days' prior written notice thereof to
Transferor, Servicer, the Rating Agencies, the Investor Certificateholders
and the Trustee. Upon receiving the notice of resignation or removal,
Transferor shall promptly appoint, subject to satisfaction of the
Modification Condition, a successor Trustee who meets the eligibility
requirements set forth in Section 11.6 by written instrument, in
duplicate, one copy of which shall be delivered to the resigning Trustee
and one copy to the successor Trustee. If no successor Trustee shall have
been so appointed and shall have accepted appointment within 30 days after
the giving of the notice of resignation or within 10 days after the giving
of the notice of removal, the resigning or
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removed Trustee, upon notice to each Required Person, may petition any
court of competent jurisdiction to appoint a successor Trustee.
(a) If at any time Trustee shall cease to be eligible to be
Trustee hereunder in accordance with the provisions of Section 11.6 hereof
and shall fail to resign promptly after its receipt of a written request
therefor by Servicer, or if at any time Trustee shall be legally unable
to act, or shall be adjudged bankrupt or insolvent, or if a receiver for
Trustee or of its property shall be appointed, or any public officer shall
take charge or control of Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation, then Servicer may
remove Trustee and, subject to the consent of the Required Persons (which
consent shall not be unreasonably withheld or delayed) and satisfaction
of the Modification Condition, promptly appoint a successor Trustee by
written instrument, in duplicate, one copy of which shall be delivered to
Trustee so removed and one copy to the successor Trustee.
(b) Any resignation or removal of Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this section shall
not become effective until (i) acceptance of appointment by the successor
Trustee as provided in Section 11.8 hereof, and (ii) such successor
Trustee shall have agreed in writing to be bound by any Intercreditor
Agreements then in effect. Any resignation or removal of Trustee, when
effective, shall terminate the Trustee in all capacities under the
Transaction Documents.
SECTION 11.8 Successor Trustee. (a) Any successor Trustee
appointed as provided in Section 11.7 shall execute, acknowledge and
deliver to Transferor, Servicer, the Investor Certificateholders and the
predecessor Trustee an instrument accepting such appointment hereunder and
an instrument pursuant to which it agrees to be bound by any existing
Intercreditor Agreement, and thereupon the resignation or removal of the
predecessor Trustee shall, upon payment of its fees and expenses and other
amounts owed to it pursuant to Section 11.5, become effective and the
successor Trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations
of its predecessor hereunder, with like effect as if originally named as
Trustee herein. The predecessor Trustee shall deliver to the successor
Trustee, at the expense of Servicer, all documents or copies thereof and
statements held by it hereunder; and Transferor and the predecessor
Trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for fully vesting and confirming in
the successor Trustee all such rights, powers, duties and obligations.
Servicer shall promptly give notice to the Required Persons and the Rating
Agencies upon the appointment of a successor Trustee.
(b) No successor Trustee shall accept appointment as provided in
this section unless at the time of the acceptance the successor Trustee
shall be eligible to become Trustee under the provisions of Section 11.6.
(c) Upon acceptance of appointment by a successor Trustee as
provided in this section, the successor Trustee shall mail notice of the
succession hereunder to all Investor Certificateholders at their addresses
as shown in the Certificate Register and to each Required Person and
Rating Agency.
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SECTION 11.9 Merger or Consolidation of Trustee. Any Person into
which Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which Trustee shall be a party, or any Person succeeding
to all or substantially all of the corporate trust business of Trustee,
shall be the successor of Trustee hereunder, if the Person meets the
requirements of Section 11.6, without the execution or filing of any paper
or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding. Servicer shall promptly give
notice to the Rating Agencies and each Required Person upon any merger or
consolidation of Trustee.
SECTION 11.10 Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in
which any part of the Trust may at the time be located, Trustee shall have
the power and may execute and deliver all instruments to appoint one or
more Persons (who may be an employee or employees of Trustee) to act as
a co-Trustee or co-Trustees, or separate Trustee or separate Trustees,
with respect to all or any part of the Trust, and to vest in such Person
or Persons, in such capacity and for the benefit of the
Certificateholders, such title to the Trust, or any part thereof, and,
subject to the other provisions of this section, such powers, duties,
obligations, rights and trusts as Trustee may consider necessary or
appropriate; provided, that such appointment shall be subject to the prior
written consent of Transferor unless an Early Amortization Event or
Servicer Default is continuing; and provided further, that in any event
Trustee will give Transferor and Servicer prior written notice of such
appointment. No co-Trustee or separate Trustee shall be required to meet
the terms of eligibility as a successor Trustee under Section 11.6 and no
notice to Certificateholders of the appointment of any co-Trustee or
separate Trustee shall be required under Section 11.8.
(b) Every separate Trustee and co-Trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions
and conditions:
(i) all rights, powers, duties and obligations conferred
or imposed upon Trustee shall be conferred or imposed upon and
exercised or performed by Trustee and the separate Trustee or
co-Trustee jointly (it being understood that the separate Trustee
or co-Trustee is not authorized to act separately without Trustee
joining in such act), except to the extent that under any law of
any jurisdiction in which any particular act or acts are to be
performed (whether as Trustee hereunder or as successor to
Servicer hereunder), Trustee shall be incompetent or unqualified
to perform such act or acts, in which event such rights, powers,
duties and obligations (including the holding of title to the
Trust or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate Trustee or
co-Trustee, but solely at the direction of Trustee,
(ii) no Trustee or co-Trustee hereunder shall be personally
liable by reason of any act or omission of any other Trustee or
co-Trustee hereunder, and
(iii) Trustee may at any time accept the resignation of or
remove any separate Trustee or co-Trustee.
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(c) Any notice, request or other writing given to Trustee shall
be deemed to have been given to each of the then separate Trustees and
co-Trustees, as effectively as if given to each of them. Every instrument
appointing any separate Trustee or co-Trustee shall refer to this
Agreement and the conditions of this Article XI. Each separate Trustee and
co-Trustee, upon its acceptance of the trusts conferred, shall be vested
with the estates or property specified in its instrument of appointment,
either jointly with Trustee or separately, as may be provided therein,
subject to all the provisions of this Agreement, specifically including
every provision of this Agreement relating to the conduct of, affecting
the liability of, or affording protection or indemnity to, Trustee. Every
such instrument shall be filed with Trustee and a copy thereof given to
Servicer.
(d) Any separate Trustee or co-Trustee may at any time constitute
Trustee, its agent or attorney-in-fact with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect
to this Agreement or any other Transaction Document on its behalf and in
its name. If any separate Trustee or co-Trustee shall die, become
incapable of acting, resign or be removed, all its estates, properties,
rights, remedies and trusts shall vest in and be exercised by Trustee, to
the extent permitted by law, without the appointment of a new or successor
Trustee or co-Trustee.
SECTION 11.11 Tax Returns. No Federal income tax return shall
be filed on behalf of the Trust unless required by applicable law or any
Governmental Authority. In the event the Trust shall be required to file
tax returns, Servicer shall prepare or shall cause to be prepared any tax
returns required to be filed by the Trust and shall remit the returns to
Trustee for signature at least five Business Days before the returns are
due to be filed. Trustee shall promptly sign and deliver the returns to
Servicer and Servicer shall promptly file the returns. Subject to the
responsibilities of Trustee set forth in any Supplement, Servicer, in
accordance with that Supplement, shall also prepare or shall cause to be
prepared all tax information required by law to be made available to
Certificateholders and shall deliver the information to Trustee at least
five Business Days prior to the date it is required by law to be made
available to the Certificateholders. Trustee, upon request, will furnish
Servicer with all the information known to Trustee as may be reasonably
required in connection with the preparation of all tax returns of the
Trust and shall, upon request, execute such returns as Trustee determines
are appropriate.
SECTION 11.12 Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement, the
Certificates or the other Transaction Documents may be prosecuted and
enforced by Trustee without the possession of any of the Certificates or
the production thereof in any proceeding relating thereto, and any such
proceeding instituted by Trustee shall be brought in its own name as
Trustee. Any recovery of judgment shall, after provision for the payment
of the reasonable compensation, expenses, disbursements and advances of
Trustee, its agents and counsel, be distributed to the Certificateholders
in respect of which such judgment has been obtained in accordance with the
related Supplement.
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SECTION 11.13 Suits for Enforcement. If an Early Amortization
Event or a Servicer Default shall occur and be continuing, Trustee, in its
discretion may, subject to the provisions of Sections 11.1 and 11.14,
proceed to protect and enforce its rights and the rights of the
Certificateholders under this Agreement by suit, action or proceeding in
equity or at law or otherwise, whether for the specific performance of any
covenant or agreement contained in this Agreement or any other Transaction
Document or in aid of the execution of any power granted in this Agreement
or any other Transaction Document or for the enforcement of any other
legal, equitable or other remedy as Trustee, being advised by counsel,
shall deem most effectual to protect and enforce any of the rights of
Trustee or the Certificateholders. Nothing herein contained shall be
deemed to authorize Trustee to authorize or consent to or accept or adopt
on behalf of any Certificateholder any plan of reorganization,
arrangement, adjustment or composition affecting the Investor Certificates
or the rights of any Holder thereof, or to authorize Trustee to vote in
respect of the claim of any Investor Certificateholder in any such
proceeding.
SECTION 11.14 Rights of Required Investors To Direct Trustee.
The Required Investors shall have the right to direct the time, method,
and place of conducting any proceeding for any remedy available to
Trustee, or exercising any trust or power conferred on Trustee; provided
that, subject to Section 11.1, Trustee may decline to follow any such
direction if Trustee, being advised by counsel, determines that the action
so directed may not be taken lawfully, or if a Responsible Officer or
Responsible Officers of Trustee shall determine, in good faith, that the
proceedings so directed would be illegal or involve Trustee in incurring
unreimbursed costs and expenses or personal liability or be unduly
prejudicial to the rights of the Investor Certificateholders not giving
such direction; and provided further, that nothing in this Agreement shall
impair the right of Trustee to take any action deemed proper by Trustee
and that is not inconsistent with such direction of the Required
Investors.
SECTION 11.15 Representations and Warranties of Trustee. Trustee
represents and warrants that:
(a) it is a national banking association, organized
existing and in good standing under the laws of the United
States,
(b) it has full power, authority and right to execute,
deliver and perform the Transaction Documents to which it is a
party, and has taken all necessary action to authorize the
execution, delivery and performance by it of the Transaction
Documents, and
(c) the Transaction Documents to which it is a party
have been duly executed and delivered by Trustee and, in the case
of all such Transaction Documents, are legal, valid and binding
obligations of Trustee, enforceable in accordance with their
respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
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SECTION 11.16 Maintenance of Office or Agency. Trustee will
maintain, at its address designated pursuant to Section 13.6, an office,
offices, agency or agencies where notices and demands to or upon Trustee
in respect of the Certificates and the Transaction Documents to which it
is a party may be served. Trustee will give prompt written notice to
Servicer and to the Certificateholders of any change in the location of
the Certificate Register or any such office or agency.
ARTICLE XII
TERMINATION
SECTION 12.1 Termination of Trust. (a) If not earlier
terminated pursuant to Section 9.3, the Trust and the respective
obligations and responsibilities of Transferor, Servicer and Trustee
created hereby (other than the obligation of Trustee to make payments to
Certificateholders as hereinafter set forth and the obligations of
Servicer contained in Section 11.11) shall terminate, except with respect
to the duties and obligations described in Sections 3.9(c), 7.3, 8.4,
11.5, 12.2(b), 13.8, 13.13, 13.14 and 13.15 upon the earliest to occur of
(i) the day on which the Investor Certificateholders and Trustee shall
have been paid all amounts required to be paid to them pursuant to this
Agreement and Trustee has disposed of all property held hereunder
(including pursuant to Section 12.3) and (ii) the day which is 21 years
less one day after the death of the officers and the last survivor of all
the lineal descendants of every officer of the Trustee who are living on
the date hereof.
(b) Notwithstanding the foregoing, the last payment of the
principal of and interest on the Investor Certificates of any Series shall
be due and payable no later than the Final Scheduled Payment Date for such
Series. If, on the Distribution Date immediately prior to the Final
Scheduled Payment Date for any Series, Servicer determines that the
Invested Amount for such Series on such Final Scheduled Payment Date
(after giving effect to all changes therein on such date) will exceed
zero, Servicer shall solicit bids for the sale of undivided interests in
the Transferred Assets for a purchase price equal to 110% of the Base
Amount (or comparable amount) for such Series on the Final Scheduled
Payment Date for such Series (after giving effect to all distributions
required to be made on the Final Scheduled Payment Date for the Series);
provided, that the undivided interests so transferred shall not exceed the
Series Collection Allocation Percentage for such Series of the Transferred
Assets held by the Trust as of the date of transfer. Transferor shall be
entitled to participate in and to receive notice of each bid submitted in
connection with the bidding process. Upon the expiration of the period,
Servicer shall determine (x) the Highest Bid and (y) the Available Final
Distribution Amount for such Series. Servicer shall sell such undivided
interests in the Transferred Assets on the Final Scheduled Payment Date
for such Series to the bidder with the Highest Bid and shall deposit the
proceeds of such sale in the Master Collection Account for allocation
(together with the Available Final Distribution Amount for such Series)
to the Certificateholders of such Series.
SECTION 12.2 Final Distribution. (a) Servicer shall give
Trustee at least 20 Business Days' prior written notice of the date on
which the Trust is expected to terminate in accordance
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with Section 12.1(a). The notice shall be accompanied by a certificate of
an Authorized Officer of Servicer setting forth the information specified
in Section 3.6 covering the period during the then current calendar year
through the date of the notice. Upon receiving the notification from
Servicer, Trustee shall give the Certificateholders written notice as soon
as practicable after Trustee's receipt of notice from Servicer, which
notice shall specify (i) the Distribution Date (the "Final Distribution
Date") upon which final payment with respect to the Certificates is
expected to be made and (ii) the amount of any such final payment. Trustee
shall give the notice to the Transfer Agent and Registrar and the Paying
Agent at the time such notice is given to Certificateholders. On the Final
Distribution Date, Trustee shall, based upon the Daily Report relating to
the Final Distribution Date, cause to be distributed to the
Certificateholders the amounts distributable to them on the Final
Distribution Date pursuant to the applicable Supplement. Each
Certificateholder shall present its Certificate to Trustee and surrender
its Certificate for cancellation at the address of Trustee set forth in
Section 13.5 not more than ten Business Days after the Final Distribution
Date upon which final payment with respect to the Certificates has been
made.
(b) Notwithstanding the termination of the Trust pursuant to
Section 12.1(a), all funds then on deposit in the Master Collection
Account shall continue to be held in trust for the benefit of the
Certificateholders and the Paying Agent or Trustee shall pay such funds
to the Certificateholders at the time set forth in Section 12.1(a). If any
Certificateholder does not claim the portion of such funds to which it is
entitled to receive on the Final Distribution Date, interest shall cease
to accrue on its Certificate and Trustee shall hold such funds in trust
for such Person, subject to the further provisions of this Section. In
the event that any of the Certificateholders shall not have claimed their
final payment with respect to their Certificates within six months after
the Final Distribution Date, Trustee shall give a second written notice
to the remaining Certificateholders concerning payment of the final
distribution with respect thereto and surrender of their Certificates for
cancellation. If within one year after the second notice all the
Certificates shall not have been surrendered for cancellation, Trustee may
take appropriate steps, or may appoint an agent to take appropriate steps,
to contact the remaining Certificateholders concerning surrender of their
Certificates, and the cost thereof shall be paid out of the funds in the
Master Collection Account held for the benefit of such Certificateholders.
Trustee and the Paying Agent shall pay to Transferor any monies held by
them for the payment of principal of or interest on the Certificates that
remains unclaimed for two years after the termination of the Trust
pursuant to Section 12.1(a). After payment of the monies to Transferor,
Certificateholders entitled to the money must look to Transferor for
payment as unsecured general creditors unless an applicable abandoned
property law designates another Person.
SECTION 12.3 Rights Upon Termination of the Trust. Upon the
termination of the Trust pursuant to Section 12.1 and the surrender of the
Transferor Certificate by Transferor to Trustee, Trustee shall transfer,
assign, set over and otherwise convey to Transferor (without recourse,
representation or warranty), all right, title and interest of the Trust
in the Receivables, whether then existing or thereafter created, the
Related Transferred Assets and all of the other property and rights
previously conveyed to Trustee hereunder, except for amounts held by
Trustee pursuant to Section 12.2(b) and except for the rights of RPA
Indemnified Parties (other than Transferor and its officers, directors,
shareholders, controlling Persons, employees and
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agents) to indemnification and contribution under Section 9.1 of the
Purchase Agreement. Trustee shall execute and deliver the instruments of
transfer and assignment (including any document necessary to release the
security interest in favor of Trustee (for the benefit of the
Certificateholders) in such Receivables and Related Transferred Assets,
to release any filing evidencing or perfecting such security interest and
to terminate all powers of attorney created by the Transaction Documents),
in each case without recourse, representation or warranty, that shall be
reasonably requested by Transferor to vest in Transferor all right, title
and interest that Trustee had in the Transferred Assets.
SECTION 12.4 Optional Repurchase of Investor Interests. Any
Supplement may provide that on any Distribution Date occurring on or after
the date that the Invested Amount of the Series governed by such
Supplement is reduced to 10% or less of the initial aggregate principal
amount of the Investor Certificates of such Series, Transferor shall have
the option, upon the giving of 45 days' prior written notice to Servicer,
Trustee, each Required Person and the Rating Agencies, to repurchase the
undivided interest of such Series in the Trust by depositing into the
Principal Funding Account, on such Distribution Date (the "Repurchase
Distribution Date") an amount (the "Repurchase Amount") equal to the
unpaid Invested Amount of the Series plus accrued and unpaid interest on
the unpaid principal amount of the Series (and accrued and unpaid interest
with respect to interest amounts that were due but not paid on a prior
Distribution Date) through the day preceding such Distribution Date at the
Certificate Rate applicable to such Series. Upon tender of all outstanding
Certificates of the Series owned by a Certificateholder, Trustee shall
then distribute to such Certificateholder the portion of such amounts owed
to such Certificateholder, together with all other amounts on deposit in
the Principal Funding Account with respect to that Series that are owed
to such Certificateholder, on the next Distribution Date in repayment of
the principal amount and all accrued and unpaid interest owing to such
Certificateholder. Following the Repurchase Distribution Date, the
Certificateholders of the Series shall have no further rights with respect
to the Transferred Assets and Trustee shall execute and deliver the
instruments of transfer and assignment (including any document necessary
to release the security interest in favor of Trustee (for the benefit of
the Certificateholders) in the Transferred Assets and to release any
filing evidencing or perfecting the security interest), in each case
without recourse, representation or warranty, as shall be reasonably
requested by Transferor to vest in Transferor all right, title and
interest that Trustee had in the Transferred Assets. In the event that
Transferor fails for any reason to deposit the Repurchase Amount for in
accordance with the terms of this Agreement, payments shall continue to
be made to the Certificateholders of each Series in accordance with the
terms of this Agreement.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1 Amendment, Waiver, Etc. (a) Except to the extent
provided otherwise hereinafter in clauses (i) through (iii), the
provisions of this Agreement may be amended, modified or waived from time
to time by the Servicer, Transferor and the Trustee, with the
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consent of the Required Persons, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Agreement or of modifying in any manner the rights of the
Certificateholders; provided, however, that no such amendment,
modification or waiver shall:
(i) reduce in any manner the amount of, or delay the
timing of, allocations, payments or distributions in respect of
the portion of the Invested Amount attributable to any Series or
class of Certificates, yield on any Series or class of
Certificates or other distributions on any Series or class of
Certificates without the consent of each Certificateholder of
such Series or class, as applicable;
(ii) adversely affect the rating of any Series or
class of Certificates by any Rating Agency without the consent of
the Certificateholders evidencing not less than a two-thirds
majority of such Series or class; or
(iii) amend, modify or waive any provision of this
Agreement which requires the approval or consent of a specified
percentage of Certificateholders without the consent of the same
percentage of Certificateholders.
The Trustee shall establish a record date for determining which
Certificateholders may give such waivers and consents. No waiver of any
Early Amortization Event or other default hereunder given at any time
shall apply to any other prior or subsequent Amortization Event or
default.
(b) As soon as practicable before the execution and delivery
of any amendment, consent or waiver pursuant to Section 13.1(a), but in
no event later than twenty Business Days prior to such execution and
delivery, the Servicer shall deliver a copy of such proposed amendment,
consent or waiver to the Rating Agencies and each Certificateholder.
(c) Unless the requisite percentage of a Series or class of
Certificates shall approve an amendment, consent or waiver pursuant to
Section 13.1(a)(iii) above, or the majority of the Holders of each
affected Series or class waive the requirement of this Section 13.1(c),
no such amendment to this Agreement shall become effective unless each
Rating Agency, after having reviewed such amendment, shall have confirmed
the initial rating of the then-issued and outstanding Series or class of
Certificates that were rated by such Rating Agency.
(d) Promptly after the execution of any such amendment,
consent or waiver, the Trustee shall furnish copies of such amendment or
consent to each Certificateholder, and the Servicer shall furnish copies
of such amendment or consent to the Rating Agencies.
(e) The manner of obtaining any waiver or consent given by
the Certificateholders under this Section 13.1 and of evidencing the
authorization of the execution thereof by the Certificateholders shall be
subject to such reasonable requirements as the Trustee may prescribe.
(f) If each Rating Agency shall not have confirmed the
initial rating on all the-issued and outstanding series of Certificates
rated by such Rating Agency after they have reviewed any
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amendment or modification of, or supplement to, any Purchase Agreement and
the Buyer Notes as provided in Section 7.2(j), then such amendment,
modification or supplement shall only become effective if each
Certificateholder of such Series has consented to such amendment.
(g) Each consent or waiver given by any Certificateholder in
connection with any matter described in Section 13.1 or in any other
provision of this Agreement shall be conclusive and binding on such
Certificateholder and on all future Certificateholders and of any
Certificate issued upon the transfer thereof or in exchange therefor or
in lieu thereof whether or not notation of such consent is made upon such
Certificate.
SECTION 13.2 Actions by Certificateholders. (a) By its
acceptance of Certificates pursuant to this Agreement and the applicable
Supplement, each Certificateholder acknowledges and agrees that, wherever
in this Agreement a provision states that an action may be taken or a
notice, demand or instruction given by any Series of Investor Certificate-
holders, any class of Investor Certificateholders or the Investor
Certificateholders, the action, notice or instruction may be taken or
given by any Holder of an Investor Certificate of the Series or class or
by any Investor Certificateholder, respectively, unless the provision
requires a specific percentage of the Series or class of Investor
Certificateholders or of all Investor Certificateholders.
(b) By its acceptance of Certificates pursuant to this Agreement
and the applicable Supplement, each Certificateholder acknowledges and
agrees that any request, demand, authorization, direction, notice,
consent, waiver or other act by the Holder of a Certificate shall bind the
Holder and every subsequent Holder of the Certificate and of any
Certificate issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof in respect of anything done or
omitted to be done by Trustee or Servicer in reliance thereon, whether or
not notation of the action is made upon such Certificate.
(c) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Agreement or any
Supplement to be given or taken by Certificateholders may be embodied in
and evidenced by one or more instruments of substantially similar tenor
signed by the Certificateholders in person or by agent duly appointed in
writing; and except as herein otherwise expressly provided, the action
shall become effective when the instrument or instruments are delivered
to Trustee and, when required, to Servicer. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Agreement, any Supplement and conclusive in favor
of Trustee and Servicer, if made in the manner provided in this section.
(d) The fact and date of the execution by any Certificateholder
of any such instrument or writing may be proved in any reasonable manner
that Trustee deems sufficient.
SECTION 13.3 Limitation on Rights of Certificateholders. (a)
The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement, any Supplement or the Trust, nor shall the death
or incapacity entitle such Certificateholder's legal representatives or
heirs to claim an accounting or to take any action or commence any
proceeding in any court for
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a partition or winding up of the Trust, nor otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.
(b) No Certificateholder shall have any right to vote (except as
expressly provided otherwise in this Agreement) or in any manner otherwise
to control the operation and management of the Trust, or the obligations
of the parties hereto, nor shall anything herein set forth, or contained
in the terms of the Certificates, be construed so as to constitute the
Certificateholders from time to time as partners or members of an
association, nor shall any Certificateholder be under any liability to any
third Person by reason of any action taken by the parties to this
Agreement pursuant to any provision hereof.
(c) No Certificateholder shall have any right by virtue of any
provisions of this Agreement to institute any suit, action or proceeding
in equity or at law upon or under or with respect to the Transaction
Documents (except to the extent any Supplement or related certificate
purchase agreement creates independent and non-duplicative rights), unless
the Certificateholder previously shall have given to Trustee, and unless
the Required Investors shall have made, written request upon Trustee to
institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to Trustee such reasonable indemnity as
it may require against the costs, expenses and liabilities to be incurred
therein or thereby, and Trustee, for 30 days after its receipt of such
notice, request and offer of indemnity, shall have neglected or refused
to institute any such action, suit or proceeding; it being understood and
intended, and being expressly covenanted by each Certificateholder with
every other Certificateholder and Trustee, that no one or more
Certificateholders shall have any right in any manner whatever by virtue
of, or by availing itself or themselves of, any provisions of a
Transaction Document to affect, disturb or prejudice the rights of any
other Investor Certificateholder, or to obtain or seek to obtain priority
over or preference to any such other Investor Certificateholder, except
to the extent provided in the Transaction Documents, or to enforce any
right under the Transaction Documents, except in the manner herein
provided and for the equal, ratable and common benefit of, all Investor
Certificateholders (subject to the priorities set forth in the Transaction
Documents). For the protection and enforcement of the provisions of this
section, each and every Certificateholder and Trustee shall be entitled
to such relief as can be given either at law or in equity.
(d) By their acceptance of Certificates pursuant to this
Agreement and the applicable Supplement, the Certificateholders agree to
the provisions of this section.
SECTION 13.4 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES, EXCEPT (I) WITH RESPECT TO TRANSFEROR, TO THE
EXTENT THAT THE PERFECTION AND THE EFFECT OF PERFECTION OR NONPERFECTION
OF THE SECURITY INTERESTS OF TRUSTEE IN THE RECEIVABLES AND THE RELATED
ASSETS OF SUCH TRANSFEROR ARE GOVERNED BY THE LAWS OF A JURISDICTION (SUCH
TRANSFEROR'S "HOME STATE") OTHER THAN THE STATE OF NEW YORK AND EXCEPT
THAT WITH RESPECT TO TRANSFEROR THE CREATION OF SUCH SECURITY INTERESTS
OF
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<PAGE>
TRUSTEE SHALL BE GOVERNED BY THE LAWS OF SUCH TRANSFEROR'S HOME STATE.
SECTION 13.5 Notices. All demands, notices, instructions and
communications hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered, four Business Days after mailing
if mailed by registered mail, return receipt requested, or sent by
facsimile transmission (a) in the case of Transferor, to its address set
forth below its signature hereto, (b) in the case of the Initial Servicer,
to its address set forth below its signature hereto, and (c) in the case
of Trustee, the Paying Agent or the Transfer Agent and Registrar, to the
address of Trustee set forth on the signature pages hereof; or, as to each
party, at such other address or facsimile number as shall be designated
by it in a written notice to each other party given in accordance with
this section. Except to the extent expressly provided otherwise in an
applicable Supplement, any notice required or permitted to be mailed to
a Certificateholder shall be sent by first-class mail, postage prepaid,
to the address of such Certificateholder as shown in the Certificate
Register. Except to the extent expressly provided otherwise in an
applicable Supplement, any notice so mailed within the time prescribed in
this Agreement shall be conclusively presumed to have been duly given on
the fourth Business Day after the notice is so mailed, whether or not a
Certificateholder receives the notice. Servicer shall deliver or make
available to the Rating Agencies each certificate and report required to
be prepared, forwarded or delivered pursuant to Section 3.5 (excluding the
Daily Reports) or 3.6 and a copy of any amendment, consent or waiver to
this Agreement, at the address of the Rating Agency set forth above or at
the other address as shall be designated by the Rating Agency in a written
notice to Servicer.
SECTION 13.6 Severability of Provisions. If any one or more of
the covenants, agreements, provisions or terms of this Agreement or any
of the other Transaction Documents shall for any reason whatsoever be held
invalid, then the unenforceable covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement or the other Transaction Documents
(as applicable) and shall in no way affect the validity or enforceability
of the other provisions of this Agreement, the Certificates or any of the
other Transaction Documents or the rights of the Certificateholders.
SECTION 13.7 Certificates Nonassessable and Fully Paid. Except
to the extent otherwise expressly provided in Section 7.3 with respect to
Transferor, it is the intention of the parties to this Agreement that the
Certificateholders shall not be personally liable for obligations of the
Trust, that the interests in the Trust represented by the Certificates
shall be nonassessable for any losses or expenses of the Trust or for any
reason whatsoever and that Certificates upon authentication thereof by
Trustee pursuant to Section 6.2 are and shall be deemed fully paid.
SECTION 13.8 Nonpetition Covenant. Notwithstanding any prior
termination of this Agreement, each of Trustee, Servicer, Transferor, the
Paying Agent, the Authenticating Agent and the Transfer Agent and
Registrar (and each Investor Certificateholder by its acceptance of a
Certificate) agrees that it shall not, with respect to the Trust or
Transferor, institute or join any other Person in instituting any
proceeding of the type referred to in the definition of "Bankruptcy Event"
so long as any Certificates issued by the Trust shall be outstanding or
there shall not have
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<PAGE>
elapsed one year plus one day since the last day on which any such
Certificates shall have been outstanding. The foregoing shall not limit
the right of Servicer, Transferor, the Paying Agent, the Authenticating
Agent, the Transfer Agent and Registrar and any Investor Certificateholder
to file any claim in or otherwise take any action with respect to any such
insolvency proceeding that was instituted against Transferor or the Trust
by any other Person. In addition, each of Servicer, the Paying Agent, the
Authenticating Agent, the Transfer Agent and Registrar, each
Certificateholder (by its acceptance of a Certificate) and (as to the
Trust) Transferor agree that all amounts owed to them by the Trust or
Transferor shall be payable solely from amounts that become available for
such payment pursuant to this Agreement and the Receivables Purchase
Agreement, and no such amounts shall constitute a claim against the Trust
or Transferor to the extent that they are in excess of the amounts
available for their payment.
SECTION 13.9 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of Trustee or the
Investor Certificateholders, any right, remedy, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and are not exhaustive of any
rights, remedies, powers and privileges provided by law.
SECTION 13.10 Counterparts. This Agreement may be executed in
any number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original, and all of which together shall constitute one and the same
instrument.
SECTION 13.11 Third-Party Beneficiaries. This Agreement will
inure to the benefit of and be binding upon the parties hereto and the
Certificateholders and their respective successors and permitted assigns.
Except as otherwise expressly provided in this Agreement, nothing
contained in this Agreement shall confer any rights upon any Person that
is not a party to, or a permitted assignee of a party to, this Agreement.
SECTION 13.12 Integration. This Agreement and the other
Transaction Documents contain a final and complete integration of all
prior expressions by the parties hereto with respect to the subject matter
hereof and thereof and shall together constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and
thereof, superseding all prior oral or written understandings.
SECTION 13.13 Binding Effect; Assignability; Survival of
Provisions. This Agreement shall be binding upon and inure to the benefit
of Transferor, Servicer and Trustee and their respective successors and
permitted assigns; provided, that Transferor shall not delegate any of its
obligations hereunder. This Agreement shall create and constitute the
continuing obligations of the parties hereto in accordance with its terms,
and shall remain in full force and effect until the termination of the
Trust pursuant to Section 12.1. The rights and remedies with respect to
(a) any breach of any representation and warranty made by Transferor in
Section 2.3 or Section 7.1, (b) any breach of any representation and
warranty made by Servicer in Section 8.1 and (c)
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<PAGE>
the indemnification and payment provisions in Sections 3.9, 7.3, 8.4, 11.5
and 12.2(b) shall be continuing and shall survive any termination of this
Agreement.
SECTION 13.14 Recourse to Transferor. Payments to be made by
Transferor pursuant to this Agreement shall be paid to the extent that
funds are available to make the payments after all amounts to be paid to
the Servicer, Trustee and Certificateholders pursuant to the applicable
Supplement shall have been paid, and there shall be no recourse to
Transferor for all or any part of any amounts payable pursuant to any
Transaction Document to the extent that the funds are at any time
insufficient to make all or part of any such payments. The provisions of
this section shall survive the termination of this Agreement.
SECTION 13.15 Recourse to Transferred Assets. The Certificates
do not represent an obligation of, or an interest in, Transferor, any
Seller, Servicer, Trustee or any Affiliate of any of them. Except as
expressly provided otherwise in this Agreement, the Certificates are
limited in right of payment to the Transferred Assets.
SECTION 13.16 Submission to Jurisdiction. Each party hereto
hereby irrevocably (a) submits to the non-exclusive jurisdiction of any
Illinois State or Federal court sitting in Chicago, Illinois over any
action or proceeding arising out of or relating to the Transaction
Documents, (b) irrevocably agrees that all claims in respect of the action
or proceeding may be heard and determined in each State or Federal court,
(c) irrevocably waives, to the fullest extent it may effectively do so,
the defense of an inconvenient forum to the maintenance of the action or
proceeding, and (d) each of Transferor and Servicer irrevocably consents
to the service of any and all process in any action or proceeding by the
mailing of copies of the process to Transferor or Servicer (as applicable)
at its address specified herein. Nothing in this section shall affect the
right of any party hereto to serve legal process in any other manner
permitted by law or affect the right of any party hereto to bring any
action or proceeding against any or all of the other parties hereto or any
of their respective properties in the courts of any other jurisdiction.
SECTION 13.17 Waiver of Jury Trial. Each party hereto waives any
right to a trial by jury in any action or proceeding to enforce or defend
any rights under or relating to the Transaction Documents, or any
amendment, instrument, document or agreement delivered or that may in the
future be delivered in connection therewith or arising from any course of
conduct, course of dealing, statements (whether oral or written), actions
of any of the parties hereto or any other relationship existing in
connection with the Transaction Documents, and agrees that any such action
or proceeding shall be tried before a court and not before a jury.
[Remainder of page intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, Transferor, Servicer and Trustee have caused
this Agreement to be executed by their respective officers thereunto duly
authorized as of the day and year first above written.
INTER-CITY PRODUCTS
RECEIVABLES COMPANY, L.P.,
as Transferor
By: Inter-City Products Partner
Corporation, its general partner
By: /s/ David P. Cain
-------------------------------
Name: David Cain
Title: Senior Vice President
Address: 650 Heil-Quaker Boulevard
Lewisburg, Tennessee 37091
Attention: David Cain
Telephone: (615) 270-4136
Facsimile: (615) 270-4220
INTER-CITY PRODUCTS CORPORATION (USA),
as initial Servicer
By: /s/ David P. Cain
-------------------------------
Name: David Cain
Title: Senior Vice President
Attention: David Cain
Telephone: (615) 270-4136
Facsimile: (615) 270-4220
LASALLE NATIONAL BANK,
as Trustee
By: /s/ Shashank Mishra
---------------------------------
Name: Shashank Mishra
Title: Vice President
Address:
Attention:
Telephone:
Facsimile:
<PAGE>
EXHIBITS
EXHIBIT A Form of Lockbox Account Letter Agreement
EXHIBIT B [Reserved]
EXHIBIT C Form of Monthly Servicer's Certificate
EXHIBIT D Semi-Annual Agreed-Upon Procedures
EXHIBIT E Form of Transferor Certificate
EXHIBIT F Form of Quarterly Servicer's Certificate
EXHIBIT G Form of Credit and Collection Policy
EXHIBIT H Form of Distributor Agreement
SCHEDULES
SCHEDULE 1 Account Banks - Lockbox Banks
APPENDIX
APPENDIX A Definitions
<PAGE>
INTER-CITY PRODUCTS CORPORATION
EXHIBIT A
FORM OF
LOCKBOX ACCOUNT LETTER AGREEMENT
,1996
---------
- ---------------------------------
- ---------------------------------
- ---------------------------------
Attention:
----------------------
Ladies and Gentlemen:
[Inter-City Products Corporation (USA) ("Seller") is in the process of
securitizing its trade receivables.] [ ("Seller") is being
acquired by Inter-City Products Corporation (USA) ("ICP"). ICP is engaged in
a securitization of its trade receivables and subsequent to the acquisition,
Seller will also be engaged in the securitization of its trade receivables.]
In connection with such securitization, by this letter agreement (effective
upon notification by LaSalle National Bank), (a) Seller irrevocably transfers
exclusive ownership and control of its interest in the lockboxes
numbered_______, _____. __________-_____ and ________, _____, ____________
(each a "Lockbox" and collectively referred to herein as the "Lockboxes") and
the corresponding demand deposit account numbered ________ (the "Lockbox
Account") maintained with you to Inter-City Products Receivables Company,
L.L.C. ("IPRC"), and (b) IPRC irrevocably transfers all of its rights and
title to and interest in the Lockboxes and the Lockbox Account acquired
hereby to LaSalle National Bank, as trustee (the "Trustee") for the benefit
of(i) certain holders of certificates issued by the Trustee under a Pooling
and Servicing Agreement, dated as of________, 1996 and as amended from time
to time (the "Pooling Agreement"), among IPRC, Seller or ICPJ as initial
Servicer, and the Trustee (collectively, the "Certificateholders") and (ii)
IPRC (to the extent of IPRC's residual interest in the Transferred Assets (as
defined in the Pooling Agreement). Seller acknowledges and agrees that IPRC
is transferring to the Trustee the rights, titles and interests transferred
by Seller to IPRC as provided above, and each of Seller and IPRC agrees to
cooperate fully with the Trustee and its agents and representatives
(including, without limitation, the Servicer referred to hereinafter) in the
exercise of such rights. The transfers described in this paragraph are
effective on and as of the date of this letter agreement.
By executing this letter agreement, you acknowledge the existence of
the Trustee's right to dominion and control over any funds or remittances
received into the Lockboxes and the Lockbox Account and its ownership of and
security interest in the Lockboxes, all moneys and instruments delivered to
the Lockboxes, the Lockbox Account and the amounts from time to time on
deposit therein and agree that from the date hereof you shall maintain the
Lockboxes and Lockbox Account
<PAGE>
and shall hold all such moneys and instruments and such amounts for the
benefit and subject to the interests of the Trustee (for the benefit of
itself, the Certificateholders and IPRC (to the extent described above)). You
also acknowledge that your execution of this letter agreement is a condition
precedent to continued maintenance of the Lockbox Account with you. The
Lockbox Account is to be maintained in the name of "LaSalle National Bank, as
Trustee". Except to the extent that this letter agreement is specifically
inconsistent therewith, the Lockbox Account and lockbox processing will be
subject to your [Terms and Conditions of Deposit Accounts and Treasury
Management Service Agreement.]
Seller and IPRC hereby irrevocably instruct you, and the Trustee, by its
acknowledgment hereof, hereby instructs you, at all times from and after the
date hereof until your receipt of contrary and/or terminating instructions
from the Trustee, to remit, on a daily basis, by automatic standing wire
transfer, in immediately available funds, all available amounts deposited in
the Lockbox Account to the following account (the "Master Collection
Account") or such other account as the Trustee or the Servicer may specify:
ABA#
---------------------------------
Attention:
--------------------------
For credit to LaSalle National Bank, as Trustee
Account No.
--------------------------
Trustee agrees to sign your necessary forms to implement the lockbox
processing arrangement and automatic standing wire transfer. No such transfer
of funds shall either reflect the rounding off of any funds so transferred or
constitute a partial remittance except for (i) amounts applied to fees and
expenses under the terms of this letter agreement, and (ii) amounts deducted
for returned checks that were previously deposited in the Lockbox Account and
with respect to which funds were previously transferred to the Master
Collection Account.
So long as this letter agreement is in effect, all transfers referred
to above shall be made by you irrespective of, and without deduction for, any
counterclaim, defense, recoupment or set-off (except as expressly permitted
otherwise by this letter agreement) and shall be final, and you agree that
you will not seek to recover any amount from the Trustee, IPRC, or the
Servicer for any reason once any payment or transfer has been made.
The Trustee's instructions with respect to the Lockboxes and the
Lockbox Account may be given through a Servicer that the Trustee may appoint
from time to time and will notify you thereof in writing, and you agree to
follow the instructions of such Servicer with the same effect as if such
instructions were given by the Trustee directly (subject to any limitations
on such appointment imposed by the Trustee that are communicated in writing
to you) until such time as the Trustee notifies you in writing of the
revocation of the Servicer's authority to act for the Trustee. The initial
servicer will be Inter-City Products Corporation (USA). The Trustee and the
Servicer shall each provide to you a list of their respective employees
authorized to issue instructions and give notices with respect to the
Lockboxes and the Lockbox Account, which lists may be revised from time to
time, and you shall be entitled to rely on (and to assume) the authority of
any employee of the Trustee or the Servicer identified on such lists, until
you receive notice to the contrary, and are
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<PAGE>
hereby authorized to act on any notice given on behalf of the Trustee or the
Servicer by any such employee, subject to any limitations on the appointment
of the Servicer and the revocation of the Servicer's authority as provided
above.
Subject to the preceding sentence and to any limitations on the
appointment of the Servicer of which you have been notified by the Trustee in
writing, you will be fully protected in acting on any instructions given by
the Trustee or the Servicer (of whose name you have been notified by the
Trustee in writing and whose authority under this letter agreement has not
been revoked by the Trustee in a writing to you) regarding the Lockboxes and
Lockbox Account without making any inquiry as to either the Trustee's or such
Servicer's right or authority to give instructions as to the application of
any payment made pursuant thereto, and any payment of all or part of the
Lockbox Account made to the Trustee or such Servicer or pursuant to the
Trustee's or such Servicer's instructions will satisfy any liability to the
Trustee with respect to such payment and relieve you of all liability to the
Seller or IPRC for such amounts.
Seller and IPRC also hereby irrevocably notify you that, at all times
from and after the date hereof until your receipt of contrary and/or
terminating instructions from the Trustee, the Trustee shall be entitled
(subject to your rights set forth herein) to exercise in the place and stead
of Seller and IPRC (or either of them) any and all rights in respect of or in
connection with the Lockboxes, this letter agreement and the Lockbox Account,
including, without limitation (i) the right to specify that payments are to
be made out of or in connection with the Lockbox Account to different
accounts or at different times than those specified above (subject to your
customary and then-current procedures for lockbox processing) and (ii) the
right to require preparation of duplicate monthly bank statements on the
Lockbox Account for mailing directly to an address specified by the Trustee.
By executing this letter agreement you acknowledge that you have not
heretofore received a notice, writ, order or any form of legal process from
any other person asserting, claiming or exercising, any right of set-off,
banker's lien or other purported form of claim with respect to the items
collected from the Lockboxes, the Lockbox Account or any funds from time to
time therein or in transit thereto, and agree that you will use reasonable
efforts to immediately inform the Trustee in writing of any such action in
the future.
By executing this letter agreement, you irrevocably waive and agree
not to assert, any right to setoff against, or otherwise deduct from, any
items collected from the Lockboxes, the Lockbox Account or any funds from
time to time therein or in transit thereto, so long as this letter agreement
is in effect;provided, however, that you may (i) debit the Lockbox Account
for any items deposited in the Lockbox Account that are returned or otherwise
not collected in accordance with your customary practices for the chargeback
of returned items and (ii) apply existing funds in the Lockbox Account or
incoming funds being deposited into the Lockbox Account for reimbursement of
any fees and expenses incurred by you in connection with this letter
agreement, to the extent that such returned items, fees and expenses are not
paid or reimbursed by Seller.
Within ten days of receiving notification from you, Seller shall pay,
or reimburse you for, customary and reasonable fees and expenses incurred by
you in the maintenance and operation of the Lockbox Account in accordance
with this letter agreement. The Trustee will have no liability to you or the
Servicer for any costs,
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<PAGE>
fees or charges under your usual and customary procedures or this letter
agreement.
The Seller agrees to pay, indemnify and hold you harmless from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind
whatsoever (including, without limitation, legal fees) (collectively
"damages") with respect to your performance under this letter agreement or
the performance of any of your directors, officers, agents or employees,
unless the damages arise from its or their own negligence, recklessness or
willful misconduct. The Seller, IPRC, the Trustee and the Servicer agree to
not make any claim or institute any suit of any kind against you with respect
to your performance under this letter agreement, except and to the extent
that such cause of action results from the negligence, recklessness or wilful
misconduct of you or any of your directors, officers, agents or employees.
The parties agree that clerical errors will not constitute a failure to
exercise ordinary care. IN NO EVENT WILL YOU BE LIABLE FOR ANY INDIRECT
DAMAGES, LOST PROFITS, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES WHICH ARISE
OUT OF OR IN CONNECTION WITh ThE SERVICES CONTEMPLATED BY THIS AGREEMENT.
Additionally, if you in good faith interplead any funds in the Lockbox
Account in a court of competent jurisdiction, the Seller shall reimburse you
for any costs reasonably incurred in maintaining that action. The provisions
of this paragraph will survive termination of the letter agreement.
You also agree that, notwithstanding anything to the contrary herein,
you shall use reasonable efforts to promptly notify the Trustee if you fail
to receive timely payment of any fee under this letter agreement.
You may terminate this letter agreement by cancelling the Lockbox
Account and Lockboxes, which cancellation and termination shall become
effective only upon sixty days' prior written notice thereof from you to the
Trustee. In addition, you may terminate this letter agreement upon fifteen
business days notice if (i) you determine complying with this letter
agreement violates applicable laws or regulations or (ii) the Seller, IPRC,
the Trustee or the Servicer fails to comply with this letter agreement in any
material respect. Upon the termination of this letter agreement, you will
close the Lockbox Account and transfer any monies remaining therein (as such
monies become available) to the Master Collection Account. You agree that you
shall forward all incoming mail addressed to the Lockboxes or the Lockbox
Account and all wire transfers and deposits to the Lockbox Account that you
receive after such cancellation in the form received to another lockbox or to
another lockbox account or the Master Collection Account or to such other
address or account as the Trustee (or the Servicer on behalf of the Trustee)
shall specify, promptly after you discover that you have received any such
mall or transfers. This letter agreement may also be terminated upon five
business days prior written notice thereof to you by the Trustee. Except as
expressly set forth in this paragraph, this letter agreement may not be
terminated or amended without the prior written consent of the Trustee and
you.
All notices and other communications provided for hereunder shall,
unless otherwise stated herein, be in writing (including facsimile
communication) and shall be personally delivered or sent by certified mail,
postage prepaid, by facsimile or by overnight courier, to the intended person
at the address or facsimile number of such person set forth under its name on
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<PAGE>
the signature pages hereof or at such other address or facsimile number as
shall be designated by such person in a written notice to the other parties
hereto given in accordance with the requirements of this paragraph. All
notices and other communications hereunder shall also be provided to the
Trustee and shall be addressed as follows until you receive written notice
from the Trustee to the contrary:
LaSalle National Bank
----------------------------------
----------------------------------
Attention:
-----------------------
Telephone: (312)
-----------------
Facsimile: (312)
-----------------
All notices and communications provided for hereunder shall be
effective, (i) if personally delivered, when received, (ii) if transmitted by
facsimile, when sent, receipt confirmed by telephone or electronic means and
(iii) if sent by any other means, when received.
This letter agreement shall be binding upon you and your successors
and assigns and shall inure to the benefit of Seller, IPRC, and the Trustee
and their respective successors, transferees and assigns; provided, however,
that no party to this letter agreement shall assign its interest hereunder
without the assumption of such party's obligations and duties hereunder by
such party's assignee (which assumption shall be confirmed in writing by the
assignee at the request of any of the parties).
This letter agreement shall be governed by and construed in accordance
with the laws of the State of New York, not including the choice of law rules
thereof.
This letter agreement represents that final agreement between the
parties and may not be contradicted by evidence of prior, contemporaneous, or
subsequent oral agreements of the parties. You are not bound by the
provisions contained in any other document executed between the Seller, IPRC,
the Trustee or the Servicer and to which you are not a party, even if you
have been provided with a copy of that document. You are not bound by the
terms of this agreement until you receive an original counterpart fully
executed by all the parties. Nothing contained herein will require you to
take any action in contravention of applicable laws, any court order or the
instructions of any bankruptcy trustee.
-5-
<PAGE>
Please acknowledge your agreement to the terms set forth in this
letter agreement by signing four (4) copies of this letter agreement in the
space provided below and returning such copies to us at the address indicated
below for Seller.
Very truly yours,
-------------------------------------
as Seller
By:
Title:
Address:
Attention: Chief Financial Officer
Telephone:
Facsimile:
INTER-CITY PRODUCTS RECEIVABLES
COMPANY, L.P.
By:.
Title:
Address:
Attention:
Telephone:
Facsimile:
-6-
<PAGE>
The undersigned hereby acknowledges and agrees to the foregoing letter
agreement as of this day of ,1996.
------------------------------------
By:
Title:
Address:
Attention:
Telephone:
Facsimile:
The undersigned hereby acknowledges and agrees to the foregoing letter
agreement dated as of this day of ,1996.
LASALLE NATIONAL BANK, as Trustee
By:
Title:
Address:
Attention:
Telephone: (312)
Facsimile: (312)
-7-
<PAGE>
EXHIBIT B
Reserved
<PAGE>
EXHIBIT C
to Pooling Agreement
FORM OF
MONTHLY SERVICER'S CERTIFICATE
TO: LASALLE NATIONAL BANK, as Trustee
LASALLE NATIONAL BANK, as Paying Agent
INTER-CITY PRODUCTS RECEIVABLES COMPANY, L.P.
STANDARD & POOR'S, A DIVISION OF THE MCGRAW-HILL
COMPANIES
DUFF & PHELPS CREDIT RATING CO.
INTER-CITY PRODUCTS CORPORATION (USA)
(the "Servicer") hereby certifies that:
(A) This Certificate is being delivered pursuant to Section 3.6 of
the Pooling and Servicing Agreement, dated as of July 25, 1996, (as the same
may be amended, supplemented or otherwise modified from time to time, the
"Pooling Agreement"), among INTER-CITY PRODUCTS RECEIVABLES COMPANY, L.P., as
Transferor, Servicer, and LASALLE NATIONAL BANK, as Trustee.
(B) As of the date of this Certificate, the Authorized Officer (as
defined in the Pooling Agreement) that is executing this Certificate is not
aware of the occurrence and continuance of any Early Amortization Event or
Unmatured Early Amortization Event (each as defined in the Pooling
Agreement). [IF AN EARLY AMORTIZATION EVENT OR UNMATURED EARLY AMORTIZATION
EVENT HAS OCCURRED AND IS CONTINUING, SPECIFY EACH SUCH EARLY AMORTIZATION
EVENT OR UNMATURED EARLY AMORTIZATION EVENT (AS APPLICABLE) OF WHICH THE
AUTHORIZED OFFICER EXECUTING THIS CERTIFICATE IS AWARE AND THE NATURE AND
STATUS THEREOF AND FURTHER CERTIFY THAT SUCH INFORMATION IS TRUE AND ACCURATE
IN ALL MATERIAL RESPECTS.]
IN WITNESS WHEREOF, Servicer has caused this Certificate to be
executed by its duly authorized officer this day of ,1996.
INTER-CITY PRODUCTS CORPORATION (USA)
By:
Name:
Title:
<PAGE>
EXHIBIT D
to Pooling Agreement
SEMI-ANNUAL AGREED UPON PROCEDURES
Select at random two Daily Reports and one Monthly Report prepared during the
preceding six months and:
1. Compare/reconcile the following report items with the Seller's original
source documents noted below:
A. MONTHLY RECEIVABLE ACTIVITY:
1. Monthly sales journal
2. Cash application journal
3. Aged trial balance
4. Journal entries and related support affecting cash
application or receivables
5. Receivable write-off approval list
6. Bank statements
7. Credit memo register
B. ELIGIBLE RECEIVABLE CALCULATION:
1. Ineligible receivables program reports
C. ADJUSTED ELIGIBLE RECEIVABLE CALCULATION:
1. Receivables program reports identifying Included Foreign
Obligor Balances as well as Co-Op Advertising, Cash Discounts
and Extended Term Receivables
D. AGED RECEIVABLES RATIO:
1. Aged trial balance for relevant aging basket
E. DILUTION RATIO:
1. Credit memo register (as above, A.7.) for returns and
allowances, warranty, other, and cash discounts (General and
Coastline only). Reconcile the monthly amount listed as
checks written to obligors in respect of dilution to
supporting documentation.
2. Verify the cash account balances for the Master Collection
Account, Carrying Cost Account, Equalization Account and
Principal Funding Account per the monthly report to the
monthly LaSalle bank statements. Verify any cash invested is
invested in an Eligible Investment.
3. Select five obligors with balances past 120 days past due and
calculate the customer balances over 120 days past due as a
percentage of the customer's total balance. If the
<PAGE>
calculated percentage is more than 25% or if more than 10% of
the receivables are over 180 days past the invoice date,
determine if the obligor was classified as ineligible.
4. Determine the accuracy of the Remaining Payment Term
Adjustment.
5. Compare/reconcile the largest ten obligor balances to the
trial balance. Annually perform confirmations for a sample of
invoices from the largest ten obligors.
6. For a sample of obligors, verify the credit limit was
approved in accordance with credit policy. Compare the
obligor's receivable balance with the approved credit limit
to verify the balance is less than or equal to the approved
limit. Review the credit file for evidence of one of the
following: National Association of Credit Managers or Dun &
Bradstreet Credit Report, financial statements, credit
reference or tax return.
7. For the sample in (6) verify the existence of current
financial statements and entry of financial information into
the Credit Model.
8. For a sample of five invoices, recompute the agings and
verify they were accurately reflected on the aged trial
balance.
9. For the sample in (8) above, compare the invoice date,
obligor name and amount to the supporting sales order as
generated by the order entry department. Compare the invoice
to the related posting in the applicable month's detail aged
accounts receivable trial balance. Obtain a copy of the
obligor's check in payment of the selected invoice and trace
it to the cash receipts journal for the day on which it was
received in the lockbox account. Verify the relief of the
receivable from the detail aged accounts receivable trial
balance.
10. For a sample of five credit memos, compare the memos to
postings in the detail aged accounts receivable trial balance
and the general ledger.
11. For a sample of twenty credit memos, determine the number of
days before the credit is processed and posted to the aged
trial balance and the general ledger.
<PAGE>
EXHIBIT E
to Pooling Agreement
FORM OF
TRANSFEROR CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), THE SECURITIES OR
BLUE SKY LAWS OF ANY STATE OR THE LAWS OF ANY FOREIGN
COUNTRY. THIS CERTIFICATE MAY NOT BE RESOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS SUCH RESALE, TRANSFER OR
DISPOSITION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS AND
FOREIGN LAWS. IN ADDITION TO THE RESTRICTIONS SET FORTH
ABOVE, RESALE, TRANSFER OR DISPOSITION OF THIS CERTIFICATE IS
PROHIBITED TO THE EXTENT SET FORTH IN THE POOLING AGREEMENT
(AS DEFINED BELOW).
INTER-CITY PRODUCTS RECEIVABLES MASTER TRUST
TRANSFEROR CERTIFICATE
THIS CERTIFIES THAT INTER-CITY PRODUCTS RECEIVABLES COMPANY, L.P. is
the registered owner of an interest in the INTER-CITY PRODUCTS Receivables
Master Trust (the "Trust"), which was created pursuant to the Pooling and
Servicing Agreement, dated as of July ___, 1996 (as the same may be amended,
supplemented or otherwise modified from time to time, the "Pooling
Agreement"), by and among INTER-CITY PRODUCTS RECEIVABLES COMPANY, L.P., a
Delaware limited partnership, as Transferor ("Transferor"), INTER-CITY
PRODUCTS CORPORATION (USA), as initial Servicer (in such capacity, the
"Servicer"), and LASALLE NATIONAL BANK, as Trustee (in such capacity,
together with its successors and assigns in such capacity, the "Trustee").
This Certificate is the duly authorized Transferor Certificate designated and
issued under the Pooling Agreement. To the extent not otherwise defined
herein, capitalized terms have the meanings assigned to them in Appendix A to
the Pooling Agreement. This Certificate is subject to the terms, provisions
and conditions of, and is entitled to the benefits afforded by, the Pooling
Agreement, to which terms, provisions and conditions the holder of this
Certificate by virtue of the acceptance hereof assents and by which the
holder is bound.
This Certificate shall not bear interest.
The Pooling Agreement may be amended and the rights and obligations of
the parties thereto and of the holder of this Certificate modified as set
forth in the Pooling Agreement.
<PAGE>
Unless the certificate of authentication hereon shall have been
executed by or on behalf of Trustee by the manual signature of a duly
authorized signatory, this Certificate shall not entitle the holder hereof to
any benefit under the Pooling Agreement or under any other Transaction
Document or be valid for any purpose.
This Certificate is limited in right of payment to the Transferred
Assets.
Transferor may not transfer, assign, exchange or otherwise convey or
pledge, hypothecate or otherwise grant a security interest in this
Certificate or any interest represented hereby except in compliance with the
terms, conditions and restrictions set forth in the Pooling Agreement.
This Certificate shall be construed in accordance with the laws of the
State of New York, without reference to its conflict of laws principles, and
all obligations, rights and remedies under, or arising in connection with,
this Certificate shall be determined in accordance with the laws of the State
of New York.
<PAGE>
IN WITNESS WHEREOF, Transferor has caused this Certificate to be
executed by its officer thereunto duly authorized.
INTER-CITY PRODUCTS
RECEIVABLES COMPANY, L.P.
By:
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is the Transferor Certificate referred to in the Pooling Agreement.
LASALLE NATIONAL BANK,
as Trustee
By:
Name:
Title:
Dated: , 199
<PAGE>
EXHIBIT F
to Pooling Agreement
FORM OF
QUARTERLY SERVICER'S CERTIFICATE
TO: LASALLE NATIONAL BANK, as Trustee
LASALLE NATIONAL BANK, as Paying Agent
INTER-CITY PRODUCTS RECEIVABLES COMPANY, L.P.
STANDARD & POOR'S, A DIVISION OF THE MCGRAW-HILL
COMPANIES
DUFF & PHELPS CREDIT RATING CO.
INTER-CITY PRODUCTS CORPORATION (USA)
(the "Servicer") hereby certifies that:
(A) This Certificate is being delivered pursuant to Section 3.2 of
the Pooling and Servicing Agreement, dated as of July 25, 1996, (as the same
may be amended, supplemented or otherwise modified from time to time, the
Pooling Agreement), among INTER-CITY PRODUCTS RECEIVABLES COMPANY, L.P., as
Transferor, Servicer, and LASALLE NATIONAL BANK, as Trustee.
(B) A review of the Servicer's activities and of the Servicer's
performance under the Pooling Agreement has been conducted for the quarter
ended _____, 19__, under the supervision of the Authorized Officer (as
defined in the Pooling Agreement) that is executing this Certificate.
(C) As of the date of this Certificate, based upon the review in
paragraph (B), the undersigned is not aware of any default in the fulfillment
of any obligations under the Pooling Agreement. [IF A DEFAULT IN THE
FULFILLMENT OF ANY OBLIGATION UNDER THE POOLING AGREEMENT HAS OCCURRED,
SPECIFY EACH SUCH DEFAULT OF WHICH THE AUTHORIZED OFFICER EXECUTING THIS
CERTIFICATE IS AWARE AND THE NATURE AND STATUS THEREOF AND FURTHER CERTIFY
THAT SUCH INFORMATION IS TRUE AND ACCURATE IN ALL MATERIAL RESPECTS.]
(D) As of the date of this Certificate, the undersigned is not aware
of the occurrence and continuance of any Early Amortization Event or
Unmatured Early Amortization Event (each as defined in the Pooling
Agreement). [IF AN EARLY AMORTIZATION EVENT OR UNMATURED EARLY AMORTIZATION
EVENT HAS OCCURRED AND IS CONTINUING, SPECIFY EACH SUCH EARLY AMORTIZATION
EVENT OR UNMATURED EARLY AMORTIZATION EVENT (AS APPLICABLE) OF WHICH THE
AUTHORIZED OFFICER EXECUTING THIS CERTIFICATE IS AWARE AND THE NATURE AND
STATUS THEREOF AND FURTHER CERTIFY THAT SUCH INFORMATION IS TRUE AND ACCURATE
IN ALL MATERIAL RESPECTS.]
<PAGE>
IN WITNESS WHEREOF, Servicer has caused this Certificate to be
executed by its duly authorized officer this day of ,19 .
INTER-CITY PRODUCTS CORPORATION (USA)
By:
Name:
Title:
<PAGE>
EXHIBIT G
Form of Credit and Collection Policy
<PAGE>
POLICY
SUBJECT NO.
CREDIT POLICY C21
- -----------------------------------------------------------------------------
SECTION APPLIES TO
CORPORATE INTER-CITY PRODUCTS CORPORATION (USA)
- -----------------------------------------------------------------------------
EFFECTIVE REFERENCE SUPERSEDES PAGE
NOVEMBER 8, 1994 PROCEDURE 1 OF 1
- -----------------------------------------------------------------------------
1.0 STATEMENT
The Corporation and its employees will at all times act in a
professional manner in dealing with customers and credit accounts. All
accounts are to be treated with courtesy, even under the most trying of
circumstances, since they are customers of the Corporation. All credit
decisions and actions must comply with Corporate and Companywide
policies and procedures on business conduct.
2.0 SCOPE
Applies to Inter-City Products Corporation (USA)
3.0 CREDIT MANAGER MISSION STATEMENT
In accordance with the Procedure accompanying this Policy, the Credit
Manager (a) will be responsible for establishing credit procedures and
practices designed to permit a maximum number of orders to flow without
interruption through the Sales Department, while protecting the
Corporation from unacceptable bad debt exposure; (b) will keep the Sales
Department fully informed whenever the routine flow of orders is in
jeopardy because of customer credit status; (c) will assist the Sales
Department, in conjunction with the Law Division, where necessary, to
protect corporate interests, in distributor/dealer problem workouts; and
(d) will analyze the financial statements of distributors/dealers and
provide advice and recommendations to sales or other management as to
that customer's financial viability and bad debt risk presented.
4.0 ORIGINATION Finance Division
5.0 DISTRIBUTION Standard Corporate Distribution
6.0 APPROVAL President
----------------------------------
Inter-City Products Corporation (USA)
<PAGE>
PROCEDURE
SUBJECT NO.
CREDIT POLICY C21
- -----------------------------------------------------------------------------
SECTION APPLIES TO
CORPORATE INTER-CITY PRODUCTS CORPORATION (USA)
- -----------------------------------------------------------------------------
EFFECTIVE REFERENCE SUPERSEDES PAGE
NOVEMBER 8, 1994 PROCEDURE 1 OF 4
- -----------------------------------------------------------------------------
1.0 PURPOSE
The purpose of this Procedure is to establish the respective authority
and procedures to be followed by the Corporation and its Credit Division
employees in conducting that portion of the Corporation's business.
2.0 SCOPE
Applies to Inter-City Products Corporation (USA)
3.0 AUTHORITY
3.1 The Credit Manager and other Corporate management shall have the
authority in granting approvals as set out in the Delegation of
Authority attached to this Procedure (Attachment A), as modified
from time to time.
3.2 Consistent with his/her own authority, the Credit Manager may
delegate authority to his/her staff. He/she must be sure that
such individuals are capable of exercising proper judgment and
understand the limits of their authority. Definite limits and
instructions must be established in writing. The Credit Manager
will remain ultimately responsible for all credit approvals.
Authority which may be delegated to the Credit Manager's staff:
a) Approve credit.
b) Sign lien waivers.
c) Approve orders for shipment that were rejected for a past due
collection not in excess of ninety (90) days.
d) Modify original invoice terms to correct order entry errors
or amend a correct invoice term with just cause.
3.3 When the Manager of Credit or appropriate staff is unavailable for
credit approval, the Vice President - Financial Operations may
approve credit within the limits of this Procedure.
4.0 CREDIT INFORMATION
4.1 All confidential financial and other information disclosed to
Corporation by a customer will be kept confidential, unless
disclosure is first advised to the customer(s).
4.2 Based on written request, reporting to others about customer
payment history may be made. Under no condition will Corporation
be a party to any effort to standardize terms, agree on concerned
action on any account, or what its future position will be in
reference to any account.
<PAGE>
PROCEDURE
SUBJECT NO.
CREDIT POLICY C21
- -----------------------------------------------------------------------------
SECTION APPLIES TO
CORPORATE INTER-CITY PRODUCTS CORPORATION (USA)
- -----------------------------------------------------------------------------
EFFECTIVE REFERENCE SUPERSEDES PAGE
NOVEMBER 8, 1994 PROCEDURE 2 OF 4
- -----------------------------------------------------------------------------
4.3 Credit files shall be kept at all times under exclusive custody
and control of the Credit Department.
5.0 NEW ACCOUNTS
5.1 All new accounts for credit shall be thoroughly investigated to
support open account accommodations to maximum of applicants.
Those who do not qualify for open account will be told the reason
for refusal in an honest, forthright and expeditious manner.
5.2 The Credit Manager has the responsibility for approving the credit
of new customers within established limits.
6.0 EMPLOYEE ACCOUNTS RECEIVABLE
An employee's account must never be permitted to become delinquent. If
an employee wishes to purchase anything on a time basis, they should
finance it through the credit union or other source.
7.0 ESTABLISHED ACCOUNTS
7.1 All pre-litigation collection efforts will be directed, controlled
and supervised by the Credit Manager in accordance with the terms
of payment and any other terms and/or conditions as in effect from
time to time.
7.2 Accounts may be placed for collection or legal action with an
established collection agency; PROVIDED THAT, before such action
is taken, the Law Division must be consulted, and only the Law
Division may approve the retention of outside counsel. All
retained outside counsel shall further be subject to the Law
Division's ultimate control and supervision.
7.3 An accounts receivable adjustment must be prepared by the Credit
Manager. Full details should accompany these requests. If the
write-off amount exceeds $10,000.00, the accounts receivable
adjustment should be sent to the Vice President- Financial
Operations, with a copy of the account's credit and collection
file and a detailed write-up as to history and reason for the
write off.
7.4 Once charged to a bad debt, a customer or principals of a former
customer may not purchase an open account until the charge-off
balance is paid. Any exceptions to this should be reviewed and
approved in writing with the Vice President - Financial
Operations.
7.5 Before any promissory notes are accepted, approval must be
obtained from the Credit Manager, the Vice President - Financial
Operations, and the Law Division.
<PAGE>
PROCEDURE
SUBJECT NO.
CREDIT POLICY C21
- -----------------------------------------------------------------------------
SECTION APPLIES TO
CORPORATE INTER-CITY PRODUCTS CORPORATION (USA)
- -----------------------------------------------------------------------------
EFFECTIVE REFERENCE SUPERSEDES PAGE
NOVEMBER 8, 1994 PROCEDURE 3 OF 4
- -----------------------------------------------------------------------------
8.0 CREDIT AND ORDER CONTROL LIST
On a regular basis, the Credit Manager will prepare a list of those
accounts which reflect a customer's approved credit and order limit.
This list will be communicated to the order entry department who
determines if an order may be shipped.
9.0 TERMS OF PAYMENT
Credit and/or other terms and conditions of sale shall be published in
written form, and the Credit Manager shall be responsible for enforcing
such credit terms and conditions as are in effect from time to time.
10.0 DISTRIBUTION Standard Corporate distribution.
11.0 APPROVAL President
----------------------------------
Inter-City Products Corporation (USA)
<PAGE>
PROCEDURE
SUBJECT NO.
CREDIT POLICY C21
- -----------------------------------------------------------------------------
SECTION APPLIES TO
CORPORATE INTER-CITY PRODUCTS CORPORATION (USA)
- -----------------------------------------------------------------------------
EFFECTIVE REFERENCE SUPERSEDES PAGE
NOVEMBER 8, 1994 PROCEDURE 4 OF 4
- -----------------------------------------------------------------------------
ATTACHMENT A
DELEGATION OF AUTHORITY IN RESPECT TO CREDIT TRANSACTIONS
The undersigned President and Treasurer of Inter-City Products Corporation
(USA) ("Corporation") each hereby delegate, to the extent set out below and
to the noted positions, and pursuant to Companywide Policy and Procedure CW3,
Procedure - Section 5.0, their respective authority under CW3, Procedure -
Section 6.7, for the extension of credit in respect to the sale of goods by
the Corporation.
1. The position of Credit Manager (or in the Credit Manager's absence the
Vice President - Financial Operations) shall have the authority, in
the normal course of business, to approve credit in an amount not to
exceed $2,000,000 per customer account; PROVIDED THAT the Credit
Manager may also, on a per order basis for orders which would cause
this limit to be exceeded, extend credit without any additional
approvals of (i) 10% of the established credit limit, or (ii)
$500,000, whichever is greater.
2. For credit limits in excess of $2,000,000 and not exceeding
$10,000,000, the prior approval of the Treasurer or the President
shall be required.
3. For amounts in excess of $10,000,000 the approval of the President and
Treasurer shall be required.
4. The authority to take all steps necessary to implement the preceding
is also hereby delegated to the referenced positions.
Signed by:
-------------------------------------------
PRESIDENT
-------------------------------------------
TREASURER
<PAGE>
EXHIBIT H
FORM OF DISTRIBUTION AGREEMENT
<PAGE>
COMFORTMAKER AIR CONDITIONING & HEATING PRODUCTS
1996 DISTRIBUTION SALES AGREEMENT
FOR
---------------------------------------------------
THIS AGREEMENT is made by and between Inter-City Products Corporation
(USA), a Delaware Corporation, which has its administrative offices at 650
Heil Quaker Avenue, Lewisburg, Tennessee 37091 (hereinafter "Manufacturer")
and -----------------------------------------------------------------------
a -------------------------------------------------------------------------
Corporation, which has its headquarters at --------------------------------
(hereinafter "Wholesale Distributor"). Wholesale Distributor and
Manufacturer may hereinafter be referred to jointly as "Parties" or
singularly as "Party".
WHEREAS, Manufacturer is engaged in the business of selling Comfortmaker
heating and air conditioning products, accessories, parts, literature, and
sales promotional materials (hereinafter "Products"); and
WHEREAS, the Wholesale Distributor is engaged in the business of
wholesale distribution and desires to purchase Products from Manufacturer for
the purposes of resale to independent contractors who install and service
such Products (hereinafter "Installing and Servicing Dealers");
NOW, THEREFORE, in consideration of the mutual covenants and promises in
this Agreement and other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties have mutually entered
into the agreement which follows.
1. Commencement will be upon acceptance and signing by Manufacturer's
Vice President, Sales, at Manufacturer's offices in Tennessee, and at such
time, the Wholesale Distributor will become a non-exclusive distributor of
Products for the calendar year 1996, unless terminated sooner by either party
as provided herein.
2. Wholesale Distributor will purchase the Products for resale within
the area described in Exhibit A (hereinafter "Area of Responsibility") to
Installing and Servicing Dealers who will resale the Products to users and/or
owners of the Products (hereinafter "Customers"). This Agreement does not
give Wholesale Distributor any right to an exclusive territory, exclusive
market, exclusive Area of Responsibility or any type of exclusive dealings
involving the Products. Wholesale Distributor will exert its best efforts to
reach and exceed the objectives also set forth in Exhibit A.
3. Wholesale Distributor acknowledges the receipt of the materials
contained in Manufacturer's Operating Letters generally and has specifically
had the opportunity to review the section entitled "Commercial Duties of the
Parties" (hereinafter "Contractual Duties") which is incorporated herein by
reference and made a part hereof. The referenced section of the
Manufacturer's Operating Letters, normally sent in October of each year, is
to be in effect for the calendar year following the October in which such is
normally sent.
4. Wholesale Distributor agrees to use its best efforts to promote
sales of the Products as more fully set forth in the Contractual Duties.
5. Wholesale Distributor is aware that the Robinson-Patman Act of the
united States Congress sets forth certain requirements concerning the sharing
of promotional materials with Wholesale Distributor's dealers. Wholesale
Distributor is also aware of its duties under the Magnuson-Moss Warranty
<PAGE>
Federal Trade Commission Improvement Act and the Consumer Product Safety Act.
Wholesale Distributor agrees to comply with these requirements which are set
forth in the Contractual Duties.
6. Wholesale Distributor agrees to use its best efforts to provide
prompt and efficient service and warranty support and follow the guidelines
set forth in the Contractual Duties.
7. Notwithstanding any other provisions concerning termination, either
Party may terminate this Agreement prior to an expiration date, with or
without cause, by giving (30) days prior written notice to the other party.
Certain acts on the part of the Wholesale Distributor may bring about
immediate termination of this Agreement and should the Wholesale Distributor
terminate this Agreement, Wholesale Distributor will comply and cooperate in
the enforcement of the remedies set forth in the Contractual Duties for such
voluntary termination.
8. The sole and exclusive liability for any breach by Manufacturer
will be an obligation to re-purchase the Products in the manner set forth in
the Contractual Duties. It is mutually agreed that Manufacturer will have no
liability for incidental, consequential or punitive damages nor will be
liable for any loss of profits, loss of goodwill or any other commercial
damages. Limited warranties accompanying the Products are for the benefit of
the Customer. There are no warranties to Wholesale Distributor or Installing
and Service Dealers, whether express, implied or by operation of law with
respect to the Products or the business conducted by Wholesale Distributor or
Installing and Service Dealers, and the Manufacturer disclaims, to the extent
allowed by law, any implied warranty of merchantability or fitness for a
particular purpose.
Any liability coverage afforded to the Wholesale Distributor under any
vendor's endorsement on a policy of insurance by Manufacturer shall be in
effect only upon the execution of this Agreement by both parties, and during
the Agreement's stated term.
9. Manufacturer is the sole owner of all trademarks, service marks,
trade names, copyrights, patents, proprietary information and other
intellectual property, whether used or owned. (hereinafter collectively
referred to as "Intellectual Property"). Wholesale Distributor is permitted
to use this Intellectual Property only in the form, style and manner
consistent with this Agreement, the Operating Letters and any written or
printed material provided by Manufacturer to Wholesale Dealer and only during
the duration of this Agreement. Wholesale Distributor agrees to protect this
Intellectual property and to return all such Intellectual Property to
Manufacturer upon termination of this Agreement as set forth in the
Contractual Duties. Any use of or reference to any Manufacturer-owned
trademark or product brand name by Wholesale Distributor in any audio, video,
or written material, including but not limited to direct mailings, flyers or
similar, which is not in accordance with Ad Planner requirements, must be
approved by Manufacturer in writing prior to such use, whether or not "co-op"
credit is requested.
10. Wholesale Distributor acknowledges that it is an independent
contractor and that the Manufacturer will not exercise any control over its
hiring, termination or business methods. Likewise, Wholesale Distributor
will have no authority to enter into any agreement that purports to bind on
Manufacturer.
11. This Agreement supersedes all previous agreements between the
parties. This Agreement, the attached exhibits, and the referenced Operating
Letters constitute the entire Agreement between the Wholesale Distributor and
Manufacturer, and this agreement may only be amended in writing executed by
both parties.
<PAGE>
12. Wholesale Distributor agrees to pay those amounts due to
Manufacturer on a timely basis, and in accordance with the terms of the sale.
Wholesale Distributor also agrees that, as advised by Manufacturer in writing
from time to time, all arrearage will bear interest at a rate of no less than
1% per month and no greater than 1 1/2% per month, or the highest rate
permitted by law, whichever is less. If the interest rate at any time would
exceed the highest lawful rate, but for the limitations contained herein, the
actual rate of interest to accrue on the unpaid principal amount shall be
limited to the highest lawful rate. It is the intention of Manufacturer to
strictly obey and comply with applicable usury laws. If any excess interest
is charged, paid, collected or received, it shall be deemed a mistake and the
same shall either be refunded to the Wholesale Distributor's account or
credited on the unpaid principal amount of Wholesale Distributor's account.
Wholesale Distributor will reimburse Manufacturer for all cost of collection
including court cost and legal fees and disbursements. As to the enforcement
of other provisions of this agreement, the prevailing party will be entitled
to legal fees and disbursements.
13. It is mutually agreed between the parties that any litigation
arising between the parties shall be brought only to the courts of the State
of Tennessee or in the federal courts located in the Middle District of
Tennessee with the filing party having the option between state and federal
court in those jurisdictions. The parties to this Agreement irrevocably
consent to the jurisdiction of said courts. As to the interpretation and the
enforcement of this Agreement, it is agreed that the laws of the State of
Tennessee will apply.
14. Wholesale Distributor agrees to hold harmless and indemnify
Manufacturer against any liability, loss, damage or expense which
Manufacturer may incur by reason of any claim against Manufacturer resulting
directly or indirectly from the acts or omissions of the Wholesale
Distributor, its employees or agents, including but not limited to claims for
personal injury and property damage.
15. Wholesale Distributor acknowledges and agrees that this Agreement
does not automatically renew. If Wholesale Distributor or Manufacturer
desire to re-establish a contractual relationship after the expiration of
this Agreement, then a new agreement must be executed. Either party, in its
discretion, may decide not to enter a new agreement. Notwithstanding the
foregoing, Manufacturer may, in its sole discretion, continue to fill orders
placed by the Wholesale Distributor after Agreement expiration without a
newly executed agreement, provided that, all such sales shall be made to such
former Agreement, but Manufacturer shall retain all of its rights hereunder
as set out in Paragraphs 2, 5, 6, 9, 10, 12, 13, 14 and Operating Letters
801, 803II, 803IV, 803VI, 803VII, 804, 805, 806, 807I, 808 and 809 in respect
to such sales.
16. Wholesale Distributor agrees and acknowledges that there have been
no other representations or oral agreements except as contained in this
Agreement and the Operating Letters, and that the parties have negotiated
this Agreement and it supersedes any dealer protection and/or franchise laws
and/or regulations.
17. The parties represent and warrant to each other that each is
authorized to enter into this Agreement and to perform its obligations
hereunder; that the execution, delivery, and performance of this Agreement is
in accordance with any charter, by-laws, or law applicable to this Agreement
or any agreement by which it is bound or by which any of its assets are
affected; and that the Agreement is fully enforceable according to its terms.
IN WITNESS WHEREOF, the Parties, finding that the above terms and
conditions accurately reflect the agreement between the Parties, have
executed this Agreement in two counterparts each of which is to be considered
an original.
<PAGE>
- ------------------------------- INTER-CITY PRODUCTS
(Wholesale Distributor) CORPORATION (USA)
By: By:
---------------------------- ---------------------------
(signature) Vice President, Sales
- -------------------------------
(type or print name and title)
Date: Date:
-------------------------- -------------------------
<PAGE>
EXHIBIT A
------------------------------------------------
(Wholesale Distributor Name)
Nonexclusive Area Of Responsibility
Cumulative Annual Purchase Objective
Manufacturer expects Wholesale Distributor to effectively represent and sell
the Products its Area of Responsibility as described in Exhibit A of this
agreement. The effectiveness of Wholesale Distributor's sales can be
measured by its cumulative annual purchases (hereinafter "Purchase
Objective") of the Products. Manufacturer has, therefore, established
Purchase Objectives for Wholesale Distributor for the calendar year 1996 as
shown below. These Purchase Objectives are not considered as a maximum
result attainable, but are considered as a reasonable expectation, taking
into account Wholesale Distributor's Area of Responsibility, potential,
competitive conditions, economic conditions, and the Products.
1996 PURCHASE OBJECTIVES
Wholesale Distributor has reviewed the above Purchase Objectives and finds
them to be fair and equitable and a reasonable estimate of the minimum
anticipated unit purchases of Products to be made during the 1996 calendar
year.
Accepted:
- ----------------------------------------
(Name of Wholesale Distributor)
By:
- ----------------------------------------
(Signature)
- ----------------------------------------
(Please Type or Print Name and Title)
Date:
-----------------------------------
<PAGE>
INTER-CITY PRODUCTS
LIMITED WARRANTY CERTIFICATE
For Cooling & Heating Products
SAVE THIS CERTIFICATE. It gives you specific legal rights, and you may also
have other rights which may vary from state to state and province to
province.
In the event your unit needs servicing, contact the dealer or contractor who
installed your unite or a dealer or service company of your choice. When
requesting service, please have the model and serial number from each unit in
your heating and/or cooling system readily available. If your dealer needs
assistance, the distributor or factory branch is available to him or her for
support and we, in turn, support their efforts.
Fill in the installation date and model and serial numbers of the unit in the
space provided below and retain this Limited Warranty for your files.
GENERAL TERMS
Except as otherwise indicated in the "Additional Terms" section of this
Limited Warranty (which is for selected components), this Limited Warranty
applies to the original purchaser and subsequent transferees, but only while
the unit remains at the site of the original installation (except for mobile
home installations) and only if the unit is installed inside the continental
United States, Puerto Rico, Alaska, Hawaii or Canada. In addition, the
Limited Warranty applies only if the unit is installed and operated in
accordance with the printed instructions accompanying the unit, and in
compliance with all applicable installation and building codes and good trade
practices. As stated in this Limited Warranty, "installation" means the
original installation of the unit.
During the first five years after installation, we will provide a replacement
for any functional component part (as defined below) of your unit found to be
defective in materials or workmanship. THERE ARE EXCEPTIONS to this five
year limited warranty as described on the reverse side of this page.
Additional extended limited warranties for selected components are also
described on the reverse side of this page. All replacement parts will be
warranted for the unused portion of that component's original warranty. The
part to be replaced must be returned by the dealer or contractor to a
distributor or factory branch, which sells products for Inter-City Products,
in exchange for the replacement part.
In lieu of providing a replacement part, we may, at our sole option, refund
to you an amount equal to the distributor's component purchase price from us,
or provide to you a credit equal to that amount to be applied toward the
purchase of any new unit which we distribute. If a credit for a new unit is
given in lieu of a replacement part, the rating plate from the unit being
replaced must be submitted on a warranty claim, and the unit being replaced
must be made available by your dealer or contractor to our distributor or
factory branch for disposition.
To receive the benefits and advantages described in this limited original
warranty, yearly maintenance to the unit, as described in the homeowner's
manual, must be performed by a licensed contractor. Satisfactory proof of
yearly service by a licensed contractor will be required.
"Functional component parts" include only the following: air handler, blower
motor, unit-mounted sensors & timers, condenser motor, evaporator coil,
condenser coil, condenser fan, capacitor, transformer, single-phase strip
heat elements, expansion device, reversing valve, solenoid valve, service
valve, electronic and electro-mechanical control board, ignitor, ignition
module, draft inducer assembly, burner pilot, gas valve, limit control,
pressure switch, relays and contactors, blower wheel, interlock switch,
crosslighter, pilot shield, gas & oil burners, oil pump assembly,
accumulators and factory installed dryers and strainers.
<PAGE>
Any labor, material, refrigerant, refrigerant inspection and refrigerant
reclaiming, freight and/or handling charges associated with any repair or
replacement pursuant to this Limited Warranty will be your responsibility.
In establishing the date of installation for any purpose, including
determination of the starting date for the term of this Limited Warranty,
proof of the original installation date must be presented (you must retain
the original records that can establish the installation date of your unit),
otherwise the effective date will be based upon the date of unit manufacture,
plus thirty (30) days. In establishing that the required yearly service has
occurred, you must furnish proof of yearly service by a licensed contractor.
We will not be responsible for and you, the user, will pay for: (a) damages
caused by an accident, abuse, negligence, misuse, riot, fire, flood, or Acts
of God (b) damages caused by operating the unit where there is a corrosive
atmosphere containing chlorine, fluorine, or any other damaging chemicals
(other that those found in a normal residential environment) (c) damages
caused by failing to provide proper maintenance and service to the unit in
accordance with this Limited Warranty Certificate and the printed
instructions originally provided with the united (f) any expenses incurred
for erecting, disconnecting, or dismantling the unit (g) parts or supplies
used in connection with service or maintenance, such as refrigerant, filters,
or belts (h) damage, repairs, inoperation or inefficiency resulting from
faulty installation or application (i) electricity or fuel costs or any
increase in electricity or fuel cost whatsoever including additional or
unusual use of supplemental electric heat (j) units which have not had the
required yearly maintenance described elsewhere in this limited warranty.
In no event shall we be liable for any incidental, or special damages or
expenses in connection with any use or failure of this unit. We have not
made and do not make any representation or warranty of fitness for a
particular purpose, and there is no implied condition of fitness for a
particular use or purpose. We make no express warranties except as stated in
this Limited Warranty. No one is authorized to change this Limited Warranty
or to create for us any other obligation or liability in connection with this
unit. Any implied warranties shall last for the term of the expressed
warranty contained herein. Some states and provinces do not allow the
exclusion or limitation of incidental or consequential damages or do not
allow limitations on how long an implied warranty or condition lasts, so the
above limitations or exclusions may not apply to you. The provisions of this
Limited Warranty are in addition to and not a modification of or subtraction
from any statutory warranties and other rights and remedies provided by law.
Please refer to reverse side of this page for additional terms.
Model No.
-------------------------------------
Serial No.
------------------------------------
Date Installed
--------------------------------
Effective April 1, 1995 or with warranty change notice.
<PAGE>
ADDITIONAL TERMS FOR RESIDENTIAL APPLICATIONS ONLY
The Additional Terms for the components listed below
are in addition to and subject to the General Terms on
the reverse side of this page
FURNACE HEAT EXCHANGERS*
1) CENTRAL GAS & OIL FURNACES
Gas Model Series: GUK, GDK, NUGM, NDGM: This additional Limited Warranty is
tot he original purchaser only for as long as the purchaser lives in the home
where the furnace is initially installed.** It provides a replacement
primary or secondary heat exchanger. HOWEVER, this limited warranty is not
transferable to any subsequent owner. If the furnace was not installed in
the home owned by the original purchaser, if the original purchaser sells the
home to subsequent owner, or if proof of original purchase cannot be
provided, then the limited warranty is only for 20 years from the date of
original installation.
Gas Model Series: GNI, GDL, GNL, NTC7, NDC7: A replacement for 25 years
from the original date of installation.
Gas Model Series: GUI, GDI, GNJ, GUM, NCC5, NDC5, NTC5, NTG5, NUG9: A
replacement for 20 years from original date of installation.
Gas Model Series: GUJ, GDJ, NUG3, NHGK, GDHH, NHGE, GDHI: A replacement for
15 years from the original date of installation.
Oil Model Series: OMD, OND, OLR, OCH, OUN, OLN, ODN, OLL, OLM, NUOD, NOLD,
NDOD, LLO5, NCO, NMO, NTO, LLO7: This additional Limited Warranty is to the
original purchaser only for as long as the purchaser lives in the home where
the furnace is initially installed.** It provides a replacement primary or
secondary heat exchanger. HOWEVER, this limited warranty is not transferable
to any subsequent owner. If the furnace was not installed in the home owned
by the original purchaser, if the original purchaser sells the home to
subsequent owner, or if proof of original purchase cannot be provided, then
the limited warranty is only for 20 years from the date of original
installation.
Oil Fired Floor Furnace: NFO AND OFN: A replacement for 10 years from
installation with the following limitation: during the sixth through tenth
year, any credit toward your purchase of a component or toward the purchase
of any new unit will be in an amount equal to the distributor's purchase
price reduced by 20 percent for each year after the fifth year.
2) GAS/ELECTRIC PACKAGED UNITS
Model Series: PGAD, PGAA, PGMD, PGME: A replacement for 10 years from
original date of installation.
COMPRESSORS:*
1) Premium Model Units: AH, AJ, YG, YH, CA90, CA96, CH97, PGME, PYMC, PHAD,
PGAD: To the original purchaser a replacement for 10 years from original
date of installation, only if the unit is installed with factory matched
coils. This limited 10 year warranty is not transferable to any subsequent
owner. HOWEVER, if the unit was not installed in the home owned by the
original purchaser, if the purchaser sells the home to a subsequent owner, or
if proof of original purchase cannot be provided, then the limited warranty
is only for 5 years from the original date of installation.**
2) All Other Models: Air Conditioners, Heat Pumps & Combination
Gas/Electric Units: AG, YJ, YK, CH55, CH75, FBA, ACS, FBY, HPS, CA55, PGAA,
PGMD, PAAA, PAMB, PHRA, PYHB, PA55, PH55, PA75, PH50: A replacement for 5
years from date of original installation, only if: (a) air conditioner
<PAGE>
condensing unites with SEER rating in the range of 10 are matched with
evaporator coils of the same nominal tonnage regardless of manufacturer and
in accordance to factory recommendations, or (b) heat pump condensing units
are used with factory matched coils, unless written approval to do otherwise
is obtained from manufacturer.
ONLY THESE COMPONENTS IN THE UNITS SHOWN WILL RECEIVE A REPLACEMENT FOR THE
PERIOD SHOWN:*
1) Combination Chamber in Oil Fired Upflow, Counterflow & Horizontal
Furnaces: 2 years from installation.
2) Functional Component Parts (as defined), Models NUG9, GUM: A replacement
for 2 years from date of original installation.
3) Functional Component Parts (as defined), Models OMD, OND, OLR, OCH, NCO,
NMO, NTO, NHGK, GDHH, NHGE, GDHI: A replacement for 1 year from the date
of original installation except Beckett Burner Assembly in Oil Fired
Furnaces which is 2 years from installation.
ADDITIONAL TERMS FOR COMMERCIAL APPLICATIONS ONLY
The additional Terms of the components listed below are in addition to
and subject to the General Terms on the reverse side of this page.
1) FURNACE HEAT EXCHANGERS (ALL MODELS):* A replacement for 10 years from
the date of original installation.
2) COMPRESSORS (ALL MODELS):* A replacement for 5 years from date of
original installation.
3) FUNCTIONAL COMPONENT PARTS (ALL MODELS):* A replacement for 1 year from
the date of original installation.
* To receive advantage of your limited warranty, you must provide proof of
yearly service by a licensed contractor.
** To receive advantage of your warranty, you must retain the original
records that can establish the installation date and proof of purchase of the
unit.
<PAGE>
INTER-CITY PRODUCTS
HEATING & AIR CONDITIONING
DISTRIBUTOR TERMS
EFFECTIVE APRIL 12, 1996
* STANDARD DISTRIBUTOR TERM
(Invoiced between 26th-10th)
2.25% 20th AVERAGES 17.5 DAYS
Z 1.5% 10TH PROX AVERAGES 37.5 DAYS
NET 25TH PROX. AVERAGES 53 DAYS
EXAMPLE OF NEW TERM:
INVOICE DATE: JAN. 26-FEB. 10TH
2.25% FEB. 20TH
1.5% MAR. 10TH
NET MAR. 25TH
(Invoiced between 11th-25th)
2.25% 5TH PROX. AVERAGES 17.5 DAYS
1.5% 25TH PROX AVERAGES 37.5 DAYS
NET 10TH 2ND MO. AVERAGES 53 DAYS
EXAMPLE OF NEW TERM:
INVOICE DATE: FEB. 11TH-FEB. 25TH
2.25% MAR. 5TH
1.5% MAR. 25TH
NET APR. 10TH
<PAGE>
SCHEDULE 1
ACCOUNT BANKS - LOCKBOX BANKS
<PAGE>
BANKING INFORMATION FOR INTER-CITY PRODUCTS
Rick Simpson
(615) 270-4233
(407) 323-8500
Gail Meador
(615) 270-4242
Ralph Bedingfield
(615) 270-4225
INTER-CITY PRODUCTS ACCOUNTS
Suntrust Accounts
Account #3590402 General Account
Account #56059531 Controlled Disbursement Account
Account #2364093 Deposit Account
Lee Lamprecth
(615) 748-5745
Lockbox Accounts
Lockbox #96941 - Account #7896301
Lockbox #96086 - Account #7896271
Nancy Chadwick
(312) 828-1619
GENERAL
BANK ACCOUNT# PHONE #
- ---------- ------------ -----------
UMB Bank Kansas 210015-134-3 (913) 648-2800
Mercantile Bank of Topeka 931000162-4 (913) 291-1310
Commerce Bank 0400122521 (800) 292-7977
Emprise Bank 72-3459-3 (316) 383-4401
Commerce Bank of Joplin 0476235036 (417) 624-2414
Boatmen's Bank of Southern Mo. 06-0101-005688 (417) 277-6017
Liberty Bank 020-016-398-8 (405) 231-6021
The F&G Bank & Trust Co. 02-5898-9 (918) 744-1330
UMB Bank, n.a. 39 0002 245 4
UMB Bank, n.a. 39 0002 190 3
Lockbox-UMB Bank, n.a. 9870573024
<PAGE>
COASTLINE
Suntrust Accounts
ACCOUNT # DESCRIPTION CONTACT
- -------------- ---------------- ----------------------------
2152-09919503 CIT/Group Finance Acct. David Evants (407)237-5880
6990-215550817 Controlled Disbursement David Evants (407)237-5880
0215-252108543 Main Checking David Evants (407)273-5880
0215-209919570 Payroll David Evants (407)273-5880
0215-252108691 Petty Cash David Evants (407)273-5880
0215-252008743 CBPT Health Insurance Acct. David Evants (407)273-5880
0215-252078580 Checking for Branches David Evants (407)273-5880
6990-215550825 Controlled Disburse Steel David Evants (407)273-5880
Service & Supply
0215-252078474 Checking for Steel Service David Evants (407)273-5880
& Supply
8800804035 Atlanta, GA Branch Account Glenda Lee (770)621-5900
First Alabama Bank
06-009-9103 Dothan, AL Branch Account Julia Blocker(334)677-2459
<PAGE>
INTER-CITY PRODUCTS CORPORATION (USA)
APPENDIX A
DEFINITIONS
A. Defined Terms. As used in the Transaction Documents, unless
otherwise defined therein:
"Account Agreements" means the Concentration Account Agreements
and the Lockbox Agreements.
"Account Banks" means the Concentration Account Banks and the
Lockbox Banks.
"Adverse Claim" means any claim of ownership interest or any
mortgage, deed of trust, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other) or other security
interest.
"Affiliate" means, with respect to a Person, any other Person
directly or indirectly controlling, controlled by or under common control
with such Person. As used in this definition of "Affiliate," the term
"control" means the power, directly or indirectly, to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of such Person's voting securities, by contract or otherwise,
and the terms "affiliated," "controlling" and "controlled" have the
meanings correlative to the term "control."
"Aggregate Unpaid Balance" is defined in Section 2.1(b) of the
Purchase Agreement.
"Amortization Period" is defined, for purposes of any Series, in
the related Supplement.
"Applicant" is defined in Section 6.7 of the Pooling Agreement.
"Authorized Newspaper" means a newspaper of general circulation
in the Borough of Manhattan, The City of New York, printed in the English
language and customarily published on each Business Day, whether or not
published on Saturdays, Sundays and holidays.
"Authorized Officer" means, with respect to Transferor, Servicer
or any Seller, the Chief Executive Officer, the President, the Treasurer,
the Chief Financial Officer, any Vice President and any Assistant
Treasurer provided, that if Trustee is Servicer, such Authorized Officers
of Servicer shall be limited to Responsible Officers.
<PAGE>
"Available Final Distribution Amount" means with respect to any
Series, the amount that would be available in the Master Collection
Account on the Final Scheduled Payment Date for the Series for
distribution to the Certificateholders of such Series.
"Bank Accounts" means the Lockbox Accounts and the Concentration
Accounts.
"Bankruptcy Code" means the United States Bankruptcy Reform Act
of 1978 (11 U.S.C. Sections 101 et seq.).
"Bankruptcy Event" means, for any Person, any of the following
events:
(a) a case or other proceeding shall be commenced,
without the application or consent of such Person, in any court,
seeking the liquidation, reorganization, debt arrangement,
dissolution, winding up or composition or readjustment of debts
of such Person, the appointment of a trustee, receiver,
custodian, liquidator, assignee, sequestrator or the like for
such Person or any substantial part of its assets, or any similar
action with respect to such Person under any law relating to
bankruptcy, insolvency, reorganization, winding up or composition
or adjustment of debts, and such case or proceeding shall
continue undismissed, or unstayed and in effect, for a period of
(i) in the case of any Person other than Transferor, 60 days and
(ii) in the case of Transferor, 10 days; or an order for relief
in respect of such Person shall be entered in an involuntary case
under the Federal bankruptcy laws or other similar laws now or
hereafter in effect, or
(b) such Person shall commence a voluntary case or other
proceeding under any applicable bankruptcy, insolvency,
reorganization, debt arrangement, dissolution or other similar
law now or hereafter in effect, or shall consent to the
appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator or the like, for such
Person or any substantial part of its property, or shall make any
general assignment for the benefit of creditors, or shall fail
to, or admit in writing its inability to, pay its debts generally
as they become due.
"Bankruptcy Opinion" means (i) with respect to any Series, the
Opinion of Counsel regarding true sale and substantive consolidation
issues rendered in connection with the original issuance of such Series,
and (ii) with respect to any other action, an Opinion of Counsel
substantially in the form of the opinion referred to in clause (i) above.
"Base Amount" is defined, for purposes of any Series, in the
applicable Supplement.
"Business Day" means any day other than a Saturday, Sunday or
public holiday under the laws of the State of New York or other day on
which banking institutions are authorized or obligated to close in the
Borough of Manhattan in the City of New York in the State of New York.
-2-
<PAGE>
"Buyer" is defined in the preamble to the Purchase Agreement.
"Buyer Note" is defined in Section 3.2 of the Purchase Agreement.
"Calculation Period" means a calendar month, provided, however,
that with respect to Coastline for periods ending prior to the First
Issuance Date, Calculation Period means a one-month period beginning on
the 26th day of the calendar month and ending on the 25th day of the next
succeeding calendar month.
"Carrying Cost Account" is defined in Section 4.2 of the Pooling
Agreement.
"Carrying Costs" means, for any period, (a) interest or yield
payable with respect to any Series for that period, (b) the aggregate
Servicing Fee for the period in the applicable amount provided for in
Section 3.4 of the Pooling Agreement, (c) the operating expenses described
in Section 7.2(m) of the Pooling Agreement for the period and (d) other
fees, costs and expenses incurred by Transferor and Trustee for the period
and paid to Persons other than Related Persons in connection with their
duties under the Transaction Documents (in the case of Trustee, to the
extent not included in the Servicing Fee).
"Certificate" means any Investor Certificate or the Transferor
Certificate.
"Certificateholder" means the Person in whose name a Certificate
is registered in the Certificate Register.
"Certificate Purchase Agreements" means the Certificate Purchase
Agreement (Series 1996-1, Class A) dated as of the First Issuance Date
among ICP and Anagram Funding Corp., as Purchaser and the Certificate
Purchase Agreement (Series 1996-1, Class B) dated as of the First Issuance
Date among ICP and Argos Funding Corp., as Purchaser.
"Certificate Register" means the register maintained pursuant to
Section 6.3 of the Pooling Agreement.
"Coastline" means Coastline Distribution, Inc., a Delaware
corporation and indirect wholly-owned Subsidiary of ICP.
"Collections" means all funds that are received by any Seller,
Transferor, Servicer or Trustee from or on behalf of any Obligor in
payment of any amounts owed (including invoice prices, finance charges,
interest and all other charges, if any) in respect of any Receivable or
Related Asset, or otherwise applied to repay or discharge any Receivable
(including insurance payments that any Seller, Transferor or Servicer
applies in the ordinary course of its business to amounts owed in respect
of such Receivable and net proceeds of sale or other disposition of
repossessed goods that were the subject of such Receivable) or otherwise
constituting proceeds of Receivables.
-3-
<PAGE>
"Commercial Stocking Receivable" means a Receivable that (i)
arises from a sale of a minimum of 25 items, each of which constitutes
two-20 ton three-phase-equipment, to a Distributor and (ii) has a final
due date that is no more than 170 days after the invoice date.
"Concentration Account" means any bank account that is maintained
in accordance with, and to perform the functions contemplated for
Concentration Accounts in, Section 3.3 of the Pooling Agreement.
"Concentration Account Agreement" means a letter agreement,
substantially in the form of Exhibit B to the Pooling Agreement (or such
other form as to which the Modification Condition has been satisfied),
among Transferor, Servicer, a Concentration Account Bank and Trustee that
relates to one or more Concentration Accounts, as it may be amended,
supplemented or otherwise modified from time to time.
"Concentration Account Banks" means any of the banks at which one
or more Concentration Accounts are maintained from time to time.
"Contract" means an agreement between a Seller and any Person
pursuant to which such Person is obligated to make payments in respect of
any Receivable or Related Asset and any Distributor Agreement.
"Contributed Initial Receivable" is defined in Section 1.8(a) of
the Purchase Agreement.
"Contributed Receivables" is defined in Section 1.8(b) of the
Purchase Agreement.
"Contributed Subsequent Receivable" is defined in Section 1.8(b)
of the Purchase Agreement.
"Cooling Preseason Receivable" means a Receivable that (i) arises
from a sale to a Distributor of air conditioning units with an invoice
date between December 1 and February 28 of the following year, (ii) a
final due date that is no more than 135 days after the invoice date and
(iii) is designated as such by Seller in accordance with Seller's seasonal
sale promotional policies which apply to Distributors generally and which
are in existence as of the Closing Date.
"Corporate Trust Office" means the principal office of Trustee in
Chicago, Illinois, at which at any particular time its corporate trust
business shall be principally administered.
"Credit and Collection Policy" means (a) so long as no Successor
Servicer has been appointed, with respect to any Seller, its credit and
collection policies and practices relating to the Contracts and
Receivables of such Seller that are attached to the Pooling Agreement as
Exhibit G, as such credit and collection policies may be modified without
violating Section 6.3(b) of the Purchase Agreement or Section 7.2(f) of
the Pooling Agreement or (b) with respect
-4-
<PAGE>
to any Successor Servicer, its collection policies and practices with
respect to receivables like the Receivables.
"Cut-Off Date" means the last day of any Calculation Period.
"Daily Report" is defined in Section 3.5 of the Pooling Agreement.
"DCR" means Duff & Phelps Credit Rating Co.
"Definitive Certificates" means any Certificate.
"Dilution" means any reduction in the balance of a Receivable or
payment (whether by credit, check, wire transfer or otherwise) issued by
any Seller to an Obligor on account of discounts, incorrect billings,
credits, rebates, allowances, chargebacks, returned or repossessed goods,
allowances for early payments or any other reduction in the balance of a
Receivable for any other reason unrelated to the inability of the Obligor
to pay the Receivable. Dilution shall also include any shortfall in
Collections on the Unpaid Balance of a Receivable denominated in a
currency other than U.S. dollars as a result of an increase in the
exchange rate of such foreign currency for U.S. dollars from the date of
origination of such Receivable to the date of such Collection.
"Discount Rate" is defined in Section 2.2(c) of the Purchase
Agreement.
"Discretionary Returns" means the voluntary acceptance of a return
of merchandise from a Distributor to ICP not required by such
Distributor's Distributor Agreement, other than (i) Terminated Distributor
Returns (ii) returns pursuant to ICP's standard or extended limited
warranties on replacement and service parts and (iii) returns of defective
merchandise.
"Disposition" is defined in Section 9.3 of the Pooling Agreement.
"Distribution Date" means the 25th day of each calendar month (or,
if not a London/U.S. Business Day, the next London/U.S. Business Day).
"Distribution Period" means each period from one Distribution Date
to the next Distribution Date.
"Distributor" means a wholesale distributor who purchases from ICP
for the purpose of resale to independent contractors heating and air
conditioning products, accessories, parts, literature and sales
promotional materials.
"Distributor Agreement" means a written distribution sales
agreement between ICP and a wholesale distributor whereby the wholesale
distributor purchases from ICP for the purpose of resale to independent
contractors heating and air conditioning products, accessories, parts,
-5-
<PAGE>
literature, and sales promotional materials substantially in the form of
Exhibit H to the Pooling Agreement.
"Dollars" means dollars in lawful money of the United States of
America.
"Domestic Person" means any Person that has a place of business
located in the United States of America or Puerto Rico or otherwise is
subject to the jurisdiction of one or more civil courts of the United
States of America (other than solely by reason of contractual submission
to such jurisdiction).
"Domestic Subsidiary" means any direct or indirect Subsidiary of
ICP that: (a) is organized under the laws of a jurisdiction in the United
States of America (whether Federal or state), and (b) has both its chief
executive office and principal place of business located in the United
States of America.
"Early Amortization Event" means, with respect to any Series, any
event identified as an Early Amortization Event in the related Supplement.
"Early Amortization Period" is defined, for purposes of any
Series, in the related Supplement.
"Eligible Deposit Account" means (a) a segregated trust account
maintained at a bank with a long-term senior unsecured debt rating of at
least "A" (or, in the case of a Bank Account, at least "BBB") from S&P,
(b) a deposit account maintained with a bank that has an unsecured long-
term senior unsecured debt rating of at least "A", or a short-term rating
of at least "A-1", from S&P or (c) another deposit account as to which the
Modification Condition has been satisfied.
"Eligible Investments" means any of the following:
(a) negotiable instruments or securities represented by
instruments in registered or book-entry form which
evidence:
(i) obligations which have the benefit of the full
faith and credit of the United States of
America, including depository receipts issued by
a bank as custodian with respect to any such
instrument or security held by the custodian for
the benefit of the holder of such depository
receipt,
(ii) demand deposits or time deposits in, or bankers'
acceptances issued by, any depositary
institution or trust company incorporated under
the laws of the United States of America or any
state thereof and subject to supervision and
examination by Federal or state
-6-
<PAGE>
banking or depositary institution authorities,
provided that at the time of such investment or
contractual commitment to invest therein, the
certificates of deposit or short-term deposits,
if any, or long-term unsecured debt obligations
(other than any such obligation whose rating is
based on collateral or on the credit of a Person
other than such institution or trust company),
of such depositary institution or trust company
are rated A-1+ by S&P and (if such certificates
of deposit or short-term deposits are then rated
by DCR) D-1+ by DCR, in the case of the
certificates of deposit or short-term deposits,
or are rated AAA by S&P and (if such obligations
are then rated by DCR) AAA by DCR, in the case
of long-term unsecured debt obligations,
(iii) certificates of deposit which, at the
time of such investment or contractual
commitment to invest therein, are rated
A-1+ by S&P and (if such certificates
of deposit are then rated by DCR) D-1+
by DCR, or
(iv) freely redeemable shares in open-end money
market mutual funds (including such mutual funds
that are offered by the Person who is acting as
the Trustee or by any agent of such Person)
which (1) maintain a constant net-asset value,
(2) at the time of such investment have been
rated not less than "AAAm" by S&P and, if rated
by DCR, "AAA" by DCR, (3) have offering
materials which explicitly state that such fund
will not invest in derivative instruments or
enter into derivative contracts and (4) invest
solely in obligations, deposits, bankers'
acceptances, certificates of deposit, repurchase
agreements and commercial paper of the types
described in clauses (a)(i) through (a)(iii)
above and (b) through (e) below, without regard
to the limitation set forth in such clauses as
to the maturity of such obligations, deposits,
bankers' acceptances, certificates of deposit,
repurchase agreements or commercial paper;
(b) demand deposits in the name of Trustee in any depositary
institution or trust company referred to in clause
(a)(ii) above;
(c) commercial paper (having original or remaining maturities
of no more than 270 days) which, at the time of Trustee's
investment or contractual commitment to invest therein,
is rated A-1+ by S&P and (if such commercial paper is
then rated by DCR) D-1+ by DCR;
-7-
<PAGE>
(d) Eurodollar time deposits that are obligations of
institutions whose time deposits are rated AAA by S&P and
(if such time deposits are then rated by DCR) AAA by DCR;
(e) repurchase agreements involving any Eligible Investment
described in any of clauses (a)(i), (a)(iii) or (d)
above, so long as the other party to such repurchase
agreement is rated AAA by S&P and (if such party is then
rated by DCR) AAA by DCR; and
(f) the following:
(i) negotiable instruments or securities represented
by instruments in registered or book-entry form
which evidence:
(1) demand deposits or time deposits in, or
bankers' acceptances issued by, any
depositary institution or trust company
incorporated under the laws of the
United States of America or any state
thereof and subject to supervision and
examination by Federal or state banking
or depositary institution authorities,
provided that at the time of the
Trustee's investment or contractual
commitment to invest therein, the
certificates of deposit or short-term
deposits, if any (other than any such
obligation whose rating is based on
collateral or on the credit of a Person
other than such institution or trust
company), of such depositary
institution or trust company are rated
A-1 by S&P and (if such certificates of
deposit or short-term deposits are then
rated by DCR) D-1 by DCR, in the case
of certificates of deposit or short-
term deposits, or are rated A by S&P
and (if such obligations are then rated
by DCR) A by DCR, in the case of long-
term unsecured debt obligations,
(2) certificates of deposit which, at the
time of the Trustee's investment or
contractual commitment to invest
therein, are rated A-1 by S&P and (if
such certificates of deposit are then
rated by DCR) D-1 by DCR, or
(3) freely redeemable shares in open-end
money market mutual funds (including
such mutual funds that are offered by
the Person who is acting as the Trustee
or by any agent of such Person) which
(A) maintain a constant net-asset
value, (B) at the time of such
investment have been rated not less
than "Am" by S&P and, if rated by DCR,
"A" by DCR,
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(C) have offering materials which
explicitly state that such fund will
not invest in derivative instruments or
enter into derivative contracts and
(D) invest solely in obligations,
deposits, bankers' acceptances,
certificates of deposit, repurchase
agreements and commercial paper of the
types described in this clause (f),
without regard to the limitation set
forth in such clauses as to the
maturity of such obligations, deposits,
bankers' acceptances, certificates of
deposit, repurchase agreements or
commercial paper;
(ii) demand deposits in the name of the Trustee in
any depositary institution or trust company
referred to in clause (f)(i)(1) above; and
(iii) commercial paper (having original or remaining
maturities of no more than 270 days) which, at
the time of the Trustee's investment or
contractual commitment to invest therein, is
rated A-1 by S&P and (if such commercial paper
is then rated by DCR) D-1 by DCR;
provided that (x) funds on deposit in the Equalization
Account may not be invested in any Eligible Investment
described in clauses (f)(i) through (f)(iii) above,
(y) each investment described in clauses (f)(i) through
(f)(iii) above must have a maturity of 30 or fewer days
after the time of the investment therein by the Trustee,
and (z) the aggregate amount invested in all investments
which are described in any of clauses (f)(i) through
(f)(iii) above at any time may not exceed 20% of the
total funds on deposit in all Transaction Accounts at
such time; and
(g) any other type of investment which is expressly permitted
by each Required Person and each Rating Agency (as
confirmed in writing by each Required Person and each
Rating Agency).
provided, that any such Eligible Investment specified in clauses
(a) through (f) shall (x) have a predetermined fixed dollar
amount of principal due at maturity that cannot vary or change;
(y) if such Eligible Investment is rate by S&P, not have an "r"
highlighter affixed to such rating; and (z) if the interest rate
on such Eligible Investment is not fixed, such interest rate
shall be tied to a single interest rate index plus a single fixed
spread, if any, and shall move proportionately with such index.
"Eligible Obligor" means, for purposes of any Series (unless
otherwise specified in the related Supplement) at any time, an Obligor
that satisfies the following criteria (unless such
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Obligor is expressly approved as an Eligible Obligor by each Required
Person and each Rating Agency (as confirmed in writing by each Required
Person and each Rating Agency)):
(a) it is not (except as otherwise specified for any
Series in the related Supplement) a Governmental Authority;
(b) it is not a direct or indirect Subsidiary of or an
Affiliate of Inter-City Products Corporation, a Canadian
corporation, or any other entity with respect to which Inter-City
Products Corporation, a Canadian corporation, or any of its
Subsidiaries or Affiliates own, directly or indirectly, more than
20% of the entity's equity interests;
(c) with respect to which no Bankruptcy Event had
occurred and was continuing without respect to such 60 day grace
period contained in clause (a)(i) of the definition of
"Bankruptcy Event"; provided that this clause shall not apply if
a bankruptcy court has approved the Obligor's payment of its
obligations on the Receivables;
(d) as of the end of the most recent Calculation Period,
either (i) no more than 25% of all Receivables of the Obligor
were (for reasons other than legitimate disputes) aged more than
120 days past their respective original invoice dates or (ii) no
more than 10% of all Receivables of the Obligor were (for reasons
other than legitimate disputes) aged more than 180 days past
their respective original invoice dates;
(e) which, if a Distributor is a party to a valid,
binding and enforceable Distribution Agreement with ICP that is
in full force and effect;
(f) as of the end of the most recent Calculation Period,
none of the Receivables of the Obligor were evidenced by
promissory notes;
(g) it is not an Obligor with whom the applicable Seller
has a "cash in advance" or "cash on account" arrangement (but may
be an Obligor that the applicable Seller bills in advance in
accordance with that Seller's customary practices, and not on
account of concerns about the creditworthiness of the Obligor);
and
(h) it is not Fahnestock or an Affiliate of Fahnestock
to the extent that a substantial portion of such entity's
Receivables are derived pursuant to floor plan financing
activities.
"Eligible Receivable" means, for purposes of any Series (unless
otherwise specified in the related Supplement) at any time, a Receivable:
(a) that arises from the sale of goods or services by a
Seller in the ordinary course of its business; provided that such
Receivable (i) is not an Excluded International
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Receivable, or (ii) does not arise out of brokerage services
rendered by Heaven Engineering, a division of General;
(b) that represents a bona fide obligation resulting
from a sale of goods that have been shipped or services that have
been performed and is (i) an Extended Term Receivable or (ii) due
and payable not more than 61 days after the date on which the
invoice for services or merchandise, the sale of which gave rise
to such Receivable, is provided or delivered;
(c) that, as of that time, is not aged more than 90 days
past its original due date;
(d) that constitutes an account or a general intangible
for the payment of money and not an instrument or chattel paper;
(e) the Obligor of which is an Eligible Obligor;
(f) with regard to which both the representation and
warranty of Transferor in Section 2.3(a)(i) of the Pooling
Agreement and the representation and warranty of the relevant
Seller in Section 5.1(k) of the Purchase Agreement are true and
correct;
(g) the transfer of which (including the sale by the
applicable Seller to Transferor and the transfer by Transferor to
the Trust) does not contravene or conflict with any law, rule or
regulation or any contractual or other restriction, limitation or
encumbrance that applies to the applicable Seller, Transferor or
the Trust, and the sale, assignment or transfer of which, and the
granting of a security interest in which, does not require the
consent of the Obligor thereof or any other Person, other than
any such consent that has been obtained and continues in full
force and effect;
(h) that, unless it is an Extended Term Receivable, is
non-interest bearing; provided that a Receivable shall not be
deemed to be interest-bearing solely as a result of the
applicable Seller's imposition of an interest or other charge on
any such Receivable that remains unpaid for some specified period
(but no interest charge or other charge shall be included in the
Unpaid Balance of a Receivable for purposes of calculating the
Base Amount);
(i) that arises under a Contract that has been duly
authorized and that, together with such Receivable, is in full
force and effect and constitutes the legal, valid and binding
obligation of the Obligor of such Receivable enforceable against
such Obligor in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a
proceeding in equity or at law;
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(j) that is not subject to any asserted reduction,
cancellation, or refund or any dispute, offset, counterclaim,
lien or defense whatsoever (including any Permitted Adverse Claim
or other potential reduction on account of any offsetting account
payable of Transferor or the applicable Seller to an Obligor or
funds of an Obligor held by Transferor or the Seller); provided
that a Receivable that is subject only in part to any of the
foregoing shall be an Eligible Receivable to the extent not
subject to reduction, cancellation, refund, dispute, offset,
counterclaim, lien or other defense;
(k) that, together with the Contract related thereto,
was created in accordance with, and conforms in all material
respects with, all applicable laws, rules, regulations, orders,
judgments, decrees and determinations of all courts and other
Governmental Authorities (whether Federal, state, local or
foreign) and including usury laws;
(l) that satisfies all applicable requirements of the
Credit and Collection Policy of the applicable Seller or, if
there is a Successor Servicer, the Successor Servicer and that
arises from a line of business in which such Seller was engaged
on the First Issuance Date;
(m) that has not been compromised, adjusted, satisfied,
subordinated, rescinded or modified (including by extension of
time or payment or the granting of any discounts, allowances or
credits), except as permitted by Section 7.2(f) of the Pooling
Agreement; and
(n) if such Receivable is payable to a Person who becomes
a Seller after the First Issuance Date, such Receivable satisfies
the conditions specified in Section 1.7 of the Receivables
Purchase Agreement.
"Eligible Servicer" means (a) the Initial Servicer, (b) Trustee
or (c) an entity that, at the time of its appointment as Servicer, (i) is
servicing a portfolio of trade receivables, (ii) is legally qualified and
has the capacity to service the Receivables, (iii) has demonstrated the
ability to service professionally and competently a portfolio of trade
receivables similar to the Receivables in accordance with high standards
of skill and care, (iv) is qualified to use the software that is then
being used to service the Receivables or obtains the right to use such
software or has its own software that is adequate to perform its duties
under the Pooling Agreement and (v) as to which the Modification Condition
has been satisfied.
"Equalization Account" is defined in Section 4.2 of the Pooling
Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"Estimated Base Amount" is defined in Section 3.5 of the Pooling
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934.
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"Excluded International Receivable" means, (i) an International
Receivable designated as such by the Agent if (a) ICP has given written
notice to the Agent that the level of Excess Foreign Obligor Balances is
unacceptably high to ICP, (b) ICP uses its good faith effort to reduce the
level of Excess Foreign Obligor Balances for a period of 90 days after
such notice, and (c) after such 90-day period a level of Excess Foreign
Obligor Balances which is unacceptably high to ICP continues to exist;
provided that if the Agent fails to make such designation within 30 days
after such 90-day period, such designation shall be made by ICP up to an
amount not to exceed the Excess Foreign Obligor Balances at such time and
(ii) at the election of ICP, all International Receivables originated
after ICP gives the Agent notice of such election to include all
International Receivables as Excluded International Receivables.
"Extended Term Receivable" means a Commercial Stocking Receivable,
Cooling Preseason Receivable, Heating Preseason Receivable, FAST Parts
Receivable, Selected Extended Term Receivable or International Receivable.
"FAST Parts Receivable" means a Receivable that (i) arises from
a sale to a Distributor of parts for heating and air conditioning units
and (ii) a final due date that is no more than 170 days after the invoice
date.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System, or any successor thereto or to the functions
thereof.
"Final Distribution Date" is defined in Section 12.2 of the
Pooling Agreement.
"Final Scheduled Payment Date" is defined, for purposes of any
Series, in the applicable Supplement.
"First Issuance Date" means July 25, 1996.
"GAAP" means United States of America generally accepted
accounting principles.
"General" means General Heating and Cooling Company, a Delaware
corporation and indirect wholly-owned Subsidiary of ICP.
"Governmental Authority" means the United States of America, any
state or other political subdivision thereof and any entity in the United
States of America or any applicable foreign jurisdiction that exercises
executive, legislative, judicial, regulatory or administrative functions
of or pertaining to government.
"Guaranty" means any agreement or arrangement by which any Person
directly or indirectly guarantees, endorses, agrees to purchase or
otherwise becomes contingently liable upon any liability of any other
Person (other than by endorsements of instruments in the course of
collection) or guarantees the payment of distributions upon the shares of
any other Person.
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<PAGE>
"Heating Preseason Receivable" means a Receivable that (i) arises
from a sale to a Distributor of heating units with an invoice date between
July 1 and October 31, (ii) a final due date that is no more than 135 days
after the invoice date and (iii) is designated as such by Seller in
accordance with Seller's seasonal sale promotional policies which apply
to Distributors generally and which were in existence as of the Closing
Date.
"Highest Bid" means the highest cash purchase offer for a Series
received by Servicer pursuant to Section 12.1 of the Pooling Agreement.
"Holdback Account" is defined in Section 4.2 of the Pooling
Agreement.
"Holder" means the Person in whose name a Certificate is
registered in the Certificate Register at the time of determination.
"ICP" means Inter-City Products Corporation (USA), a Delaware
corporation.
"ICP Person" means ICP or any of its Affiliates.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent certified public accountant as to any
financial statement of the Initial Servicer or ICP, any qualification or
exception to such opinion or certification that is of a "going concern"
or similar nature.
"Indebtedness" of any Person means all of that Person's
obligations for borrowed money, obligations evidenced by bonds,
debentures, notes or other similar instruments, obligations as lessee
under leases that are required by GAAP to be recorded as capitalized
leases and obligations to pay the deferred purchase price of property or
services.
"Indemnified Losses" is defined in Section 7.3 of the Pooling
Agreement.
"Indemnified Party" is defined in Section 7.3 of the Pooling
Agreement.
"Initial Cut-Off Date" means the Business Day immediately
preceding the First Issuance Date.
"Initial Servicer" means Inter-City Products Corporation (USA),
a Delaware corporation.
"Intercreditor Agreement" means an intercreditor agreement, in
form and substance satisfactory to the Trustee and each Required Person,
between the Trustee and a secured creditor of a Seller.
"Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended.
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<PAGE>
"International Receivable" means a right of any Seller to payment,
whether constituting an account, chattel paper, instrument, general
intangible or otherwise, arising from the sale of goods, services or
future services by such Seller (and including the right to payment of any
interest or finance charges and other obligations with respect thereto)
owing from an entity (i) with its chief executive office outside of the
United States and Canada, (ii) that transacts a substantial portion of its
business and maintains a substantial portion of its fixed assets outside
the United States and Canada and (iii) which is not engaged primarily in
financing the operations of businesses within the United States and
Canada.
"Invested Amount" is defined, with respect to any Series, in the
related Supplement.
"Investor Certificateholder" means the Person in whose name an
Investor Certificate is registered in the Certificate Register at the time
of determination.
"Investor Certificates" means the Certificates issued pursuant to
any Supplement.
"Investor Exchange" is defined in Section 6.10(a) of the Pooling
Agreement.
"Issuance" is defined in Section 6.10(a) of the Pooling Agreement.
"Issuance Date" is defined in Section 6.10(b) of the Pooling
Agreement.
"Issuance Notice" is defined in Section 6.10(b) of the Pooling
Agreement.
"Lockbox Accounts" means the bank accounts, maintained at those
certain locations described in Schedule 1 to the Pooling Agreement, into
which Collections from Receivables are deposited, and any bank account
that is hereafter created in accordance with, and to perform the functions
contemplated for "Lockbox Accounts" in, Section 3.3 of the Pooling
Agreement.
"Lockbox Agreement" means any of the letter agreements delivered
in connection with the Pooling Agreement and any other letter agreement,
substantially in the form of Exhibit A to the Pooling Agreement (or such
other form as to which the Modification Condition is satisfied), among a
Lockbox Bank, one or more Sellers, Servicer and Trustee that relates to
one or more Lockbox Accounts, as they may be amended, supplemented or
otherwise modified from time to time.
"Lockbox Bank" means any of the banks at which one or more Lockbox
Accounts are maintained from time to time.
"Loss to Liquidation Ratio" means, as calculated in each Monthly
Report, a fraction (a) the numerator of which is the aggregate Unpaid
Balance of Receivables (net of recoveries) that were written off as
uncollectible or (without duplication) converted into promissory notes
during the three preceding Calculation Periods in accordance with the
Credit and Collection Policy, and
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(b) the denominator of which is the aggregate amount of Collections on the
Receivables received during such three Calculation Periods.
"Master Collection Account" is defined in Section 4.2 of the
Pooling Agreement.
"Material Adverse Effect" means, with respect to Transferor, any
ICP Person, any Servicer and any event or circumstance at any time, a
material adverse effect on (a) the ability of that Person to perform its
obligations under any Transaction Document or (b) the validity,
enforceability or collectibility of any Receivables, Related Assets or
Contracts; provided, that for the purpose of determining whether any
Adverse Claim or other event or circumstance results (or has a likelihood
of resulting) in a Material Adverse Effect, the effect of such event or
circumstance shall be considered in the aggregate with the effect of all
other Adverse Claims (including Permitted Adverse Claims) or other events
and circumstances occurring or existing at the time of such determination.
"Maximum Exposure Amount" shall be the lowest amount specified in
any Supplement as the "Maximum Exposure Amount."
"Modification Condition" means, with respect to any action, that
(a) each Rating Agency has confirmed in writing that such action will not
result in a reduction or withdrawal of the initial rating of any
outstanding Series that was rated by such Rating Agency and (b) each
Required Person has consented to such action in writing.
"Monthly Report" is defined in Section 3.5(d) of the Pooling
Agreement.
"Net Invested Amount" is defined, for purposes of any Series, in
the applicable Supplement.
"New Issuance" is defined in Section 6.10(a) of the Pooling
Agreement.
"Noncomplying Receivables and Dilution Adjustment" is defined in
Section 3.1(b) of the Purchase Agreement.
"Non-Recourse Claim" is defined in Section 11.3 of the Pooling
Agreement.
"Obligations" means (a) all obligations of Buyer, the Sellers and
the Servicer to the Trustee, the Trust, any other Indemnified Party, the
Investor Certificateholders and their respective successors, permitted
transferees and assigns, arising under or in connection with the
Transaction Documents, and (b) all obligations of a Seller to Buyer, any
other RPA Indemnified Party and their respective successors, transferees
and assigns, arising under or in connection with the Transaction
Documents, in each case howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent, now or hereafter existing, or
due or to become due.
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"Obligor" means a Person obligated to make payments on a
Receivable.
"Officer's Certificate" means, unless otherwise specified in the
Pooling Agreement or in any Supplement, a certificate signed by an
Authorized Officer of Transferor or the Initial Servicer, as the case may
be, or, in the case of a Successor Servicer, a certificate signed by the
President, any Vice President, Assistant Treasurer or the financial
controller (or an officer holding an office with equivalent or more senior
responsibilities) of such Successor Servicer, that, in the case of any of
the foregoing, is delivered to Trustee.
"Opinion of Counsel" means a written opinion of counsel, who shall
be reasonably acceptable to Trustee and each Required Person and, if the
Rating Agencies are addressees, the Rating Agencies.
"Origination and Servicing Party" means any of each Seller, the
Servicer, each Sub-Servicer and Transferor.
"Paying Agent" means any paying agent appointed pursuant to
Section 6.6 of the Pooling Agreement and shall initially be Trustee.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Adverse Claims" means (a) ownership or security
interests arising under the Transaction Documents, (b) liens for taxes,
assessments or charges of any Governmental Authority (other than Tax or
ERISA Liens) and liens of landlords, carriers, warehousemen, mechanics and
materialmen imposed by law in the ordinary course of business, in each
case (i) for amounts not yet due or (ii) which are being contested in good
faith by appropriate proceedings and with respect to which adequate
reserves or other appropriate provisions are being maintained in
accordance with GAAP, provided that the aggregate amount secured by all
liens referred to in this clause (ii) does not exceed $250,000 (or for
purposes of any Series, any different amount that may be specified in the
applicable Supplement).
"Permitted Discretionary Returns" is defined in Section 3.2(k) of
the Pooling Agreement.
"Person" means an individual, partnership, limited liability
company, corporation (including a business trust), joint stock company,
trust, unincorporated association, joint venture, government or any agency
or political subdivision thereof or any other entity.
"Pooling Agreement" means the Pooling and Servicing Agreement,
dated as of the First Issuance Date, among Transferor, as transferor, the
Initial Servicer, as Servicer, and Trustee, as it may be amended,
supplemented or otherwise modified from time to time.
"Portfolio Collection Days" means, at any time, the product of (i)
30 and (ii) the quotient of (x) the sum of the Unpaid Balance of
Receivables as of the end of each of the three
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Calculation Periods ending on the most recent Cut-Off Date divided by (y)
the sum of the aggregate amounts payable pursuant to invoices giving rise
to Receivables generated by the Sellers during the three Calculation
Periods ending on the most recent Cut-Off Date.
"Principal Funding Account" is defined in Section 4.2 of the
Pooling Agreement.
"Private Holder" shall mean each holder of a right to receive
interest or principal with respect to a Certificate, other than
Certificates with respect to which an opinion is rendered that such
Certificates will be treated as debt for Federal income tax purposes, and
any holder of a right to receive any amount in respect of the Transferor
Certificate. A Person holding more than one interest in the Trust each
of which separately would cause such Person to be a Private Holder shall
be treated as a single Private Holder; a Private Holder that would be a
partnership, an S corporation or a grantor trust under the Internal
Revenue Code shall be treated as one or more Private Holders in accordance
with the provisions of Treasury Regulation Section 1.7704-1 or any
successor provision of law.
"Program" means the transactions contemplated in the Transaction
Documents.
"Publication Date" is defined in Section 9.3(a) of the Pooling
Agreement.
"Public Notice" means all financing statements (and continuation
statements or financing change statements with respect to such financing
statements where applicable), filings, notices and registrations and any
other instrument similar in effect, and all amendments or assignments of
any of the foregoing, relating to assignment or perfection of a security
interest meeting the requirements of applicable state, provincial,
territorial or other local law.
"Purchase" means each purchase of Receivables and Related Assets
by Transferor from a Seller under the Purchase Agreement.
"Purchase Agreement" means the Receivables Purchase Agreement,
dated as of the First Issuance Date, among the Sellers and Transferor, as
it may be amended, supplemented or otherwise modified from time to time.
"Purchase Discount Reserve Ratio" is defined in Section 2.2(b) of
the Purchase Agreement.
"Purchase Price" is defined in Section 2.1(b) of the Purchase
Agreement.
"Purchase Price Percentage" is defined in Section 2.2(a) of the
Purchase Agreement.
"Purchase Termination Date" means the date of occurrence of any
event referred to in Section 8.1 of the Purchase Agreement.
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"Purchased Assets" is defined in Section 1.1 of the Purchase
Agreement.
"Purchased Receivables" is defined in Section 1.1 of the Purchase
Agreement.
"Rating Agency" means each statistical rating agency, if any, that
at the request of ICP or Transferor has rated any then-issued and
outstanding Series of Investor Certificates.
"Receivable" means any right of any Seller to payment, whether
constituting an account, chattel paper, instrument, general intangible or
otherwise, arising from the sale of goods, services or future services by
such Seller (and including the right to payment of any interest or finance
charges and other obligations with respect thereto); provided that such
right to payment is not an Excluded International Receivable.
"Receivables Pool" means at any time all Receivables then held by
the Trust.
"Record Date" means the Business Day that is three Business Days
prior to a Distribution Date.
"Records" means all Contracts, purchase orders, invoices and other
agreements, documents, books, records and other media for the storage of
information (including tapes, disks, punch cards, computer programs and
databases and related property) maintained by Transferor, the Sellers or
Servicer with respect to the Transferred Assets and/or the related
Obligors.
"Recoveries" means all Collections received by the Trust in
respect of any Write-Off held by the Trust.
"Related Assets" is defined in Section 1.1 of the Purchase
Agreement.
"Related Contributed Assets" is defined in Section 1.8(b) of the
Purchase Agreement.
"Related Contributed Initial Assets" is defined in Section 1.8(a)
of the Purchase Agreement.
"Related Contributed Subsequent Assets" is defined in Section
1.8(b) of the Purchase Agreement.
"Related Person" means the Initial Servicer and each of its
Affiliates (other than Transferor).
"Related Purchased Assets" is defined in Section 1.1 of the
Purchase Agreement.
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"Related Security" means, with respect to any Receivable, (a) all
of the applicable Seller's right, title and interest in and to the goods,
if any, relating to the sale that gave rise to the Receivable, (b) all
other security interests or liens and property subject thereto from time
to time purporting to secure payment of the Receivable, whether pursuant
to the Contract related to the Receivable or otherwise, (c) all
merchandise (including returned merchandise), if any, relating to the sale
which gave rise to such Receivable for so long as such Receivable remains
outstanding or (in the case of returned merchandise) until the Seller has
complied with its obligations relating to any Seller Dilution Adjustment
arising in connection therewith, and (d) all letters of credit, guarantees
and other agreements or arrangements of whatever character from time to
time supporting or securing payment of the Receivable, whether pursuant
to the Contract related to the Receivable or otherwise.
"Related Transferred Assets" is defined in Section 2.1(a) of the
Pooling Agreement.
"Report Date" means the Business Day that is three Business Days
prior to a Distribution Date.
"Repurchase Amount" is defined in Section 12.4 of the Pooling
Agreement.
"Repurchase Distribution Date" is defined in Section 12.4 of the
Pooling Agreement.
"Required Investors" means Holders of Investor Certificates that
evidence at least 66-2/3% of the total outstanding principal amount of
Investor Certificates.
"Required Person" means each person designated as such pursuant
to any Supplement.
"Required Receivables" is defined, for purposes of any Series, in
the applicable Supplement.
"Required Series Holders" means with respect to any action to be
taken by Investor Certificateholders of any Series, unless otherwise
specified in the related Supplement, Investor Certificateholders that
evidence at least 66-2/3% of the principal amount of those Certificates.
"Responsible Officer" means, when used with respect to Trustee,
(a) any officer within the Corporate Trust Office (or any successor group
of Trustee), including any vice president, assistant vice president or any
officer or assistant trust officer of Trustee customarily performing
functions similar to those performed by the persons who hold the office
of vice president, assistant vice president, or assistant secretary and
(b) any other officer within the Corporate Trust Office with direct
responsibility for the administration of the Pooling Agreement or to whom
any corporate trust matter is referred at Trustee's Corporate Trust Office
because of his knowledge of and familiarity with the particular subject.
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"Revolving Period" means, with respect to any Series, the period
before the commencement of the earliest of any applicable amortization
period, accumulation period or early amortization period (other than a
prepayment accumulation period with respect to a partial prepayment of any
such Series) for any such Series; provided, that the Revolving Period for
any such Series shall be suspended during a prepayment accumulation period
with respect to a partial prepayment of any such Series.
"RPA Indemnified Losses" is defined in Section 9.1 of the Purchase
Agreement.
"RPA Indemnified Party" is defined in Section 9.1 of the Purchase
Agreement.
"S&P" means Standard & Poor's, a division of The McGraw-Hill
Companies, Inc.
"Scoring Model" means an automated system of ICP, satisfactory to
the Agent, that is used to measure the creditworthiness of Distributors
by analyzing, among other things, each Distributor's balance sheets,
income statements, statements of cash flow and payment history, which
system shall be applied consistently among all Distributors by
incorporating uniform procedures.
"Securities Act" means the Securities Act of 1933, as amended.
"Selected Extended Term Receivable" means a Receivable (i) that
arises from a sale to a Distributor that is rated "20" or better under the
Servicer's Scoring Model, and (ii) that has a final due date that is no
more than 150 days after the invoice date.
"Seller" means each Person from time to time party to the Purchase
Agreement as a "Seller."
"Seller Assignment Certificate" means an assignment by a Seller,
substantially in the form of Exhibit B to the Purchase Agreement,
evidencing Transferor's acquisition of the Purchased Assets generated by
the Seller, as it may be amended, supplemented or otherwise modified from
time to time.
"Seller Change Event" is defined in Section 3.5(e) of the Pooling
Agreement.
"Seller Dilution Adjustment" is defined in Section 3.5(b) of the
Purchase Agreement.
"Seller Guaranty" means the Guaranty, dated as of the First
Issuance Date, by ICP of the Obligations of the other Sellers, as it may
be amended, supplemented or otherwise modified from time to time.
"Seller Maturity Date" is defined in Section 3.2 of the Purchase
Agreement.
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<PAGE>
"Seller Noncomplying Receivable" means a Receivable that does not
meet the criteria set forth in the definition of Eligible Receivables.
"Seller Noncomplying Receivables Adjustment" is defined in Section
3.5(a) of the Purchase Agreement.
"Seller Noncomplying Receivables and Dilution Excess" is defined
in Section 3.1(c) of the Purchase Agreement.
"Seller Receivables Review" is defined in Section 6.1(c) of the
Purchase Agreement.
"Seller Transaction Documents" means the Purchase Agreement, the
Seller Assignment Certificates, the Account Agreements and the Seller
Guaranty.
"Senior Interest" is defined in each Buyer Note.
"Series" means any series of Investor Certificates issued pursuant
to Section 6.10 of the Pooling Agreement.
"Series Collection Allocation Percentage" means, for any Series,
at any time, the percentage equivalent of a fraction: (a) the numerator
of which is the Required Receivables for that Series and (b) the
denominator of which is the sum of the Required Receivables for all then
outstanding Series.
"Series Interest" is defined in Section 4.1 of the Pooling
Agreement.
"Series Loss Allocation Percentage" means, for any Series for
purposes of any Monthly Report, the percentage equivalent of a fraction:
(a) the numerator of which is the Invested Amount of that Series and (b)
the denominator of which is the sum of the Invested Amounts of all then
outstanding Series, in each case determined as of the beginning of the
related Calculation Period (or such other date as may be specified in the
related Supplement).
"Servicer" means at any time the Person then authorized pursuant
to Article III of the Pooling Agreement to service, administer and collect
Receivables and Related Transferred Assets.
"Servicer Default" is defined in Section 10.1 of the Pooling
Agreement.
"Service Transfer" is defined in Section 10.2(b) of the Pooling
Agreement.
"Servicing Fee" is defined in Section 3.4 of the Pooling
Agreement.
"Shared Investor Collections" means any funds identified as such
in any Supplement.
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<PAGE>
"Shortfall" is defined, for any Series, in the related Supplement.
"Specified Assets" is defined in Section 1.1 of the Purchase
Agreement.
"Specified Receivables" is defined in Section 1.1 of the Purchase
Agreement.
"Subject Instruments" means any Certificates with respect to which
the Transferor shall not have received an Opinion of Counsel to the effect
that such Certificates will be treated as debt for Federal income tax
purposes.
"Sub-Servicer" is defined in Section 3.1 of the Pooling Agreement.
"Subsidiary" means, with respect to any Person, any corporation
of which more than 50% of the outstanding capital stock having ordinary
voting power to elect a majority of the board of directors of such
corporation (irrespective of whether at the time capital stock of any
other class or classes of such corporation shall or might have voting
power upon the occurrence of any contingency) is at the time directly or
indirectly owned by such Person.
"Successor Servicer" is defined in Section 10.2(a) of the Pooling
Agreement.
"Supplement" means each supplement to the Pooling Agreement
executed by Transferor, Servicer and Trustee to specify the terms of a
Series of Certificates, as the same may be amended, supplemented or
otherwise modified from time to time.
"Tax or ERISA Lien" means a lien arising under Section 6321 of the
Internal Revenue Code or Section 302(f) or 4068 of ERISA.
"Tax Opinion" means, with respect to any action, an Opinion of
Counsel to the effect that, for Federal and state income and franchise tax
purposes, (a) such action will not adversely affect the existing
characterization of the Investor Certificates of any outstanding Series
or class as debt or (if applicable) as interests in a partnership (that
is not a publicly traded partnership), (b) following such action the Trust
will not be treated as an association (or publicly traded partnership)
taxable as a corporation, (c) such action will not be treated as a taxable
event to any Investor Certificateholder or Certificate Owner and (d) in
the case of the original issuance of any Series or class of Investor
Certificates, unless specified otherwise in the applicable Supplement, the
Investor Certificates of the new Series or class will properly be
characterized as debt.
"Terminated Distributor Returns" means a return of merchandise
from a Distributor to a Seller due to the termination of such
Distributor's status as a Distributor.
"Termination Notice" is defined in Section 10.1 of the Pooling
Agreement.
"Transaction Accounts" is defined in Section 4.2 of the Pooling
Agreement.
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<PAGE>
"Transaction Documents" means each Seller Transaction Document,
the Pooling Agreement, the Seller Guaranty, each Supplement, the
Certificate Purchase Agreements and the related Certificates, and each
other agreement designated as a Transaction Document in any Supplement,
as any of the same from time to time may be amended, supplemented, amended
and restated or otherwise modified in accordance with the terms thereof.
"Transfer Agent and Registrar" means any transfer agent and
registrar appointed pursuant to Section 6.3 of the Pooling Agreement and
shall initially be Trustee.
"Transferor" means Inter-City Products Receivables Company, L.P.,
a Tennessee limited partnership.
"Transferor Certificate" means a certificate substantially in the
form of Exhibit E to the Pooling Agreement, as described in Section 4.1
of the Pooling Agreement.
"Transferor Interest" is defined in Section 4.1 of the Pooling
Agreement.
"Transferor Retained Interest" means, on any date of
determination, the sum of the Transferor Interest and the interest in the
Trust represented by any Investor Certificates (regardless of Series or
class) owned or otherwise retained by the Transferor.
"Transferred Assets" is defined in Section 2.1 of the Pooling
Agreement.
"Trigger Event" is defined in Section 9.3(a) of the Pooling
Agreement.
"Trust" means the trust created by the Pooling Agreement, which
shall be known as the Inter-City Products Receivables Master Trust.
"Trust Asset Shortfall" means, as of any date of determination,
that the aggregate Required Receivables for all outstanding Series exceeds
the aggregate Unpaid Balance of Receivables held by the Trust on such
date.
"Trustee" means LaSalle National Bank, a national banking
association, in its capacity as agent for the Certificateholders, or its
successor-in-interest, or any successor trustee appointed as provided in
the Pooling Agreement.
"UCC" means the Uniform Commercial Code as from time to time in
effect in the applicable jurisdiction or jurisdictions.
"Unmatured Early Amortization Event" means any event that, with
the giving of notice or lapse of time, or both, would become an Early
Amortization Event.
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<PAGE>
"Unpaid Balance" of any Receivable means at any time the unpaid
amount thereof (excluding interest accrued for the period after the due
date of such Receivable and related service charges) as shown in the books
of Servicer at such time.
"Write-Off" means any Receivable that, consistent with the
applicable Credit and Collection Policy, has been written off as
uncollectible.
B. Other Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. To the extent that the
definitions of accounting terms in any Transaction Document are
inconsistent with the meanings of such terms under GAAP, the definitions
contained in such Transaction Document shall control.
C. Reference. The words "hereof", "herein" and "hereunder" and
words of similar import when used in any Transaction Document shall refer
to such Transaction Document as a whole and not to any particular
provision of such Transaction Document; and reference to "Section",
"subsection", "Schedule" and "Exhibit" in any Transaction Document are
references to Sections, subsections, Schedules and Exhibits in or to such
Transaction Document unless otherwise specified in such Transaction
Document .
D. Number and Gender. Each defined term used in the Transaction
Documents has a comparable meaning when used in its plural or singular
form. Each gender-specific term used in the Transaction Documents has a
comparable meaning whether used in a masculine, feminine or gender-neutral
form.
E. Including. Whenever the term "including" (whether or not that
term is followed by the phrase "but not limited to" or "without
limitation" or words of similar effect) is used in the Transaction
Documents in connection with a listing of items within a particular
classification, that listing will be interpreted to be illustrative only
and will not be interpreted as a limitation on, or exclusive listing of,
the items within that classification.
F. Taking Actions. Actions permitted under the Transaction
Documents may be taken at any time and from time to time in the actor's
sole discretion.
G. Reference to Statutes and Regulations. References to a
statute shall refer to such statute and any successor statute, and to all
regulations promulgated under or implementing the statute or successor,
as in effect at the relevant time. References to a regulation shall refer
to such regulation and any successor regulation, as in effect from time
to time.
H. Regulatory Bodies. References to a governmental or quasi-
governmental agency, authority or instrumentality shall also refer to a
regulatory body that succeeds to the functions of such agency, authority
or instrumentality.
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<PAGE>
I. Time Periods. In computing periods from a specified date to
a later specified date, when precise times of day are not stated, the
words "from" and "commencing on" (and the like) mean "from and including,"
and the words "to," "until" and "ending on" (and the like) mean "to but
excluding."
J. Time of Day. Unless otherwise specified, indications of time
of day mean New York, New York time.
K. Interpretation of Standards. The parties acknowledge
that this Pooling Agreement and the other Transaction Documents contain
many determinations, standards and measurements which must be made or
applied by the Transferor and the Servicer in the process of performing
their obligations under this Agreement and the other Transaction
Documents, including the determination of whether Receivables constitute
Eligible Receivables, when or whether Dilutions, Write-offs or Early
Amortization Events have occurred, and many other matters. The Transferor
and the Servicer shall make or apply such determinations, standards and
measurements in good faith and using reasonable judgment, and the
Transferor and the Servicer shall bear the burden of proof in any dispute
with the Trustee or any Required Person regarding any such determinations,
standards or measurements.
L. "Or." The word "or" is not exclusive. Thus, "A or B" means
"A or B or both."
M. Agreements. References to any agreement, arrangement or other
document (including the Buyer Note) shall refer to such agreement,
arrangement or other document as the same may be amended, supplemented,
amended and restated, endorsed or otherwise modified from time to time,
together with any other agreement, arrangement or other document entered
into or executed in substitution therefor or renewal thereof in accordance
with the Transaction Documents.
N. Valuation of Foreign Currency Receivables. Amounts
payable with respect to any Receivable denominated in a currency other
than Dollars shall be calculated at the applicable exchange rate in effect
at the time of the origination of such Receivable, except that Collections
with respect to any such Receivable shall be calculated at the applicable
exchange rate in effect on the date on which such Collection is received.
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<PAGE>
INTER-CITY PRODUCTS CORPORATION (USA)
SERIES 1996-1 SUPPLEMENT
to POOLING AND SERVICING AGREEMENT
dated as of July 25, 1996
among
INTER-CITY PRODUCTS RECEIVABLES COMPANY, L.P.,
as Transferor,
INTER-CITY PRODUCTS CORPORATION (USA),
as Servicer,
and
LASALLE NATIONAL BANK,
as Trustee
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS; INCORPORATION OF TERMS
SECTION 1.1 Definitions. . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Incorporation of Terms . . . . . . . . . . . . . .19
ARTICLE II
DESIGNATION
SECTION 2.1 Designation. . . . . . . . . . . . . . . . . . . .20
ARTICLE III
CONDITIONS TO ISSUANCE
SECTION 3.1 Conditions to Issuance . . . . . . . . . . . . . .20
ARTICLE IV
PAYMENTS AND ALLOCATIONS
SECTION 4.1 Interest; Additional Amounts . . . . . . . . . . .20
SECTION 4.2 Daily Calculations and Series Allocations. . . . .21
SECTION 4.3 Allocations of Daily Series Collections During
Revolving Period. . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 4.4 Allocations of Daily Series Collections (Other
than During the
Revolving Period). . . . . . . . . . . . . . . . . . .22
SECTION 4.5 Withdrawals from the Equalization Account. . . . .24
SECTION 4.6 Available Subordinated Amount. . . . . . . . . . .24
SECTION 4.7 Write-Offs and Recoveries. . . . . . . . . . . . .25
SECTION 4.8 Certain Dilution in an Amortization Period or
Early Amortization
Period . . . . . . . . . . . . . . . . . . . . . . . .26
SECTION 4.9 Pre-Closing Modification Notification. . . . . . .27
SECTION 4.10 Calculations of Reserves. . . . . . . . . . . . .27
SECTION 4.11 Investment of Funds in Transaction Accounts. . . .27
ARTICLE V
DISTRIBUTIONS AND REPORTS
SECTION 5.1 Distributions. . . . . . . . . . . . . . . . . . .28
SECTION 5.2 Payments in Respect of Transferor Certificate. . .29
SECTION 5.3 Daily Reports and Monthly Reports. . . . . . . . .30
SECTION 5.4 Annual Tax Information . . . . . . . . . . . . . .30
<PAGE>
SECTION 5.5 Periodic Perfection Certificate. . . . . . . . . .30
ARTICLE VI
EARLY AMORTIZATION EVENTS
SECTION 6.1 Early Amortization Events. . . . . . . . . . . . .31
SECTION 6.2 Early Amortization Period. . . . . . . . . . . . .33
ARTICLE VII
OPTIONAL REDEMPTION; INDEMNITIES
SECTION 7.1 Optional Redemption of Investor Interests. . . . .33
SECTION 7.2 Indemnification by Transferor. . . . . . . . . . .34
SECTION 7.3 Indemnification by Servicer. . . . . . . . . . . .35
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Governing Law. . . . . . . . . . . . . . . . . . .35
SECTION 8.2 Counterparts . . . . . . . . . . . . . . . . . . .35
SECTION 8.3 Severability of Provisions . . . . . . . . . . . .35
SECTION 8.4 Amendment, Waiver, Etc.. . . . . . . . . . . . . .35
SECTION 8.5 Trustee. . . . . . . . . . . . . . . . . . . . . .36
SECTION 8.6 Instructions in Writing. . . . . . . . . . . . . .36
SECTION 8.7 Rule 144A. . . . . . . . . . . . . . . . . . . . .36
SECTION 8.8 Supplemental Ratings Requirement . . . . . . . . .36
EXHIBITS
EXHIBIT A Part 1. Form of Class A Certificate
Part 2. Form of Class B Certificate
EXHIBIT B Form of Daily Report
Part 1. For Use other than in Early
Amortization Period
Part 2. For Use in Early Amortization Period
EXHIBIT C Form of Monthly Report
Part 1. For Use other than in Early
Amortization Period
Part 2. For Use in Early Amortization Period
EXHIBIT D Form of Seller Guaranty
<PAGE>
This SERIES 1996-1 SUPPLEMENT, dated as of July 25, 1996 (this
"Supplement"), is made among INTER-CITY PRODUCTS RECEIVABLES COMPANY,
L.P., a Tennessee limited partnership, as Transferor, INTER-CITY PRODUCTS
CORPORATION (USA), a Delaware corporation, as the Initial Servicer, and
LASALLE NATIONAL BANK, a national banking association, as Trustee.
Pursuant to the Pooling and Servicing Agreement, dated as of the
date hereof (as it may be amended, supplemented or otherwise modified from
time to time, and as supplemented hereby, the "Pooling Agreement"), among
Transferor, Servicer and Trustee, Transferor may from time to time issue,
and direct Trustee to authenticate, on behalf of the Trust, one or more
Series of Certificates representing undivided interests in the Transferred
Assets. Certain terms applicable to a Series are to be set forth in a
Supplement. This Supplement is a "Supplement" as that term is defined in
the Pooling Agreement.
Pursuant to this Supplement, Transferor and Trustee shall create
a Series of Certificates ("Series 1996-1") and specify certain of their
terms.
ARTICLE I
DEFINITIONS; INCORPORATION OF TERMS
SECTION 1.1 Definitions. (a) Capitalized terms used and not
otherwise defined herein are used as defined in Appendix A to the Pooling
Agreement. This Supplement shall be interpreted in accordance with the
conventions set forth in Part B of that Appendix A.
(b) Each reference in this Supplement to funds on deposit in the
Carrying Cost Account, the Equalization Account or the Principal Funding
Account (or similar phrase) refers only to funds in the administrative
sub-accounts of those Accounts that are allocated to Series 1996-1. Unless
the context otherwise requires, in this Supplement: (i) each reference to
a "Daily Report" or "Monthly Report" refers to a Daily Report or Monthly
Report for the Series 1996-1 Certificates; (ii) each reference to the
"Servicing Fee" refers to the Servicing Fee allocable to Series 1996-1;
(iii) each reference to the "Series Collection Allocation Percentage" or
the "Series Loss Allocation Percentage" refers to the Series Collection
Allocation Percentage or Series Loss Allocation Percentage for the Series
1996-1 Certificates; and (iv) each reference to the Transaction Documents
shall include a reference to the Certificate Purchase Agreements.
(c) Each capitalized term defined below relates only to the Series
1996-1 Certificates and to no other Series of Certificates. Whenever used
in this Supplement, the following words and phrases shall have the
following meanings:
<PAGE>
"ABR Tranche" means, during any Interest Period, and as the
context shall indicate, (i) any portion of the Class A Invested Amount
that, in accordance with the Class A Certificate Purchase Agreement,
accrues interest based on the Alternate Base Rate and (ii) if the Holder
of the Class B Certificates shall have given the notice specified in
Section 3.2 of the Class B Certificate Purchase Agreement (and for so long
as such notice continues in effect), the Class B Invested Amount.
"Additional Amounts" means all amounts payable to the Holders or
the Agent pursuant to the Certificate Purchase Agreements, including,
without limitation pursuant to Sections 2.2(c), 2.3(b), 4.2, 4.3, 4.5,
4.6, 9.10, and 10.5 of the Class A Certificate Purchase Agreement and
Sections 3.2, 3.3, 3.4, 3.5 and 8.5 of the Class B Certificate Purchase
Agreement; provided that "Additional Amounts" shall not include principal
or interest on the Series 1996-1 Certificates or Non-Usage Fees.
"Adjusted Eligible Receivables" means, on any Business Day, the
result of (a) the aggregate Unpaid Balance of Eligible Receivables, minus
(b) the Unapplied Cash, plus (c) the Aggregate Retained Balances, minus
(d) the sum of Excess Foreign Obligor Balances, Excess Foreign Currency
Receivables, Co-Op Advertising Reserves and Cash Discount Reserves, minus
(e) on or after April 1, 2001, all Extended Term Receivables arising on
or after such date in each case as reflected in the Daily Report for that
day.
"Aged Receivables Ratio" means, as calculated in each Monthly
Report as of the Cut-Off Date for the related Calculation Period, a
fraction (expressed as a percentage) having (a) a numerator that is the
sum of (i) the aggregate Unpaid Balance of Eligible Receivables (and
Receivables that would be Eligible Receivables but for clause (c) of the
definition of Eligible Receivables) that remained outstanding 151 to 180
days (except Receivables of General, for which the reference shall be to
61 to 90 days) after their respective original due dates, as determined
as of the Cut-Off Date for such Calculation Period, plus (ii) the
aggregate Unpaid Balance of Eligible Receivables (and Receivables that
would be Eligible Receivables but for clause (c) of the definition of
Eligible Receivables) that were written off as uncollectible during the
most recently ended Calculation Period and that, if not so written off,
would have been outstanding not more than 180 days (except Receivables of
General, for which the reference shall be to 90 days) after their
respective original due dates, as determined as of that Cut-Off Date, plus
(iii) the aggregate amount of unpaid credit memoranda issued by the
Servicer, to the extent that such unpaid credit memoranda have reduced the
aggregate balance of Eligible Receivables pursuant to clause (i), and (b)
a denominator that is the aggregate amount payable pursuant to invoices
giving rise to Eligible Receivables (and Receivables that would be
Eligible Receivables but for clause (c) of the definition of Eligible
Receivables) that were generated by the Sellers during the Calculation
Period that occurred seven Calculation Periods (except Eligible
Receivables of General, for which the reference shall be to three
Calculation Periods and except for Eligible Receivables of Coastline, for
which the reference shall be to six Calculation Periods) and prior to the
most recently ended Calculation Period, as determined as of the Cut-Off
Date for such prior Calculation Period;
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<PAGE>
provided, however, that for purposes of calculating this ratio, any
unapplied credit memoranda shall be excluded.
"Agent" means The Chicago Corporation, a Delaware corporation, and
its successors and assigns.
"Aggregate Retained Balances" means, on any Business Day, the
aggregate of the balances retained in Lockbox Accounts or Concentration
Accounts for items in the process of collection but for which funds have
not been made available by the related Lockbox Bank or Concentration
Account Bank, provided that (i) no notice of insufficient funds or similar
situation shall exist with respect thereto; (ii) the Unpaid Balance of
Receivables shall have been reduced by an amount equal to such balances;
and (iii) the Obligor which remitted such funds shall have no Receivables
which have aged more than 120 days past their respective original invoice
dates.
"Alternate Base Rate" means, on any day, a fluctuating rate of
interest per annum equal to the highest of:
(a) the rate of interest announced, from time to time,
by the Trustee as its prime commercial rate for United States
dollar loans made in the United States for any day, and
(b) the Federal Funds Rate.
Any change in the interest rate resulting from a change in the prime
commercial rate announced by the Trustee shall become effective without
prior notice to Transferor or Servicer as of 12:01 a.m., New York City
time, on the Business Day on which each change in the prime commercial
rate is announced by the Trustee. The prime commercial rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged by the Trustee to any customer. The Trustee may make
commercial loans or other loans at rates of interest at, above or below
the prime commercial rate.
"Amortization Period" means the period (x) beginning on July 1,
2001, and (y) ending on the earlier of (i) the Expected Final Payment Date
and (ii) the date, if any, on which an Early Amortization Period
commences.
"Applicable Ratings Factor" means the Class A Ratings Factor or
the Class B Ratings Factor, as specified in each calculation where the
Applicable Ratings Factor is used.
"Applicable Receivables" is defined in Section 4.10.
"ASA Measuring Period" means, for any Cut-Off Date falling in an
Early Amortization Period, the Calculation Period ending on that Cut-Off
Date (or the portion thereof falling after
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<PAGE>
the Early Amortization Calculation Date, in the case of the first Cut-Off
Date falling in the Early Amortization Period).
"Available Subordinated Amount" means, at any time during an Early
Amortization Period, the amount calculated pursuant to Section 4.6.
"Base Amount" means, on any Business Day, the result of the
following formula:
[NER x SCAP x (100%-CBRR)] - CASD - CCRR
where:
NER = the Net Eligible Receivables as
reported in the Daily Report for that
Business Day;
SCAP = the Series Collection Allocation
Percentage for that Business Day;
CBRR = the Class B Reserve Ratio in effect for
that Business Day;
CASD = the Class A Subordination Deficit for that
Business Day; and
CCRR = the Carrying Cost Receivables Reserve as
reported in the Daily Report for such
day.
"Carrying Cost Cash Required Amount" means, on any Business Day,
an amount equal to the Current Carrying Costs.
"Carrying Cost Receivables Reserve" means, on any Business Day,
the result of:
(a) the Current Carrying Costs; plus
(b) (i) the Class A Invested Amount, multiplied by
(ii) 1.5 multiplied by the weighted average of the interest rates
on Class A Certificates, multiplied by (iii) a fraction the
numerator of which is the product of two and the number of
Portfolio Collection Days and the denominator of which is 360;
plus
(c) (i) the Class B Invested Amount, multiplied by
(ii) 1.5 multiplied by the weighted average of the interest rates
on the Class B Certificates, multiplied by (iii) a fraction the
numerator of which is the product of two and the number of
Portfolio Collection Days and the denominator of which is 360;
plus
(d) (i) the Class A Stated Amount minus the Class A
Invested Amount, multiplied by (ii) the Non-Usage Fee Rate,
multiplied by (iii) a fraction the numerator of which is the
product of two and the number of Portfolio Collection Days and
the denominator of which is 360; plus
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<PAGE>
(e) the product of (i) the Series Collection
Allocation Percentage at the close of business on the next
preceding Distribution Date, multiplied by (ii) the aggregate
Unpaid Balance of Receivables on the next preceding Distribution
Date, multiplied by (iii) 1%, multiplied by (iv) a fraction the
numerator of which is the product of two and the number of
Portfolio Collection Days and the denominator of which is 360;
minus
(f) the balance on deposit in the Carrying Cost
Account at the beginning of that Business Day.
"Cash Discount Credits" means, with respect to any period of time,
all cash discounts for prompt payment taken by Obligors with respect to
Eligible Receivables of ICP during such period.
"Cash Discount Reserves" means, on any day, 1.5% of the aggregate
Unpaid Balance of those Eligible Receivables of ICP for which cash
discounts for prompt payment are available.
"Certificate Purchase Agreements" means the Class A Certificate
Purchase Agreement and the Class B Certificate Purchase Agreement.
"Class A Certificate" is defined in Section 2.1. Each Class A
Certificate shall be substantially in the form of Part 1 of Exhibit A.
"Class A Certificate Purchase Agreement" means the Class A
Certificate Purchase Agreement dated as of the Closing Date among
Transferor, Servicer and the purchaser of the Class A Certificates. The
Class A Certificate Purchase Agreement is hereby designated a "Transaction
Document" for purposes of the Pooling Agreement.
"Class A Certificate Spread" means with respect to any Tranche of
the Class A Certificates, 1.20% per annum; provided that at any time that
an Unmatured Early Amortization Event or an Early Amortization Event has
occurred and is continuing, "Class A Certificate Spread" means with
respect to any Tranche of the Class A Certificates, 3.20% per annum.
"Class A Excess Concentration Balances" means, on any day and with
respect to all Obligors as a group, the minimum aggregate outstanding
balance of Eligible Receivables that do not satisfy all of the following
tests:
(i) no single Obligor may account for a percentage of
Adjusted Eligible Receivables greater than the Class A
Concentration Percentage multiplied by 35.0%;
(ii) no two Obligors together may account for a
percentage of Adjusted Eligible Receivables in excess of the
Class A Concentration Percentage multiplied by 50.0%;
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<PAGE>
(iii) no six Obligors together may account for a
percentage of Adjusted Eligible Receivables in excess of the
Class A Concentration Percentage; and
(iv) no Obligor (other than the six Obligors with the
largest outstanding balances of Eligible Receivables after the
eliminations effected pursuant to clauses (i) to (iii) above) may
account for more than 10% of the Class A Concentration
Percentage;
where "Class A Concentration Percentage" means the Class A Reserve
Ratio minus the product of the average of the Dilution Ratios for the
period of 12 preceding Calculation Periods ending on the Cut-Off Date,
multiplied by the Dilution Horizon Variable for the Cut-Off Date.
Class A Excess Concentration Balances will be measured on each day during
each Distribution Period with respect to Obligors for such period. For
purposes of this definition, all Obligors that are Affiliates of each
other shall be treated as a single Obligor.
"Class A Incremental Concentration Balance" means at any time, the
excess, if any, of (i) the sum of the Class A Excess Concentration
Balances with respect to all Obligors over (ii) the sum of the Class B
Excess Concentration Balances with respect to all Obligors. The Class A
Incremental Concentration Balance will be measured on each day during each
Distribution Period.
"Class A Invested Amount" means, at any time, the sum of the
purchase prices paid for Class A Purchases made at or prior to that time,
reduced (but not below zero) by (a) the aggregate amount of all
distributions that have been made to the Holders of the Class A
Certificates on account of principal, and (b) the amount of all Investor
Write-Offs that have been applied to reduce the Class A Invested Amount
(net of Investor Allocable Recoveries and Investor Allocable Dilution
Adjustments that have been applied to reinstate the Class A Invested
Amount).
"Class A Purchases" means Purchases made in respect of Class A
Certificates pursuant to the Class A Certificate Purchase Agreement.
"Class A Ratings Factor" means 2.50.
"Class A Required Reserves" means, at any time, the product of (a)
the excess of the Net Eligible Receivables over the Class A Incremental
Concentration Balance multiplied by (b) the Class A Reserve Ratio
multiplied by (c) the Series Collection Allocation Percentage.
"Class A Reserve Ratio" means, during any Distribution Period, the
greatest of (a) 25%, (b) the Loss Reserve Ratio plus the Dilution Reserve
Ratio (each calculated using the Class A Ratings Factor), and (c) the Loss
Reserve Ratio (Z-value) plus the Dilution Reserve Ratio (Z-value) (each
calculated using the Class A Ratings Factor and the Class A Z-value), in
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each case as calculated in the Monthly Report required to be delivered on
the Report Date immediately prior to the start of that Distribution
Period, provided that during the period from the Closing Date to the first
Distribution Date thereafter, the Class A Reserve Ratio shall be 50.92%.
"Class A Restrictive Components" means on any Business Day, the
sum of (i) the Class A Incremental Concentration Balance and (ii) Included
Foreign Obligor Balances; provided that to the extent any Class B Excess
Concentration Balance exists as a result of taking into account any
Included Foreign Obligor Balance, such Included Foreign Obligor Balance
shall be excluded from the calculation of Class A Restrictive Components.
"Class A Stated Amount" means as to any Class A Certificate, the
initial maximum principal amount that may be required to be funded by the
Holder of such Certificate, as such amount may be reduced pursuant to
Section 2.3 of the Certificate Purchase Agreement, which initial amount
in the aggregate is $60,000,000.
"Class A Subordination Deficit" means on any Business Day, the
positive result (if any) of
(a) the Class A Required Reserves, minus the Class
B Required Reserves, plus
(b) the Class A Restrictive Components, minus
(c) the Class B Invested Amount.
(all calculated as of the beginning of that Business Day); provided that
at any time when no Class A Certificates are outstanding the Class A
Subordination Deficit shall equal zero.
"Class A Z-value"means 2.58.
"Class B Certificate" is defined in Section 2.1. Each Class B
Certificate shall be substantially in the form of Part 2 of Exhibit A.
"Class B Certificate Purchase Agreement" means the Class B
Certificate Purchase Agreement dated as of the Closing Date among
Transferor, Servicer and the purchasers of the Class B Certificates. The
Class B Certificate Purchase Agreement is hereby designated a "Transaction
Document" for purposes of the Pooling Agreement.
"Class B Certificate Spread" means with respect the Class B
Certificates, 3.50% per annum; provided that at any time that an Unmatured
Early Amortization Event or an Early Amortization Event has occurred and
is continuing, "Class B Certificate Spread" means with respect to the
Class B Certificates 5.50% per annum.
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"Class B Excess Concentration Balances" means, on any day and with
respect to all Obligors as a group, the minimum aggregate outstanding
balance of Eligible Receivables that do not satisfy all of the following
tests:
(i) no single Obligor may account for a percentage of
Adjusted Eligible Receivables greater than the Class B
Concentration Percentage multiplied by 45.0%;
(ii) no two Obligors together may account for a
percentage of Adjusted Eligible Receivables in excess of the
Class B Concentration Percentage multiplied by 67.5%;
(iii) no four Obligors together may account for a
percentage of Adjusted Eligible Receivables in excess of the
Class B Concentration Percentage; and
(iv) no Obligor (other than the four Obligors with the
largest outstanding balances of Eligible Receivables after the
eliminations effected pursuant to clauses (i) to (iii) above) may
account for more than 12.5% of the Class B Concentration
Percentage;
where "Class B Concentration Percentage" means (i) the Class B
Reserve Ratio minus (ii) the product of the average of the Dilution Ratios
for the period of 12 preceding Calculation Periods ending on the Cut-Off
Date, multiplied by the Dilution Horizon Variable for the Cut-Off Date,
minus (iii) the quotient of (x) Included Foreign Obligor Balances divided
by (y) Adjusted Eligible Receivables.
Class B Excess Concentration Balances will be measured on each day during
each Distribution Period with respect to Obligors for such period. For
purposes of this definition, all Obligors that are Affiliates of each
other shall be treated as a single Obligor.
"Class B Invested Amount" means, at any time, the sum of the
purchase prices paid for Class B Purchases made at or prior to that time
divided by 99.45%, reduced (but not below zero) by (a) the aggregate
amount of all distributions that have been made to the Holders of the
Class B Certificates on account of principal, and (b) the amount of all
Investor Write-Offs that have been applied to reduce the Class B Invested
Amount (net of Investor Allocable Recoveries and Investor Allocable
Dilution Adjustments that have been applied to reinstate the Class B
Invested Amount).
"Class B Purchases" means Purchases made in respect of Class B
Certificates pursuant to the Class B Certificate Purchase Agreement.
"Class B Ratings Factor" means 2.0.
"Class B Required Reserves" means, at any time, the product of (a)
the Net Eligible Receivables multiplied by (b) the Class B Reserve Ratio
multiplied by (c) the Series Collection Allocation Percentage.
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"Class B Reserve Ratio" means, during any Distribution Period, the
greatest of (a) 18%, (b) the Loss Reserve Ratio plus the Dilution Reserve
Ratio (each calculated using the Class B Ratings Factor), and (c) the Loss
Reserve Ratio (Z-value) plus the Dilution Reserve Ratio (Z-value) (each
calculated using the Class B Ratings Factor and the Class B Z-value), in
each case as calculated in the Monthly Report required to be delivered on
the Report Date immediately prior to the start of that Distribution
Period, provided that during the period from the Closing Date to the first
Distribution Date thereafter, the Class B Reserve Ratio shall be 41.54%.
"Class B Z-value"means 1.96.
"Closing Date" means July 25, 1996.
"Co-Op Advertising Credits" mean cooperative advertising credits
granted by ICP, but only to the extent that (i) such credits are
calculated by means of a flat percentage of sales and require no further
action by Obligors to be earned and (ii) such credits are recorded as
credits concurrently with the sending of the related invoice.
"Co-Op Advertising Reserves" means, on any day, all outstanding
and unpaid Co-Op Advertising Credits in existence with respect to all
Eligible Receivables.
"Current Carrying Costs" means, on any Business Day during any
Distribution Period, the sum of (i) the amount of accrued and unpaid
interest on the Series 1996-1 Certificates through such Business Day, (ii)
the amount of additional interest that will be accrued and unpaid on the
Series 1996-1 Certificates through the last day of such Distribution
Period at the interest rates applicable to the Invested Amount as of such
Business Day, (iii) the amount of the Servicing Fee that will be payable
on the next Distribution Date, (iv) the amount of accrued and unpaid Non-
Usage Fees with respect to the Class A Certificates through such Business
Day, and (v) the amount of Non-Usage Fees that will accrue and be payable
on the next Distribution Date based on the current Stated Amount and
Invested Amount of the Class A Certificates.
"Daily Series Collections" is defined in Section 4.2.
"DCR" means Duff & Phelps Credit Rating Co.
"Designated Receivables" is defined in Section 4.10.
"Dilution Horizon Variable" means, at any time, a fraction having
(a) a numerator equal to the sum of the aggregate amounts payable pursuant
to invoices giving rise to Receivables and generated by the Sellers during
the three Calculation Periods ending on the most recent Cut-Off Date (as
of that Cut-Off Date) and (b) a denominator equal to the Net Eligible
Receivables as of the most recent Cut-Off Date.
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"Dilution Ratio" means, as calculated in each Monthly Report as
of the most recent Cut-Off Date, a fraction (expressed as a percentage)
having (a) a numerator equal to the aggregate amount of Dilution on the
Eligible Receivables occurring during the three Calculation Periods ending
on the most recent Cut-Off Date (except for Planned ICP Dilution), and (b)
a denominator equal to the aggregate amounts payable pursuant to invoices
giving rise to Eligible Receivables that were generated by the Seller
during the fifth, fourth and third preceding Calculation Periods (so that,
for example, if the Calculation Periods specified in clause (a)
corresponded to the April, May and June Calculation Periods, the
Calculation Periods in this clause (b) would be the ones corresponding to
the January, February and March Calculation Periods).
"Dilution Reserve Ratio" means, as calculated in each Monthly
Report, the result (expressed as a percentage) calculated in accordance
with the following formula:
{(ARF x ADR) + [(HDR-ADR) x (HDR/ADR)]} x DHV
where:
ADR = the average of the Dilution Ratios during the
period of 12 consecutive Calculation Periods
ending on the related Cut-Off Date;
ARF = the Applicable Ratings Factor;
DHV = the Dilution Horizon Variable; and
HDR = the highest Dilution Ratio as of the end of any
of the 12 consecutive Calculation Periods ending
on the related Cut-Off Date.
"Dilution Reserve Ratio (Z-value)" means, as calculated in each
Monthly Report, the result (expressed as a percentage) calculated in
accordance with the following formula:
[(ARF x ADR) + (Z-value x SD)] x DHV
where:
ADR = the average of the Dilution Ratios during the
period of 12 consecutive Calculation Periods
ending on the related Cut-Off Date.
ARF = the Applicable Ratings Factor.
DHV = the Dilution Horizon Variable.
SD = the sample standard deviation, during the period
of 12 consecutive Calculation Periods ending on
the related Cut-Off Date, of the Dilution Ratio.
"Early Amortization Calculation Date" means the day before an
Early Amortization Period begins.
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"Early Amortization Period" means the period beginning on the date
(if any) specified in Section 6.2 and ending on the day on which the
Invested Amount has been reduced to zero.
"Eurodollar Tranche" means, during any Interest Period, and as the
context shall indicate, (i) any portion of the Class A Invested Amount
that, in accordance with the Class A Certificate Purchase Agreement,
accrues interest based on LIBOR or (ii) unless the Holder of the Class B
Certificates shall have given the notice specified in Section 3.2 of the
Class B Certificate Purchase Agreement (and for so long as such notice
continues in effect), the Class B Invested Amount.
"Excess Foreign Currency Receivables" means, on any day, the
positive result (if any), of the aggregate Unpaid Balance of Eligible
Receivables which are denominated and payable in currencies other than
Dollars, minus 0.5% of the aggregate Unpaid Balance of Eligible
Receivables.
"Excess Foreign Obligor Balances" means, on any day, without
duplication, the sum of (a) the positive result (if any), of the aggregate
Unpaid Balance of Eligible Receivables generated by Obligors (other than
ICP Canada) who are not Domestic Persons, minus 5% of the aggregate Unpaid
Balance of Eligible Receivables, plus (b) the positive result (if any),
of the aggregate Unpaid Balance of Eligible Receivables generated by any
single Obligor who is not a Domestic Person, minus 1% of the aggregate
Unpaid Balance of Eligible Receivables, plus (c) the positive result (if
any), of the aggregate Unpaid Balance of Eligible Receivables generated
by Obligors who are located in countries whose Dollar denominated
obligations have a debt rating from S&P of less than "A" (or its
equivalent), minus 2% of the aggregate Unpaid Balance of Eligible
Receivables.
"Expected Final Payment Date" means the Distribution Date
occurring in September 2001.
"Federal Funds Rate" means (a) the weighted average of the rates
on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for the day
(or, if the day is not a Business Day, the immediately preceding Business
Day) by the Federal Reserve Bank of New York; provided that if the rate
is not so published for any Business Day, the rate for purposes of this
clause will be the average of the quotations for the day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it, plus (b) 100 basis points.
"Final Scheduled Payment Date" means the Distribution Date
occurring in August 2002.
"First Issuance Date" means July 25, 1996.
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"Fully Funded Date" means the first date falling in the
Amortization Period or an Early Amortization Period on which there are
funds on deposit in the Carrying Cost Account and the Principal Funding
Account that, in the aggregate, equal or exceed the sum of (i) any
Servicing Fee payable to anyone other than a Related Person on the first
Distribution Date falling after that date, and (ii) the Investor Repayment
Amount.
"Guarantor" means ICP, in its capacity as the guarantor under the
Seller Guaranty.
"Holdback Account Termination Date" is defined in Section 4.4.
"Holder" means a Holder (as defined in the Pooling Agreement) of
a Class A Certificate or Class B Certificate.
"Included Foreign Obligor Balances" means, on any day, the result
of (i) the aggregate Unpaid Balance of Eligible Receivables generated by
Obligors (other than ICP Canada) who are not Domestic Persons minus (ii)
the Excess Foreign Obligor Balances.
"Interest Payment Date" means, (i) with respect to any ABR
Tranche, the date that is one month after the first day of such Tranche's
Interest Period (provided that if such day is not a London/U.S. Business
Day, the Interest Payment Date shall instead be the next London/U.S.
Business Day), or (ii) with respect to a Eurodollar Tranche, the date that
is one month after the first day of such Eurodollar Tranche's Interest
Period (provided that if such day is not a London/U.S. Business Day, the
Interest Payment Date shall instead be the next day that is a London/U.S.
Business Day, unless such day falls in the next calendar month, in which
case the Interest Payment Date shall instead be the next preceding day
that is a London/U.S. Business Day).
"Interest Period" means as to each Tranche (if any) from time to
time, each period from and including the date upon which that Tranche was
first designated as such pursuant to the Class A Certificate Purchase
Agreement (or the end of the preceding Interest Period for such Tranche,
if there has been one) to but excluding the date that is one month
thereafter; (provided, with respect to an Interest Period for a Eurodollar
Tranche, that if such day is not a London/U.S. Business Day, the Interest
Payment Date shall instead be the next day that is a London/U.S. Business
Day, unless such day falls in the next calendar month, in which case the
Interest Payment Date shall instead be the next preceding day that is a
London/U.S. Business Day).
"Invested Amount" means, at any time, the sum of the Class A
Invested Amount plus the Class B Invested Amount.
"Investor Allocable Dilution" means for any Calculation Period or
ASA Measuring Period, the product of the aggregate amount of Dilution for
that Calculation Period or ASA Measuring Period as to which neither the
applicable Seller nor the Guarantor has made any
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payment required by Section 3.1 of the Purchase Agreement or the Seller
Guaranty on account of Seller Dilution Adjustments multiplied by the
Series Loss Allocation Percentage as of the beginning of that Calculation
Period or ASA Measuring Period, multiplied by the Investor Allocation
Percentage as of the first Business Day of that Calculation Period or ASA
Measuring Period.
"Investor Allocable Dilution Adjustments" is defined in Section
4.8.
"Investor Allocable Loss Amount" means, for any ASA Measuring
Period, the product of the Loss Amount for that ASA Measuring Period,
multiplied by the Series Loss Allocation Percentage as of the beginning
of that ASA Measuring Period, multiplied by the Investor Allocation
Percentage as of the first Business Day of that ASA Measuring Period.
"Investor Allocable Recoveries" means, for any ASA Measuring
Period, the product of the Net Recoveries for that ASA Measuring Period,
multiplied by the Series Loss Allocation Percentage as of the beginning
of that ASA Measuring Period, multiplied by the Investor Allocation
Percentage as of the first Business Day of that ASA Measuring Period.
"Investor Allocation Percentage" means:
(x) on any Business Day falling in the Revolving Period,
a fraction (expressed as a percentage, which in any event may not
exceed 100%) (a) the numerator of which is the Net Invested
Amount as of that Business Day, and (b) the denominator of which
is the Base Amount as of that Business Day; and
(y) on any Business Day falling in the Amortization
Period or an Early Amortization Period, a fraction (expressed as
a percentage, which in any event may not exceed 100%) (a) the
numerator of which is the Net Invested Amount as of the first day
of the Amortization Period or the Early Amortization Calculation
Date, as applicable, and (b) the denominator of which is the Base
Amount as of the first day of the Amortization Period or the
Early Amortization Calculation Date, as applicable.
"Investor Repayment Amount" means, on any Business Day falling in
the Amortization Period or an Early Amortization Period, the sum of (a)
the outstanding principal amount of the Series 1996-1 Certificates, plus
(b) the interest and any Additional Amounts known to be payable on the
Series 1996-1 Certificates on the first Distribution Date falling after
that date, plus (c) an amount determined by the Trustee as reasonably
expected to constitute Additional Amounts but are not known to be payable
on the Series 1996-1 Certificates on the first Distribution Date falling
after that date.
"Investor Write-Offs" means, as calculated in any Monthly Report
relating to a Calculation Period falling completely or partially in an
Early Amortization Period:
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(a) if the Available Subordinated Amount is greater than
zero at the end of the related ASA Measuring Period, zero; and
(b) if the Available Subordinated Amount is zero at the
end of the related ASA Measuring Period (after taking into
account any reduction in the Available Subordinated Amount shown
in such Monthly Report), the excess (if any) of (x) the sum of
the Investor Allocable Loss Amount and the Investor Allocable
Dilution minus the sum of Investor Allocable Recoveries and
Investor Allocable Dilution Adjustments for the related ASA
Measuring Period, over (y) the Available Subordinated Amount as
of the beginning of that ASA Measuring Period.
"LIBOR" means, for any Interest Period, the quotient determined
by dividing (i) the one-month rate described on the Dow Jones Telerate
System, page 3750, as of 11:00 a.m. London time on the LIBOR Determination
Date, by (ii) a percentage equal to 100% minus the stated maximum rate of
all reserve requirements (including any marginal, emergency, supplemental,
special or other reserves) applicable on the LIBOR Determination Date to
any member bank of the Federal Reserve System in respect of "Eurocurrency
liabilities" as defined in Regulation D of the Federal Reserve Bank (or
any successor category of liabilities under Regulation D).
Notwithstanding the foregoing, in the event that such rate is not
provided, LIBOR shall mean the rate determined in accordance with the
following procedure:
(i) The Agent on the LIBOR Determination
Date will request the principal London offices of each of
four major reference banks in the London interbank
market, as selected by the Agent, to provide the Agent
with its offered quotation for deposits in United States
Dollars for the upcoming one-month period, commencing on
the second London Business Day immediately following such
LIBOR Determination Date, to prime banks in the London
interbank market at approximately 11:00 a.m. London time
on such LIBOR Determination Date and in a principal
amount that is representative for a single transaction in
United States Dollars in such market at such time. If at
least two such quotations are provided, LIBOR determined
on such LIBOR Determination Date will be the arithmetic
mean of such quotations.
(ii) If fewer than two quotations are
provided, LIBOR determined on such LIBOR Determination
Date will be the arithmetic mean of the rates quoted at
approximately 11:00 a.m. in New York City on such LIBOR
Determination Date by three major banks in New York City
selected by the Agent for one-month United States Dollar
loans to leading European banks, in a principal amount
that is representative for a single transaction in United
States Dollars in such market at such time; provided,
however, that if the banks so selected by the Agent are
not quoting as mentioned in this sentence, LIBOR
determined on such LIBOR Determination Date will continue
to be LIBOR as then currently in effect on such LIBOR
Determination Date.
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"LIBOR Determination Date" means, for any Interest Period, the
date which is two London/U.S. Business Days prior to the date on which
such Interest Period begins.
"London Business Day" means any day on which dealings in deposits
in United States Dollars are transacted in the London interbank market.
"London/U.S. Business Day" means a day that is both a Business Day
and a London Business Day.
"Loss Amount" means, with respect to any ASA Measuring Period, an
amount equal to the positive difference (if any) of (a) the amount of
Receivables held by the Trust that became Write-Offs during that ASA
Measuring Period, minus (b) the amount of Recoveries received during that
ASA Measuring Period.
"Loss Reserve Ratio" means, as calculated in each Monthly Report,
the result (expressed as a percentage) of (a) the Applicable Ratings
Factor multiplied by (b) the highest average of the Aged Receivables Ratio
for any three consecutive Calculation Periods that occurred during the
preceding 12 consecutive Calculation Periods ending on the most recent
Cut-Off Date multiplied by (c) a fraction having (i) a numerator equal to
the sum of the aggregate amounts payable pursuant to invoices giving rise
to Receivables generated by the Sellers during the five Calculation
Periods ending on the most recent Cut-Off Date, and (ii) a denominator
equal to the Net Eligible Receivables, as of the most recent Cut-Off Date,
multiplied by (d) one plus the Remaining Payment Term Adjustment.
"Loss Reserve Ratio (Z-value)" means, as calculated in each
Monthly Report, the result (expressed as a percentage) of (a) the Loss
Reserve Ratio plus (b) the product of the Z-value multiplied by the sample
standard deviation of the Aged Receivables Ratio during the preceding 12
consecutive Calculation Periods ending on the most recent Cut-Off Date.
"Maximum Exposure Amount" means, as of any Business Day, the
positive result (if any) of (a) the product of (i) the Pro Forma Eligible
Receivables, multiplied by (ii) the result (expressed as a decimal) of
100% minus the Pro Forma Reserve Ratio, minus (b) the Net Invested Amount.
"Net Eligible Receivables" means, at any time, (a) the Adjusted
Eligible Receivables, minus (b) the then aggregate amount of all Class B
Excess Concentration Balances with respect to all Obligors.
"Net Invested Amount" means, on any Business Day, the Invested
Amount, reduced by the aggregate balance on deposit in the Equalization
Account and the Principal Funding Account.
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"Net Recoveries" means, with respect to any ASA Measuring Period,
an amount equal to the positive difference (if any) of (a) the amount of
Recoveries received in that ASA Measuring Period minus (b) the amount of
Receivables that became Write-Offs in that ASA Measuring Period.
"Non-Usage Fee Rate" means a per annum rate equal to 0.55%.
"Non-Usage Fees" means the fees payable to the Class A
Certificateholders as provided in Section 4.2(a) of the Class A
Certificate Purchase Agreement.
"Planned ICP Dilution" means, with respect to any period of time,
Dilution (i) arising as a result of Permitted Inventory Management Product
Returns or Permitted Terminated Distributor Returns occurring during such
period, (ii) constituting Co-Op Advertising Credits granted during such
period, or (iii) constituting Cash Discount Credits granted during such
period.
"Principal Payment Date" means (i) with respect to the Class A
Certificate during the Revolving Period, any date on which the Class A
Invested Amount is to be reduced pursuant to Section 3.1 of the Class A
Certificate Purchase Agreement, (ii) with respect to the Class A
Certificate during an Amortization Period or Early Amortization Period,
each Interest Payment Date falling in such Amortization Period or Early
Amortization Period and (iii) with respect to the Class B Certificate,
each Distribution Date falling in an Amortization Period or Early
Amortization Period.
"Pro Forma Eligible Receivables" means, at any time, (a) the
Adjusted Eligible Receivables, minus (b) the then aggregate amount of all
Pro Forma Excess Concentration Balances with respect to all Obligors.
"Pro Forma Excess Concentration Balances" means, on any day and
with respect to all Obligors as a group, the minimum aggregate outstanding
balance of Eligible Receivables that do not satisfy all of the following
tests:
(i) no single Obligor may account for a percentage of
Adjusted Eligible Receivables greater than the Pro Forma Reserve
Ratio multiplied by 60.0%; and
(ii) no three Obligors together may account for a
percentage of Adjusted Eligible Receivables in excess of the Pro
Forma Reserve Ratio; and
(iv) no Obligor (other than the two Obligors with the
largest outstanding balances of Eligible Receivables after the
eliminations effected pursuant to clauses (i) to (iii) above) may
account for a percentage of Adjusted Eligible Receivables that is
larger than the Obligor with the third largest balance of
Adjusted Eligible Receivables after then eliminations effected
pursuant to clauses (i) and (ii) above).
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Pro Forma Excess Concentration Balances will be measured on each day
during each Distribution Period with respect to Obligors for such period.
For purposes of this definition, all Obligors that are Affiliates of each
other shall be treated as a single Obligor.
"Pro Forma Ratings Factor" means 1.5.
"Pro Forma Reserve Ratio" means, on any Business Day, the greatest
of (a) 13.5%, (b) the Loss Reserve Ratio (calculated using the Pro Forma
Ratings Factor), and (c) the Loss Reserve Ratio (Z-value) (calculated
using the Class B Z-value).
"Rating Agency" means either of S&P and DCR.
"Remaining Payment Term" shall mean, as calculated in each Monthly
Report as of the most recently ended Cut-Off Date, with respect to any
Receivable, the number of days remaining between such Cut-Off Date and its
due date (such number not to be less than zero).
"Remaining Payment Term Adjustment" shall mean, as calculated in
each Monthly Report as of the most recently ended Cut-Off Date, the result
of (i) (A) (1) the aggregate Remaining Payment Term Weightings divided by
the aggregate Unpaid Balance of all Eligible Receivables as of such Cut-
Off Date minus (2) 60, divided by (B) 60, multiplied by (ii) 0.4.
"Remaining Payment Term Weightings" shall mean, as calculated in
each Monthly Report as of the most recently ended Cut-Off Date, with
respect to each Eligible Receivable, the product of (i) the Unpaid Balance
of such Receivable as of such Cut-Off Date multiplied by (ii) the
Remaining Payment Term with respect to such Receivable.
"Required Persons" means
(i) for the purposes of instructing the Trustee to
declare that the Early Amortization Period has commenced pursuant
to Section 6.2. either (x) Holders of Class A Certificates whose
aggregate Class Percentages (as defined in the Class A
Certificate Purchase Agreement) exceed 66_% or (y) Holders of
Class B Certificates whose aggregate Class Percentages (as
defined in the Class B Certificate Purchase Agreement) exceed
66_%; and
(ii) for all other purposes, the Agent.
"Required Receivables" means, on any Business Day:
(a) So long as an Early Amortization Period has not
commenced, the result of the following formula:
SIA + CCRR X R
(1 - CARR) NER
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where:
SIA = the Specified Invested Amount;
CCRR = the Carrying Cost Receivables Reserve, as
reported in the Daily Report for that
Business Day;
CARR = the Class A Reserve Ratio in effect for that
Business Day;
R = the aggregate Unpaid Balance of
Receivables held by the Trust as
reported in the Daily Report for that
Business Day; and
NER = the Net Eligible Receivables minus the
Class A Restrictive Components, each as
reported in the Daily Report for that
Business Day.
(b) If an Early Amortization Period has commenced, the
result of the following formula:
ASIA + ASA + UCCRR
where:
ASIA = the Adjusted Specified Invested Amount,
which shall be the Specified Invested
Amount on that Business Day (which
shall equal the Specified Invested
Amount, reduced (but not below zero) by
the amount of all Investor Write-Offs
(net of Investor Allocable Recoveries
and Investor Allocable Dilution
Adjustments that have been applied to
reinstate the Invested Amount));
ASA = the Available Subordinated Amount on
that Business Day; and
UCCRR = the Unfunded Carrying Cost Receivables Reserve
on that Business Day.
.
"Revolving Period" means the period beginning on the Closing Date
and ending on the day before the first day of the Amortization Period or
an Early Amortization Period.
"Series Allocable Dilution Adjustments" means, for any ASA
Measuring Period, the product of the aggregate amount of payments pursuant
to Section 3.1 of the Purchase Agreement or pursuant to the Seller
Guaranty received during that ASA Measuring Period relating to Dilution
that occurred prior to that ASA Measuring Period, multiplied by the Series
Loss Allocation Percentage as of the beginning of that ASA Measuring
Period.
"Series 1996-1" is defined in the preamble.
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"Series 1996-1 Certificates" means any of the Class A Certificates
and the Class B Certificates.
"Specified Invested Amount" means (i) during the Revolving Period,
the Invested Amount, and (ii) thereafter, the Invested Amount as of the
last day of the Revolving Period.
"Specified Reserves" is defined in Section 4.10.
"Stated Amount" means as to any Certificate, the initial maximum
principal amount that may be required to be funded by the Holder of such
Certificate, as such amount may be reduced pursuant to Section 2.3 of the
Series A Certificate Purchase Agreement.
"Tranche" means an ABR Tranche or a Eurodollar Tranche.
"Transferor Indemnified Losses" is defined in Section 7.2.
"Transferor Indemnified Party" is defined in Section 7.2.
"Transferor Payment Percentage" means, on any Business Day, the
difference of 100% minus the Investor Allocation Percentage on that
Business Day.
"Trustee One-Time Fees" means all amounts payable to the Trustee
pursuant to the last sentence of Section 10.2(b) of the Pooling Agreement
(if any).
"Unapplied Cash" means, on any Business Day, available funds
received in the Master Collection Account and reflected in the Daily
Report for that Business Day that have not been applied as Collections on
a particular Receivable on or prior to the time as of which that Daily
Report is prepared.
"Unfunded Carrying Cost Receivables Reserve" means, on any
Business Day falling in an Early Amortization Period, the difference (but
not less than zero) of (a) the Carrying Cost Receivables Reserve as of the
Early Amortization Calculation Date, minus (b) the aggregate Collections
deposited into the Carrying Cost Account during the portion of the Early
Amortization Period up to and including that Business Day.
"Unmatured Early Amortization Event" means an event or condition
that, upon the giving of notice or the passage of time, would become an
Early Amortization Event.
"Z-value" means the Class A Z-value or the Class B Z-value, as
specified in each calculation where the Z-value is used.
SECTION 1.2 Incorporation of Terms. The terms of the Pooling
Agreement are incorporated in this Supplement as if set forth in full
herein. As supplemented by this
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Supplement, the Pooling Agreement is in all respects ratified and
confirmed and both together shall be read, taken and construed as one and
the same agreement. If the terms of this Supplement and the terms of the
Pooling Agreement conflict, the terms of this Supplement shall control
with respect to the Series 1996-1 Certificates.
ARTICLE II
DESIGNATION
SECTION 2.1 Designation. There is hereby created a Series to be
known as the "Series 1996-1 Certificates," consisting of two classes: the
$60,000,000 Variable Rate Class A Trade Receivables Backed Certificates,
Series 1996-1 (the "Class A Certificates"); and the $10,000,000 Variable
Rate Class B Trade Receivables Backed Certificates, Series 1996-1 (the
"Class B Certificates"). Subject to the conditions set forth in Article
II, Trustee shall authenticate and deliver the Class A Certificates and
the Class B Certificates, to or upon the order of Transferor in the
aggregate principal amount indicated for each above.
ARTICLE III
CONDITIONS TO ISSUANCE
SECTION 3.1 Conditions to Issuance. Trustee will not authenticate
the Series 1996-1 Certificates unless all conditions to the issuance of
the Series 1996-1 Certificates under Section 6.10 of the Pooling Agreement
shall have been satisfied.
ARTICLE IV
PAYMENTS AND ALLOCATIONS
SECTION 4.1 Interest; Additional Amounts. (a) Subject to Section
4.1 of the Class A Certificate Purchase Agreement, Transferor may from
time to time allocate the outstanding principal amount under the Class A
Certificates to one ABR Tranche and up to three Eurodollar Tranches
(although the total number of tranches may not exceed three at any one
time). Interest on each Tranche shall be payable on the Interest Payment
Date applicable to such Tranche.
(b) Interest on a Eurodollar Tranche of the Class A Certificates
shall accrue during any Interest Period at a rate per annum equal to LIBOR
plus the applicable Class A Certificate Spread and shall be calculated on
the basis of actual days over a year of 360 days.
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(c) Interest on an ABR Tranche of the Class A Certificates shall
accrue during any Interest Period at the Alternate Base Rate in effect
from time to time plus the applicable Class A Certificate Spread and shall
be calculated on the basis of actual days over a year of 360 days.
(d) Interest on the Class B Certificates shall accrue during any
Distribution Period at a rate per annum equal to LIBOR plus the Class B
Certificate Spread and shall be calculated on the basis of actual days
over a year of 360 days.
(e) Interest with respect to the Series 1996-1 Certificates due
but not paid on any Distribution Date or the last day of an Interest
Period, as the case may be, will be due on demand with additional interest
on the amount at 2% per annum above the Alternate Base Rate to the extent
permitted by law (and such interest will be compounded daily); provided,
however, that Transferor may direct any such overdue interest (together
with such additional interest thereon) to be paid on any Business Day
prior to such next Distribution Date or last day of the next Distribution
Period from funds on deposit in the Carrying Cost Account.
(f) Non-Usage Fees shall be payable with respect to the Series
1996-1 Certificates at a daily rate equal to (i) the Non-Usage Fee Rate
multiplied by (ii) the remainder of (A) the Stated Amount minus (B) the
Class A Invested Amount on each day divided by (iii) 360.
(g) Trustee One-Time Fees shall also be payable with respect to
the Series 1996-1 Certificates as specified in the Pooling Agreement and
to the extent (but only to the extent) that funds become available for
such Trustee One-Time Fees in accordance with Sections 4.3 and 4.4.
(h) Additional Amounts shall also be payable with respect to the
Series 1996-1 Certificates as specified in the Certificate Purchase
Agreements and to the extent (but only to the extent) that funds become
available for such Additional Amounts in accordance with Sections 4.3 and
4.4.
SECTION 4.2 Daily Calculations and Series Allocations. On each
Business Day, Servicer shall calculate the Series Collection Allocation
Percentage for Series 1996-1 (and, if necessary for that calculation, the
Required Receivables), the Carrying Cost Cash Required Amount and, during
the Revolving Period and the Amortization Period, the Base Amount. On each
Business Day during the Revolving Period or the Amortization Period,
Servicer shall also determine whether the Net Invested Amount is greater
than, equal to or less than the Base Amount.
Pursuant to Section 4.3 of the Pooling Agreement, Servicer shall
allocate the Series Collection Allocation Percentage of available funds
received in the Master Collection Account since the preceding Business
Day's allocation to Series 1996-1. The portion of funds so
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allocated, together with any funds released from the Equalization Account
in accordance with Section 4.5 on that Business Day, are called the "Daily
Series Collections."
SECTION 4.3 Allocations of Daily Series Collections During
Revolving Period. On each Business Day falling in the Revolving Period,
Servicer shall allocate the Investor Allocation Percentage of the Daily
Series Collections to the following purposes, in the priority indicated
(and to the extent of Daily Series Collections available):
first, to the Carrying Cost Account until the amount
allocated to the Carrying Cost Account equals the Carrying Cost
Cash Required Amount;
second, if Transferor shall have notified the Required
Persons in accordance with Section 3.1 of the Class A Certificate
Purchase Agreement that it desires to reduce the Invested Amount,
to the Principal Funding Account until the funds on deposit in
that account equal the amount of such reduction;
third, if the Net Invested Amount is greater than the
Base Amount, to the Equalization Account in an amount sufficient
to reduce the Net Invested Amount to an amount equal to the Base
Amount;
fourth, to hold in the Master Collection Account the
amount necessary to pay on the next Distribution Date all Trustee
One-Time Fees payable to the Trustee; and
fifth, to hold in the Master Collection Account the
amount necessary to pay on the next Distribution Date all
Additional Amounts payable to the Holders.
On such Business Day, Servicer shall allocate the remainder of
Daily Collections to make current and/or deferred transfer payments to
Transferor in respect of the Transferor Certificate, provided that
Transferor may, from time to time, direct Servicer to direct Trustee to
hold all or part of the funds to be paid pursuant to this sentence in the
Master Collection Account to be applied as Daily Series Collections on the
following Business Day.
If, on any day, the amount of Collections that is then allocated
to the Carrying Cost Account exceeds the amount of Collections that is
then required to be allocated to the Carrying Cost Account, Servicer shall
reallocate such Collections on such day to one or more of the obligations
described in priorities second through fifth, and in the preceding
paragraph, in the order of priority set forth therein.
SECTION 4.4 Allocations of Daily Series Collections (Other than
During the Revolving Period). On each Business Day (i) not falling in the
Revolving Period and (ii) prior to or on the Fully Funded Date, Servicer
shall allocate the Daily Series Collections to the following purposes, in
the priority indicated (and to the extent of Daily Series Collections
available):
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first, to the Carrying Cost Account to the extent that
the balance therein is less than the amount of Current Carrying
Costs (other than any Servicing Fee payable to any ICP Person)
payable on the Distribution Date relating to the Calculation
Period during which such Business Day falls;
second, to the Principal Funding Account and to
Transferor (or, prior to the Holdback Account Termination Date,
to the Holdback Account) in the following amounts:
(a) the amount to be transferred to the
Principal Funding Account shall equal the product of (i)
the Investor Allocation Percentage, multiplied by (ii)
the excess of the Daily Series Collections over the
amount allocated on that Business Day pursuant to
priority first, provided that the aggregate amount so
transferred on such Business Day shall in no event exceed
the Net Invested Amount prior to such transfer; and
(b) the amount to be transferred to Transferor
(or, prior to the Holdback Account Termination Date, to
the Holdback Account) shall equal the product of (i) the
Transferor Payment Percentage, multiplied by (ii) the
excess of the Daily Series Collections over the amount
allocated on that Business Day pursuant to priority
first;
the amount allocated to the Principal
Funding Account pursuant to clause (a)
of this priority second shall be
divided as follows:
(1) first such amount shall
be allocated to the sub-account for the
Class A Certificates, but the amount
deposited in such sub-account shall in
no event cause the balance therein to
exceed the Class A Invested Amount; and
(2) any remaining amount
shall be allocated to the sub-account
for the Class B Certificates, but the
amount deposited in such sub-account
shall in no event cause the balance
therein to exceed the Class B Invested
Amount;
third, to hold in the Master Collection Account the
amount necessary to pay on the next Distribution Date all Trustee
One-Time Fees payable to the Trustee;
fourth, to hold in the Master Collection Account the
amount necessary to pay on the next Distribution Date all
Additional Amounts payable to the Holders;
fifth, to pay any Servicing Fee payable to any ICP Person
on the Distribution Date relating to the Calculation Period
during which such Business Day falls; and
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sixth, the balance to Transferor, provided that prior to
the Holdback Account Termination Date, amounts payable to
Transferor pursuant to this priority sixth shall be deposited
into the Holdback Account and held as provided below.
The "Holdback Account Termination Date" shall be the earlier to
occur of (i) the date that falls twelve months after the beginning of the
Early Amortization Period and (ii) the Fully Funded Date. If at any time
prior to the Holdback Account Termination Date, the amount of funds on
deposit in the Holdback Account exceeds the difference of (1) the Investor
Repayment Amount minus (2) the amount of funds then held in the Carrying
Cost Account and the Principal Funding Account that are available to pay
the Investor Repayment Amount, then the amount of such excess funds shall
be released from the Holdback Account and paid to Transferor as current
and/or deferred transfer payments. On the Holdback Account Termination
Date, Servicer shall calculate an amount equal to (x) the aggregate amount
of funds held in the Holdback Account, minus (y) the aggregate Investor
Allocable Dilution for the Early Amortization Period as to which no Series
Allocable Dilution Adjustments have been received. The amount of such
difference, if positive, will be first applied to any outstanding Current
Carrying Costs or Additional Amounts, and then the balance will be paid
to Transferor. The funds remaining in the Holdback Account after the
payment of such amount to Transferor shall be transferred to the Master
Collection Account and applied to the items listed in priorities first
through sixth above, in that order (except that no such funds shall be
allocated to Transferor or the Holdback Account pursuant to priority
second and the amount allocable to the Principal Funding Account shall
computed using an Investor Allocation Percentage of 100%).
SECTION 4.5 Withdrawals from the Equalization Account. On any
Business Day during the Revolving Period on which no Early Amortization
Event or Unmatured Early Amortization Event exists, Servicer may instruct
Trustee in writing to withdraw funds from the Equalization Account and
apply such funds as Daily Series Collections, so long as the Net Invested
Amount would not exceed the Base Amount after giving effect to such
transfer and application. On the first day of the Amortization Period or
an Early Amortization Period, Servicer shall instruct Trustee to transfer
the entire balance in the Equalization Account to the Principal Funding
Account.
SECTION 4.6 Available Subordinated Amount. (a) If an Early
Amortization Period begins, Servicer shall promptly calculate the
Available Subordinated Amount as of the Early Amortization Calculation
Date and report such amount in the Daily Report for the first day in the
Early Amortization Period. Servicer shall also calculate the Available
Subordinated Amount as of each Cut-Off Date falling in the Early
Amortization Period, such calculation to be reflected in the related
Monthly Report.
(b) The Available Subordinated Amount as of the Early
Amortization Calculation Date shall equal the product of (x) the Investor
Allocation Percentage, multiplied by (y) the result of:
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(i) the product of the Unpaid Balance of Receivables held
by Trustee at the opening of business on the Early Amortization
Calculation Date, multiplied by the Series Collection Allocation
Percentage on that date; minus
(ii) the sum of (i) the lesser of (A) the Base Amount and
(B) the Net Invested Amount and (ii) the Carrying Cost
Receivables Reserve at the opening of business on the Early
Amortization Calculation Date.
(c) The Available Subordinated Amount, as of any Cut-Off Date in
the Early Amortization Period, shall equal the result of:
(i) the Available Subordinated Amount as of the
preceding Cut-Off Date (or as of the Early Amortization
Calculation Date, in the case of the first Cut-Off Date falling
in the Early Amortization Period); minus
(ii) the Investor Allocable Loss Amount with respect to
the ASA Measuring Period ending on that Cut-Off Date; minus
(iii) any Investor Allocable Dilution with respect to
the ASA Measuring Period ending on that Cut-Off Date; plus
(iv) subject to Sections 4.7 and 4.8, the Investor
Allocable Recoveries and Investor Allocable Dilution Adjustments
with respect to the ASA Measuring Period ending on that Cut-Off
Date.
(d) Notwithstanding the foregoing, in no event shall the
Available Subordinated Amount at any time be less than zero or greater
than the initial Available Subordinated Amount calculated pursuant to
subsection (b).
SECTION 4.7 Write-Offs and Recoveries. (a) In each Monthly
Report required to be delivered during the Early Amortization Period,
Servicer shall calculate the Investor Write-Offs and the Investor
Allocable Recoveries for the most recently ended ASA Measuring Period.
(b) If the Investor Write-Offs calculated in any Monthly Report
exceed zero, the Invested Amount and the outstanding principal amount of
the Series 1996-1 Certificates shall be reduced by the amount of the
Investor Write-Offs with effect from the related Distribution Date. Any
such reduction shall be allocated to the Class B Invested Amount until the
Class B Invested Amount has been reduced to zero. Any remaining reduction
shall be allocated to the Class A Invested Amount.
(c) If the Invested Amount has been reduced on account of any
Investor Write-Offs, then any Investor Allocable Recoveries with respect
to any Calculation Period ending after the
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reduction takes place shall be applied to reinstate the Invested Amount
and the outstanding principal amount of the Series 1996-1 Certificates,
to the extent of such prior reductions that have not previously been
reinstated, with effect from the related Distribution Date. Any such
reinstatement shall be allocated to the Class A Invested Amount until all
prior reductions to the Class A Invested Amount on account of Investor
Write-Offs have been reinstated. Any remaining reinstatement shall be
allocated to the Class B Invested Amount.
(d) If Investor Allocable Recoveries applied pursuant to
subsection (c) above to reinstate the Invested Amount on any Distribution
Date, then Investor Allocable Recoveries shall be applied to increase the
Available Subordinated Amount on the same Distribution Date only to the
extent of the excess, if any, of the Investor Allocable Recoveries, minus
the amount of Investor Allocable Recoveries so applied to reinstate the
Invested Amount.
(e) The outstanding principal amount under the Class A
Certificates shall be reduced by any reduction, and increased by any
reinstatement, of the Class A Invested Amount pursuant to this Section 4.7
or Section 4.8, in the amount of such reduction or reinstatement. The
outstanding principal amount under the Class B Certificates shall be
reduced by any reduction, and increased by any reinstatement, of the Class
B Invested Amount pursuant to this Section 4.7 or Section 4.8, in the
amount of such reduction or reinstatement.
SECTION 4.8 Certain Dilution in an Amortization Period or Early
Amortization Period. (a) In each Monthly Report required to be delivered
during the Amortization Period or any Early Amortization Period, Servicer
shall calculate the Investor Allocable Dilution and the Series Allocable
Dilution Adjustments for the most recently ended Calculation Period or ASA
Measuring Period.
(b) If the Investor Allocable Dilution calculated in any Monthly
Report is greater than zero, and there are funds in the Holdback Account,
then those funds (up to an amount equal to the amount of the Investor
Allocable Dilution), shall be allocated (i) first, in accordance with
priority first of the first paragraph of Section 4.4, (ii) second, to the
Principal Funding Account (in accordance with priority second of the first
paragraph of Section 4.4), so long as the aggregate amount on deposit
therein does not exceed the Invested Amount and (iii) third, in accordance
with priorities third through sixth of the first paragraph of Section 4.4,
in that priority.
(c) If the Available Subordinated Amount or the Invested Amount
has been reduced on account of any Investor Allocable Dilution, then (i)
any Series Allocable Dilution Adjustments with respect to any Calculation
Period or ASA Measuring Period ending after the reduction takes place and
(ii) any additional funds deposited in the Holdback Account (the "Investor
Allocable Dilution Adjustments") shall be allocated (x) first, to
reinstate the Invested Amount and the outstanding principal amount of the
Series 1996-1 Certificates, and (y) second, to reinstate the Available
Subordinated Amount, in each case to the extent not previously reinstated.
Any amount so allocated on any day shall be allocated (i) first, in
accordance with priority first of Section 4.4, (ii) second, to the
Principal Funding Account, so long as the
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aggregate amount on deposit therein does not exceed the Invested Amount
and (iii) third, in accordance with priorities third through sixth of the
first paragraph of Section 4.4, in that priority.
SECTION 4.9 Pre-Closing Modification Notification. The Agent,
in its sole discretion, shall be entitled to deliver notice to the
Transferor prior to the initial Purchase under the Certificate Purchase
Agreements which shall have the following effect:
(a) the Interest Period for each Tranche shall end on the
Distribution Date next succeeding the day on which such Tranche is
designated;
(b) with respect to each Tranche for which the applicable
Interest Period does not commence on the first day of a Distribution
Period, interest will accrue at a rate equal to the rate upon which
interest would otherwise accrue pursuant to Section 4.1(c); and
(c) a fee (a "Minimum LIBOR Return Fee") would be payable to
the Purchasers on each Distribution Date equal to the product of (i) the
excess, if any, of (A) LIBOR over (B) such Purchaser's average return on
investments in cash or cash equivalents during the preceding Distribution
Period multiplied by (ii) the result of (A) the Stated Amount minus (B)
the weighted average Class A Invested Amount during such Distribution
Period.
SECTION 4.10 Calculations of Reserves. In calculating each of the
Co-Op Advertising Reserves, Cash Discount Reserves, Excess Foreign
Currency Receivables, and the amounts in each of the clauses of the
definition of Excess Foreign Obligor Balances(collectively, the "Specified
Reserves"), Servicer may (but is not required to) deduct from the
Receivables of each Obligor whose Receivables are included in the
calculation of that Specified Reserve (as to any Specified Reserve, the
"Applicable Receivables") an amount equal to any Class B Excess
Concentration Balance applicable to that Obligor. In addition, on each
Business Day Servicer may calculate the Specified Reserves in any order
that it chooses. After having calculated any particular Specified Reserve
on a Business Day, Servicer may designate one or more of the Applicable
Receivables for that Specified Reserve, with an aggregate Unpaid Balance
equal to the amount of that Specified Reserve (and for this purpose one
such Applicable Receivable may be so designated as to only the necessary
portion of its Unpaid Balance), as "Designated Receivables." Such
designation shall be made in an exhibit to the applicable Daily Report.
In calculating each of the remaining Specified Receivables on that
Business Day, each of the Designated Receivables shall be deemed not to
be Eligible Receivables.
SECTION 4.11 Investment of Funds in Transaction Accounts. Funds
invested in Eligible Investments in the Transaction Accounts in accordance
with Section 4.4 of the Pooling Agreement shall mature not later than: (i)
with respect to the Equalization Account, the Master Collection Account
and the Holdback Account, the next succeeding Distribution Date; and (ii)
with respect to the Principal Funding Account and the Carrying Cost
Account, the Interest Payment Date(s) on which such funds will be required
to be paid out in accordance with the then outstanding Tranches (so that,
for example, if two tranches are outstanding, funds up to the
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amounts required be repaid on the earlier Interest Payment Date shall be
invested with maturities not later than such Interest Payment Date and
funds in excess thereof may be invested with maturities not later than the
second Interest Payment Date).
ARTICLE V
DISTRIBUTIONS AND REPORTS
SECTION 5.1 Distributions. On each Interest Payment Date, Trustee
shall, in accordance with instructions set out in the applicable Daily
Report (following delivery within the time period required under Section
3.5(c) of the Pooling Agreement), distribute to the Holders of Class A
Certificates at or before 2:00 p.m., New York City time, all accrued and
unpaid interest on the Class A Certificates, and any additional interest
payable to the Holders of Class A Certificates pursuant to Section 4.1,
to the extent funds are available for such payment in the Carrying Cost
Account. In addition, on each Distribution Date and (with respect to
clause (b) below) each Principal Payment Date, Trustee shall, in
accordance with instructions set out in the applicable Daily Report
(following delivery within the time period required under Section 3.5(c)
of the Pooling Agreement), distribute to the Holders at or before 2:00
p.m., New York City time, the following amounts:
(a) Non-Usage Fees on the Class A Certificates and
accrued and unpaid interest on the Class B Certificates, and any
additional interest payable to the Holders of Class B
Certificates pursuant to Section 4.1, to the extent funds are
available for such payment in the Carrying Cost Account (and in
the event of any shortfall, the Holders of Class A Certificates
shall first be paid such Non-Usage Fees, and the Holders of Class
B Certificates shall second be paid such interest); provided that
if any interest which was due and payable to the Holders of Class
A Certificates on any Interest Payment Date preceding such
Distribution Date pursuant to the first sentence of this Section
5.1 has not yet been paid in full, then before any payments are
made to the Holders pursuant to this clause (a), all such overdue
interest shall first be paid to the Holders of Class A
Certificates;
(b) on each Principal Payment Date, all funds deposited
in the Principal Funding Account on or prior to the most recent
Cut-Off Date (but in no event in excess of the Invested Amount)
shall be distributed (subject to any applicable notification
period) in reduction of the Invested Amount; all such amounts on
deposit in the Principal Funding Account shall be paid to the
Holders of Class A Certificates until they have been paid or
provided for in full before any such amounts are paid to the
Holders of Class B Certificates;
(c) if, on the Expected Final Payment Date or any
Distribution Date falling in an Early Amortization Period, the
funds on deposit in the Carrying Cost Account (less any Servicing
Fee payable on that day to anyone other than an ICP Person) will
be
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equal to or greater than the Invested Amount (after giving effect
to the distribution required by subsection (b)), then an amount
equal to such remaining Invested Amount shall be withdrawn from
the Carrying Cost Account and distributed in reduction of the
Invested Amount; all such amounts withdrawn from the Carrying
Cost Account shall be paid to the Holders of Class A Certificates
until they have been paid or provided for in full before any such
amounts are paid to the Holders of Class B Certificates;
(d) any Trustee One-Time Fees payable to the Trustee to
the extent that funds have been allocated for those Trustee One-
Time Fees pursuant to priority fourth of Section 4.3 or priority
third of Section 4.4; and
(e) any Additional Amounts payable with respect to
Series 1996-1 Certificates to the extent that funds have been
allocated for those Additional Amounts pursuant to priority fifth
of Section 4.3 or priority fourth of Section 4.4 (and in the
event of any shortfall, Additional Amounts shall be paid first to
Holders of Class A Certificates (pro rata among such Holders
according to the Additional Amounts owed to each of them), and
second to Holders of Class B Certificates (pro rata among such
Holders according to the Additional Amounts owed to each of
them)).
On each Distribution Date, Trustee shall also, in accordance with
instructions set out in the applicable Daily Report (following delivery
within the time period required under Section 3.5(c) of the Pooling
Agreement), distribute at or before 2:00 p.m., New York City time, the
Servicing Fee (after having made the distributions specified in Section
5.1(a) herein) to the Servicer to the extent that funds are available for
that purpose in the Carrying Cost Account.
On any Business Day, Trustee shall, in accordance with
instructions set out in the applicable Daily Report (following delivery
within the time period required under Section 3.5(c) of the Pooling
Agreement), distribute to the Holders, at or before 2:00 p.m., New York
City time, overdue interest payable pursuant to Section 4.1(e) on such
Business Day, to the extent funds are available for such payment in the
Carrying Cost Account and such other fees (including Minimum LIBOR Return
Fees, Commitment Reduction Fees, Breakage Fees, Non-Usage Fees,
Administration Fees, Commitment Fees and Minimum Usage Fees) as shall be
due and owing on such day.
All distributions pursuant to this Section 5.1 shall be
distributed to the Holders in immediately available funds by wire
transfer.
SECTION 5.2 Payments in Respect of Transferor Certificate. On
each day on which funds are allocated pursuant to Sections 4.3 and 4.4
(and subject to the terms of Section 4.4 relating to the Holdback
Account), Trustee shall, in accordance with instructions set out in the
applicable Daily Report (following delivery within the time period
required under Section 3.5(c) of the Pooling Agreement), distribute to
Transferor, in respect of the Transferor Certificate, at or before 2:00
p.m., New York City time, all funds allocated for that purpose in
accordance with those Sections. In addition, after the Invested Amount
has been repaid in full
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<PAGE>
and all interest and Additional Amounts owed to the Holders and the Agent
have been paid, any additional funds on deposit in the Carrying Cost
Account, the Equalization Account or the Principal Funding Account shall
similarly be paid to Transferor, at or before 2:00 p.m., New York City
time, in respect of the Transferor Certificate. Any funds paid to the
Transferor pursuant to this Section 5.2 shall be subject to any then-
current indemnity obligations of the Transferor pursuant to Section 7.2
of this Supplement, Section 7.3(a) of the Pooling Agreement, Section 10.5
of the Class A Certificate Purchase Agreement and Section 8.5 of the Class
B Certificate Purchase Agreement.
SECTION 5.3 Daily Reports and Monthly Reports. Each Daily Report
and Monthly Report shall be substantially in the applicable form set out
in Exhibit B or C or in such other form as may be satisfactory to Servicer
and Trustee and consistent with the terms of this Supplement and the
Pooling Agreement. Copies of each Monthly Report and, upon request, the
Daily Report shall be provided free of charge by the Servicer to the
Holders of Series 1996-1 Certificates.
SECTION 5.4 Annual Tax Information. On or before February 15 of
each calendar year, beginning with calendar year 1997, Servicer, on behalf
of Trustee, shall furnish or cause to be furnished to each Person who at
any time during the preceding calendar year was a Holder the information
for the preceding calendar year, or the applicable portion thereof during
which the Person was a Holder, as is required to be provided by an issuer
of indebtedness under the Internal Revenue Code to the holders of the
issuer's indebtedness and such other customary information as is necessary
to enable such Holders to prepare their federal income tax returns.
Notwithstanding anything to the contrary contained in this Agreement,
Trustee shall, to the extent required by applicable law, from time to time
furnish to the appropriate Persons a Form 1099-INT within the period
required by applicable law.
SECTION 5.5 Periodic Perfection Certificate. On or before March
15 of each calendar year, beginning with calendar year 1997, Servicer, on
behalf of Trustee, shall furnish or cause to be furnished to Trustee and
the Holders an Officer's Certificate setting forth a list of all changes
in (a) the name, identity or corporate structure of Transferor or any
Seller and (b) the chief executive office of Transferor or any Seller (or
in the place of business of Transferor or any Seller that has only one
place of business) that have taken place since the date of the Officer's
Certificate most recently delivered pursuant to this Section 5.5 (or since
the Closing Date, in the case of the first such Officer's Certificate to
be delivered), or indicating that no such events have taken place, and
stating in each case what filings of UCC financing statements, or
amendments thereto, relating to the Transaction Documents have been made
in connection with each such event (identifying the date and filing index
numbers for each). Any financing statement identified in such an Officer's
Certificate delivered to Trustee shall be deemed to have been identified
to Trustee in writing for purposes of subsection 11.1(c)(v) of the Pooling
Agreement. If any such new UCC financing statements are filed, Servicer
shall cause Trustee to be named as secured party (in the case of any
filing against Transferor) or assignee of the secured party (in the case
of any filing against a Seller).
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<PAGE>
ARTICLE VI
EARLY AMORTIZATION EVENTS
SECTION 6.1 Early Amortization Events. Each of the following
shall constitute an "Early Amortization Event":
(a) any of the following shall occur;
(i) failure on the part of Transferor
or Servicer to make any payment of the principal
amount of or any interest on the Series 1996-1
Certificates when due, or to make any deposit
required by the terms of any Transaction
Document within one Business Day after the date
the deposit is required to be made, or to make
any other payment required by the terms of any
Transaction Document on or before three Business
Days after the date such payment is required to
be made; or
(ii) failure on the part of Servicer to
deliver a Daily Report within the time period
required under Section 3.5(c) of the Pooling
Agreement, and continuance of such failure for
three Business Days; provided that if the
Servicer shall have estimated the Base Amount in
the Daily Report for one or more days due to
adverse circumstances beyond its control (as
described in, and subject to the limitations in,
such Section 3.5(c)), then the three day grace
period specified in this clause (ii) shall be
reduced by the number of days on which the Base
Amount was estimated (of, if such number of days
exceeds three, shall be reduced to zero); or
(iii) failure on the part of the
Servicer to deliver a Monthly Report within the
time required under Section 3.5(d) of the
Pooling Agreement and the applicable Supplement,
and continuance of such failure for three
Business Days; or
(iv) failure on the part of Transferor,
Guarantor, Servicer or any Seller duly to
observe or perform Section 6.1(f), 6.1(h),
6.1(i), 6.1(j), 6.3(a), 6.3(b), 6.3(c), 6.3(e),
6.3(f) or 6.3(g) of the Purchase Agreement or
Section 7.2(c), 7.2(d), 7.2(e), 7.2(f), 7.2(h),
7.2(i), 7.2(j), 7.2(k), 7.2(m) or 7.2(o) of the
Pooling Agreement, which failure continues
unremedied for a period of five Business Days;
or
(v) failure on the part of Transferor,
Guarantor, Servicer or any Seller duly to
observe or perform any other covenant or
agreement set forth in any Transaction Document,
which failure continues unremedied for a period
of 30 days; or
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<PAGE>
(vi) Guarantor gives notice of
termination of the Seller Guaranty;
(b) any representation or warranty made by a Seller in
subsection 5.1(d), 5.1(k), 5.1(n), 5.1(o) or 5.1(r) of the
Purchase Agreement or by Transferor in subsection 2.3(a)(i),
2.3(a)(ii) or 7.1(i) of the Pooling Agreement shall prove to have
been incorrect in any material respect when made, and continues
to be incorrect in any material respect for a period of five
Business Days, or any other representation or warranty made by
Transferor, Servicer or any Seller in any Transaction Document
shall prove to have been incorrect in any material respect when
made, and continues to be incorrect in any material respect for
a period of 30 days; provided that a mistake in the
representation of a Receivable as an Eligible Receivable or the
breach of a representation and warranty with respect to a
Receivable shall not constitute an Early Amortization Event
unless and until the applicable Seller has failed to make the
cash payments (if any) owed under Sections 3.1 of the Purchase
Agreement in respect of such mistake or breach (it being
understood that certain of such mistakes or breaches may result
in a non-cash adjustment under the Purchase Agreement);
(c) a Bankruptcy Event shall occur with respect to
Transferor, Servicer, Guarantor or any Seller, or Transferor
shall become unable, for any reason, to transfer Receivables or
other Transferred Assets to the Trust in accordance with the
provisions of this Agreement and the Pooling Agreement; provided
that if, at the time any event that would, with the passage of
time, become a Bankruptcy Event occurs as a result of a
bankruptcy proceeding being filed against Transferor or any
Seller, then, on and after the day on which the bankruptcy
proceeding is filed until the earlier to occur of the dismissal
of the proceeding and the Early Amortization Commencement Date,
Transferor shall not purchase Receivables and Related Assets from
the affected Seller or, if Transferor is the subject of the
proceeding, transfer Receivables and Related Transferred Assets
to the Trust;
(d) the Trust or Transferor shall be required to be
registered as an "investment company" under and within the
meaning of the Investment Company Act of 1940, as amended;
(e) the Net Invested Amount exceeds the Base Amount for
a period of two or more consecutive Business Days;
(f) a Servicer Default shall have occurred and shall not
have been remedied;
(g) ICP shall cease to own, directly or indirectly, 100%
of the equity interests of Transferor;
(h) the Internal Revenue Service or the PBGC files one
or more Tax or ERISA Liens against the assets of Transferor or
any Seller (including Receivables);
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<PAGE>
(i) the cessation of, or the failure to create, a valid
first-priority perfected ownership or security interest in favor
of Trustee in the Receivables or the rights of Transferor under
the Purchase Agreement;
(j) the aggregate outstanding principal amount of the
Buyer Notes exceeds the Maximum Exposure Amount for five or more
consecutive Business Days; or
(k) any foreclosure or similar proceeding in respect of
any adverse claim on any Buyer Note or the Transferor's common
stock shall have been commenced; or title to any Buyer Note or
Transferor's common stock shall pass to the holders of such
adverse claim.
SECTION 6.2 Early Amortization Period. Upon the occurrence and
continuance of any Early Amortization Event described in subsections
6.1(c), (d), (i) or (j), an Early Amortization Period shall commence
without any notice or other action on the part of Trustee or the Series
1996-1 Certificateholders, immediately upon the occurrence of such Early
Amortization Event. On the tenth day after Transferor receives notice or
otherwise becomes aware of the occurrence of any Early Amortization Event
described in subsection 6.1(e), an Early Amortization Period shall
commence without any notice or other action on the part of Trustee or the
Series 1996-1 Certificateholders, unless waived by the Required Persons
(except that an Early Amortization Period shall commence immediately upon
notice thereof from Trustee or the Required Persons prior to the running
of such ten day period). Upon the occurrence and continuance of any other
Early Amortization Event, after the applicable grace period, if any, set
forth in such subsection, Trustee may (and, at the direction of the
Required Persons, shall) by notice then given in writing to Transferor and
Servicer, declare that an Early Amortization Period has commenced as of
the date of Transferor's receipt of the notice.
ARTICLE VII
OPTIONAL REDEMPTION; INDEMNITIES
SECTION 7.1 Optional Redemption of Investor Interests. On any
Distribution Date occurring during an Early Amortization Period with
respect to the Series 1996-1 Certificates on or after the date that the
Invested Amount is reduced to ten percent or less of the sum of the
initial Stated Amounts for the Certificates, Transferor shall have the
option to redeem the Series 1996-1 Series Interest. The purchase price
will be an amount equal to the Invested Amount plus accrued and unpaid
interest (and accrued and unpaid interest with respect to interest that
was due but not paid on any prior Distribution Date) through the day
preceding the Distribution Date at the applicable interest rates (as
specified in Section 4.1) for such Certificates plus the aggregate amount
by which the Invested Amount has been reduced on account of Investor
Write-Offs and Investor Allocable Dilution (and not subsequently
reinstated) plus any Additional Amounts then due. Upon the tender of the
outstanding Certificates of the Series by the Holders, Trustee shall
distribute the amounts, together with all
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<PAGE>
funds on deposit in the Principal Funding Account that are allocable to
the Series 1996-1 Certificates, to the Holders of the Series on the next
Distribution Date in repayment of the principal amount and accrued and
unpaid interest owing to the Holders. Following any redemption, the
Holders of the Series shall have no further rights with respect to the
Receivables. In the event that Transferor fails for any reason to deposit
in the Principal Funding Account the aggregate purchase price for the
Series 1996-1 Certificates, payments shall continue to be made to the
Holders of the Series in accordance with the terms of the Pooling
Agreement and this Supplement.
SECTION 7.2 Indemnification by Transferor. Transferor hereby
agrees to indemnify the Trust, Trustee, each Holder of a Series 1996-1
Certificate and each of the successors, permitted transferees and assigns
of any such Person and all officers, directors, shareholders, controlling
Persons, employees, affiliates and agents of any of the foregoing (each
of the foregoing Persons individually being called a "Transferor
Indemnified Party"), forthwith on demand, from and against any and all
damages, losses, claims (whether on account of settlements or otherwise,
and whether or not the relevant Indemnified Party is a party to any action
or proceeding that gives rise to any Transferor Indemnified Losses (as
defined below)), judgments, liabilities and related reasonable costs and
expenses (including reasonable attorneys' fees and disbursements) (all of
the foregoing collectively being called "Transferor Indemnified Losses")
awarded against or incurred by any of them that arise out of or relate to
Transferor's performance of, or failure to perform, any of its obligations
under or in connection with any Transaction Document.
Notwithstanding the foregoing (and with respect to clause (ii)
below, without prejudice to the rights that the Trustee may have pursuant
to the other provisions of this Agreement or the provisions of any of the
other Transaction Documents), in no event shall any Transferor Indemnified
Party be indemnified against any Transferor Indemnified Losses (i)
resulting from gross negligence or willful misconduct on the part of such
Transferor Indemnified Party (or the gross negligence or willful
misconduct on the part of any of such Indemnified Party's officers,
directors, employees, affiliates or agents), (ii) to the extent the same
include Transferor Indemnified Losses in respect of Receivables and
reimbursement therefor that would constitute credit recourse to Transferor
for the amount of any Receivable or Related Transferred Asset not paid by
the related Obligor, (iii) to the extent such Indemnified Losses are or
result from lost profits (other than any prepayment premium or breakage
fee), or (iv) to the extent such Indemnified Losses are or result from
taxes asserted with respect to (A) distributions on the Investor
Certificates (other than any withholding taxes, if and to the extent that
(a) such withholding taxes should have been (but in fact were not)
withheld and paid over by the Trust to the relevant taxing authority, (b)
such taxing authority asserts a claim for such withholding taxes against
the Trust or the Transferor, and (c) the assets of the Trust are
insufficient to satisfy such claim at the time a final determination is
made that such withholding taxes are due and payable) and (B) federal or
other income taxes on or measured by the net income of such Indemnified
Party.
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<PAGE>
If for any reason the indemnification provided in this section is
unavailable to a Transferor Indemnified Party or is insufficient to hold
a Transferor Indemnified Party harmless, then Transferor shall contribute
to the amount paid by such Transferor Indemnified Party as a result of any
loss, claim, damage or liability in such proportion as is appropriate to
reflect not only the relative benefits received by such Transferor
Indemnified Party on the one hand and Transferor on the other hand, but
also the relative fault (if any) of such Transferor Indemnified Party and
Transferor and any other relevant equitable considerations.
Notwithstanding any provisions contained in any Transaction
Document to the contrary, Transferor shall not, and shall not be obligated
to, pay any amount pursuant to this Section unless and to the extent that
the Transferor has funds available to pay such amounts or funds are
allocated thereafter to the Transferor pursuant to the penultimate
paragraph of Section 4.3 or priority sixth of Section 4.4 of this
Supplement. Any amount which Transferor does not pay pursuant to the
operation of the preceding sentence shall not constitute a claim (as
defined in Sec. 101 of the Bankruptcy Code) against or corporate obligation
of Transferor for any such insufficiency.
SECTION 7.3 Indemnification by Servicer. Servicer agrees that
each Holder of a Series 1996-1 Certificate shall be an "Indemnified Party"
for purposes of the Pooling Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Governing Law. THIS SUPPLEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
SECTION 8.2 Counterparts. This Supplement may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original, and all of which together shall constitute one and the same
instrument.
SECTION 8.3 Severability of Provisions. If any one or more of the
provisions or terms of this Supplement shall for any reason whatsoever be
held invalid, then the unenforceable provision(s) or term(s) shall be
deemed severable from the remaining provisions or terms of this Supplement
and shall in no way affect the validity or enforceability of the other
provisions or terms of this Supplement.
SECTION 8.4 Amendment, Waiver, Etc. The provisions of this
Supplement may be amended, modified, or waived, subject to Section 13.1
of the Pooling Agreement, Section 10.1 of the Class A Certificate Purchase
Agreement and Section 7.1 of the Class B Certificate
-35-
<PAGE>
Purchase Agreement, from time to time by Servicer, Transferor, Trustee and
each Required Person by a written instrument signed by each of them,
without the consent of any Holders; provided, that such amendment,
modification or waiver shall have the effect specified in clauses (i),
(ii) or (iii) of the Pooling Agreement without obtaining the consent
specified in such clause.
SECTION 8.5 Trustee. Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplement or for or in respect of the recitals contained herein, all of
which recitals are made solely by Transferor and Servicer.
SECTION 8.6 Instructions in Writing. All instructions given by
Servicer to Trustee pursuant to this Supplement shall be in writing, and
may be included in a Daily Report or Monthly Report.
SECTION 8.7 Rule 144A. So long as any of the Series 1996-1
Certificates are "restricted securities" within the meaning of Rule
144(a)(3) under the Securities Act, Transferor shall, unless it becomes
subject to and complies with the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended, or rule 12g3-
2(b) thereunder, provide to any Holder of such restricted securities, or
to any prospective purchaser of such restricted securities designated by
a Holder, upon the request of such Holder or prospective purchaser, any
information required to be provided by Rule 144A(d)(4) under the Act.
SECTION 8.8 Supplemental Ratings Requirement. So long as any of
the Series 1996-1 Certificates are outstanding, if any provision of the
Purchase Agreement, the Pooling Agreement, this Supplement or the
Certificate Purchase Agreement requires a person or investment to have a
certain rating from S&P, and such person or investment is also rated by
DCR, such provision shall be read to also require a rating from DCR that
is equivalent to the required rating from S&P.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, Transferor, Servicer and Trustee have caused
this Supplement to be duly executed by their respective officers thereunto
duly authorized as of the day and year first above written.
INTER-CITY PRODUCTS RECEIVABLES
COMPANY, L.P., as Transferor
By: Inter-City Products
Partner Corporation
By:
Name: David Cain
Title: Senior Vice President
INTER-CITY PRODUCTS CORPORATION
(USA), as Servicer
By:
Name: David Cain
Title: Senior Vice President
LASALLE NATIONAL BANK, as Trustee
By:
Name:
Title:
<PAGE>
EXHIBIT A
<PAGE>
EXHIBIT A-Part I
to the Series 1996-1 Supplement
FORM OF
CLASS A, SERIES 1996-1 CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD IN
CONTRAVENTION OF THAT ACT. THIS CERTIFICATE WILL NOT BE ACCEPTED FOR
REGISTRATION OF TRANSFER EXCEPT UPON PRESENTATION OF EVIDENCE SATISFACTORY
TO THE REGISTRAR AND TRANSFER AGENT THAT THE RESTRICTIONS ON TRANSFER SET
FORTH IN THE POOLING AGREEMENT HAVE BEEN COMPLIED WITH.
INTER-CITY PRODUCTS TRADE RECEIVABLES BACKED CERTIFICATES
CLASS A SERIES 1996-1 CERTIFICATE
Maximum Principal Amount:
First Distribution Date: $_______________
THIS CERTIFIES THAT _________________ is the registered owner of
a nonassessable, fully-paid, fractional undivided interest in the Inter-
City Products Receivables Master Trust (the "Trust") that was created
pursuant to (a) the Pooling and Servicing Agreement, dated as of July 25,
1996 (as the same may be amended, supplemented or otherwise modified from
time to time, the "Pooling Agreement"), among Inter-City Products
Receivables Company, L.P., a Tennessee limited partnership,
("Transferor"), INTER-CITY PRODUCTS CORPORATION (USA), a Delaware
corporation, ("Servicer"), and LASALLE NATIONAL BANK, as trustee (together
with its successors and assigns in such capacity, "Trustee") and (b) the
Supplement dated as of the same date relating to the Series 1996-1
Certificates (the "Supplement"). This Certificate is one of the duly
authorized Series 1996-1 Certificates designated and issued under the
Pooling Agreement and the Supplement. Except as otherwise defined herein,
capitalized terms have the meanings that Appendix A to the Pooling
Agreement assigns to them. This Certificate is subject to the terms,
provisions and conditions of, and is entitled to the benefits afforded by,
the Pooling Agreement and the Supplement, to which terms, provisions and
conditions the Holder of this Certificate by virtue of the acceptance
hereof assents and by which the Holder is bound.
Unless the certificate of authentication hereon shall have been
executed by or on behalf of Trustee by the manual signature of a duly
authorized signatory, this Certificate shall not<PAGE>
entitle the Holder hereof to any benefit under the Transaction Documents
or be valid for any purpose.
This Certificate does not represent a recourse obligation of, or
an interest in, Transferor, any Seller, Servicer, Trustee or any Affiliate
of any of them. This Certificate is limited in right of payment to the
Transferred Assets.
By its acceptance of this Certificate, each Holder hereof (a)
acknowledges that it is the intent of Transferor, and agrees that it is
the intent of the Holder that, for purposes of Federal, applicable state
and local income and franchise and other taxes measured by or imposed on
income, the Class A, Series 1996-1 Certificates (including this
Certificate) will be treated as evidence of indebtedness secured by the
Transferred Assets and the Trust will not be characterized as an
association taxable as a corporation or a publicly-traded partnership, (b)
agrees that the provisions of the Transaction Documents shall be construed
to further that intent, and (c) agrees to treat this Certificate for
purposes of Federal, applicable state and local income and franchise and
other taxes measured by or imposed on income as indebtedness.
This Certificate shall be construed in accordance with the laws
of the State of New York, without regard to its conflict of laws
principles, and all obligations, rights and remedies under or arising in
connection with this Certificate shall be determined in accordance with
the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, Transferor has caused this Certificate to be
executed by its officer thereunto duly authorized.
INTER-CITY PRODUCTS RECEIVABLES COMPANY,
L.P.
By: Inter-City Products Partner
Corporation, its general partner
By:
Name:
Title:
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Series 1996-1 Certificates referred to in the
Pooling Agreement, as supplemented by the Supplement.
LASALLE NATIONAL BANK, as
Trustee
By:
Name:
Title:
Dated: ___________, 1996
<PAGE>
PURCHASES AND REPAYMENTS
Principal
Amount of Outstanding
Amount Purchase Principal Stated
Purchased Repaid Balance Amount
- --------- --------- ----------- ------
Distribution
Base LIBOR Period (if Base LIBOR Base LIBOR Reduction
Rate applicable) Rate Rate Net
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
<PAGE>
EXHIBIT A-Part II
to the Series 1996-1 Supplement
FORM OF
CLASS B SERIES 1996-1 CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD IN
CONTRAVENTION OF THAT ACT. THIS CERTIFICATE WILL NOT BE ACCEPTED FOR
REGISTRATION OF TRANSFER EXCEPT UPON PRESENTATION OF EVIDENCE SATISFACTORY
TO THE REGISTRAR AND TRANSFER AGENT THAT THE RESTRICTIONS ON TRANSFER SET
FORTH IN THE POOLING AGREEMENT HAVE BEEN COMPLIED WITH.
INTER-CITY PRODUCTS TRADE RECEIVABLES BACKED CERTIFICATES
CLASS B, SERIES 1996-1 CERTIFICATE
Maximum Principal Amount:
First Distribution Date: $_______________
THIS CERTIFIES THAT _________________ is the registered owner of
a nonassessable, fully-paid, fractional undivided interest in the Inter-
City Products Receivables Master Trust (the "Trust") that was created
pursuant to (a) the Pooling and Servicing Agreement, dated as of July 25,
1996 (as the same may be amended, supplemented or otherwise modified from
time to time, the "Pooling Agreement"), among Inter-City Products
Receivables Company, L.P., a Tennessee limited partnership,
("Transferor"), INTER-CITY PRODUCTS CORPORATION (USA), a Delaware
corporation, ("Servicer"), and LASALLE NATIONAL BANK, as trustee (together
with its successors and assigns in such capacity, "Trustee") and (b) the
Supplement dated as of the same date relating to the Series 1996-1
Certificates (the "Supplement"). This Certificate is one of the duly
authorized Series 1996-1 Certificates designated and issued under the
Pooling Agreement and the Supplement. Except as otherwise defined herein,
capitalized terms have the meanings that Appendix A to the Pooling
Agreement assigns to them. This Certificate is subject to the terms,
provisions and conditions of, and is entitled to the benefits afforded by,
the Pooling Agreement and the Supplement, to which terms, provisions and
conditions the Holder of this Certificate by virtue of the acceptance
hereof assents and by which the Holder is bound.
Unless the certificate of authentication hereon shall have been
executed by or on behalf of Trustee by the manual signature of a duly
authorized signatory, this Certificate shall not entitle the Holder hereof
to any benefit under the Transaction Documents or be valid for any
purpose.<PAGE>
This Certificate does not represent a recourse obligation of, or
an interest in, Transferor, any Seller, Servicer, Trustee or any Affiliate
of any of them. This Certificate is limited in right of payment to the
Transferred Assets.
By its acceptance of this Certificate, each Holder hereof (a)
acknowledges that it is the intent of Transferor, and agrees that it is
the intent of the Holder that, for purposes of Federal, applicable state
and local income and franchise and other taxes measured by or imposed on
income, the Class B, Series 1996-1 Certificates (including this
Certificate) will be treated as evidence of indebtedness secured by the
Transferred Assets and the Trust will not be characterized as an
association taxable as a corporation or a publicly-traded partnership, (b)
agrees that the provisions of the Transaction Documents shall be construed
to further that intent, and (c) agrees to treat this Certificate for
purposes of Federal, applicable state and local income and franchise and
other taxes measured by or imposed on income as indebtedness.
This Certificate shall be construed in accordance with the laws
of the State of New York, without regard to its conflict of laws
principles, and all obligations, rights and remedies under or arising in
connection with this Certificate shall be determined in accordance with
the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, Transferor has caused this Certificate to be
executed by its officer thereunto duly authorized.
INTER-CITY PRODUCTS RECEIVABLES
COMPANY, L.P.
By: Inter-City Products Partner
Corporation, its general partner
By: ____________________________________
Name:
________________________________
Title:
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Series 1996-1 Certificates referred to in the
Pooling Agreement, as supplemented by the Supplement.
LASALLE NATIONAL BANK, as Trustee
By:__________________________________
Name:
______________________________
Title:
Dated: ___________, 1996<PAGE>
EXHIBIT B
<PAGE>
ICP RECEIVABLES COMPANY, L.P. CONSOLIDATED SERVICER REPORT
Report Date:
NET ELIGIBLE RECEIVABLES REPORT
- --------------------------------
Total Receivables - Prior Day
+ Gross Billings
- Collections
- Credit Memos
- Bad Debt Write-Offs
+/- Adjustments
-------------
Total before Ineligible Canada & General
+ Ineligible ICP Intercompany (from General, & Canada)
Total Receivables - 18-Mar-97 -------------
Ineligible Receivables
- Unapplied Lockbox Receipts
- Intercompany Receivables
- Finance Charges less than 90 days
- Government receivables
- Obligor bankruptcies not charged-off
- Receivables over 90 days past original due date
- Receivables from individual Obligors with either (i) more than 25%
of receivables over 120 days past their original invoice dates
or (ii) more than 10% of receivables over 180 days past their
original invoice dates
- Receivables evidenced by promissory notes
- Receivables from any ICP Corporation subsidiary not defined as a
Seller
- Receivables from Fahnestock or Fahnestock Affiliate
- Receivables from Heaven Engineering brokerage services
- Excluded International Receivables
- Receivables subject to offset, counterclaim, lien or other defense
- Receivables with payment terms in excess of 61 days (excluding
Extended Term Receivables)
- Interest bearing Receivables (excluding Extended Term Receivables)
- Other receivables not in accordance with definitions of Eligible
Obligor or Eligible Receivable
-------------------------------------
Total Ineligible Receivables
Eligible Receivables
+ Aggregate Retained Balances
- Excess Foreign Obligor Balances
- Excess Foreign Currency Receivables
- Co-Op Advertising Reserves
- Cash Discount Reserves
- Extended Term Receivables (as of April 1, 2001)
--------------------
Adjusted Eligible Receivables
Class B Concentration Percentage #DIV/01
Each Obligor exceeding 45% of the Class B Concentration %
Any two Obligors exceeding 67.5% of the Class B Concentration %
Any four Obligors exceeding the Class B Concentration %
Each Obligor (excluding the four largest) exceeding 12.5% of the
Class B Concentration %
Class B Excess Concentration Balances
<PAGE>
Net Eligible Receivables
Net Eligible Receivables (1-Class B Reserve Ratio)
Class A Subordination Deficit (CASD)
Carrying Cost Receivables Reserve (CCRR)
Base Amount
<PAGE>
Top 10 Concentration Balances 18-Mar-97 Balance
---------
A & C Distributors
Pameco Aire
Epting
Wittichen Supply
Shollmier Investments
Baker Distributing
Ed's Supply
Wesley Electric
ACR Supply
United Refrigeration
Class A Subordination Deficit (CASD):
Class A Required Reserves
Class B Required Reserves
Class A Restrictive Components
Class B Invested Amount
Class A Concentration Percentage: 0.00%
Class A Excess Concentration Balances
Class B Excess Concentration Balances
Class A Incremental Concentration Balance
Carrying Cost Receivables Reserve (CCRR):
Current Carrying Costs
Class A Reserve
Class B Reserve
Non-Usage Fee Reserve
Servicing Fee Reserve
Carrying Cost Account Balance
<PAGE>
DAILY CALCULATIONS AND FUNDS ALLOCATION REPORT
Report Date 19-Mar-97
DAILY ALLOCATIONS - REVOLVING PERIOD PRIOR DAY 18-Mar-97
- ------------------------------------ ---------- ---------
Daily Update
- ------------
Total Receivables $0.00
Eligible Receivables $0.00
Adjusted Eligible Receivables $0.00
Net Eligible Receivables $0.00
Class B Reserve Ratio 0.00%
Class A Stated Amount $0.00
Balance Sheet
- -------------
Assets
- -------
Base Amount $0.00
Equalization Account $0.00
Principal Funding Account $0.00
Total $0.00
-----
Liabilities
- -----------
Class A Invested Amount $0.0
Class B Invested Amount 0.0
---
Invested Amount 0.0
Transferor Amount 0.0
---
Total 0.0
---
Daily Calculations (Section 4.2)
- --------------------------------
Daily Series Collections $0.00
Principal Variance $0
Current Day
-----------------------------
Prior Day Pre-4.3 Post-4.3
--------- ------- --------
Base Amount 0.00 0.00
Invested Amount 0.00 0.00
Equalization Account 0.00 0.00
Transferor Amount 0.00 0.00
Net Invested Amount 0.00 0.00
Base Amount - Net Invested Amount 0.00 0.00
Collections to be allocated
- ---------------------------
Daily Series Collections Available
for Allocation 0.00
Change in Equalization Account 0.00
Portfolio Collection Days 0.0
<PAGE>
Current Carrying Costs
- ----------------------
Class A Certificate Rate 1.20%
Class B Certificate Rate 3.50%
Servicing Fee Percentage 1.00%
Non-Usage Fee Rate 0.80%
LIBOR 0.000000%
<PAGE>
DAILY TRANCHE ALLOCATION REPORT
Report Date 19-Mar-97
ALLOCATION OF INVESTED AMOUNT TO TRANCHES Tranche
- ----------------------------------------- ------------------------------
A B C
--- --- ---
Amount 0.00 0.00
Interest Period End Date 25-Mar-97 03-Apr-97 07-Apr-97
2.2 Purchase - Notification Date 20-Feb-97 03-Mar-97 06-Mar-97
2.2 Libor Set Date 21-Mar-97 30-Mar-97 03-Apr-97
2.2 Purchase - Funding Date 25-Mar-97 03-Apr-97 07-Apr-97
2.2 Purchase - Amount 0.00 0.00 0.00
3.1 Reduction - Notification Date 20-Feb-97 03-Mar-97 06-Mar-97
3.1 Reduction - Effective Date 25-Mar-97 03-Apr-97 07-Apr-97
3.1 Reduction - Amount 0.00 0.00 0.00
Prior Day Amount 0.00 0.00 0.00
Pro-Forma Amount (post 2.2 and 3.1) 0.00 0.00 0.00
Next Interest Payment Amount 0.00 0.00
LIBOR 0.00000% 0.00000%
Prime Rate X X X
------------------------------
USAGE
- -----
Total Investment Amount
Stated Amount
Unused Amount
Non-Usage Fee Payable
Series B Interest Due
Servicer Fee Payable
Other Fees Due (For Extra Tranche Creation & Breakage)
2.2 TRANCHE CREATION
- --------------------
Notification Date X
Libor Set Date X
Funding Date X
Amount X
Tranche Designation X
Index Rate Libor
BREAKAGE CALCULATION
- --------------------
Any Prepaid Tranche Amount $0.00
Remaining Days in the Interest Period 0
Existing Rate
LaSalle CP Rate
Breakage Amount $0.00
<PAGE>
DAILY CALCULATIONS AND FUNDS ALLOCATION REPORT
Report Date 19-Mar-97
ALLOCATIONS OF COLLECTIONS PRIOR DAY 19-Mar-97
- -------------------------- --------- ---------
Daily Series Collections $0.00 0.00
Bad Debt Recoveries $0.00 0.00
Total Available $0.00 0.00
Current Carrying Costs
- ----------------------
Class A - Tranche A Interest $0.00 0.00
Class A - Tranche B Interest $0.00 0.00
Class A - Tranche C Interest $0.00 0.00
Class B Interest $0.00 0.00
Servicing Fee $0.00 0.00
Non-Use Fees $0.00 0.00
Other Fees (Extra Tranche Creation) $0.00 0.00
Minimum LIBOR Return Fees $0.00 0.00
Commitment Reduction Fees $0.00 0.00
Administration Fees $0.00 0.00
Commitment Fees $0.00 0.00
-------------------------
Minimum Usage Fees $0.00 0.00
Remaining Collections $0.00 $0.00
Principal Funding Account:
- --------------------------
Beginning Balance $0.00 0.00
Current Day Deposit; Allocation to Class A
Invested Amount $0.00 $0.00
Current Day Withdrawal; Payment of Class A
Invested Amount $0.00 $0.00
Ending Balance $0.00 0.00
Remaining Collections $0.00 0.00
Equalization Account:
- ---------------------
Beginning Balance $0.00 0.00
Current Day Deposit; Net Invested Amount>Base Amount $0.00 0.00
Current Day Withdrawal; Net Invested Amount<Base Amount $0.00 0.00
Ending Balance $0.00 0.00
Remaining Collections $0.00 0.00
<PAGE>
DAILY ACCOUNT SUMMARY REPORT
PRIOR DAY 19-Mar-97
--------- ---------
Master Collection Account
- -------------------------
Beginning Balance $0.00 0.00
Collections from Obligors and Bad Debt Recoveries $0.00 0.00
Credit - Increase in Borrowings or
Miscellaneous Received $0.00 0.00
Credit - Transfer from Equalization Account -
Net Invested Amount<Base Amount $0.00 0.00
Credit - Transfer from Equalization Account -
reduction in Transferor Amount $0.00 0.00
Credit - Interest Income from Master Collection Account $0.00 0.00
Credit - Interest Income from Carry Cost Account $0.00 0.00
Credit - Interest Income from Equalization Account $0.00 0.00
Credit - Interest Income from Principal Funding Account $0.00 0.00
Debit - Transfer to Carrying Cost Account $0.00 0.00
Debit - Transfer to Equalization Account -
Net Invested Amount>Base Amount $0.00 0.00
Debit - Transfer to Principal Funding Account $0.00 0.00
Debit - Servicer Fee Income from Carrying Cost Account $0.00 0.00
Debit - Wire Funds to ICP(USA) ABA#064000046
Acct. # 359-040-2 $0.00 0.00
Debit - Wire Funds to General Heating & Cooling
ABA# 101000695, Acct # 3900022454 $0.00 0.00
Debit - Other Miscellaneous Wire to ICP $0.00 0.00
-------------------
Ending Balance $0.00 0.00
Carrying Cost Account
- ---------------------
Beginning Balance $0.00 0.00
Credit - Transfer from Master Collection Account -
Current Carrying Costs $0.00 0.00
Credit - Interest Income on Balance $0.00 0.00
Debit - Interest Income on Balance $0.00 0.00
Debit - Payment of Class A - Tranche A Interest $0.00 0.00
Debit - Payment of Class A - Tranche B Interest $0.00 0.00
Debit - Payment of Class A - Tranche C Interest $0.00 0.00
Debit - Payment of Class B Interest $0.00 0.00
Debit - Payment of Non-Use Fees $0.00 0.00
Debit - Payment of Other Fees $0.00 0.00
Debit - Payment of Servicing Fee $0.00 0.00
------------------
Ending Balance $0.00 0.00
Principal Funding Account
- -------------------------
Beginning Balance $0.00 0.00
Credit - Allocation to Class A Invested Amount $0.00 0.00
Credit - Interest Income on Balance $0.00 0.00
Debit - Interest Income on Balance $0.00 0.00
Debit - Payment of Class A Invested Amount $0.00 0.00
------------------
Ending Balance $0.00 0.00
<PAGE>
Equalization Account
- --------------------
Beginning Balance $0.00 0.00
Credit - Transfer from Master Collection Account -
Net Invested Amount>Base Amount $0.00 0.00
Debit - Transfer to Master Collection Account -
Net Invested Amount<Base Amount $0.00 0.00
Debit - Transfer to Master Collection Account
to reduce Transferor Amount $0.00 0.00
Credit - Interest Income on Balance $0.00 0.00
Debit - Interest Income on Balance $0.00 0.00
------------------
Ending Balance $0.00 0.00
Incoming Wire Transfer Reconciliation
- -------------------------------------
From ICP (USA)
ICP (USA) lock box at LaSalle # 2131 $0.00
HVAC First lock box at LaSalle #2464 $0.00
From General Heating & Cooling at UMB ABA #101000695,
Acct. # 3900022454 $0.00
-------------------
Total $0.00
<PAGE>
GENERAL HEATING AND COOLING COMPANY SERVICER REPORT
Report Date 19-Mar-97
Eligible Receivables Report
- ---------------------------
Total Receivables - Prior Day
+ Gross Billings $0.00
- Collections $0.00
- Credit Memos $0.00
- Bad Debt Write-Offs $0.00
+/- Adjustments $0.00
-------------
Total Receivables - 18-Mar-97 $0.00
Ineligible Receivables
- Unapplied Lockbox Receipts $0.00
- Finance Charges less than 90 days $0.00
- Government receivables $0.00
- Obligor bankruptcies not charged-off $0.00
- Receivables over 90 days past original due date $0.00
- Receivables from individual Obligors with either (i)
more than 25% of receivables over 120 days past
their original invoice dates or (ii) more than 10%
of receivables over 180 days past their original
invoice dates $0.00
- Receivables evidenced by promissory notes $0.00
- Receivables from Fahnestock or Fahnestock Affiliate $0.00
- Receivables from Heaven Engineering brokerage services $0.00
- Receivables subject to offset, counterclaim, lien or
other defense $0.00
- Interest bearing Receivables $0.00
- Other receivables not in accordance with definitions of
Eligible Obligor or Eligible Receivable $0.00
-------------
Total Ineligible Receivables $0.00
Eligible Receivables $0.00
Checks issued directly to Obligors in respect of credit memos $0.00
GENERAL HEATING AND COOLING COMPANY PURCHASE PRICE REPORT
Report Date 19-Mar-97
Purchase Price Report
- ---------------------
New Receivables originated $0.00
X Purchase Discount Reserve Ration (recalculated monthly) 0.00%
Purchase Price $0.00
- - Collections paid to Seller (from Master Collection Account) $0.00
Receivables Purchased with Cash - sent to General $0.00
Receivables Purchased with Cash - sent to ICP to pay down
intercompany note $0.00
Receivables purchased with Buyer Notes (or redemption of notes) $0.00
Receivables Contributed $0.00
Beginning Buyer Note Balance $0.00
Change in Balance $0.00
Ending Buyer Note Balance $0.00
<PAGE>
ICP (USA) SERVICER REPORT
Report Date 19-Mar-97
Eligible Receivables Report
- ---------------------------
Total Receivables - Prior Day
+ Gross Billings $0.00
- Collections $0.00
- Credit Memos $0.00
- Bad Debt Write-Offs $0.00
+/- Adjustments $0.00
Total before Ineligible Canada & General -------------
+ Ineligible ICP Intercompany (from General & Canada)
Total Receivables - 18-Mar-97 $0.00
Ineligible Receivables
- Unapplied Lockbox Receipts $0.00
- Intercompany Receivables (Canada & General) $0.00
- Finance Charges less than 90 days $0.00
- Government receivables $0.00
- Obligor bankruptcies not charged-off $0.00
- Receivables over 90 days past original due date $0.00
- Receivables from individual Obligors with either (i)
more than 25% of receivables over 120 days past
their original invoice dates or (ii) more than 10%
of receivables over 180 days past their original
invoice dates $0.00
- Receivables evidenced by promissory notes $0.00
- Receivables from any ICP Corporation Subsidiary not
defined as a Seller $0.00
- Receivables subject to offset, counterclaim, lien or
other defense $0.00
- Excluded International Receivables $0.00
- Receivables with payment terms in excess of 61 days
(excluding Extended Term Receivables) $0.00
- Interest bearing Receivables
(excluding Extended Term Receivables) $0.00
- Other receivables not in accordance with definitions of
Eligible Obligor or Eligible Receivable $0.00
-------------
Total Ineligible Receivables $0.00
Eligible Receivables $0.00
Checks issued directly to Obligors in respect of credit memos
Eligible Extended Term Receivables
Commercial Stocking Receivables $0.00
Cooling Preseason Receivables $0.00
Heating Preseason Receivables $0.00
FAST Parts Receivables $0.00
Selected Extended Term Receivables $0.00
International Receivables $0.00
LOC Backed International Receivables $0.00
Past Due LOC Backed International Receivables $0.00
<PAGE>
ICP (USA) PURCHASE PRICE REPORT
Report Date 19-Mar-97
Purchase Price Report
- ---------------------
New Receivables originated $0.00
X Purchase Discount Reserve Ration (recalculated monthly) 0.00%
Purchase Price $0.00
- - Collections paid to Seller (from Master Collection Account) $0.00
Receivables Purchased with Cash - sent to ICP to pay down
intercompany note $0.00
Receivables Purchased with Cash $0.00
Receivables purchased with Buyer Notes (or redemption of notes) $0.00
Receivables Contributed $0.00
Beginning Buyer Note Balance $0.00
Change in Balance $0.00
Ending Buyer Note Balance $0.00
ICP RECEIVABLES COMPANY, L.P. CONSOLIDATED PURCHASE PRICE REPORT
Report Date 19-Mar-97
Purchase Price Report
- ---------------------
New Receivables originated $0.00
X Purchase Discount Reserve Ration (recalculated monthly) 0.00%
Purchase Price $0.00
- - Collections paid to Seller (from Master Collection Account) $0.00
Receivables Purchased with Cash $0.00
Receivables purchased with Buyer Notes (or redemption of notes) $0.00
Receivables Contributed $0.00
Beginning Buyer Note Balance $0.00
Change in Balance $0.00
Ending Buyer Note Balance $0.00
Maximum Buyer Note (Consolidated) $0.00
- ----------------------------------
Paul Merrill
Financial Analyst
<PAGE>
EXHIBIT C
<PAGE>
ICP RECEIVABLES COMPANY, L.P. CONSOLIDATED SERVICER REPORT
Report Date:
NET ELIGIBLE RECEIVABLES REPORT
- --------------------------------
Total Receivables - Prior Month
+ Gross Billings
- Collections
- Credit Memos
- Bad Debt Write-Offs
+/- Adjustments
Total Receivables - Month End
Ineligible Receivables
- Unapplied Lockbox Receipts
- Intercompany Receivables
- Finance Charges less than 90 days
- Government receivables
- Obligor bankruptcies not charged-off
- Receivables over 90 days past original due date
- Receivables from individual Obligors with either (i) more than 25%
of receivables over 120 days past their original invoice dates
or (ii) more than 10% of receivables over 180 days past their
original invoice dates
- Receivables evidenced by promissory notes
- Receivables from any ICP Corporation subsidiary not defined as a
Seller
- Receivables from Fahnestock or Fahnestock Affiliate
- Receivables from Heaven Engineering brokerage services
- Receivables subject to offset, counterclaim, lien or other defense
- Receivables with payment terms in excess of 61 days (excluding
Extended Term Receivables)
- Interest bearing Receivables (excluding Extended Term Receivables)
- Other receivables not in accordance with definitions of Eligible
Obligor or Eligible Receivable
Total Ineligible Receivables
Eligible Receivables
+ Aggregate Retained Balances
- Excess Foreign Obligor Balances
- Excess Foreign Currency Receivables
- Co-Op Advertising Reserves
- Cash Discount Reserves
- Extended Term Receivables
Adjusted Eligible Receivables
Class B Concentration Percentage
Each Obligor exceeding 45% of the Class B Concentration %
Any two Obligors exceeding 67.5% of the Class B Concentration %
Any four Obligors exceeding the Class B Concentration %
Each Obligor (excluding the four largest) exceeding 12.5% of the
Class B Concentration %
Class B Excess Concentration Balances
Net Eligible Receivables
Net Eligible Receivables (1-Class B Reserve Ratio)
Class A Subordination Deficit (CASD)
Carrying Cost Receivables Reserve (CCRR)
Base Amount
<PAGE>
COASTLINE DISTRIBUTION, INC. SERVICER REPORT
Report Date:
ELIGIBLE RECEIVABLES REPORT
- --------------------------------
Total Receivables - Prior Month
+ Gross Billings
- Collections
- Credit Memos
- Bad Debt Write-Offs
+/- Adjustments
Total Receivables - Month End
Ineligible Receivables
- Government receivables
- Obligor bankruptcies not charged-off
- Receivables over 90 days past original due date
- Receivables from individual Obligors with either (i) more than 25%
of receivables over 120 days past their original invoice dates
or (ii) more than 10% of receivables over 180 days past their
original invoice dates
- Receivables evidenced by promissory notes
- Receivables subject to offset, counterclaim, lien or other defense
- Interest bearing Receivables
- Other receivables not in accordance with definitions of Eligible
Obligor or Eligible Receivable
Total Ineligible Receivables
Eligible Receivables
Checks issued directly to Obligors in respect of credit memos
<PAGE>
GENERAL HEATING AND COOLING COMPANY SERVICER REPORT
Report Date:
ELIGIBLE RECEIVABLES REPORT
- --------------------------------
Total Receivables - Prior Month
+ Gross Billings
- Collections
- Credit Memos
- Bad Debt Write-Offs
+/- Adjustments
Total Receivables - Month End
Ineligible Receivables
- Government receivables
- Obligor bankruptcies not charged-off
- Receivables over 90 days past original due date
- Receivables from individual Obligors with either (i) more than 25%
of receivables over 120 days past their original invoice dates
or (ii) more than 10% of receivables over 180 days past their
original invoice dates
- Receivables evidenced by promissory notes
- Receivables from Fahnestock or Fahnestock Affiliate
- Receivables from Heaven Engineering brokerage services
- Receivables subject to offset, counterclaim, lien or other defense
- Interest bearing Receivables
- Other receivables not in accordance with definitions of Eligible
Obligor or Eligible Receivable
Total Ineligible Receivables
Eligible Receivables
Checks issued directly to Obligors in respect of credit memos
<PAGE>
ICP (USA) SERVICER REPORT
Report Date:
ELIGIBLE RECEIVABLES REPORT
- --------------------------------
Total Receivables - Prior Month
+ Gross Billings
- Collections
- Credit Memos
- Bad Debt Write-Offs
+/- Adjustments
Total Receivables - Month End
Ineligible Receivables
- Government receivables
- Obligor bankruptcies not charged-off
- Receivables over 90 days past original due date
- Receivables from individual Obligors with either (i) more than 25%
of receivables over 120 days past their original invoice dates
or (ii) more than 10% of receivables over 180 days past their
original invoice dates
- Receivables evidenced by promissory notes
- Receivables from any ICP Corporation subsidiary not defined as
Seller
- Receivables subject to offset, counterclaim, lien or other defense
- Excluded International Receivables
- Receivables with payment terms in excess of 61 days (excluding
Extended Term Receivables)
- Interest bearing Receivables (excluding Extended Term Receivables)
- Other receivables not in accordance with definitions of Eligible
Obligor or Eligible Receivable
Total Ineligible Receivables
Eligible Receivables
Checks issued directly to Obligors in respect of credit memos
Extended Term Receivables
Commercial Stocking Receivables
Cooling Preseason Receivables
Heating Preseason Receivables
FAST Parts Receivables
Selected Extended Term Receivables
Eligible International Receivables
<PAGE>
ICP RECEIVABLES COMPANY
Supplemental Servicer Report
As of
-------------------
1. Current Ratings S&P D&P
----------- ----------
Class A AAA AAA
Class B A A
2. Initial Principal Amount
Class A
Class B
3. Current Principal Amount
Class A
Class B
4. Additional Available Amount
Class A
5. Total Receivables
6. Eligible Receivables
7. Equalization Account Balance
8. Transferor Amount
9. Underlying Portfolio Amount (5+7-8)
10. Total Eligible Receivables greater than 60 days delinquent
11. Net Losses on Total Receivables
12. Current Month's Collections
13. Prior Month's Total Receivables
Approved:
---------------------------------------
Name
Title:
---------------------------------------
Date:
---------------------------------------
<PAGE>
EXHIBIT D
<PAGE>
Inter-City Products Corporation (USA)
EXHIBIT D
to Series 1996-1 Supplement
GUARANTY
THIS GUARANTY, dated as of July 25,1996 (this "Guaranty"), is
issued by INTER-CITY PRODUCTS CORPORATION (USA), a Delaware corporation
("Guarantor"), for the benefit of INTER-CITY PRODUCTS RECEIVABLES COMPANY,
L.P., a Tennessee limited partnership ("Buyer"), and its successors and
assigns.
Guarantor agrees as follows:
SECTION 1. Definitions. Capitalized terms used in this Guaranty,
unless otherwise defined herein, shall have the meaning set forth in
Appendix A to the Pooling and Servicing Agreement, dated as of the date
hereof (as it may be amended, supplemented or otherwise modified from time
to time, the "Pooling Agreement" among Buyer, Guarantor, as Servicer, and
LASALLE NATIONAL BANK, as Trustee.
SECTION 2. Guaranty. FOR VALUE RECEIVED, Guarantor hereby
unconditionally guarantees the full and prompt payment when due, whether
by acceleration or otherwise, and at all times thereafter, and the full
and prompt performance, of each Seller's (each, a "Guaranteed Party")
obligations, howsoever created, arising or evidenced, whether direct or
indirect, primary or secondary, absolute or contingent, joint or several,
now or hereafter existing or due or to become due, which arise out of or
in connection with any Seller Transaction Document other than this
Guaranty (all of such obligations being hereinafter collectively called
the "Liabilities"); provided that nothing contained herein shall be
deemed to constitute credit recourse for the payment of any Receivable;
provided further that to the extent (but solely to the extent) that
Guarantor's obligations under this Guaranty would breach, violate or
constitute an event of default under, that certain Indenture, dated as of
March 1, 1993, by and between Guarantor and United States Trust Company
of New York, as trustee (the "Indenture"), such obligations shall be
deemed void and unenforceable against Guarantor until such time as the
Indenture is terminated, at which time such obligations shall be. deemed
fully enforceable against Guarantor. Guarantor further agrees to pay all
expenses (including reasonable attorneys' fees and legal expenses) paid
or incurred by Buyer or its assigns in endeavoring to collect the
Liabilities, or any part thereof, and in enforcing this Guaranty.
SECTION 3. Continuing Guaranty. This Guaranty shall in all
respects be a continuing, absolute and unconditional guaranty, and shall
remain in full force and effect (notwithstanding, without limitation, that
at any time or from time to time all Liabilities may have been paid in
full), subject to discontinuance only upon actual receipt by Trustee of
written notice from Guarantor of the discontinuance hereof, provided,
however, that no such notice of discontinuance hereof shall affect or
impair any of the agreements and obligations of Guarantor hereunder with
respect to (i) any and all Liabilities existing prior to the time of
actual receipt of such notice by Trustee, any and all Liabilities created
or acquired thereafter pursuant to any commitments and agreements made by
<PAGE>
Buyer under and with respect to the Purchase Agreement, and any and all
extensions or renewals thereof, and (ii) any and all expenses paid or
incurred by Buyer or its assigns in endeavoring to collect any of the
foregoing and in enforcing this Guaranty; and all of the agreements and
obligations under this Guaranty shall, notwithstanding any such notice of
discontinuance, remain fully in effect until all such Liabilities
(including any extensions or renewals of any thereof) and all such other
obligations and expenses finally shall have been paid in full.
SECTION 4. Rescission. Guarantor further agrees that, if at any
time all or any part of any payment theretofore applied by Buyer to any
of the Liabilities is or must be rescinded or returned by Buyer for any
reason whatsoever, such Liabilities shall, for the purposes of this
Guaranty, to the extent that such payment is or must be rescinded or
returned, be deemed to have continued in existence, notwithstanding such
application by Buyer, and this Guaranty shall continue to be effective or
be reinstated, as the case may be, as to such Liabilities, all as though
such application by Buyer had not been made.
SECTION 5. Certain Actions. Buyer may, from time to time at its
sole discretion and without notice to Guarantor, take any or all of the
following actions without affecting the obligations of Guarantor
hereunder: (a) retain or obtain a lien upon or a security interest in any
property to secure any of the Liabilities or any obligation hereunder; (b)
retain or obtain the primary or secondary obligation of any obligor or
obligors, in addition to Guarantor, with respect to any of the Liabilities
or any obligation hereunder; (c) extend or renew for one or more periods
(regardless of whether longer than the original period), alter or exchange
any of the Liabilities, or release or compromise any obligation of
Guarantor hereunder or any obligation of any nature of any other obligor
(including any Guaranteed Party) with respect to any of the Liabilities;
(d) release or fail to perfect its lien upon or security interest in, or
impair, surrender, release or permit any substitution or exchange for, all
or any part of any property securing any of the Liabilities or any
obligation hereunder, or extend or renew for one or more periods
(regardless of whether longer than the original period) or release,
compromise, alter or exchange any obligations of any nature of any obligor
with respect to any such property; and (e) resort to Guarantor for payment
of any of the Liabilities, regardless of whether Buyer shall have resorted
to any property securing any of the Liabilities or any obligation
hereunder or shall have proceeded against any other obligor primarily or
secondarily obligated with respect to any of the Liabilities.
SECTION 6. Subrogation. Any amounts received by Buyer from
whatsoever source on account of the Liabilities may be applied by it
toward the payment of such of the Liabilities, and in such order of
application, as Buyer or its assigns may from time to time elect. Until
such time as Buyer shall have received payment of the full amount of all
Liabilities and performance of all of Guarantor's obligations hereunder,
no payment made by or for the account of Guarantor pursuant to this
Guaranty shall entitle Guarantor by subrogation, indemnity or otherwise
to any payment by any Guaranteed Party or from or out of any property of
any Guaranteed Party and Guarantor shall not exercise any right or remedy
against any Guaranteed Party or any property of any Guaranteed Party by
reason of any performance by Guarantor of this Guaranty.
SECTION 7. Waiver. Guarantor hereby expressly waives: (a) notice
of Purchaser's acceptance of this Guaranty; (b) notice of the existence
or creation or non-payment of all or any of the Liabilities, (c)
presentment, demand, notice of dishonor, protest, and ' all other notices
whatsoever (provided that nothing contained in this clause (c) shall
affect any obligations to give notice or make
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<PAGE>
demand as set forth in the Purchase Agreement or the Pooling Agreement);
and (d) all diligence in collection or protection of or realization upon
the Liabilities or any thereof, any obligation hereunder, or any security
for or guaranty of any of the foregoing.
SECTION 8. Unconditional Nature of Guaranty. No delay on
Purchaser's part in the exercise of any right or remedy shall operate as
a waiver thereof, and no single or partial exercise by Purchaser of any
right or remedy shall preclude other or @her exercise thereof or the
exercise of any other right or remedy; nor shall any modification or
waiver of any of the provisions of this Guaranty be binding upon Purchaser
except as expressly set forth in a writing duly signed by Purchaser. No
action or omission of Purchaser permitted hereunder shall in any way
affect or impair Purchaser's rights or Guarantor's obligations under this
Guaranty. For the purposes of this Guaranty, Liabilities shall include
all of each Guaranteed Party's obligations under the Transaction
Documents, notwithstanding any right or power of such Guaranteed Party or
anyone else to assert any claim or defense as to the invalidity or
unenforceability of any such obligation, and no such claim or defense
shall affect or impair the obligations of Guarantor hereunder.
Guarantor's obligations under this Guaranty shall be absolute and
unconditional irrespective of any circumstance whatsoever which might
constitute a legal or equitable discharge or defense of Guarantor.
Guarantor hereby acknowledges that there are no conditions to the
effectiveness of this Guaranty.
SECTION 9. Information. Guarantor has and will continue to have
independent means of obtaining information concerning each Guaranteed
Party's affairs, financial condition and business. Purchaser shall not
have any duty or responsibility to provide Guarantor with any credit or
other information concerning any Guaranteed Party's affairs, financial
condition or business which may come into Purchaser's possession.
SECTION 10. Representations and Warranties. Guarantor represents
and warrants as follows:
(a) Organization and Good Standing. It has been duly
organized and is validly existing as a corporation in good
standing under the laws of its state of incorporation, with
corporate power and authority to own its properties and to
conduct its business as such properties are presently owned and
such business is presently conducted.
(b) Due Qualification. It is duly licensed or
qualified to do business as a foreign corporation in good
standing in each jurisdiction in which (i) the ownership or lease
of its property or the conduct of its business requires such
licensing or qualification, and (ii) the failure to be so
licensed or qualified reasonably could be expected to have a
Material Adverse Effect.
(c) Power and Authority, Due Authorization. It has
(i) all necessary power, authority and legal right to execute,
deliver and perform its obligations under this Guaranty and (ii)
duly authorized by all necessary corporate action such execution,
delivery and performance of this Guaranty.
(d) Binding Obligations. This Guaranty constitutes
the legal, valid and binding obligation of Guarantor, enforceable
in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the
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<PAGE>
enforcement of creditors' rights generally and by general principles
of equity, regardless of whether such enforceability is considered
in a proceeding in equity or at law.
(e) No Violation. The execution, delivery and
performance of this Guaranty will not (i) conflict with, or result
in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time or both) a default under (A)
the certificate of incorporation or by-laws of Guarantor or (B) any
indenture, loan agreement, receivables purchase agreement, mortgage,
deed of trust, or other agreement or instrument to which Guarantor
is a party or by which it or any of its property is bound, (ii)
result in or require the creation or imposition of any Adverse Claim
(other than a Permitted Adverse Claim) upon any of its properties
pursuant to the terms of any such indenture, loan agreement,
receivables purchase agreement, mortgage, deed of trust, or other
agreement or instrument or (iii) violate any law or any order, rule
or regulation applicable to Guarantor of any court or of any federal,
state or foreign regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over Guarantor or
any of its properties.
SECTION 11. Successors and Assigns. (a) This Guaranty shall be
binding upon Guarantor and upon Guarantor's successors and assigns and all
references herein to Guarantor or any Guaranteed Party shall be deemed to
include any successor or successors, whether immediate or remote, to such
Person. Guarantor shall not assign any of its obligations hereunder without
the prior written consent of Buyer.
(b) This Guaranty shall inure to the benefit of Purchaser and
its
successors and assigns. Guarantor acknowledges and agrees that Purchaser's
rights under this Guaranty are being assigned to Trustee, for the benefit of
the Certificateholders and the Purchasers, pursuant to the Pooling Agreement,
as supplemented from time to time (including by the Series 1996-1 Supplement
to the Pooling Agreement, of even date with this Guaranty).
SECTION 12. GOVERNING LAW. THIS GUARANTY SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICT OF LAW PRINCIPLES. Wherever possible each provision of
this Guaranty.. shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Guaranty shall be
prohibited by or invalid under such law, such provision shall be ineffective
only to the extent of such prohibition or invalidity, without invalidating
the remainder of such provision or the remaining provisions of this Guaranty.
SECTION 13. Consent to Jurisdiction, Waiver of July Trial. Buyer
may enforce any claim arising out of this Guaranty in any state or federal
court having subject matter jurisdiction and located in New York City, New
York and with respect to any such claim, Guarantor hereby irrevocably submits
to the Jurisdiction of such courts. Guarantor irrevocably consents to the
service of process out of said courts by mailing a copy thereof, by
registered mail, postage prepaid, to Guarantor, and agrees that such service,
to the fullest extent permitted by law, (i) shall be deemed in every respect
effective service of process upon it in any suit, action or proceeding and
(ii) shall be taken and held to be valid personal service upon and personal
delivery to it. Nothing herein contained shall preclude Buyer from bringing
an action or proceeding in respect hereof in any other country, state or
place having jurisdiction over such action. Guarantor irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of
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<PAGE>
the venue of any such suit, action or proceeding brought in such a court
located in New York City, New York and any claim that any such suit, action
or proceeding brought in such court has been brought in an inconvenient
forum. GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS GUARANTY OR
UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY
IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY
RELATIONSHIP EXISTING IN CONNECTION WITH THIS GUARANTY, AND AGREES THAT ANY
SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY.
SECTION 14. Notices. All notices hereunder shall be given in the
manner set forth in Section 13.5 of the Pooling Agreement.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, this Guaranty has been executed and delivered by
Guarantor duly authorized officer as of the date first written above.
INTER-CITY PRODUCTS CORPORATION
(USA)
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Address: 650 Heil-Quaker Blvd.
Lewisburg, Tennessee 37091
Attn:
Telephone:
Facsimile:
<PAGE>
APPENDIX X
to Certificate Purchase Agreement
Series 1996-1, Class A
INDEX OF ADDITIONAL DEFINED TERMS
Administration Fee. . . . . . . . . . . . . . . . . . . . . . . . . 3
Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Agent Administration Fee. . . . . . . . . . . . . . . . . . . . . . 25
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Arrangement Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Assignee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Breakage fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Class Percentage. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Commitment Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Commitment Reduction Fee. . . . . . . . . . . . . . . . . . . . . . 4
Credit Exposure . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ICP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Indemnitees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Initial Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . 5
LIBOR Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Minimum Usage Fee . . . . . . . . . . . . . . . . . . . . . . . . . 8
Non-Usage Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Pooling Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 5
Purchase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Purchasers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Receivables Review. . . . . . . . . . . . . . . . . . . . . . . . . 22
Required Class A Purchasers . . . . . . . . . . . . . . . . . . . . 25
Required Purchasers . . . . . . . . . . . . . . . . . . . . . . . . 25
Series Percentage . . . . . . . . . . . . . . . . . . . . . . . . . 2
Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Stated Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Supplement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Transferee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Transferor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Trust Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
<PAGE>
Inter-City Products Corporation (USA)
==========================================================================
RECEIVABLES PURCHASE AGREEMENT
dated as of July 25,1996
among
INTER-CITY PRODUCTS CORPORATION (USA)
and
CERTAIN SUBSIDIARIES,
as Sellers
INTER-CITY PRODUCTS PARTNER CORPORATION,
and
INTER-CITY PRODUCTS RECEIVABLES COMPANY, L.P.
as Buyer
==========================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
AGREEMENT TO PURCHASE AND SELL
SECTION 1.1 Agreement to Purchase and Sell 1
SECTION 1.2 Timing of Purchases 2
SECTION 1.3 Consideration for Purchases 2
SECTION 1.4 No Recourse 2
SECTION 1.5 No Assumption of Obligations Relating to Receivables,
Related Assets or Contracts 2
SECTION 1.6 True Sales 3
SECTION 1.7 Addition of Sellers 3
SECTION 1.8 Contribution of Receivables 4
ARTICLE II
CALCULATION OF PURCHASE PRICE
SECTION 2.1 Calculation of Purchase Price 6
SECTION 2.2 Definitions and Calculations Related to
Purchase Price Percentage 7
ARTICLE III
PAYMENT OF PURCHASE PRICE; SERVICING, ETC.
SECTION 3.1 Purchase Price Payments 8
SECTION 3.2 The Buyer Notes 11
SECTION 3.3 Application of Collections and Other Funds 11
SECTION 3.4 Servicing of Receivables and Related Assets 12
SECTION 3.5 Adjustments for Noncomplying Receivables and Dilution 12
SECTION 3.6 Payments and Computations, Etc 12
ARTICLE IV
CONDITIONS TO PURCHASES
SECTION 4.1 Conditions Precedent to Initial Purchase 13
SECTION 4.2 Certification as to Representations and Warranties 14
SECTION 4.3 Effect of Payment of Purchase Price 14
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<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 Representations and Warranties of the Sellers 15
SECTION 5.2 Representations and Warranties of Buyer 20
ARTICLE VI
GENERAL COVENANTS OF THE SELLERS
SECTION 6.1 Affirmative Covenants 21
SECTION 6.2 Reporting Requirements 24
SECTION 6.3 Negative Covenants 25
ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE SPECIFIED ASSETS
SECTION 7.1 Rights of Buyer 28
SECTION 7.2 Responsibilities of the Sellers 29
SECTION 7.3 Further Action Evidencing Purchases 29
SECTION 7.4 Collection of Receivables; Rights of Buyer
and Its Assignees 30
ARTICLE VIII
TERMINATION
SECTION 8.1 Automatic Termination 31
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 Indemnities by the Sellers 32
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Amendments; Waivers, Etc 34
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<PAGE>
SECTION 10.2 Notices, Etc 34
SECTION 10.3 Cumulative Remedies 34
SECTION 10.4 Binding Effect; Assignability; Survival of Provisions 35
SECTION 10.5 Governing Law 35
SECTION 10.6 Costs, Expenses and Taxes 35
SECTION 10.7 Submission to Jurisdiction 36
SECTION 10.8 Waiver of Jury Trial 36
SECTION 10.9 Integration 36
SECTION 10.10 Counterparts 37
SECTION 10.11 Acknowledgment and Consent 37
SECTION 10.12 No Partnership or Joint Venture 37
SECTION 10.13 No Proceedings 37
SECTION 10.14 Severability of Provisions 38
SECTION 10.15 Recourse to Buyer 38
EXHIBITS
EXHIBIT A Form of Buyer Note
EXHIBIT B Form of Seller Assignment Certificate
SCHEDULES
SCHEDULE 1 Litigation and Other Proceedings
SCHEDULE 2 Changes in Financial Condition
SCHEDULE 3 Offices of the Sellers where Records are Maintained
SCHEDULE 4 Legal Names, Trade Names and Names Under Which the
Companies Do Business
SCHEDULE 5 Software Programs and Licenses
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<PAGE>
This RECEIVABLES PURCHASE AGREEMENT, dated as of July 25, 1996
(this "Agreement"), is made among INTER-CITY PRODUCTS CORPORATION (USA),
a Delaware corporation ("ICP"), INTER-CITY PRODUCTS PARTNER CORPORATION,
a Delaware corporation ("ICPPC"), certain direct or indirect domestic
subsidiaries of ICP that are listed on the signature pages hereto or that
become party hereto in accordance with the terms hereof (together with ICP
and ICPPC, the "Sellers"), and INTER-CITY PRODUCTS RECEIVABLES COMPANY,
L.P., a Tennessee limited partnership ("Buyer").
Pursuant to the Pooling and Servicing Agreement dated as of the
date hereof (as amended, supplemented or otherwise modified from time to
time, the "Pooling Agreement"), Buyer intends to transfer its interests
in the Receivables sold pursuant hereto, together with Receivables
contributed to Buyer by ICP and ICPPC from time to time, to the Trust in
order to, among other things, finance its purchases hereunder. Except as
otherwise defined herein, capitalized terms have the meanings assigned to
them in Appendix A to the Pooling Agreement, and this Agreement shall be
interpreted in accordance with the conventions set forth in Part B of such
Appendix A.
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE I
AGREEMENT TO PURCHASE AND SELL
SECTION 1.1 Agreement to Purchase and Sell. Each Seller hereby
sells, transfers, assigns, sets over and conveys to Buyer, and Buyer
agrees to purchase from each Seller, at the times set forth in Section
1.2, all of such Seller's right, title and interest in, to and under:
(a) all Receivables of such Seller (other than
Contributed Initial Receivables) that existed and were owing to such
Seller as at the closing of such Seller's business on the Initial Cut-Off
Date,
(b) all Receivables created by such Seller (other than
Contributed Subsequent Receivables) that arise during the period from and
including the closing of such Seller's business on the Initial Cut-Off
Date to but excluding the Purchase Termination Date,
(c) all Related Security with respect to such
Receivables of such Seller,
(d) all proceeds of the foregoing, including all funds
received by any Person in payment of any amounts owed (including invoice
prices, finance charges, interest and all other charges, if any) in
respect of any Receivable described above or Related Security with respect
to any such Receivable, or otherwise applied to repay or discharge any
such Receivable (including insurance payments that a Seller or the
Servicer applies in the ordinary course of its business to amounts owed
in respect of any such Receivable and net proceeds of any sale or
<PAGE>
other disposition of repossessed goods that were the subject of any such
Receivable) or other collateral or property of any Obligor or any other
party directly or indirectly liable for payment of such Receivables, and
(e) all Records relating to any of the foregoing.
As used herein, (i) "Purchased Receivables" means the items listed
above in clauses (a) and (b), (ii) "Related Purchased Assets" means the
items listed above in clauses (c), (d) and (e), (iii) "Related Assets"
means the Related Purchased Assets and the Related Contributed Assets,
(iv) "Purchased Assets" means the Purchased Receivables and the Related
Purchased Assets, (v) "Specified Assets" means the Purchased Receivables,
the Contributed Receivables and the Related Assets and (vi) "Specified
Receivables" means the Purchased Receivables and the Contributed
Receivables.
SECTION 1.2 Timing of Purchases.
(a) Initial First Issuance Date Purchases. All of the
Purchased Assets of each Seller that existed at the closing of such
Seller's business on the Initial Cut-Off Date shall be sold automatically
to Buyer on the First Issuance Date.
(b) Regular Purchases. Except to the extent otherwise
provided in Section 8.1, after the closing of a Seller's business on the
Initial Cut-Off Date until the closing of such Seller's business on the
Business Day immediately preceding the Purchase Termination Date, all
Purchased Receivables and the Related Purchased Assets of each Seller
shall be sold automatically to Buyer pursuant hereto immediately (and
without further action by any Person) upon the creation of the Purchased
Receivable or Related Purchased Asset.
SECTION 1.3 Consideration for Purchases. On the terms and
subject to the conditions set forth in this Agreement, Buyer agrees to
make Purchase Price payments to the Sellers in accordance with Article
III.
SECTION 1.4 No Recourse. Except as specifically provided in
this Agreement, the sale and purchase of Purchased Assets under this
Agreement shall be without recourse to the Sellers; it being understood
that (i) each Seller shall be liable to Buyer for all representations,
warranties, covenants and indemnities made by such Seller pursuant to the
terms of this Agreement, all of which obligations are limited so as not
to constitute recourse to such Seller for the credit risk of the Obligors,
and (ii) ICP shall be liable to Buyer to the extent specified in the
Seller Guaranty.
SECTION 1.5 No Assumption of Obligations Relating to
Receivables, Related Assets or Contracts. None of Buyer, any Servicer nor
the Trustee shall have any obligation or liability to any Obligor or other
customer or client of a Seller (including any obligation to perform any
of the obligations of such Seller under any Receivable, related Contracts
or any other related
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<PAGE>
purchase orders or other agreements). No such obligation or liability is
intended to be assumed by Buyer, any Servicer or the Trustee hereunder,
and any assumption thereof is expressly disclaimed.
SECTION 1.6 True Sales. The Sellers and Buyer intend the
transfers of Receivables hereunder to be true sales (or, with respect to
Contributed Receivables, true conveyances) by the Sellers to Buyer that
are absolute and irrevocable and that provide Buyer with the full benefits
of ownership of the Receivables, and none of the Sellers nor Buyer intends
the transactions contemplated hereunder to be, or for any purpose to be
characterized as, loans from Buyer to any Seller. ICP and ICPPC intend
the transfers of Receivables by ICP to ICPPC to be true conveyances by ICP
to ICPPC that are absolute and irrevocable and that provide ICPPC with the
full benefits of ownership of such Receivables, and neither ICP nor ICPPC
intends the transactions contemplated hereunder to be, or for any purpose
to be characterized as, loans from ICPPC to ICP.
It is, further, not the intention of Buyer or any Seller that the
conveyance of the Specified Assets by a Seller be deemed a grant of a
security interest in the Specified Assets by such Seller to Buyer (or
ICPPC, as the case may be) to secure a debt or other obligation of such
Seller. However, in the event that, notwithstanding the intent of the
parties, any Specified Assets are property of any Seller's estate, then
(i) this Agreement also shall be deemed to be and hereby is a security
agreement within the meaning of the UCC, and (ii) the conveyance by such
Seller provided for in this Agreement shall be deemed to be a grant by
such Seller to Buyer (or ICPPC, as the case may be) of, and such Seller
hereby grants to Buyer (or ICPPC, as the case may be), a security interest
in and to all of such Seller's right, title and interest in, to and under
the Specified Assets to secure (1) the rights of Buyer (or ICPPC, as the
case may be) hereunder and (2) a loan by Buyer (or ICPPC, as the case may
be) to such Seller in the amount of the related Purchase Price of the
Purchased Assets sold by it or the Unpaid Balance of any Contributed
Receivables and the Related Contributed Assets, as the case may be. Each
Seller and Buyer shall, to the extent consistent with this Agreement, take
such actions as may be necessary to ensure that, if this Agreement were
deemed to create a security interest in the Specified Assets, such
security interest would be deemed to be a perfected security interest of
first priority (subject to Permitted Adverse Claims) in favor of Buyer (or
ICPPC, as the case may be) under applicable law and will be maintained as
such throughout the term of this Agreement.
SECTION 1.7 Addition of Sellers. ICP shall cause each
Subsidiary of ICP which originates any right of such Subsidiary to
payment, whether constituting an account, chattel paper, instrument,
general intangible or otherwise, arising from the sale of goods, services
or future services by such Subsidiary, to become a Seller hereunder
immediately upon such entity becoming a Subsidiary and shall cause such
Subsidiary to sell its accounts receivable and property of the types that
constitute Related Assets hereunder to Buyer. ICP and each Person that
will be added as a Subsidiary shall give to Buyer, the Trustee, the Rating
Agencies and each Required Person not less than 30 days' prior written
notice of the effective date of the addition
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<PAGE>
of such Person as a Subsidiary. Once the notice has been given, the
Receivables given by any Subsidiary of ICP as a Seller added to this
Agreement pursuant to this section shall satisfy clause (n) of the
definition of "Eligible Receivables" on the first Business Day following
the expiration of the notice period (or such later date as may be
specified in the notice) on which (i) the Required Persons have consented
(if the Subsidiary is General or Coastline) or the Modification Condition
has been satisfied (for any other Subsidiary), (ii) the Servicer shall
have delivered to the Trustee a supplement to the Monthly Report then in
effect as described in Section 3.5(e) of the Pooling Agreement and shall
have confirmed in writing to the Trustee that the Seller Guaranty covers
Obligations of such Subsidiary, (iii) such Subsidiary and the parties
hereto shall have executed and delivered the agreements, instruments and
other documents and the amendments or other modifications to the
Transaction Documents, in form and substance reasonably satisfactory to
Buyer, the Trustee and each Required Person, that Buyer, the Trustee or
any Required Person reasonably determine are necessary or appropriate to
effect the addition and (iv) shall have delivered such legal opinions as
are in form and substance satisfactory to the Rating Agencies, each
Required Person and the Trustee.
SECTION 1.8 Contribution of Receivables. (a) ICP hereby
transfers to ICPPC, as a contribution to the capital of ICPPC, all its
right, title and interest in, to and under:
(i) $1,017,156,.79 of Receivables of ICP having, among
the existing Receivables, the oldest invoice dates as of the
closing of ICP's business on the Initial Cut-Off Date (the
"Contributed ICPPC Initial Receivables"),
(ii) all Related Security with respect to the
Contributed ICPPC Initial Receivables,
(iii) all proceeds of the foregoing, including all funds
received by any Person in payment of any amounts owed (including
invoice prices, finance charges, interest and all other charges,
if any) in respect of any Contributed ICPPC Initial Receivable or
Related Security with respect to any such Contributed ICPPC
Initial Receivable, or otherwise applied to repay or discharge
any such Contributed ICPPC Initial Receivable (including
insurance payments that ICP or the Servicer applies in the
ordinary course of its business to amounts owed in respect of any
such Contributed ICPPC Initial Receivable and net proceeds of any
sale or other disposition or repossessed goods that were the
subject of any such Contributed ICPPC Initial Receivable) or
other collateral or property of any Obligor or any other party
directly or indirectly liable for payment of such Contributed
ICPPC Initial Receivables, and
(iv) all Records relating to any of the foregoing (the
items listed above in clauses (ii), (iii) and (iv) being referred
to herein as the "Related Contributed ICPPC Initial Assets").
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<PAGE>
(b) ICPPC hereby transfers to Buyer, as a contribution
to the capital of Buyer, all its right, title and interest in, to and
under the Contributed ICPPC Initial Receivables and the Related
Contributed ICPPC Initial Assets.
(c) ICP hereby transfers to Buyer, as a contribution to
the capital of Buyer, all its right, title and interest in, to and under:
(i) $54,926,466.85 of Receivables of ICP having, among
the existing Receivables (other than the Contributed ICPPC
Initial Receivables), the oldest invoice dates as of the closing
of ICP's business on the Initial Cut-Off Date (the "Contributed
ICP Initial Receivables," and collectively with the Contributed
ICPPC Initial Receivables, the "Contributed Initial
Receivables"),
(ii) all Related Security with respect to the
Contributed ICP Initial Receivables,
(iii) all proceeds of the foregoing, including all funds
received by any Person in payment of any amounts owed (including
invoice prices, finance charges, interest and all other charges,
if any) in respect of any Contributed ICP Initial Receivable or
Related Security with respect to any such Contributed ICP Initial
Receivable, or otherwise applied to repay or discharge any such
Contributed ICP Initial Receivable (including insurance payments
that ICP or the Servicer applies in the ordinary course of its
business to amounts owed in respect of any such Contributed ICP
Initial Receivable and net proceeds of any sale or other
disposition or repossessed goods that were the subject of any
such Contributed ICP Initial Receivable) or other collateral or
property of any Obligor or any other party directly or indirectly
liable for payment of such Contributed ICP Initial Receivables,
and
(iv) all Records relating to any of the foregoing (the
items listed above in clauses (ii), (iii) and (iv) being referred
to herein as the "Related Contributed ICP Initial Assets," and
collectively with the Related Contributed ICPPC Initial Assets,
the "Related Contributed Initial Assets").
(d) On any date following the date hereof, (x) ICP may
elect to transfer to Buyer or to ICPPC (in which case ICPPC shall
immediately transfer to Buyer), as a contribution to capital, or (y) ICP
may be required to transfer to Buyer or to ICPPC (in which case ICPPC
shall immediately transfer to Buyer), as a contribution to capital
pursuant to Section 3.1(a)(iii):
(i) any Receivables which have arisen since the
preceding Business Day which ICP shall have identified on a
schedule (a "Contributed Subsequent Receivables Schedule")
delivered to the Buyer on such date (such Receivables being
"Contributed Subsequent Receivables" and, together with
Contributed Initial Receivables, "Contributed Receivables"),
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(ii) all Related Security with respect to the
Contributed Subsequent Receivables,
(iii) all proceeds of the foregoing, including all funds
received by any Person in payment of any amounts owed (including
invoice prices, finance charges, interest and all other charges,
if any) in respect of any Contributed Subsequent Receivable or
Related Security with respect to any such Contributed Subsequent
Receivable, or otherwise applied to repay or discharge any such
Contributed Subsequent Receivable (including insurance payments
that ICP or the Servicer applies in the ordinary course of its
business to amounts owed in respect of any such Contributed
Subsequent Receivable and net proceeds of any sale or other
disposition or repossessed goods that were the subject of any
such Contributed Subsequent Receivable) or other collateral or
property of any Obligor or any other party directly or indirectly
liable for payment of such Contributed Subsequent Receivables,
and
(iv) all Records relating to any of the foregoing (the
items listed above in clauses (ii), (iii) and (iv) being referred
to herein as the "Related Contributed Subsequent Assets" and,
together with the Related Contributed Initial Assets, "Related
Contributed Assets").
ARTICLE II
CALCULATION OF PURCHASE PRICE
SECTION 2.1 Calculation of Purchase Price. (a) On each
Business Day (including the First Issuance Date), the Servicer shall
deliver to Buyer, the Trustee and ICP a Daily Report with respect to
Buyer's purchases of Receivables from the Sellers:
(i) that are to be made on the First Issuance Date (in
the case of the Daily Report to be delivered on the First
Issuance Date) or
(ii) that were made on the immediately preceding
Business Day (in the case of each subsequent Daily Report).
(b) On each day when Receivables are purchased by Buyer from
a Seller pursuant to Article I, the "Purchase Price" to be paid to such
Seller on such day for the Purchased Receivables and Related Purchased
Assets that are to be sold by such Seller on such day shall be determined
in accordance with the following formula:
PP = AUB x PPP
where:
PP = the aggregate Purchase Price for the Purchased
Receivables and Related Purchased Assets to be
purchased from such Seller on such day,
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AUB = the "Aggregate Unpaid Balance" of the Purchased
Receivables that are to be purchased from such
Seller on such day. For purposes of this
calculation, "Aggregate Unpaid Balance" shall mean
(i) for purposes of calculating the Purchase Price
to be paid to such Seller on the First Issuance
Date, the sum of the Unpaid Balance of each
Receivable generated by such Seller (other than
Contributed Initial Receivables), as measured as
at the closing of such Seller's business on the
Initial Cut-Off Date, and (ii) for purposes of
calculating the Purchase Price on each Business
Day thereafter, the sum of the Unpaid Balance of
each Receivable to be purchased from such Seller
on such day, calculated at the time of the
Receivable's sale to Buyer, and
PPP = the Purchase Price Percentage applicable to the
Receivables to be purchased on such day, as
determined pursuant to Section 2.2.
SECTION 2.2 Definitions and Calculations Related to Purchase
Price Percentage.
(a) "Purchase Price Percentage" for the Receivables to be
sold by a Seller on any day during a Distribution Period shall mean the
percentage determined in accordance with the following formula:
PPP = 100% - (LLR + PDRR)
where:
PPP = the Purchase Price Percentage in effect during
such Distribution Period,
LLR = the Loss to Liquidation Ratio (expressed as a
percentage) in effect during such Distribution
Period, and
PDRR = the Purchase Discount Reserve Ratio (expressed as
a percentage) in effect during such Distribution
Period, as determined on such day pursuant to
subsection (b) below.
The Purchase Price Percentage, the Loss to Liquidation Ratio and the
Purchase Discount Reserve Ratio shall be recomputed by the Servicer on
each Report Date, in each case as of the then most recent Cut-Off Date,
and shall become effective on the next Distribution Date.
(b) "Purchase Discount Reserve Ratio" for the Receivables to
be sold on any day shall mean a percentage determined in accordance with
the following formula:
PDRR = (TD/360 x DR) + PD
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where:
PDRR = the Purchase Discount Reserve Ratio in effect
during such Distribution Period,
TD = the Portfolio Collection Days during the
Calculation Period preceding the first day of such
Distribution Period,
DR = the Discount Rate (expressed as a percentage) in
effect during such Distribution Period as
determined pursuant to subsection (c) below, and
PD = a profit discount equal to .25%; provided that
such percentage may be changed by written
agreement of the Sellers and Buyer if, prior to
giving effect to such change, (i) Buyer shall have
provided to the Trustee, the Agent and the Rating
Agencies a Bankruptcy Opinion that takes such
change into account and (ii) the Modification
Condition shall have been satisfied.
(c) "Discount Rate" for the Receivables to be sold on any day
during a Distribution Period shall mean a fraction (expressed as a
percentage) having (i) a numerator equal to 12 multiplied by an amount
equal to the sum for the Calculation Period ending prior to the first day
of such Distribution Period of (A) accrued Carrying Costs and (B) accrued
interest on Buyer Notes and (ii) a denominator equal to the aggregate
Unpaid Balance of the Receivables as of the last day of the Calculation
Period preceding the first day of such Distribution Period.
ARTICLE III
PAYMENT OF PURCHASE PRICE; SERVICING, ETC.
SECTION 3.1 Purchase Price Payments. (a) On the First
Issuance Date and on the Business Day following each day on which any
Purchased Receivables and Related Purchased Assets are purchased by Buyer
pursuant to Article I, on the terms and subject to the conditions of this
Agreement, Buyer shall pay to the Sellers the Purchase Price for the
Purchased Receivables and Related Purchased Assets purchased on such day
by Buyer (i) by making a cash payment to Servicer (for the account of the
Sellers) to the extent that Buyer has cash available to make the payment
pursuant to Section 3.3, (ii) if the Purchase Price to be paid for such
Receivables and Related Assets of any Seller exceeds the amount of any
cash actually paid for the account of such Seller on such day pursuant to
clause (i), by automatically increasing the principal amount outstanding
under the relevant Buyer Notes by the amount of such excess and (iii) if
the Purchase Price to be paid for such Receivables and Related Assets of
ICP exceeds the sum of (x) the amount of any cash paid to the Servicer on
such day pursuant to clause (i) and (y) the aggregate amount by which all
Buyer Notes may be increased without exceeding the Maximum Exposure
Amount, by deeming (x) Receivables in an amount equal to 99% of such
excess to have been contributed to Buyer by ICP as a capital contribution,
(y) Receivables in an
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amount equal to 1% of such excess to have been contributed to ICPPC by ICP
as a capital contribution and (z) the Receivables contributed to ICPPC
pursuant to clause (y) to have been contributed to Buyer by ICPPC as a
capital contribution.
Each Seller agrees that, prior to the Seller Maturity Date, Buyer
shall be required to make payments in respect of the payment obligations
evidenced by the Buyer Notes only to the extent that it has cash available
under Section 3.3.
(b) Except as provided in a Supplement, on each Business Day,
the "Noncomplying Receivables and Dilution Adjustment" shall be equal to
the result (whether the result is positive or negative) of (i) the sum of
(A) the aggregate Seller Dilution Adjustments in respect of all Sellers,
if any, for the immediately preceding Business Day, as shown in the Daily
Report for such day, plus (B) the aggregate Seller Noncomplying
Receivables Adjustments in respect of all Sellers, if any, for the
immediately preceding Business Day, as shown in the Daily Report for such
day, in the case of each of clauses (A) and (B), as the amounts are
determined pursuant to Section 3.5, minus (ii) the amount of the payments
(if any) that Buyer shall have received on the immediately preceding
Business Day on account of any Seller Noncomplying Receivables that had
been the subject of an earlier Seller Noncomplying Receivables Adjustment.
If the Noncomplying Receivables and Dilution Adjustment is positive on any
day, Buyer shall reduce the Purchase Price payable on such day pursuant
to subsection (a) above by the amount of the Noncomplying Receivables and
Dilution Adjustment. If instead, the Noncomplying Receivables and
Dilution Adjustment is negative on any day, Buyer shall increase the
Purchase Price payable pursuant to subsection (a) above on such day by the
amount of the Noncomplying Receivables and Dilution Adjustment.
(c) If on any day the Noncomplying Receivables and Dilution
Adjustment attributable to any Seller exceeds the Purchase Price payable
by Buyer to such Seller pursuant to subsection (a) above on such day (the
amount of such excess being a "Seller Noncomplying Receivables and
Dilution Excess") then (i) if a Trust Asset Shortfall exists on such day
or if the Purchase Termination Date has occurred, such Seller shall pay
to the Servicer an amount equal to the lesser of (A) the amount of the
Trust Asset Shortfall and (B) the amount of the Seller Noncomplying
Receivables and Dilution Excess, (ii) to the extent of any remaining
Seller Noncomplying Receivables and Dilution Excess after reducing it by
the amount paid to the Servicer pursuant to clause (i), the principal
amount of Seller's Buyer Note shall be reduced automatically by the amount
of such remaining Seller Noncomplying Receivables and Dilution Excess and
(iii) any Seller Noncomplying Receivables and Dilution Excess remaining
after reduction by the amounts specified in clauses (i) and (ii) shall be
paid to Servicer. Amounts paid to Servicer pursuant to this Section
3.1(c) shall be deposited on behalf of such Seller into the Master
Collection Account and shall be deemed a Collection in accordance with
Section 3.5.
(d) If, on any day, the amounts, if any, allocated to any
Seller pursuant to clause (b)(ii) above exceed the sum of any Seller
Dilution Adjustments and the Seller Noncomplying Receivables Adjustments,
if any, in respect of such Seller (as determined pursuant to Section
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3.5) for such day, then Buyer shall either (i) pay Servicer (for the
account of such Seller) in cash the amount of such excess, or (ii) if
Buyer does not have sufficient cash to pay such amount in full, increase
the principal amount of such Seller's Buyer Note by the amount of such
excess that is not paid in cash to Servicer.
(e) Amounts received by Servicer pursuant to this Section 3.1
shall be allocated among the Sellers in accordance with Section 3.3, and
the Seller Dilution Adjustments and the Seller Noncomplying Receivables
Adjustments, if any, in respect of each such Seller (as determined
pursuant to Section 3.5) shall be allocated to such Seller. Servicer
shall maintain a bookkeeping account (the "Seller Account") for purposes
of tracking:
(i) the Purchase Price payable to each Seller in
respect of Receivables and Related Assets sold by it to Buyer
(including the extent to which cash and non-cash payments made by
Buyer should be allocated to each Seller),
(ii) the extent to which such Purchase Price should be
reduced on account of such Seller's Seller Dilution Adjustments
and Seller Noncomplying Receivables Adjustments (including any
allocation of Seller Noncomplying Receivables and Dilution
Excess),
(iii) if a Seller makes cash payments in respect of the
Noncomplying Receivables and Dilution Adjustment (including any
payment in respect of Seller Noncomplying Receivables and
Dilution Excess), the obligation of each other Seller to
reimburse such Seller for its proportionate share thereof,
(iv) if Purchase Price payments attributable to a
Seller's Receivables and Related Assets have been reduced on
account of another Seller's Seller Dilution Adjustment or the
Seller Noncomplying Receivables Adjustment, the obligation of
such other Seller to reimburse the Seller subject to such
reduction,
(v) the extent to which payments (whether cash or non-
cash) by Buyer in respect of a negative Noncomplying Receivables
and Dilution Adjustment should be allocated to each Seller, and
(vi) cash payments made to and by each Seller in respect
of the items described above.
Servicer shall calculate each of the items set forth above on each
day. Intercompany accounts among the Sellers resulting from the items
described above and any payments made by ICP pursuant to the Seller
Guaranty will be settled in accordance with the intercompany cash
management system customarily employed by ICP and its Subsidiaries.
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SECTION 3.2 The Buyer Notes. (a) On the First Issuance Date,
Buyer will deliver to each Seller a promissory note, substantially in the
form of Exhibit A, payable to the order of such Seller (each such
promissory note, as the same may be amended, supplemented, endorsed or
otherwise modified from time to time, together with any promissory note
issued from time to time in substitution therefor or renewal thereof in
accordance with the Transaction Documents, being herein called a "Buyer
Note"), that is subordinated to all Senior Interests now or hereafter
arising under or in connection with the Pooling Agreement. Each Buyer
Note is payable in full on the date (the "Seller Maturity Date") that is
one year and one day after the date on which all Investor Certificates
have been repaid in full and the Revolving Periods for all Investor
Certificates have terminated. Each Buyer Note bears interest at a rate
per annum equal to the rate publicly announced by the Trustee from time
to time as its "reference" or "prime" rate, determined as of each Cut-Off
Date. Buyer may prepay all or part of the outstanding balance of any
Buyer Note from time to time without any premium or penalty, unless the
prepayment would result in a default in Buyer's payment of any other
amount required to be paid by it under any Transaction Document.
(b) The Initial Servicer (or its designee) shall hold all
Buyer Notes for the benefit of the Sellers and shall make all appropriate
recordkeeping entries with respect to the Buyer Notes or otherwise to
reflect the payments on and adjustment of the Buyer Notes. The Initial
Servicer's books and records shall constitute rebuttable presumptive
evidence of the principal amount of and accrued interest on each Buyer
Note at any time. Each Seller hereby irrevocably authorizes the Initial
Servicer to mark its Buyer Note "CANCELLED" and return it to Buyer upon
the final payment thereof.
SECTION 3.3 Application of Collections and Other Funds. If,
on any day, Buyer receives proceeds of transfers pursuant to the Pooling
Agreement, Buyer shall apply the funds as follows:
(a) first, to pay its existing expenses and to set
aside funds for the payment of expenses that are then accrued (in
each case to the extent such expenses are permitted to exist
under Section 7.2(m) of the Pooling Agreement),
(b) second, to pay the Purchase Price as adjusted
pursuant to Section 3.1 for Receivables and Related Assets
purchased by Buyer from the Sellers on such day (in the case of
the First Issuance Date) or the next preceding Business Day,
(c) third, in such order among Sellers as Buyer shall
elect, to repay amounts owed by Buyer to the Sellers under the
Buyer Notes,
(d) fourth, to pay amounts owed pursuant to Section
3.1(d), and
(e) fifth, if the Buyer shall elect, to declare and
make distributions to its partners to the extent permitted by law
and the Transaction Documents.
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SECTION 3.4 Servicing of Receivables and Related Assets.
Consistent with Buyer's ownership of the Receivables and the Related
Assets, as between the parties to this Agreement, Buyer shall have the
sole right to service, administer and collect the Receivables, to assign
the right and to delegate the right to others. Without limiting the
generality of Section 10.11, each Seller hereby acknowledges and agrees
that Buyer shall assign to the Trustee for the benefit of the Investor
Certificateholders the rights and interests of Buyer hereunder and agrees
to cooperate fully with the Servicer and the Trustee in the exercise of
such rights and interests. As more fully described in Section 7.4(b) and
in the Pooling Agreement, the Trustee may exercise the rights in the place
of Buyer (as assignee or otherwise) only after the designation of a
Servicer other than the Initial Servicer pursuant to Section 10.2 of the
Pooling Agreement.
At Trustee's request, each Seller will (A) assemble all of the
Records that are necessary or appropriate to collect the Receivables and
Related Transferred Assets, and shall make the same available to Trustee
at one or more places selected by Trustee or its designee, and (B) permit,
upon not less than two Business Days' prior written notice, any Successor
Servicer and its agents, employees and assignees access to their
respective facilities and their respective Records.
SECTION 3.5 Adjustments for Noncomplying Receivables and
Dilution. (a) If at any time any of Buyer, the Servicer, the Trustee or
a Seller shall determine that any Receivable identified by the Servicer
as an Eligible Receivable on the date of Purchase thereof by Buyer or the
contribution thereof to Buyer was in fact a Seller Noncomplying Receivable
on such date, or that any of the representations and warranties made by
the related Seller in Section 5.1(k) with respect to such Receivable was
not true on such date, such Seller shall be deemed to have received on the
date of such determination a Collection of the Receivable in an amount
equal to the Unpaid Balance of the Receivable on such date (the sum of all
such amounts for such Seller on any day being called the "Seller
Noncomplying Receivables Adjustment" for such Seller for such day), and
such Seller Noncomplying Receivables Adjustment shall be settled in the
manner provided for in Section 3.1.
(b) If on any day the aggregate Unpaid Balance of the
Receivables sold or contributed to Buyer on or before such date by a
Seller is reduced in any manner described in the definition of "Dilution"
(the total of the reductions being called the "Seller Dilution Adjustment"
for the Seller for such day), then such Seller shall be deemed to have
received on such day a Collection of Receivables in the amount of the
Seller Dilution Adjustment and such Seller Dilution Adjustment shall be
settled in the manner provided in Section 3.1.
SECTION 3.6 Payments and Computations, Etc. (a) All amounts
to be paid by a Seller to Buyer hereunder shall be received in accordance
with the terms hereof no later than 1:00 p.m., New York City time, on the
day when due in Dollars in immediately available funds in the Master
Collection Account. Payments received by Buyer after such time shall be
deemed to have been received on the next Business Day. In the event that
any payment otherwise is scheduled to become due on a day that is not a
Business Day, then payment shall become due
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on the next Business Day. Each Seller shall, to the extent permitted by
law, pay to Buyer, on demand, interest on all amounts not paid when due
hereunder at 2% per annum above the interest rate on the applicable Buyer
Note in effect on the date the payment was due; provided, however, that
the interest rate shall not at any time exceed the maximum rate permitted
by applicable law. All computations of interest payable hereunder shall
be made on the basis of a year of 360 days for the actual number of days
(including the first but excluding the last day) elapsed.
(b) All amounts to be paid by Buyer to a Seller hereunder
shall be paid to Servicer (for the account of such Seller) no later than
2:00 p.m., New York City time, on the day when due in Dollars in
immediately available funds to an account that Servicer shall from time
to time specify in writing. Payments received by Servicer after such time
shall be deemed to have been received on the next Business Day. Servicer
shall promptly remit payments received by it in immediately available
funds to such account as the applicable Seller shall from time to time
specify in writing. In the event that any payment otherwise is scheduled
to become due on a day that is not a Business Day, then such payment shall
become due on the next Business Day.
(c) Permitted Inventory Discretionary Returns shall not be
deemed to give rise to a Seller Noncomplying Receivables Adjustment or a
Seller Dilution Adjustment if effected in accordance with Section 3.2(k)
of the Pooling Agreement.
ARTICLE IV
CONDITIONS TO PURCHASES
SECTION 4.1 Conditions Precedent to Initial Purchase. The
initial purchase hereunder is subject to the conditions precedent that (i)
each of the conditions precedent to the execution, delivery and
effectiveness of each other Transaction Document (other than a condition
precedent in any other Transaction Document relating to the effectiveness
of this Agreement) shall have been fulfilled to the satisfaction of Buyer,
and (ii) Buyer shall have received (or in the case of subsection (f)
below, shall have delivered) each of the following, on or before the First
Issuance Date, each (unless otherwise indicated) dated the date hereof or
the First Issuance Date and each in form and substance satisfactory to
Buyer:
(a) Seller Assignment Certificates. A Seller
Assignment Certificate from each Seller in the form of Exhibit B,
duly completed, executed and delivered by such Seller,
(b) Resolutions. A copy of the resolutions of the
Board of Directors of each Seller approving this Agreement and
the other Transaction Documents to be delivered by it hereunder
and the transactions contemplated hereby and thereby and
addressing such other matters as may be required by Buyer,
certified by its Secretary or Assistant Secretary, each as of a
recent date acceptable to Buyer,
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(c) Good Standing Certificate of each Seller;
Certificates as to Foreign Qualification of each Seller. A good
standing certificate for each Seller, issued as of a recent date
by the Secretary of State of: (i) the jurisdiction of its
incorporation and (ii) each state in which such Seller does
business and where the failure so to be in good standing
reasonably could be expected to have a Material Adverse Effect,
(d) Incumbency Certificate. A certificate of the
Secretary or Assistant Secretary of each Seller certifying, as of
a recent date reasonably acceptable to Buyer, the names and true
signatures of the officers authorized on such Seller's behalf to
sign the Transaction Documents to be delivered by such Seller (on
which certificate Buyer, the Trustee and the Servicer may
conclusively rely until such time as Buyer shall receive from
such Seller (with a copy to the Trustee and the Servicer), a
revised certificate meeting the requirements of this subsection),
(e) Other Transaction Documents. Original copies,
executed by each of the parties thereto in such reasonable number
as shall be specified by Buyer, of each of the other Transaction
Documents to be executed and delivered in connection herewith,
(f) Buyer Notes. The Buyer Notes, executed by Buyer,
and
(g) License Agreements. Duly executed counterparts of
(i) software license agreements between each Seller or Servicer
that uses its own proprietary software in the origination or
servicing of Receivables or Related Assets and Buyer, and (ii)
amendments to any license agreement between a Seller or Servicer
and any third party vendor, adding any substitute Servicer as a
licensee.
(h) Auditors' Letter. A letter from Coopers & Lybrand
L.L.P. in form and substance satisfactory to Buyer, as to certain
agreed-upon procedures performed prior to the First Issuance
Date.
SECTION 4.2 Certification as to Representations and Warranties.
Each Seller (by accepting the Purchase Price paid for each Purchase), ICP
(upon a contribution of Receivables and Related Assets to the Buyer or
ICPPC) and ICPPC (upon a contribution of Receivables and Related Assets
to the Buyer) shall be deemed to have certified with respect to such
Receivables and Related Assets to be sold or contributed on such day that
its representations and warranties contained in Article V (excluding, with
respect to any day after the First Issuance Date, Section 5.1(i)) are true
and correct on and as of such day, with the same effect as though made on
and as of such day.
SECTION 4.3 Effect of Payment of Purchase Price. Upon the
payment of the Purchase Price (whether in cash or by an increase in a
Buyer Note pursuant to Section 3.1) for any Purchase or, in the case of
ICP or ICPPC as a Seller, by a capital contribution, title to the
Receivables and the Related Assets included in the Purchase shall vest in
Buyer, whether or not
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the conditions precedent to the Purchase were in fact satisfied; provided,
however, that Buyer shall not be deemed to have waived any claim it may
have under this Agreement for the failure by a Seller in fact to satisfy
any such condition precedent. Upon any capital contribution of
Receivables and Related Assets by ICP to ICPPC, title to the Receivables
and Related Assets included in the contribution shall vest in ICPPC.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 Representations and Warranties of the Sellers. In
order to induce Buyer to enter into this Agreement and to make purchases
hereunder, each Seller hereby makes the representations and warranties set
forth in this section with respect to itself at the times and to the
extent set forth in Section 4.2 (it being understood that only ICP makes
the representations and warranties set forth below with respect to any
Contributed Receivables and Related Contributed Assets). Furthermore, in
order to induce ICPPC to enter into this Agreement, ICP hereby makes the
representations and warranties set forth in this section with respect to
itself at the times and to the extent set forth in Section 4.2 with
respect to any Contributed Receivables and Related Contributed Assets
contributed to ICPPC.
(a) Organization and Good Standing. Such Seller is a
corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has
full power and authority to own its properties and to conduct its
business as the properties presently are owned and the business
presently is conducted. Such Seller had at all relevant times,
and now has, all necessary power, authority and legal right to
own, sell and (if applicable) contribute its Receivables and the
Related Assets.
(b) Due Qualification. Such Seller is duly qualified
to do business and is in good standing as a foreign corporation
(or is exempt from such requirements), and has obtained all
necessary licenses and approvals, in all jurisdictions in which
the ownership or lease of property or the conduct of its business
requires qualification, licenses or approvals.
(c) Power and Authority; Due Authorization. Such
Seller has (i) all necessary power and authority to (A) execute
and deliver this Agreement and the other Transaction Documents to
which it is a party, (B) perform its obligations under this
Agreement and the other Transaction Documents to which it is a
party, and (C) sell, assign and (if applicable) contribute the
Receivables and the Related Assets on the terms and subject to
the conditions herein and therein provided and (ii) duly
authorized by all necessary action such sale, assignment and (if
applicable) contribution, the execution, delivery and performance
of this Agreement and the other Transaction Documents to which it
is a
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party and the consummation of the transactions provided for in
this Agreement and the other Transaction Documents to which it is
a party.
(d) Valid Sale; Binding Obligations. Each sale of
Receivables and Related Assets made by such Seller pursuant to
this Agreement, and each contribution of Receivables and Related
Assets made to Buyer shall constitute a valid sale (except in the
case of Contributed Receivables and Related Contributed Assets),
transfer and assignment of all of such Seller's right, title and
interest in, to and under such Receivables and the Related Assets
of such Seller to Buyer that is perfected and of first priority
under the UCC and otherwise, enforceable against creditors of,
and purchasers from, such Seller and free and clear of any
Adverse Claim (other than any Permitted Adverse Claim); and this
Agreement constitutes, and each other Transaction Document to
which such Seller is a party when duly executed and delivered
will constitute, a legal, valid and binding obligation of such
Seller, enforceable against it in accordance with its terms,
except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by general
principles of equity, regardless of whether enforceability is
considered in a proceeding in equity or at law.
(e) No Conflict or Violation. The execution, delivery
and performance of, and the consummation of the transactions
contemplated by, this Agreement and the other Transaction
Documents to be signed by such Seller and the fulfillment of the
terms hereof and thereof will not (i) conflict with, violate,
result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time or both) a
default under, (A) its Certificate of Incorporation or Bylaws or
(B) any indenture, loan agreement, mortgage, deed of trust or
other agreement or instrument to which such Seller is a party or
by which it or any of its properties is bound, (ii) result in the
creation or imposition of any Adverse Claim upon any of the
Receivables or Related Assets pursuant to the terms of any such
indenture, loan agreement, mortgage, deed of trust or other
agreement or instrument, other than to this Agreement and the
other Transaction Documents, or (iii) conflict with or violate
any federal, state, local or foreign law or any decision, decree,
order, rule or regulation applicable to it or any of its
properties of any court or of any federal, state, local or
foreign regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over it or any
of its properties.
(f) Litigation and Other Proceedings. Except as
described in Schedule 1, (i) there is no action, suit, proceeding
or investigation pending or, to the best knowledge of such
Seller, threatened against it before any court, regulatory body,
arbitrator, administrative agency or other tribunal or
governmental instrumentality and (ii) it is not subject to any
order, judgment, decree, injunction, stipulation or consent order
of or with any court or other government authority that, in the
case of each of clauses (i) and (ii), (A) asserts the invalidity
of this Agreement or any other Transaction Document, (B) seeks to
prevent the sale, assignment or contribution of any Receivables
or Related
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Assets by such Seller to Buyer, the issuance of the applicable
Seller Assignment Certificate or the consummation of any of the
transactions contemplated by this Agreement or any other
Transaction Document, (C) seeks any determination or ruling that
would materially and adversely affect the performance by such
Seller of its obligations under this Agreement or any other
Transaction Document or the validity or enforceability of this
Agreement or any other Transaction Document, (D) seeks to affect
adversely the income tax attributes of the purchases hereunder or
the applicable Seller Assignment Certificate, in the case of each
of the foregoing whether under the United States Federal income
tax system or any state income tax system, or (E) individually or
in the aggregate for all such actions, suits, proceedings and
investigations would have a reasonable likelihood of having a
Material Adverse Effect.
(g) Third Party Approvals. Except for the filing of
the Public Notices referred to in Article IV, all of which, at
the time required in Article IV, shall have been duly made and
shall be in full force and effect, all authorizations, consents,
orders and approvals of, or other action by, any Governmental
Authority or other third party that are required to be obtained
by such Seller, and all notices to and filings with any
Governmental Authority or other third party that are required to
be made by it, in the case of each of the foregoing in connection
with the conveyance of Receivables and Related Assets or the due
execution, delivery and performance by such Seller of this
Agreement, such Seller's Seller Assignment Certificate or any
other Transaction Document to which it is a party and the
consummation of the transactions contemplated by this Agreement
and the other Transaction Documents, have been obtained or made
and are in full force and effect.
(h) Bulk Sales Act. No transaction contemplated by
this Agreement or any other Transaction Document requires
compliance with, or will be subject to avoidance under, any bulk
sales act or similar law.
(i) Financial Condition. The audited consolidated
balance sheet of ICP and its consolidated Subsidiaries as at the
end of ICP's most recent fiscal year and the related statements
of earnings, stockholders' equity and cash flows of ICP and its
consolidated Subsidiaries for such fiscal year and the unaudited
consolidated balance sheet of ICP and its consolidated
Subsidiaries as at the end of ICP's most recent fiscal quarter
and the related statements of earnings, stockholders' equity and
cash flows of ICP and its consolidated Subsidiaries for such
fiscal quarter, copies of which have been furnished to Buyer, the
Trustee and each Required Person, fairly present the consolidated
financial position and business of ICP and its consolidated
Subsidiaries as at the dates specified therein and the
consolidated results of the operations of ICP and its
consolidated Subsidiaries for the periods ended on such dates,
all in accordance with GAAP consistently applied throughout the
periods reflected therein, and, since the end of ICP's most
recent fiscal year through the date hereof there has been no
material adverse change
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in the condition (financial or otherwise), business or operations
of ICP and its consolidated Subsidiaries.
(j) Margin Regulations. No use of any funds obtained
by such Seller under this Agreement will conflict with or
contravene any of Regulations G, T, U and X promulgated by the
Federal Reserve Board from time to time.
(k) Quality of Title. (i) Immediately before each
purchase to be made by Buyer hereunder and (in the case of ICP
and ICPPC) each contribution to be made to Buyer, each Receivable
and Related Asset of such Seller that is then to be transferred
to Buyer thereunder, and the related Contracts, shall be owned by
such Seller free and clear of any Adverse Claim (other than any
Permitted Adverse Claim or any Adverse Claim arising solely as
the result of any action taken by Buyer hereunder or by the
Trustee under the Pooling Agreement); provided that the existence
of an Adverse Claim that is released on the First Issuance Date
(upon application of the proceeds of the issuance of Certificates
on that date) shall not constitute a breach of this
representation and warranty; and such Seller shall have made or
effected all Public Notices and shall have taken all other action
under applicable law in each relevant jurisdiction in order to
protect and perfect the ownership interest of Buyer and its
successors in the Receivables and Related Assets against all
creditors of, and purchasers from, such Seller.
(ii) Whenever Buyer makes a purchase hereunder
from such Seller (or accepts a contribution from ICP or
ICPPC), Buyer shall have acquired a valid and perfected
first priority ownership interest in each Specified Asset
sold by such Seller or contributed by ICP or ICPPC on
such date, free and clear of any Adverse Claim (other
than any Permitted Adverse Claim).
(iii) No effective Public Notice that covers all
or part of any Receivable originated by such Seller, any
interest therein or any Related Asset with respect
thereto is on file in any recording office except such as
may be filed (A) in favor of such Seller in accordance
with the Contracts, (B) in favor of Buyer pursuant to
this Agreement and (C) in favor of the Trustee, for the
benefit of the Investor Certificateholders, in accordance
with the Pooling Agreement. No Public Notice relating to
perfection that covers any inventory of such Seller that
might give rise to Receivables is on file in any
recording office except for (x) (so long as an
Intercreditor Agreement is in effect) Public Notices in
favor of creditors of such Seller bound by such
Intercreditor Agreement and (y) that certain Public
Notice in favor of The Toronto Dominion Bank which covers
certain inventory of ICP but which does not cover any
Specified Assets (including, without limitation, any
Related Security).
(iv) No Purchase by Buyer from such Seller (or,
in the case of ICP and ICPPC, no capital contribution to
Buyer) constitutes a fraudulent transfer or
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fraudulent conveyance under the United States Bankruptcy
Code or applicable state bankruptcy or insolvency laws or
is otherwise void or voidable or subject to subordination
under similar laws or principles or for any other reason.
(v) Each Purchase by Buyer from such Seller
constitutes a true and valid sale of the Receivables and
Related Assets under applicable state law and true and
valid assignments and transfers for consideration (and
not merely a pledge of the Receivables and Related Assets
for security purposes), enforceable against the creditors
of such Seller, and no Receivables or Related Assets
transferred to Buyer hereunder shall constitute property
of such Seller.
(l) Eligible Receivables. (i) On the date of each
Purchase of Receivables hereunder from such Seller (or, in the
case of ICP or ICPPC, contribution from ICP or ICPPC,
respectively), each such Receivable, unless otherwise identified
to Buyer and the Trustee by the Servicer in the Daily Report for
such date, is an Eligible Receivable, and (ii) on the date of
each Daily Report or Monthly Report that identifies a Receivable
originated by such Seller as an Eligible Receivable, such
Receivable is an Eligible Receivable.
(m) Accuracy of Information. All written information
furnished by or on behalf of such Seller to Buyer, the Servicer
or the Trustee pursuant to or in connection with any Transaction
Document or any transaction contemplated herein or therein shall
not contain any untrue statement of a material fact or omit to
state material facts necessary to make the statements made
therein not misleading, in each case in the light of the
circumstances under which the statements were made or the
information was furnished.
(n) Offices. The principal place of business and chief
executive office of such Seller is located at the address set
forth on Schedule 3, and any other location which has been such
Seller's principal place of business or chief executive office
during the past four months or in which such Seller keeps (or has
kept during the past four months) all Records and all Contracts,
invoices, purchase orders and agreements related to the
Receivables or Related Assets (and all original documents
relating thereto) is specified in Schedule 3 (or at such other
locations, notified to the Servicer, the Trustee, each Rating
Agency and each Required Person in accordance with Section
6.1(f), in jurisdictions where all action required pursuant to
Section 7.3 has been taken and completed).
(o) Account Banks and Payment Instructions. The names
and addresses of all the banks, together with the account numbers
of the accounts at the banks, into which Collections are paid as
of the First Issuance Date have been accurately identified to
Buyer in a letter from such Seller to Buyer dated the First
Issuance Date or have been specified in the notices as shall have
been delivered thereafter pursuant to Section 6.3(c). Each
Account Bank has executed and delivered an Account Agreement to
Buyer and the
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Trustee. Such Seller has instructed all Obligors to submit all
payments on the Receivables and Related Assets directly to one of
the Lockbox Accounts. Any payments not made directly to the
Account Banks will be forwarded by the recipient of such payments
to the Account Banks within two Business Days.
(p) Compliance with Applicable Laws. Such Seller is in
compliance with the requirements of all applicable laws, rules,
regulations and orders of all Governmental Authorities (federal,
state, local or foreign, and including consumer protection and
environmental laws).
(q) Legal Names. Except as set forth in Schedule 4,
since January 1, 1990 such Seller has not been known by any legal
name other than its corporate name as of the date hereof, except
to the extent permitted otherwise pursuant to Section 6.3(e), nor
has such Seller been the subject of any merger, consolidation,
amalgamation or other corporate reorganization since January 1,
1990 that resulted in a change of name, identity or corporate
structure. Such Seller uses no trade names other than its actual
corporate name and the trade names set forth in Schedule 4.
(r) Investment Company Act. Such Seller is not, and is
not controlled by, an "investment company" registered or required
to be registered under the Investment Company Act of 1940, as
amended.
(s) Taxes. Such Seller has filed or caused to be filed
all tax returns (foreign or domestic, federal, province,
territory, state or local) and reports required by law to have
been filed by it and has paid all taxes, assessments and
governmental charges which are due and payable by it, except any
such taxes, assessments or charges (i) that are being diligently
contested in good faith by appropriate proceedings, (ii) for
which adequate reserves in accordance with GAAP have been set
aside on its books and (iii) with respect to which no Adverse
Claim, except Permitted Adverse Claims, has been imposed upon any
Receivables or Related Assets.
(t) Software Programs. Each software program, and any
license or other agreement relating to such program, used in the
origination or servicing of Receivables and Related Assets is
described in Schedule 5.
SECTION 5.2 Representations and Warranties of Buyer. From the
date hereof until the Purchase Termination Date, Buyer hereby represents
and warrants that (a) this Agreement (i) has been duly authorized,
executed and delivered by Buyer and (ii) constitutes the legal, valid and
binding obligation of Buyer, enforceable against it in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity,
regardless of whether enforceability is considered in a proceeding in
equity or at law, and
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(b) the execution, delivery and performance of this Agreement does not
violate any applicable law or any agreement to which Buyer is a party or
by which its properties are bound.
ARTICLE VI
GENERAL COVENANTS OF THE SELLERS
SECTION 6.1 Affirmative Covenants. From the First Issuance
Date until the first day following the Purchase Termination Date on which
all Obligations of the Sellers shall have been finally and fully paid and
performed and the Invested Amount for each Series shall have been reduced
to zero, unless Buyer shall otherwise give its prior written consent, each
Seller hereby agrees that it will perform the covenants and agreements set
forth in this section.
(a) Compliance with Laws, Etc. Such Seller will comply
in all material respects with all applicable laws, rules,
regulations, judgments, decrees and orders (including those
relating to the Receivables, the Related Assets, the related
Contracts of such Seller and any other agreements related
thereto), in each case to the extent the failure to comply,
individually or in the aggregate for all such failures,
reasonably could be expected to have a Material Adverse Effect.
(b) Preservation of Corporate Existence. Such Seller
will preserve and maintain its corporate existence, rights,
franchises and privileges in the jurisdiction of its
incorporation, and qualify and remain qualified in good standing
as a foreign corporation in each jurisdiction where the failure
to preserve and maintain such existence, rights, franchises,
privileges and qualifications reasonably could be expected to
have a Material Adverse Effect.
(c) Receivables Reviews. Such Seller shall, during
regular business hours upon not less than two Business Days'
prior notice, permit Buyer and its agents or representatives, at
the expense of such Seller, (i) to examine and make copies of and
abstracts from, and to conduct accounting reviews of, all Records
in the possession or under the control of such Seller relating to
the Receivables or Related Assets generated by such Seller, and
(ii) to visit the offices and properties of such Seller for the
purpose of examining the materials described in clause (i) above,
and to discuss matters relating to any Receivables or any Related
Assets of such Seller or such Seller's performance hereunder with
any of the Authorized Officers of such Seller or, with the prior
consent of an Authorized Officer of such Seller, with employees
of such Seller having knowledge of such matters (the examinations
set forth in the foregoing clauses (i) and (ii) being herein
called a "Seller Receivables Review"). Buyer and its agents or
representatives shall be entitled to conduct Seller Receivables
Reviews whenever Buyer, in its reasonable judgment, deems it
appropriate; provided, that prior to the occurrence and
continuance of an Early Amortization Event or an Unmatured Early
Amortization Event or during the period in which the most recent
quarterly servicing report delivered pursuant to Section
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3.7 of the Pooling Agreement discloses a material exception,
Buyer (or its agent or representative) shall give such Seller at
least one Business Day's prior notice of any Seller Receivables
Review, and Buyer shall have the right to request a Seller
Receivables Review not more than three times in any calendar
year.
(d) Keeping of Records and Books of Account. Such
Seller shall maintain and implement administrative and operating
procedures (including an ability to recreate records evidencing
its Receivables and Related Assets in the event of the
destruction of the originals thereof), and shall keep and
maintain all documents, books, records and other information
that, in the reasonable determination of Buyer and the Trustee,
are necessary or advisable in accordance with prudent industry
practice and custom for transactions of this type for the
collection of all Receivables and the Related Assets. Upon the
reasonable request of Buyer made at any time after the occurrence
and continuance of a Servicer Default, such Seller will deliver
copies of all books and records maintained pursuant to this
subsection to the Trustee. Such Seller shall maintain at all
times accurate and complete books, records and accounts relating
to the Receivables, Related Assets and Contracts and all
Collections thereon in which timely entries shall be made. Such
books and records shall be marked to indicate the sales (and, in
the case of ICP and ICPPC, contributions) of all Receivables and
Related Assets hereunder and shall include (i) all payments
received and all credits and extensions granted with respect to
the Receivables and (ii) the return, rejection, repossession or
stoppage in transit of any merchandise, the sale of which has
given rise to a Receivable that has been purchased by or
contributed to Buyer.
(e) Performance and Compliance with Receivables and
Contracts. Such Seller will, at its expense, timely and fully
perform and comply with all provisions, covenants and other
promises required to be observed by it under the Contracts of
such Seller related to the Receivables and Related Assets, in
each case to the extent failure to perform or comply reasonably
could be expected to have a Material Adverse Effect.
(f) Location of Records and Offices. Such Seller will
keep its principal place of business and chief executive office,
and the offices where it keeps all Records related to the
Receivables and the Related Assets (and all original documents
relating thereto), at the addresses referred to in Schedule 3 or,
upon not less than 30 days' prior written notice given by such
Seller to Buyer, the Trustee, the Rating Agencies and each
Required Person at such other locations in jurisdictions where
all action required by Section 7.3 shall have been taken and
completed.
(g) Credit and Collection Policies. Such Seller will
comply with its Credit and Collection Policy in regard to each
Receivable of such Seller and the Related Assets and the
Contracts related to each such Receivable.
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(h) Separate Existence of Buyer. Such Seller hereby
acknowledges that the Trustee, on behalf of the Trust, is
entering into the transactions contemplated by the Transaction
Documents in reliance upon Buyer's identity as a legal entity
separate from such Seller and the other Related Persons.
Therefore, from and after the date hereof until the first day
following the Purchase Termination Date on which all Obligations
shall have been fully paid and performed and the Invested Amount
for each Series shall have been reduced to zero, such Seller
will, and will cause each other Related Person to, take all
reasonable steps to continue their respective identities as
separate legal entities and to make it apparent to third Persons
that each is an entity with assets and liabilities distinct from
those of Buyer and that Buyer is not a division of the Servicer,
such Seller, ICP or any other Person. Without limiting the
foregoing, ICP and each Seller will, and will cause each other
ICP Person to, operate, conduct their respective businesses and
otherwise act in a manner which is consistent with the factual
assumptions in each Bankruptcy Opinion for each Series.
(i) Payment Instructions to Obligors. Such Seller will
instruct all Obligors to submit all payments either (i) to one of
the lockboxes maintained at the Lockbox Banks for deposit in a
Lockbox Account or (ii) directly to one of the Lockbox Accounts.
(j) Segregation of Collections. Such Seller shall use
best efforts to minimize the deposit of any funds other than
Collections into any of the Lockbox Accounts and, to the extent
that any such funds nevertheless are deposited into any of the
Lockbox Accounts, shall promptly identify any such funds, or
shall cause the funds to be so identified, to Buyer, the
Servicer, the Trustee and each Required Person (following which
notice, Buyer shall use best efforts to cause the Servicer to
return all the funds to such Seller).
(k) Identification of Eligible Receivables. Such Seller
will (i) establish and maintain such procedures as are necessary
for determining no less frequently than each Business Day whether
each Receivable qualifies as an Eligible Receivable, and for
identifying, on any Business Day, all Receivables to be sold on
that date that are not Eligible Receivables, and (ii) except as
permitted in Section 3.5(c) of the Pooling Agreement, notify
Buyer prior to the occurrence of a Purchase (and, in the case of
ICP and ICPPC, before a contribution of Receivables and Related
Assets) if a Receivable to be sold or contributed hereunder will,
to such Seller's knowledge, not be an Eligible Receivable as of
the date of such Purchase or contribution.
(l) Accuracy of Information. All written information
furnished on and after the First Issuance Date by or on behalf of
such Seller to Buyer, the Servicer or the Trustee pursuant to or
in connection with any Transaction Document or any transaction
contemplated herein or therein shall not contain any untrue
statement of a material fact or omit to state material facts
necessary to make the statements made not misleading, in each
case on the date the statement was made and in light of the
circumstances under which the statements were made or the
information was furnished.
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(m) Taxes. Such Seller shall file or cause to be filed,
and cause each Person with whom it shares consolidated tax
liability to file, all Federal, state and local tax returns
(foreign or domestic, federal, state, province, territory or
local) and reports required by law to have been filed by it
(except where the failure to file such returns or reports
reasonably could not be expected to have a Material Adverse
Effect) and pay or cause to be paid all taxes, assessments and
governmental charges which are due and payable by it (including
any obligation, as agent or otherwise, to pay or remit any goods
and services tax) except any such taxes or assessments the
validity of which are being contested in good faith by
appropriate proceedings and with respect to which such Seller
shall have set aside adequate reserves on its books in accordance
with GAAP and which proceedings reasonably could not be expected
to have a Material Adverse Effect.
(n) Software Licenses. Such Seller shall cause all
software licenses or similar agreements used by the Sellers or
Servicer in the origination or servicing of Receivables to
expressly permit use by any Successor Servicer of the materials
subject to such licenses or agreements.
SECTION 6.2 Reporting Requirements. From the First Issuance
Date until the first day following the Purchase Termination Date on which
all Obligations of the Sellers shall have been finally and fully paid and
performed and the Invested Amount for each Series shall have been reduced
to zero, such Seller agrees that it will, unless Buyer and the Trustee
shall otherwise give prior written consent, and (with respect to the
notices described below in subsections (c) and (d)) unless the
Modification Condition has been satisfied, furnish to Buyer, the Trustee
and each Required Person (and in the case of the notices described below
in subsections (c), (d) and (f), to the Rating Agencies):
(a) Quarterly Financial Statements. Within 45 days
after the end of each of the first three fiscal quarters of each
fiscal year of ICP, copies of the unaudited consolidated balance
sheets of ICP and its consolidated Subsidiaries as at the end of
the fiscal quarter and the related unaudited statements of
earnings and cash flows, in each case for the fiscal quarter and
for the period from the beginning of the fiscal year through the
end of such fiscal quarter, prepared in accordance with GAAP
consistently applied throughout the periods reflected therein and
certified (subject to year end adjustments and the omission of
footnotes) by the chief financial officer or chief accounting
officer of ICP,
(b) Annual Financial Statements. As soon as possible
and in any event within 90 days after the end of each fiscal year
of ICP, a copy of the audited consolidated balance sheet of ICP
and its consolidated Subsidiaries as at the end of the fiscal
year and the related statements of earnings, stockholders' equity
and cash flows of ICP and its consolidated Subsidiaries for the
fiscal year, setting forth in each case in comparative form the
corresponding figures for the preceding fiscal year and prepared
in accordance with GAAP consistently applied throughout the
periods reflected therein, certified, without Impermissible
Qualification, by Coopers & Lybrand L.L.P. (or such other
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independent certified public accountants of a nationally
recognized standing in the United States of America as shall be
selected by ICP),
(c) Early Amortization Events. As soon as possible, and
in any event within two Business Days after any officer of such
Seller has obtained knowledge of the occurrence of any Early
Amortization Event or any Unmatured Early Amortization Event, a
written statement of an Authorized Officer of such Seller
describing the event and the action that such Seller proposes to
take with respect thereto, in each case in reasonable detail,
(d) Material Adverse Effect. As soon as possible and in
any event within two Business Days after any officer of such
Seller has knowledge thereof, written notice that describes in
reasonable detail any event or occurrence that, individually or
in the aggregate for all such events or occurrences, has had, or
reasonably could be expected to have, a Material Adverse Effect,
(e) Proceedings. As soon as possible and in any event
within two Business Days after any officer of such Seller has
knowledge thereof, written notice of (i) any litigation,
investigation or proceeding of the type described in Section
5.1(f) not previously disclosed to Buyer and (ii) any judgment,
settlement or other final disposition with respect to any such
previously disclosed litigation, investigation or proceeding, and
(f) Other. Promptly, from time to time, (i) such other
information, documents, records or reports respecting the
Receivables or the Related Assets or (ii) such other publicly
available information respecting the condition or operations,
financial or otherwise, of such Seller, in each case as Buyer may
from time to time reasonably request in order to protect the
interests of Buyer, the Trustee or the Certificateholders under
or as contemplated by this Agreement.
SECTION 6.3 Negative Covenants. From the First Issuance Date
until the first day following the Purchase Termination Date on which all
Obligations of the Sellers shall have been finally and fully paid and
performed and the Invested Amount for each Series shall have been reduced
to zero, unless Buyer and the Trustee shall otherwise give prior written
consent, each Seller hereby agrees that it will perform the covenants and
agreements set forth in this section.
(a) Sales, Liens, Etc. Except as otherwise provided
herein or in the Pooling Agreement, such Seller will not (i)(A)
sell, assign (by operation of law or otherwise) or otherwise
transfer to any Person, (B) pledge any interest in, (C) grant,
create, incur, assume or permit to exist any Adverse Claim (other
than Permitted Adverse Claims) to or in favor of any Person upon
or with respect to, or (D) cause to be filed any Public Notice
relating to perfection with respect to, any Transferred Asset or
any Contract related to any Receivable, or upon or with respect
to any lockbox or account to which any Collections of any such
Receivable or any Related Assets are sent or any interest
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therein, or (ii) assign to any Person any right to receive income
from or in respect of any of the foregoing.
In the event that such Seller fails to keep any Specified
Assets free and clear of any Adverse Claim (other than a
Permitted Adverse Claim, any Adverse Claims arising hereunder,
and other Adverse Claims permitted by any other Transaction
Document), Buyer may (without limiting its other rights with
respect to such Seller's breach of its obligations hereunder)
make reasonable expenditures necessary to release the Adverse
Claim. Buyer shall be entitled to indemnification for any such
expenditures pursuant to the indemnification provisions of
Article IX. Alternatively, Buyer may deduct such expenditures as
an offset to the Purchase Price owed to such Seller hereunder.
Such Seller will not pledge or grant any security
interest in its inventory, the Buyer Note or its ownership
interest in Buyer unless (i) prior to any pledge or grant such
Seller, Buyer, the Trustee and the Person for whose benefits the
pledge or grant is being made have entered into an Intercreditor
Agreement and (ii) the Modification Condition has been satisfied;
provided that the continuing existence of that certain security
interest previously granted by ICP in favor of The Toronto
Dominion Bank in certain inventory of ICP (but no Specified
Assets (including, without limitation, any Related Security))
shall not be a breach of the covenant contained in this
paragraph.
(b) Extension or Amendment of Receivables; Change in
Credit and Collection Policy or Contracts. Such Seller will not,
(i) without the prior written consent of Buyer and the Trustee,
extend, amend or otherwise modify the terms of any Receivable or
Contract in a manner that reasonably could be expected to have a
Material Adverse Effect or (ii) change the terms and provisions
of the Credit and Collection Policy in any material respect
unless (x) with respect to collection policies, the change is
made with the prior written approval of the Trustee and Buyer and
the Modification Condition is satisfied with respect thereto, (y)
with respect to collection procedures, the change is made with
prior written notice to the Trustee, Buyer and each Required
Person and no Material Adverse Effect would result and (z) with
respect to accounting policies relating to Receivables that have
become Write-Offs, the change is made in accordance with GAAP.
(c) Change in Payment Instructions to Obligors. Such
Seller will not (i) add or terminate any bank as an Account Bank
from those listed in the letter referred to in Section 5.1(o)
unless, prior to any such addition or termination, Buyer, the
Trustee, the Rating Agencies and the Required Persons shall have
received not less than ten Business Days' prior written notice of
the addition or termination and, not less than ten Business Days
prior to the effective date of any such proposed addition or
termination, Buyer and the Trustee shall have received (A)
counterparts of the applicable type of Account Agreement with
each new Account Bank, duly executed by such new Account Bank and
all other parties thereto, and (B) copies of all other agreements
and documents signed by
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the Account Bank and such other parties with respect to any new
Bank Account, all of which agreements and documents shall be
reasonably satisfactory in form and substance to Buyer and the
Trustee, or (ii) make any change in its instructions to Obligors,
given in accordance with Section 5.1(o), regarding payments to be
made to such Seller or payments to be made to any Account Bank,
other than changes in the instructions that direct Obligors to
make payments to another Bank Account at such Account Bank or
another Account Bank or to the Master Collection Account.
(d) Mergers, Acquisitions, Sales, etc. Except for
(i) mergers or consolidations in which such Seller is the
surviving Person, (ii) mergers or consolidations of a Subsidiary
of ICP into such Seller or (iii) mergers or consolidations in
which the surviving Person expressly assumes the performance of
this Agreement and the Modification Condition shall have been
satisfied with respect to the consolidation or merger, such
Seller will not be a constituent corporation to any merger or
consolidation. Such Seller will give the Rating Agencies, the
Trustee and each Required Person written notice of any such
permitted merger or consolidation promptly following completion
thereof. Unless the Modification Condition is satisfied, such
Seller will not, directly or indirectly, transfer, assign, convey
or lease, whether in one transaction or in a series of
transactions, all or substantially all of its assets or sell or
assign, with or without recourse, any Receivables or Related
Assets, in each case other than pursuant to this Agreement.
(e) Change in Name. Such Seller will not (i) change
its corporate name or (ii) change the name under or by which it
does business in any manner that would or may make any Public
Notice filed by such Seller in accordance herewith seriously
misleading within the meaning of Section 9-402(7) of an
applicable enactment of the UCC, in each case unless such Seller
shall have given Buyer, the Servicer, the Trustee, the Rating
Agencies and each Required Person 30 days' prior written notice
thereof and unless, prior to any change in name, such Seller
shall have taken and completed all action required by Section
7.3.
(f) Certificate of Limited Partnership. ICP will not
cause or permit Buyer to amend its Certificate of Limited
Partnership or partnership agreement without the prior written
consent of the Required Persons.
(g) Amendments to Transaction Documents. Such Seller
will not amend or otherwise modify or supplement any Transaction
Document to which it is a party unless (i) Buyer and the Trustee
shall have given prior written consent to each amendment,
modification or supplement and (ii) the Modification Condition
shall have been satisfied.
(h) Accounting for Purchases. Such Seller shall
prepare its financial statements in accordance with GAAP, and any
financial statements that are made publicly available and which
are consolidated to include Buyer will contain footnotes stating
that such Seller
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has sold or contributed its Receivables to Buyer and that the
assets of Buyer will not be available to ICP and its Subsidiaries
(other than Buyer) unless Buyer's liabilities have been paid in
full. Such Seller shall not prepare any financial statements
that account for the transactions contemplated in this Agreement
in any manner other than as a sale or contribution of Specified
Assets by such Seller to Buyer, or in any other respect account
for or treat the transactions contemplated in this Agreement
(including but not limited to accounting and, where taxes are not
consolidated, for tax reporting purposes) in any manner other
than as a sale or contribution of Specified Assets by such Seller
to Buyer.
(i) Discretionary Returns and Terminations of
Distributors. Such Seller will not allow any Discretionary
Returns or exercise its right to terminate a Distributor under a
Distributor Agreement unless it has complied with the provisions
of Section 3.2(k) of the Pooling Agreement.
ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE SPECIFIED ASSETS
SECTION 7.1 Rights of Buyer. (a) Subject to Section 7.4(b),
each Seller hereby authorizes Buyer, the Servicer and/or their respective
designees to take any and all steps in such Seller's name and on behalf
of such Seller that Buyer, the Servicer and/or their respective designees
determine are reasonably necessary or appropriate to collect all amounts
due under any and all Specified Assets, including endorsing the name of
such Seller on checks and other instruments representing Collections and
enforcing such Seller's rights under such Specified Assets.
(b) Except as set forth in Section 3.1 with respect to payments
that Buyer shall have received on account of Seller Noncomplying
Receivables that had been the subject of an earlier Seller Noncomplying
Receivables Adjustment, Buyer shall have no obligation to account for any
Specified Asset to any Seller. Buyer shall have no obligation to account
for, or to return Collections, or any interest or other finance charge
collected pursuant thereto, to any Seller, irrespective of whether such
Collections and charges are in excess of the Purchase Price for the
Purchased Assets.
(c) Buyer shall have the unrestricted right to further assign,
transfer, deliver, hypothecate, subdivide or otherwise deal with the
Specified Assets, and all of Buyer's right, title and interest in, to and
under this Agreement, on whatever terms Buyer shall determine, pursuant
to the Pooling Agreement or otherwise.
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(d) Buyer shall have the sole right to retain any gains or
profits created by buying, selling or holding the Specified Assets and
shall have the sole risk of and responsibility for losses or damages
created by such buying, selling or holding.
SECTION 7.2 Responsibilities of the Sellers. Anything herein
to the contrary notwithstanding, each Seller hereby agrees:
(a) to deliver directly to the Servicer (for Buyer's
account), within two Business Days after receipt thereof, any
Collections that it receives, in the form so received, and agrees
that all such Collections shall be deemed to be received in trust
for Buyer and shall be maintained and segregated separate and
apart from all other funds and moneys of such Seller until
delivery of such Collections to the Servicer,
(b) to perform all of its obligations hereunder and
under the Contracts at least to the same extent as if the
Receivables had not been sold hereunder, and the exercise by
Buyer or its designee or assignee of Buyer's rights hereunder or
in connection herewith shall not relieve such Seller from any of
its obligations under the Contracts or Related Assets related to
the Receivables,
(c) that it hereby grants to Buyer an irrevocable power
of attorney, with full power of substitution, coupled with an
interest, to take in the name of such Seller all steps necessary
or advisable to endorse, negotiate or otherwise realize on any
writing or other right of any kind held or transmitted by such
Seller or transmitted or received by Buyer (whether or not from
such Seller) in connection with any Transferred Asset, and
(d) to the extent that such Seller does not own the
computer software that such Seller uses to account for
Receivables, such Seller shall provide Buyer, any Successor
Servicer and the Trustee with such licenses, sublicenses and/or
assignments of contracts as Buyer, such Successor Servicer or the
Trustee shall require with regard to all services and computer
hardware or software used by such Seller that relate to the
servicing of the Specified Assets.
SECTION 7.3 Further Action Evidencing Purchases. Each Seller
agrees that from time to time, at its expense, it will promptly, upon
reasonable request by Buyer, Servicer or Trustee, execute and deliver all
further instruments and documents, and take all further action, in order
to perfect, protect or more fully evidence the Purchase by Buyer or
contribution to Buyer of the Receivables and the Related Assets under this
Agreement (as applicable), or to enable Buyer to exercise or enforce any
of its rights under any Transaction Document. Each Seller further agrees
that from time to time, at its expense, it will promptly, upon request,
take all action that Buyer, the Servicer or the Trustee may reasonably
request in order to perfect, protect or more fully evidence the Purchase
or contribution of the Receivables and the Related
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Assets or to enable Buyer or the Trustee (as the assignee of Buyer) to
exercise or enforce any of its rights hereunder or under any other
Transaction Document. Without limiting the generality of the foregoing,
upon the request of Buyer or the Trustee, each Seller will:
(a) execute and file such Public Notices and such other
instruments or notices, as Buyer or the Trustee may reasonably
determine to be necessary or appropriate, and
(b) mark the master data processing records evidencing
the Receivables with the following legend:
"THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD
TO INTER-CITY PRODUCTS RECEIVABLES COMPANY, L.P.
("BUYER") PURSUANT TO A RECEIVABLES PURCHASE
AGREEMENT, DATED AS OF JULY 25, 1996, AMONG
INTER-CITY PRODUCTS CORPORATION (USA), CERTAIN
OF ITS SUBSIDIARIES AND BUYER; AND SUCH
RECEIVABLES HAVE BEEN TRANSFERRED TO THE INTER-
CITY PRODUCTS MASTER TRUST PURSUANT TO A
POOLING AND SERVICING AGREEMENT, DATED AS OF THE
SAME DATE, AMONG BUYER, AS TRANSFEROR, INTER-
CITY PRODUCTS CORPORATION (USA) AS THE INITIAL
SERVICER, AND LASALLE NATIONAL BANK, AS
TRUSTEE."
Each Seller hereby authorizes Buyer or its designee to file one
or more Public Notices relative to all or any of the Receivables and
Related Assets of such Seller, in each case whether now existing or
hereafter generated by such Seller. Except for material performance
obligations of such Seller to any Obligor hereunder or under any of the
Contracts, if (i) such Seller fails to perform any of its agreements or
obligations under this Agreement and does not remedy the failure within
the applicable cure period, if any, and (ii) Buyer in good faith
reasonably believes that the performance of such agreements and
obligations is necessary or appropriate to protect its interests under
this Agreement, then Buyer or its designee may (but shall not be required
to) perform, or cause performance of, such agreement or obligation and the
reasonable expenses of Buyer or its designee or assignee incurred in
connection with such performance shall be payable by such Seller as
provided in Section 9.1.
SECTION 7.4 Collection of Receivables; Rights of Buyer and Its
Assignees. (a) Each Seller hereby transfers to the Trustee (as
transferee of Buyer's interest in the Specified Assets) the ownership of,
and the exclusive dominion and control over, each of the Bank Accounts and
all related lockboxes owned by such Seller, and such Seller hereby agrees
to take any further action that Buyer or the Trustee may reasonably
request in order to effect or complete the transfer. Each Seller further
agrees to use best efforts to prevent funds other than proceeds of the
Specified Assets from being deposited in any Bank Account.
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(b) Buyer may, at any time after an Early Amortization Event or
Servicer Default, direct the Obligors of Receivables, or any of them, to
pay all amounts payable under any Transferred Asset directly to the
Trustee or its designees. Furthermore, each Seller shall, at the request
of Buyer and at such Seller's expense, promptly give notice of the Trust's
interest in the Receivables of the Obligor and the Related Assets to each
such Obligor and direct that payments be made directly to the Trustee or
its designee, which notice shall be acceptable in form and substance to
Buyer. In addition, each Seller hereby authorizes Buyer to take any and
all steps in such Seller's name and on its behalf that are necessary or
desirable, in the reasonable determination of Buyer, to collect all
amounts due under any and all Specified Assets, including endorsing such
Seller's name on checks and other instruments representing Collections and
enforcing the Specified Assets and the Contracts related to the
Receivables. The Trustee may exercise any of the foregoing rights in the
place of Buyer (as assignee or otherwise) at any time following the
designation of a Servicer other than the Initial Servicer pursuant to
Section 10.2 of the Pooling Agreement.
(c) At any time when (i) an Early Amortization Event shall have
occurred and remain continuing or (ii) a Servicer other than the Initial
Servicer has been designated pursuant to Section 10.2 of the Pooling
Agreement, each Seller shall, at Buyer's request, assemble all of the
Records that evidence the Receivables and Related Assets originated by
such Seller, or that are otherwise necessary or desirable to collect the
Receivables or Related Assets, and make the same available to Buyer or the
Trustee at a place selected by the Trustee or its designee.
ARTICLE VIII
TERMINATION
SECTION 8.1 Automatic Termination. (a) This Agreement shall
terminate on the date on which the Pooling Agreement terminates in
accordance with its terms. Notwithstanding anything to the contrary in
this Agreement, if, at any time prior to such date, an event specified in
the definition of Bankruptcy Event occurs (without regard to the 60 day
grace period specified in paragraph (a) of that definition), then on and
after the date on which such bankruptcy proceeding is filed until the
dismissal of the proceeding Buyer shall not purchase Receivables and
Related Assets from such Seller.
(b) If the Internal Revenue Service or the PBGC files one or more
Tax or ERISA Liens against the assets of any Seller or Buyer (including
Receivables), then (unless such liens are removed and the Modification
Condition is satisfied) Buyer shall not purchase any Receivables or
Related Assets from such Seller (or from any Seller if such Lien is filed
against Buyer).
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ARTICLE IX
INDEMNIFICATION
SECTION 9.1 Indemnities by the Sellers. Without limiting any
other rights that any RPA Indemnified Party (as defined below) may have
hereunder or under applicable law, each Seller agrees to indemnify Buyer,
each of its successors, permitted transferees and assigns, and all
officers, directors, shareholders, controlling Persons, employees and
agents of any of the foregoing (each of the foregoing Persons being
individually called a "RPA Indemnified Party"), forthwith on demand, from
and against any and all damages, losses, claims (whether on account of
settlements or otherwise), judgments, liabilities and related reasonable
costs and expenses (including reasonable attorneys' fees and
disbursements) awarded against or incurred by any of them arising out of,
in connection with, or as a result of any of the following (all of the
foregoing being collectively called "RPA Indemnified Losses"):
(a) any representation or warranty by such Seller (or
any of its Authorized Officers) under any of the Transaction
Documents, any Monthly Report, any Daily Report or any other
information or report delivered by or on behalf of such Seller or
the Servicer with respect to such Seller or the Receivables or
Related Assets originated by such Seller (including without
limitation any representation, warranty, information or report
relied upon by Buyer in connection with the offering or sale of
any Certificate), that contained any untrue statement or omitted
to state facts necessary to make the statements not misleading
when made,
(b) the failure by such Seller to comply with any
applicable law, rule or regulation with respect to any Receivable
or any Related Asset or to comply with any Contract related
thereto, or the nonconformity of any Receivable, the related
Contract or any Related Assets with any such applicable law, rule
or regulation,
(c) the failure to vest and maintain vested in Buyer a
first priority perfected ownership interest in the Receivables
originated by such Seller and the Related Assets, free and clear
of any Adverse Claim (other than an Adverse Claim created in
favor of Buyer pursuant to this Agreement or in favor of the
Trustee pursuant to the Pooling Agreement), whether existing at
the time of the sale of such Receivable or at any time thereafter
and without regard to whether such Adverse Claim was a Permitted
Adverse Claim,
(d) any failure of such Seller to perform its duties or
obligations in accordance with the provisions of the Transaction
Documents,
(e) any products liability claim, personal injury or
property damage suit, environmental liability claim or any other
claim or action by a party other than Buyer of whatever sort,
whether sounding in tort, contract or any other legal theory,
arising out
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of or in connection with the goods or services that are the
subject of any Specified Assets with respect thereto,
(f) the failure to file, or any delay in filing, any
Public Notice with respect to any Specified Assets, whether at
the time of any sale or at any subsequent time,
(g) any dispute, claim, offset or defense (other than
the discharge in bankruptcy) of an Obligor to the payment of any
Receivable originated by such Seller or Related Asset, or
purported Receivable or Related Asset, including a defense based
on such Receivable's or the related Contract's not being a legal,
valid and binding obligation of the Obligor enforceable against
it in accordance with its terms, and
(h) any tax or governmental fee or charge (other than
franchise taxes and taxes on or measured by the net income of
Buyer or any of its assignees), all interest and penalties
thereon or with respect thereto, and all reasonable out-of-pocket
costs and expenses, including the reasonable fees and expenses of
counsel in defending against the same, that may arise by reason
of the purchase or ownership of the Receivables originated by
such Seller or any Related Asset connected with any such
Receivables.
Notwithstanding the foregoing (and with respect to clause (ii) below,
without prejudice to the rights that Buyer may have pursuant to the other
provisions of this Agreement or the provisions of any of the other
Transaction Documents), in no event shall any RPA Indemnified Party be
indemnified for any RPA Indemnified Losses (i) resulting from gross
negligence or willful misconduct on the part of the RPA Indemnified Party,
(ii) to the extent the same includes losses in respect of Receivables and
reimbursement therefor that would constitute credit recourse to such
Seller for the amount of any Receivable or Related Asset not paid by the
related Obligor, (iii) to the extent the same are or result from lost
profits (other than any breakage amounts or early termination amounts owed
to any RPA Indemnified Party) or (iv) to the extent the same are or result
from taxes on or measured by the net income of the RPA Indemnified Party.
If for any reason the indemnification provided above in this
section is unavailable to a RPA Indemnified Party or is insufficient to
hold a RPA Indemnified Party harmless, then such Seller shall contribute
to the maximum amount payable or paid to the RPA Indemnified Party as a
result of the loss, claim, damage or liability in such proportion as is
appropriate to reflect not only the relative benefits received by the RPA
Indemnified Party on the one hand and such Seller on the other hand, but
also the relative fault of the RPA Indemnified Party (if any) and such
Seller and any other relevant equitable considerations.
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ARTICLE X
MISCELLANEOUS
SECTION 10.1 Amendments; Waivers, Etc. (a) The provisions of
this Agreement may from time to time be amended, modified or waived, if
such amendment, modification or waiver is in writing and signed by Buyer
and each Seller (with respect to an amendment) or by Buyer (with respect
to a waiver or consent by it) and, in the case of any amendment,
modification or waiver, to the extent provided in Section 7.2(k) of the
Pooling Agreement, by the Trustee and each Required Person, and then any
such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. This Agreement shall not
be amended unless Buyer shall have delivered the proposed amendment to the
Rating Agencies at least ten Business Days (or such shorter period as
shall be acceptable to each of them) prior to the execution and delivery
thereof and the Modification Condition has been satisfied with respect to
such amendment.
(b) No failure or delay on the part of Buyer, any RPA
Indemnified Party, the Trustee or any other third party beneficiary
referred to in Section 10.11(a) in exercising any power or right hereunder
shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power or right preclude any other or further exercise
thereof or the exercise of any other power or right. No notice to or
demand on any Seller in any case shall entitle it to any notice or demand
in similar or other circumstances. No waiver or approval by Buyer, the
Trustee or any Required Person under this Agreement shall, except as may
otherwise be stated in the waiver or approval, be applicable to subsequent
transactions. No waiver or approval under this Agreement shall require
any similar or dissimilar waiver or approval thereafter to be granted
hereunder.
SECTION 10.2 Notices, Etc. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in
writing (including facsimile communication) and shall be personally
delivered or sent by certified mail, postage prepaid, by facsimile or by
overnight courier, to the intended party at the address or facsimile
number of such party set forth under its name on the signature pages
hereof or at such other address or facsimile number as shall be designated
by the party in a written notice to the other parties hereto given in
accordance with this section. Copies of all notices and other
communications provided for hereunder shall be delivered to the Trustee,
the Rating Agencies and any Required Person at their respective addresses
for notices set forth in the Pooling Agreement. All notices and
communications provided for hereunder shall be effective, (a) if
personally delivered, when received, (b) if sent by certified mail, four
Business Days after having been deposited in the mail, postage prepaid and
properly addressed, (c) if transmitted by facsimile, when sent, receipt
confirmed by telephone or electronic means and (d) if sent by overnight
courier, two Business Days after having been given to the courier unless
sooner received by the addressee.
SECTION 10.3 Cumulative Remedies. The remedies herein provided
are cumulative and not exclusive of any remedies provided by law. Without
limiting the foregoing, each Seller
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hereby authorizes Buyer, at any time and from time to time, to the fullest
extent permitted by law, to set-off, against any Obligations of any Seller
to Buyer that are then due and payable or that are not then due and
payable from a Seller to Buyer but have then accrued, any and all
indebtedness or other obligations at any time owing to any Seller by Buyer
to or for the credit or the account of any Seller or that are not then due
and payable from Buyer to a Seller but have then accrued.
SECTION 10.4 Binding Effect; Assignability; Survival of
Provisions. This Agreement shall be binding upon and inure to the benefit
of Buyer and the Sellers and their respective successors and permitted
assigns (including, in the case of the Buyer, the Trustee). No Seller may
assign any of its rights hereunder or any interest herein without (i) the
prior written consent of Buyer and the Trustee and (ii) the satisfaction
of the Modification Condition. This Agreement shall create and constitute
the continuing obligations of the parties hereto in accordance with its
terms, and shall remain in full force and effect until the first date
following the Purchase Termination Date, but not later than the date on
which the Trust is terminated pursuant to Section 12.1 of the Pooling
Agreement, on which all Obligations shall have been finally and fully paid
and performed or such other time as the parties hereto shall agree and as
to which the Trustee (at the direction of the Majority Investors) shall
have given its prior written consent, which consent shall not be
unreasonably withheld or delayed. The rights and remedies with respect
to any breach of any representation and warranty made by a Seller pursuant
to Article V and the indemnification and payment provisions of Article IX
and Section 10.6 shall be continuing and shall survive any termination of
this Agreement.
SECTION 10.5 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES, EXCEPT (I) WITH RESPECT TO EACH SELLER, TO
THE EXTENT THAT THE PERFECTION AND THE EFFECT OF PERFECTION OR
NONPERFECTION OF THE SECURITY INTERESTS OF BUYER IN THE RECEIVABLES AND
THE RELATED ASSETS OF SUCH SELLER ARE GOVERNED BY THE LAWS OF A
JURISDICTION (SUCH SELLER'S "HOME STATE") OTHER THAN THE STATE OF NEW YORK
AND (II) WITH RESPECT TO EACH SELLER THE CREATION OF SUCH SECURITY
INTERESTS OF BUYER SHALL BE GOVERNED BY THE LAWS OF SUCH SELLER'S HOME
STATE.
SECTION 10.6 Costs, Expenses and Taxes. In addition to the
obligations of the Sellers under Article IX, the Sellers agree jointly and
severally to pay on demand:
(a) all reasonable out-of-pocket and other costs and
expenses in connection with the enforcement of this Agreement,
the Seller Assignment Certificates or the other Transaction
Documents by Buyer or any successor in interest to Buyer, and
(b) all stamp and other taxes and fees payable or
determined to be payable in connection with the execution and
delivery, and the filing and recording, of this
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Agreement or the other Transaction Documents, and agrees to
indemnify each RPA Indemnified Party against any liabilities with
respect to or resulting from any delay in paying or omission to
pay the taxes and fees.
SECTION 10.7 Submission to Jurisdiction. Each party hereto
hereby irrevocably submits to the non-exclusive jurisdiction of any New
York State or Federal court sitting in the Borough of Manhattan in the
City of New York, New York over any action or proceeding arising out of
or relating to the Transaction Documents, and hereby (A) irrevocably
agrees that all claims in respect of the action or proceeding may be heard
and determined in the state or Federal court, (B) irrevocably waives, to
the fullest extent it may effectively do so, the defense of an
inconvenient forum to the maintenance of the action or proceeding, and (C)
irrevocably consents to the service of any and all process in any action
or proceeding by the mailing of copies of the process to Buyer or a Seller
(as applicable) at its address specified herein.
Nothing in this section shall affect the right of any party hereto
to serve legal process in any other manner permitted by law or affect the
right of any party hereto to bring any action or proceeding against the
other party or any of its properties in the courts of any other
jurisdiction.
SECTION 10.8 Waiver of Jury Trial. Each party hereto waives any
right to a trial by jury in any action or proceeding to enforce or defend
any rights under or relating to the Transaction Documents or any
amendment, instrument, document or agreement delivered or that may in the
future be delivered in connection therewith or arising from any course of
conduct, course of dealing, statements (whether verbal or written),
actions of either of the parties hereto or any other relationship existing
in connection with the Transaction Documents, and agrees that any such
action or proceeding shall be tried before a court and not before a jury.
SECTION 10.9 Integration. This Agreement and the other
Transaction Documents contain a final and complete integration of all
prior expressions by the parties hereto with respect to the subject matter
hereof and thereof and shall together constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and
thereof, superseding all prior oral or written understandings.
SECTION 10.10 Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which together shall constitute one and the same
agreement.
SECTION 10.11 Acknowledgment and Consent. (a) The Sellers
acknowledge that, contemporaneously herewith, Buyer is selling,
transferring, assigning, setting over and otherwise conveying to the Trust
all of Buyer's right, title and interest in, to and under the Specified
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Assets, this Agreement and all of the other Transaction Documents pursuant
to Sections 2.1 and 2.4 of the Pooling Agreement. The Sellers hereby
consent to the sale, transfer, assignment, set over and conveyance to the
Trust by Buyer of all right, title and interest of Buyer in, to and under
the Specified Assets, this Agreement and the other Transaction Documents,
and all of Buyer's rights, remedies, powers and privileges, and all claims
of Buyer against the Sellers, under or with respect to this Agreement and
the other Transaction Documents (whether arising pursuant to the terms of
this Agreement or otherwise available at law or in equity), including (i)
the right of Buyer, at any time, to enforce this Agreement against the
Sellers and the obligations of the Sellers hereunder, (ii) the right to
appoint a successor to the Servicer at the times and upon the conditions
set forth in the Pooling Agreement, and (iii) the right, at any time, to
give or withhold any and all consents, requests, notices, directions,
approvals, demands, extensions or waivers under or with respect to this
Agreement, any other Transaction Document or the obligations in respect
of the Sellers thereunder to the same extent as Buyer may do. Each of the
parties hereto acknowledges and agrees that the Trustee and the Trust are
third party beneficiaries of the rights of Buyer arising hereunder and
under the other Transaction Documents to which any Seller is a party
except to the extent the Trustee's rights have been expressly limited
hereunder. Each Seller hereby acknowledges and agrees that it has no
claim to or interest in any of the Bank Accounts or the Trust Accounts.
(b) The Sellers hereby agree to execute all agreements,
instruments and documents, and to take all other action, that Buyer or the
Trustee reasonably determines is necessary or appropriate to evidence its
consent described in subsection (a) above. To the extent that Buyer,
individually or through the Servicer, has granted or grants powers of
attorney to the Trustee under the Pooling Agreement, the Sellers hereby
grant a corresponding power of attorney on the same terms to Buyer. The
Sellers hereby acknowledge and agree that Buyer, in all of its capacities,
shall assign to the Trustee for the benefit of the Certificateholders the
powers of attorney and other rights and interests granted by the Sellers
to Buyer hereunder and agrees to cooperate fully with the Trustee in the
exercise of the rights.
SECTION 10.12 No Partnership or Joint Venture. Nothing contained
in this Agreement shall be deemed or construed by the parties hereto or
by any third person to create the relationship of principal and agent or
of partnership or of joint venture.
SECTION 10.13 No Proceedings. Each Seller hereby agrees that it
will not institute against Buyer or the Trust, or join any other Person
in instituting against Buyer or the Trust, any insolvency proceeding (such
as any proceeding of the type referred to in the definition of Event of
Bankruptcy) so long as any Investor Certificates issued by the Trust shall
be outstanding or there shall not have elapsed one year plus one day since
the last day on which any such Investor Certificates shall have been
outstanding. The foregoing shall not limit the right of a Seller to file
any claim in or otherwise take any action with respect to any insolvency
proceeding that was instituted against Buyer or the Trust by any Person
other than a Seller or any other Related Person (provided that no such
action may be taken by a Seller until such proceeding has continued
undismissed, unstayed and in effect for a period of 10 days).
-37-
<PAGE>
SECTION 10.14 Severability of Provisions. If any one or more of
the covenants, agreements, provisions or terms of this Agreement or any
of the other Transaction Documents shall for any reason whatsoever be held
invalid, then the unenforceable covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement or the other Transaction Documents
(as applicable) and shall in no way affect the validity or enforceability
of the other provisions of this Agreement or any of the other Transaction
Documents.
SECTION 10.15 Recourse to Buyer. Except to the extent expressly
provided otherwise in the Transaction Documents, the obligations of Buyer
under the Transaction Documents to which it is a party are solely the
obligations of Buyer. No recourse shall be had for payment of any fee
payable by or other obligation of or claim against Buyer that arises out
of any Transaction Document to which Buyer is a party against any
director, officer or employee of Buyer. The provisions of this section
shall survive the termination of this Agreement.
[Remainder of page intentionally left blank.]
-38-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the
date first above written.
INTER-CITY PRODUCTS CORPORATION (USA),
as Seller
By: /s/ David P. Cain
------------------------------------
Title: Senior Vice President
Address: 650 Heil-Quaker Boulevard
Lewisburg, Tennessee 37091
Attention: David Cain
Telephone: (615) 270-4136
Facsimile: (615) 270-4220
INTER-CITY PRODUCTS PARTNER CORPORATION,
as Seller
By: /s/ David P. Cain
--------------------------------------
Title: Senior Vice President
Address: 650 Heil-Quaker Boulevard
Lewisburg, Tennessee 37091
Attention: David Cain
Telephone: (615) 270-4136
Facsimile: (615) 270-4220
<PAGE>
GENERAL HEATING AND COOLING COMPANY,
as Seller
By: /s/ David P. Cain
--------------------------------------
Title: Senior Vice President
Address: 650 Heil-Quaker Boulevard
Lewisburg, Tennessee 37091
Attention: David Cain
Telephone: (615) 270-4136
Facsimile: (615) 270-4220
COASTLINE DISTRIBUTION, INC., as Seller
By: /s/ David P. Cain
--------------------------------------
Title: Senior Vice President
Address: 650 Heil-Quaker Boulevard
Lewisburg, Tennessee 37091
Attention: David Cain
Telephone: (615) 270-4136
Facsimile: (615) 270-4220
INTER-CITY PRODUCTS
RECEIVABLES COMPANY, L.P.,
as the Buyer
By: Inter-City Products Partner Corporation,
its general partner
By: /s/ David P. Cain
--------------------------------------
Title: Senior Vice President
Address: 650 Heil-Quaker Boulevard
Lewisburg, Tennessee 37091
Attention: David Cain
Telephone: (615) 270-4136
Facsimile: (615) 270-4220
<PAGE>
EXHIBIT A
<PAGE>
EXHIBIT A
to Receivables Purchase Agreement
FORM OF BUYER NOTE
___________, 1996
FOR VALUE RECEIVED, the undersigned, INTER-CITY PRODUCTS
RECEIVABLES COMPANY, L.P., a Tennessee limited partnership ("Buyer"),
promises to pay to _________________________, a ____________ corporation
(the "Seller" and together with its successors and assigns, the "Holder"),
on the terms and subject to the conditions set forth in this promissory
note (this "Note") and in the Receivables Purchase Agreement, dated as of
July 25, 1996 (the "Agreement") among Buyer, Inter-City Products
Corporation (USA), ("ICP") and certain of its Subsidiaries, an amount
equal to the aggregate deferred Purchase Price owed by Buyer to the Seller
pursuant to Article III of the Agreement. Such amount, as shown in the
records of the Servicer, will be rebuttable presumptive evidence of the
principal amount and interest owing under this Note.
1. Purchase Agreement. This Note is a Buyer Note described in,
and is subject to the terms and conditions set forth in, the Agreement.
Reference is hereby made to the Agreement for a statement of certain other
rights and obligations of Buyer and the Seller.
2. Rules of Construction; Definitions. Certain rules of
construction governing the interpretation of this Note are as set forth
in Appendix A to the Pooling Agreement (as defined in the Agreement) and,
except as otherwise specifically provided herein, capitalized terms used
but not defined herein have the meanings ascribed to them in such Appendix
A. In addition, as used herein, the following terms have the following
meanings:
"Bankruptcy Proceedings" means any dissolution, winding
up, liquidation, readjustment, reorganization or other similar
event relating to Buyer, whether voluntary or involuntary,
partial or complete, and whether in bankruptcy, insolvency,
receivership or other similar proceedings, or upon an assignment
for the benefit of creditors, or any other marshalling of the
assets and liabilities of Buyer or any sale of all or
substantially all of the assets of Buyer; provided, however, that
none of the following shall constitute a "Bankruptcy Proceeding"
so long as no Bankruptcy Event shall have occurred with respect
to the Buyer and is continuing: (i) the commencement of an
amortization period, accumulation period or early amortization
period, (ii) the allocation and distribution of Collections and
other amounts during an amortization period, accumulation period
or early amortization period in accordance with the terms of the
Pooling Agreement and (iii)
A-1
<PAGE>
the liquidation, dissolution and winding up of Buyer during an
amortization period, accumulation period or early amortization
period in accordance with the Pooling Agreement after the
termination of the Pooling Agreement in accordance with Section
12.1 thereof.
"Final Maturity Date" means the date occurring one year
and one day after the Final Scheduled Payment Date of the latest
maturing Series from time to time outstanding.
"Highest Lawful Rate" has the meaning set forth in
paragraph 9.
"Junior Liabilities" means all obligations of Buyer to
the Holder under this Note.
"Reference Rate" means, with respect to any day occurring
in a Calculation Period, the rate of interest publicly announced
from time to time by the Trustee as its "reference rate" or
"prime rate" and in effect on the first day of such Calculation
Period, as determined by the Servicer.
"Senior Interests" means all obligations of Buyer to the
Trustee or the Investor Certificateholders under or in connection
with the Transaction Documents, whether direct or indirect,
absolute or contingent, now or hereafter existing, or due or to
become due, including without limitation interest or other
amounts due or to become due after an Event of Bankruptcy.
"Subordination Provisions" means, collectively, the
provisions of paragraph 7.
3. Interest. Subject to the Subordination Provisions, Buyer
promises to pay interest on the aggregate unpaid principal amount of this
Note outstanding on each day at an adjustable rate per annum equal to the
Reference Rate in effect on such day.
4. Interest Payment Dates. (a) Subject to the Subordination
Provisions, Buyer shall pay accrued interest on this Note on each
Distribution Date and on the Final Maturity Date. Buyer also shall pay
accrued interest on the principal amount of each prepayment hereof on the
date of such prepayment.
(b) Notwithstanding the provisions of paragraph 4(a), in the
event that on the date an interest payment is due hereunder the amount of
funds available therefor pursuant to Section 3.3 of the Agreement is
insufficient to pay any amount due pursuant to paragraph 4(a), then
interest shall be payable only to the extent that funds are available
therefor in accordance with Section 3.3 of the Agreement. All interest
on this Note that is not paid when due pursuant to this paragraph shall
be payable on the next date on which an interest payment on this Note is
due and on which funds are available therefor pursuant to Section 3.3 of
the Agreement, and all such unpaid interest shall accrue interest at the
Reference Rate until paid in full.
A-2
<PAGE>
5. Basis of Computation. Interest accrued hereunder shall be
computed for the actual number of days elapsed on the basis of a 360-day
year.
6. Principal Payment Dates. Subject to the Subordination
Provisions, any unpaid principal of this Note shall only become due and
payable on the Final Maturity Date. Subject to the Subordination
Provisions, the principal amount of and accrued interest on this Note may
be prepaid on any Business Day without premium or penalty; provided, that
no prepayment shall be made by Buyer to the extent that such prepayment
would result in a default in the payment of any other amount required to
be paid by Buyer under any Transaction Document.
7. Subordination Provisions. Buyer covenants and agrees, and the
Holder, by its acceptance of this Note, likewise covenants and agrees,
that the payment of all Junior Liabilities is hereby expressly
subordinated in right of payment to the payment and performance of the
Senior Interests to the extent and in the manner set forth in this
paragraph:
(a) In the event of any Bankruptcy Proceeding, the
Senior Interests shall first be paid and performed in full and in
cash before the Holder shall be entitled to receive and to retain
any payment or distribution in respect of the Junior Liabilities.
In order to implement the foregoing: (i) all payments and
distributions of any kind or character in respect of the Junior
Liabilities to which the Holder would be entitled except for this
clause (a) shall be made directly to the Trustee (for the benefit
of itself and the Investor Certificateholders), and (ii) if a
Bankruptcy Proceeding has been commenced, the Holder shall
promptly file a claim or claims, in the form required in any
Bankruptcy Proceedings, for the full outstanding amount of the
Junior Liabilities, and shall use commercially reasonable efforts
to cause said claim or claims to be approved and all payments and
other distributions in respect thereof to be made directly to the
Trustee (for the benefit of itself and the Investor
Certificateholders) until the Senior Interests shall have been
paid and performed in full and in cash.
(b) In the event that the Holder receives any payment
or other distribution of any kind or character from Buyer or from
any other source whatsoever, in payment of the Junior
Liabilities, after the commencement of any Bankruptcy Proceeding,
such payment or other distribution shall be received in trust for
the Trustee and the Investor Certificateholders and shall be
turned over by the Holder to the Trustee forthwith.
(c) Upon the date that is a year and a day after the
final payment in full and in cash of all Senior Interests, the
Holder shall be subrogated to the rights of the Trustee and the
Investor Certificateholders to receive payments or distributions
from Buyer that are applicable to the Senior Interests until the
Junior Liabilities are paid in full.
(d) These Subordination Provisions are intended solely
for the purpose of defining the relative rights of the Holder, on
the one hand, and the Trustee and the Investor Certificateholders
on the other hand. Nothing contained in these Subordination
A-3
<PAGE>
Provisions or elsewhere in this Note is intended to or shall
impair, as between Buyer, its creditors (other than the Trustee
and the Investor Certificateholders) and the Holder, Buyer's
obligation, which is unconditional and absolute, to pay the
Junior Liabilities as and when the same shall become due and
payable in accordance with the terms hereof and of the Agreement
or to affect the relative rights of the Holder and creditors of
Buyer (other than the Trustee and the Investor
Certificateholders).
(e) Except as otherwise permitted in Section 10.4 of
the Agreement, the Holder shall not, until the Senior Interests
have been finally paid and performed in full and in cash, (i)
cancel, waive, forgive, transfer or assign, or commence legal
proceedings to enforce or collect, or subordinate to any
obligation of Buyer (other than to the Senior Interests),
howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent, or now or hereafter existing,
or due or to become due, the Junior Liabilities or any rights in
respect hereof or (ii) convert the Junior Liabilities into an
equity interest in Buyer, unless, in the case of each of clauses
(i) and (ii), the Holder shall have received the prior written
consent of the Trustee in each case.
(f) The Holder shall not, without the advance written
consent of the Trustee, commence, or join with any other Person
in commencing, any Bankruptcy Proceedings with respect to Buyer
until at least one year and one day shall have passed after the
Senior Interests shall have been finally paid and performed in
full and in cash; provided, however, that the Holder shall at all
times have the right to file any claim in or otherwise take any
action with respect to any insolvency proceeding instituted
against Buyer by any Person other than the Holder or any other
Related Person (provided that no such action may be taken by the
Holder until such proceeding has continued undismissed, unstayed
and in effect for a period of 10 days).
(g) If, at any time, any payment (in whole or in part)
made with respect to any Senior Interest is rescinded or must be
restored or returned by a Certificateholder (whether in
connection with any Bankruptcy Proceedings or otherwise), these
Subordination Provisions shall continue to be effective or shall
be reinstated, as the case may be, as though such payment had not
been made.
(h) Each of the Trustee and the Investor
Certificateholders may, from time to time, in its sole
discretion, without notice to the Holder, and without waiving any
of its rights under these Subordination Provisions, take any or
all of the following actions: (i) retain or obtain an interest in
any property to secure any of the Senior Interests, (ii) retain
or obtain the primary or secondary obligations of any other
obligor or obligors with respect to any of the Senior Interests,
(iii) extend or renew for one or more periods (whether or not
longer than the original period), alter, increase or exchange any
of the Senior Interests, or release or compromise any obligation
of any nature with respect to any of the Senior Interests, (iv)
amend, supplement, amend and restate, or otherwise modify any
Transaction Document to which it is a party, and (v) release its
security
A-4
<PAGE>
interest in, or surrender, release or permit any substitution or exchange
for all or any part of any rights or property securing any of the Senior
Interests, or extend or renew for one or more periods (whether or not
longer than the original period), or release, compromise, alter or
exchange any obligations of any nature of any obligor with respect to any
such rights or property.
(i) The Holder hereby waives: (i) notice of acceptance
of these Subordination Provisions by the Trustee or any of the
Investor Certificateholders, (ii) notice of the existence,
creation, non-payment or non-performance of all or any of the
Senior Interests, and (iii) all diligence in enforcement,
collection or protection of, or realization upon, the Senior
Interests, or any thereof, or any security therefor.
(j) These Subordination Provisions constitute a
continuing offer from Buyer to all Persons who become the holders
of, or who continue to hold, Senior Interests, and these
Subordination Provisions are made for the benefit of the Trustee
and the Investor Certificateholders, and the Trustee may proceed
to enforce such provisions on behalf of each of such Persons.
8. General. No failure or delay on the part of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power or right
preclude any other or further exercise thereof or the exercise of any
other power or right. No amendment, modification or waiver of, or consent
with respect to, any provision of this Note shall in any event be
effective unless (a) the same shall be in writing and signed and delivered
by Buyer and the Seller, and (b) all consents required for such actions
under the Transaction Documents shall have been received by the
appropriate Persons.
9. Limitation on Interest. Notwithstanding anything in this Note
to the contrary, Buyer shall never be required to pay unearned interest
on any amount outstanding hereunder, and shall never be required to pay
interest on the principal amount outstanding hereunder, at a rate in
excess of the maximum nonusurious interest rate that may be contracted
for, charged or received under applicable federal or state law (such
maximum rate being herein called the "Highest Lawful Rate"). If the
effective rate of interest that would otherwise be payable under this Note
would exceed the Highest Lawful Rate, or the Holder shall receive any
unearned interest or shall receive monies that are deemed to constitute
interest that would increase the effective rate of interest payable by
Buyer under this Note to a rate in excess of the Highest Lawful Rate, then
(a) the amount of interest that would otherwise be payable by Buyer under
this Note shall be reduced to the amount allowed by applicable law, and
(b) any unearned interest paid by Buyer or any interest paid by Buyer in
excess of the Highest Lawful Rate shall be refunded to Buyer. Without
limitation of the foregoing, all calculations of the rate of interest
contracted for, charged or received by the Holder under this Note that are
made for the purpose of determining whether such rate exceeds the Highest
Lawful Rate shall be made, to the extent permitted by applicable usury
laws (now or hereafter enacted), by amortizing, prorating and spreading
in equal parts during the actual period during which any amount has been
outstanding hereunder all interest
A-5
<PAGE>
at any time contracted for, charged or received by the Holder in
connection herewith. If at any time and from time to time (i) the amount
of interest payable to the Holder on any date shall be computed at the
Highest Lawful Rate pursuant to the provisions of the foregoing sentence,
and (ii) in respect of any subsequent interest computation period the
amount of interest otherwise payable to the Holder would be less than the
amount of interest payable to the Holder computed at the Highest Lawful
Rate, then the amount of interest payable to the Holder in respect of such
subsequent interest computation period shall continue to be computed at
the Highest Lawful Rate until the total amount of interest payable to the
Holder shall equal the total amount of interest that would have been
payable to the Holder if the total amount of interest had been computed
without giving effect to the provisions of the foregoing sentence.
10. No Negotiation. This Note is not negotiable.
11. Governing Law. THIS NOTE SHALL BE DEEMED TO BE A CONTRACT
MADE UNDER AND CONSTRUED IN ACCORDANCE WITH THE AGREEMENT AND THE INTERNAL
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES.
12. Security Interest. The Seller may grant a security interest
in or otherwise pledge this Note as security, and any Person to whom such
security interest is granted or to whom this Note is pledged shall be
bound by, and for all purposes takes this Note subject to, the
restrictions and other provisions (including the Subordination Provisions)
set forth herein.
13. Captions. Paragraph captions used in this Note are provided
solely for convenience of reference and shall not affect the meaning or
interpretation of any provision of this Note.
INTER-CITY PRODUCTS
RECEIVABLES COMPANY, L.P.
By: Inter-City Products Partner Corporation
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
A-6
<PAGE>
EXHIBIT B
<PAGE>
EXHIBIT B
to Receivables Purchase Agreement
FORM OF
SELLER ASSIGNMENT CERTIFICATE
Reference is made to the Receivables Purchase Agreement, dated as
of July 25, 1996 (as the same may be amended, supplemented, amended and
restated or otherwise modified from time to time, the "Agreement") between
INTER-CITY PRODUCTS CORPORATION (USA), CERTAIN OF ITS SUBSIDIARIES and
INTER-CITY PRODUCTS RECEIVABLES COMPANY, L.P. ("Buyer"). Unless otherwise
defined herein, capitalized terms used herein have the meanings ascribed
to them pursuant to the Agreement.
The undersigned (the "Seller") hereby sells, transfers, assigns,
sets over and conveys unto Buyer and its successors and assigns all right,
title and interest of the Seller in, to and under:
(a) all Receivables of the Seller (other than
Contributed Receivables) that existed and was owing to the Seller
as at the closing of the Seller's business on the Initial Cut-Off
Date,
(b) all Receivables created by the Seller (other than
Contributed Receivables) that arise during the period from and
including the closing of the Seller's business on the Initial
Cut-Off Date to but excluding the Purchase Termination Date,
(c) all Related Security with respect to all Receivables
(other than Contributed Receivables) of the Seller,
(d) all proceeds of the foregoing, including all funds
received by any Person in payment of any amounts owed (including
invoice prices, finance charges, interest and all other charges,
if any) in respect of any Receivable described above (other than
a Contributed Receivable) or Related Security with respect to any
such Receivable, or otherwise applied to repay or discharge any
such Receivable (including insurance payments that the Seller or
the Servicer applies in the ordinary course of its business to
amounts owed in respect of any such Receivable and net proceeds
of any sale or other disposition of repossessed goods that were
the subject of any such Receivable) or other collateral or
property of any Obligor or any other party directly or indirectly
liable for payment of such Receivables, and
(e) all Records relating to any of the foregoing.
B-1
<PAGE>
This Seller Assignment Certificate is made without recourse but
on the terms and subject to the conditions set forth in the Transaction
Documents to which the Seller is a party. The Seller acknowledges and
agrees that Buyer is accepting this Seller Assignment Certificate in
reliance on the representations, warranties and covenants of the Seller
contained in the Transaction Documents to which the Seller is a party.
THIS SELLER ASSIGNMENT CERTIFICATE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE AGREEMENT AND THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
IN WITNESS WHEREOF, the undersigned has caused this Seller
Assignment Certificate to be duly executed and delivered by its duly
Authorized Officer this _____ day of _______________, 1996.
[SELLER'S FULL NAME]
By:
------------------------------
Title:
----------------------------
<PAGE>
SCHEDULE 1
to Receivables Purchase Agreement
LITIGATION AND OTHER PROCEEDINGS
<PAGE>
SCHEDULE 1
to
Receivables Purchase Agreement
dated as of July 25, 1996
among
INTER-CITY PRODUCTS CORPORATION (USA)
and certain subsidiaries, as Sellers
and
INTER-CITY PRODUCTS RECEIVABLES COMPANY, L.P. as Buyer
LITIGATION
This Schedule 1 consists of the following thirty-one (31) pages.
<PAGE>
35 Woodward St. Condo Trust
* Product Liability
- -----------------------------------------------------------------------------
A&J Heating and Air Conditioning (Travelers Insurance)
* Product Liability
- -----------------------------------------------------------------------------
Ables, Sherry
* Worker's Compensation
- -----------------------------------------------------------------------------
AJ Auto World
* Product Liability
- -----------------------------------------------------------------------------
Aldsdon, Robert F.
* Worker's Compensation
- -----------------------------------------------------------------------------
Allen, Dan Harvey
* Worker's Compensation
- -----------------------------------------------------------------------------
Allen, Misty (Farmer)
* Worker's Compensation
- -----------------------------------------------------------------------------
Allinder, Linda
* Employment
- -----------------------------------------------------------------------------
<PAGE>
Alliots, Charles R. v. ICP (USA)
* Product Liability
- -----------------------------------------------------------------------------
Allstate Insurance Company (Beverly Miller)
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------
Allums, Lucile
* Product Liability
- -----------------------------------------------------------------------------
American Freight
* Transpo. Undercharge
- -----------------------------------------------------------------------------
Appleby Brothers & Wittaker Company, Inc.
* Product Liability
- -----------------------------------------------------------------------------
Bailey, Norman C. (State Farm)
* Product Liability
- -----------------------------------------------------------------------------
Bauer-Utica Mutual Insurance Company
* Product Liability
- -----------------------------------------------------------------------------
Bechtler, John
* Product Liability
- -----------------------------------------------------------------------------
Berry, Robert
* Product Liability
- -----------------------------------------------------------------------------
Blerga, David and Karen
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
Black, Rebecca A. and Ricky L.
* Other Non-Product Liability
- -----------------------------------------------------------------------------
Borkowski, Harry
* Product Liability
- -----------------------------------------------------------------------------
Brodeur, Edward v. Addams, et al
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
Brown, Charles F.
* EEOC Claim
- -----------------------------------------------------------------------------
Bryant, James Kennith
* Worker's Compensation
- -----------------------------------------------------------------------------
C&C Comfortmaker
* Non-Product Liability
- -----------------------------------------------------------------------------
Capers, Victor and Catherine
* Product Liability
- -----------------------------------------------------------------------------
Card, Robert and Jan
* Product Liability
- -----------------------------------------------------------------------------
Carpenter, Gordon
* Product Liability
- -----------------------------------------------------------------------------
Cavaness, James E., Jr., d/b/a Westaire and Donna
* Bankruptcy
- -----------------------------------------------------------------------------
CCK, Ltd. - Roger Hansen
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
Champnelia, Frederick and Irene
* Product Liability
- -----------------------------------------------------------------------------
Chandler, Erlene v. ICP (USA) et al.
* Product Liability
- -----------------------------------------------------------------------------
Charles P. Jeffries Tower
* Product Liability
- -----------------------------------------------------------------------------
Claghorn, Lan and Karey
* Product Liability
- -----------------------------------------------------------------------------
Conant, Yvonne A.
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
Conley, Gary
* Product Liability
- -----------------------------------------------------------------------------
Corinthian Suites
* Product Liability
- -----------------------------------------------------------------------------
Cruz, Ziola
* Product Liability
- -----------------------------------------------------------------------------
D'Ambrosio, John P.
* Product Liability
- -----------------------------------------------------------------------------
Dalton, Donald Wayne
* Worker's Compensation
- -----------------------------------------------------------------------------
Davis, Joe M.
* Employment
- -----------------------------------------------------------------------------
Dearie, Martino Contractors Ltd.
* Collection
- -----------------------------------------------------------------------------
Dimperio, Francis Jr. and Katie (State Farm)
* Product Liability
- -----------------------------------------------------------------------------
Dorwart, Doug and Rella
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
Duchardt, Roger
* Product Liability
- -----------------------------------------------------------------------------
Duncan, Donna M.
* Worker's Compensation
- -----------------------------------------------------------------------------
Dungy, Shannon
* EEOC Claim
- -----------------------------------------------------------------------------
Elf's Workshop - Dr. Leonard Brown
* Product Liability
- -----------------------------------------------------------------------------
F.P.R. Distributors, Inc.
* Collection
- -----------------------------------------------------------------------------
Farley, Adelaide, Jeffrey, Joan, Meeyah, James
* Product Liability
- -----------------------------------------------------------------------------
Fawcett, Michael of Fawcett Construction
* Product Liability
- -----------------------------------------------------------------------------
Ferry, Charles and Lori
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
FMI Insurance Co. (Blodgett)
* Product Liability
- -----------------------------------------------------------------------------
Foster, James and Myrtle
* Product Liability
- -----------------------------------------------------------------------------
Fulton, Joseph
* Product Liability
- -----------------------------------------------------------------------------
Geissler, Jeff and Cheryl (Integrity Mutual Ins.)
* Product Liability
- -----------------------------------------------------------------------------
Gibson, Betty Ann
* Worker's Compensation
- -----------------------------------------------------------------------------
Gilliam, James
* Worker's Compensation
- -----------------------------------------------------------------------------
Gordon, Robert and Candyce Anderson (St. Farm)
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
Goslin, Bart and Karen
* Product Liability
- -----------------------------------------------------------------------------
Grant, Hoyts and Rita (State Farm)
* Product Liability
- -----------------------------------------------------------------------------
Green Shield HVAC Consultants, Inc. v. ICP (USA)
* Product Liability
- -----------------------------------------------------------------------------
Griffith, Hiram and Linda
* Product Liability
- -----------------------------------------------------------------------------
Hagan, Al Don
* Worker's Compensation
- -----------------------------------------------------------------------------
Haile, Sherry and Tony
* Product Liability
- -----------------------------------------------------------------------------
Hajoka
* Collection
- -----------------------------------------------------------------------------
Haley, James and Barbara
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
Hamilton, Gregory, Nancy and Nicholas
* Product Liability
- -----------------------------------------------------------------------------
Hamlin, Mary L.
* Worker's Compensation
- -----------------------------------------------------------------------------
Hankwitz Heating and Refrigeration (Buskirk)
* Product Liability
- -----------------------------------------------------------------------------
Harper, Charles
* Product Liability
- -----------------------------------------------------------------------------
Harris, William and Kathryn
* Product Liability
- -----------------------------------------------------------------------------
Hauser, Clarence and Gladys
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
Haydu, James and Beth (Travelers)
* Product Liability
- -----------------------------------------------------------------------------
Heisel, Martin W.
* Product Liability
- -----------------------------------------------------------------------------
Hendrickson, Thomas and Trisia
* Product Liability
- -----------------------------------------------------------------------------
Henningsen, Robert C.
* Other Non-Product Liability
- -----------------------------------------------------------------------------
Hess, George and Karen
* Worker's Compensation
- -----------------------------------------------------------------------------
Hickerson, Cynthia
* Worker's Compensation
- -----------------------------------------------------------------------------
Hildahl, Daniel
* Product Liability
- -----------------------------------------------------------------------------
Hogarth, Douglas L. (State Farm Insurance)
* Product Liability
- -----------------------------------------------------------------------------
Holt, Fred (General Accident Ins)
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
Howisey, Unknown
* Product Liability
- -----------------------------------------------------------------------------
Huitt, Patricia Ann
* Worker's Compensation
- -----------------------------------------------------------------------------
Huntley, Roger and Linda
* Product Liability
- -----------------------------------------------------------------------------
ICP v. Belcher & Miller (Napco, Inc.)
* Collection
- -----------------------------------------------------------------------------
ICP v. Buckhead A-C
* Collection
- -----------------------------------------------------------------------------
ICP v. Executive Protection International and Dots
* Other Non-Product Liability
- -----------------------------------------------------------------------------
Insurance Company of North America (INA)
* Non-Product Liability
- -----------------------------------------------------------------------------
Jackson, Ernie Lee and Jessie M.
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
Jacoby, Charles G.
* Product Liability
- -----------------------------------------------------------------------------
Janes, Susie (State Farm)
* Product Liability
- -----------------------------------------------------------------------------
Jardine, Mr. and Mrs. William
* Product Liability
- -----------------------------------------------------------------------------
Jensen, Mark
* Product Liability
- -----------------------------------------------------------------------------
Jerry, Donna and Jeffrey
* Product Liability
- -----------------------------------------------------------------------------
Jones, Glendon and Linda v. ICP (USA)
* Product Liability
- -----------------------------------------------------------------------------
Kasperson, Dennis & Julie (American Family Ins.)
* Product Liability
- -----------------------------------------------------------------------------
Katz, Gary and Marjorie
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
Klein, Patricia (State Farm)
* Product Liability
- -----------------------------------------------------------------------------
Kline, Edward J. and Nancy L. Kline
* Product Liability
- -----------------------------------------------------------------------------
Klos, Eugene R. and Elsie T. (Commercial Union)
* Product Liability
- -----------------------------------------------------------------------------
Landrum, Randall and Wanda (Safeco Ins.)
* Product Liability
- -----------------------------------------------------------------------------
Lane, Napolean
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
Lardy, Harlan
* Product Liability
- -----------------------------------------------------------------------------
Larry Peel & Co., Inc.
* Product Liability
- -----------------------------------------------------------------------------
Larsen, Alvin and Janice (State Farm)
* Product Liability
- -----------------------------------------------------------------------------
Laur, Thomas & Pamela (American Family Ins)
* Product Liability
- -----------------------------------------------------------------------------
Linton, Jen and Mary Jane (Farms Mutual Ins)
* Product Liability
- -----------------------------------------------------------------------------
Loomis, Stephen & Francis
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
Lopez, Frank (Prudential Insurance)
* Product Liability
- -----------------------------------------------------------------------------
Macht, Richard & Nancy
* Product Liability
- -----------------------------------------------------------------------------
Major, Ramona R.
* Product Liability
- -----------------------------------------------------------------------------
Markert, Roy R. and Helen
* Product Liability
- -----------------------------------------------------------------------------
McCandless, James, Jr.
* Worker's Compensation
- -----------------------------------------------------------------------------
McCord, Debra Flickinger
* Employment
- -----------------------------------------------------------------------------
McGee, Jackie
* Worker's Compensation
- -----------------------------------------------------------------------------
McWilliams, Clair and Janet (Erie Insurance)
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
Mekler, Martin and Jill
* Product Liability
- -----------------------------------------------------------------------------
Messick, Judy
* Worker's Compensation
- -----------------------------------------------------------------------------
Metric Air Systems (Ontario) Limited (Monaco)
* Collection
- -----------------------------------------------------------------------------
Morganroth, Michael and Shila - Republic Ins. Co.
* Product Liability
- -----------------------------------------------------------------------------
Morris, Fran
* Other Non-Product Liability
- -----------------------------------------------------------------------------
Morris, Windred E.
* Product Liability
- -----------------------------------------------------------------------------
Morrison, Cyrus, Estate of
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
Nations, Paul (Allstate)
* Product Liability
- -----------------------------------------------------------------------------
Nationwide Mutual Insurnace (Spencer, Donna)
* Product Liability
- -----------------------------------------------------------------------------
Nationwide Mutual Insurance (Vance, Otto and Iris)
* Product Liability
- -----------------------------------------------------------------------------
Navarrete, Mary Agnes
* Product Liability
- -----------------------------------------------------------------------------
Noah, Martha
* Product Liability
- -----------------------------------------------------------------------------
Norman, John
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
Norman, Patricia
* Worker's Compensation
- -----------------------------------------------------------------------------
Notaro Homes Inc. (Country Mutual Ins.)
* Product Liability
- -----------------------------------------------------------------------------
Oden, Eddie Wade
* Worker's Compensation
- -----------------------------------------------------------------------------
Olympia Holding Corporation
* Transpo. Undercharge
- -----------------------------------------------------------------------------
Ontario New Home Warranty Program v. ICP (USA)
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
Oravetz, David and family
* Product Liability
- -----------------------------------------------------------------------------
Palermo, A.
* Product Liability
- -----------------------------------------------------------------------------
Paliotta, Robert (Aetna Casualty)
* Product Liability
- -----------------------------------------------------------------------------
Panciera, Lawrence E.
* Product Liability
- -----------------------------------------------------------------------------
Paolillo, Samuel
* Product Liability
- -----------------------------------------------------------------------------
Patel, Amrat R. d/b/a New Road Inn
* Product Liability
- -----------------------------------------------------------------------------
Patrick, Sandra and Gerald
* Product Liability
- -----------------------------------------------------------------------------
Patten's Plumbing & Heating
* Bankruptcy
- -----------------------------------------------------------------------------
Pennsylvania Millers-Bartlett
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
Pepe, James and Gloria v. Aaron and Company
* Product Liability
- -----------------------------------------------------------------------------
Peters, Seth A. and Janet A. (State Farm)
* Product Liability
- -----------------------------------------------------------------------------
Pettry, James O.
* Product Liability
- -----------------------------------------------------------------------------
Pigg, Clarence
* Worker's Compensation
- -----------------------------------------------------------------------------
Pollock, Anita
* Worker's Compensation
- -----------------------------------------------------------------------------
<PAGE>
Pringle, Jon and Susan
* Product Liability
- -----------------------------------------------------------------------------
Pulvirenti, Paul and Elizabeth
* Product Liability
- -----------------------------------------------------------------------------
Quinones, Alvaro v. Hastings and ICP
* Product Liability
- -----------------------------------------------------------------------------
Reedy, Catherine, Estate of
* Product Liability
- -----------------------------------------------------------------------------
Reibly, Patricia
* Product Liability
- -----------------------------------------------------------------------------
Renata Construction Co.
* Collection
- -----------------------------------------------------------------------------
Rieger, Jason B.
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
Robert, James D.
* Product Liability
- -----------------------------------------------------------------------------
Roberts, James D.
* Product Liability
- -----------------------------------------------------------------------------
Roberts, Norman
* Product Liability
- -----------------------------------------------------------------------------
Robertson, Jimmy L.
* Product Liability
- -----------------------------------------------------------------------------
Robichaux, Jr., J. Van
* Product Liability
- -----------------------------------------------------------------------------
Ruvo, Ralph J. (Estate) and Helen Ruvo
* Product Liability
- -----------------------------------------------------------------------------
Rylko, Felix and Louise v. ICP (USA)
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
Sage, Gene and Margaret
* Product Liability
- -----------------------------------------------------------------------------
Salaverra, Jose
* Product Liability
- -----------------------------------------------------------------------------
Samuels, Billy J.
* Product Liability
- -----------------------------------------------------------------------------
Scarrella, Amy and Vincent
* Product Liability
- -----------------------------------------------------------------------------
Shad's Wholesale Supply Corporation
* Collection
- -----------------------------------------------------------------------------
Schwegler, Walter F. and Marcelene
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
Selective Ins. Co. (Davis, Arthur & Judith)
* Product Liability
- -----------------------------------------------------------------------------
Selective Insurance (Vanetten)
* Product Liability
- -----------------------------------------------------------------------------
Sherman, Clark (GAB Business Services)
* Product Liability
- -----------------------------------------------------------------------------
Simon, Johnnie G.
* Product Liability
- -----------------------------------------------------------------------------
Sotiropoulos, Costa (Allstate Insurance)
* Product Liability
- -----------------------------------------------------------------------------
Spell, Howard
* Product Liability
- -----------------------------------------------------------------------------
Spencer, James
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
State Farm Fire and Casualty (Dawson)
* Product Liability
- -----------------------------------------------------------------------------
Stebbins, Dale v. ICP (USA)
* Product Liability
- -----------------------------------------------------------------------------
Steer, Harold
* Product Liability
- -----------------------------------------------------------------------------
Stephenson, Patrick and Karyl
* Product Liability
- -----------------------------------------------------------------------------
Stewart, Mary
* Worker's Compensation
- -----------------------------------------------------------------------------
Tabor, Mr. and Mr.s Nick
* Product Liability
- -----------------------------------------------------------------------------
Taule, Yvonne
* Product Liability
- -----------------------------------------------------------------------------
Teece, David F. and Sand Valley
* Collection
- -----------------------------------------------------------------------------
<PAGE>
Tracy, Joseph R.
* Product Liability
- -----------------------------------------------------------------------------
Travelers Insurance Company and Triple A
* Product Liability
- -----------------------------------------------------------------------------
Truex, Susan
* Product Liability
- -----------------------------------------------------------------------------
Tsiampas, George and Bessie
* Product Liability
- -----------------------------------------------------------------------------
Turner, Thomas and Betty
* Product Liability
- -----------------------------------------------------------------------------
Ulery, David and Terry C.
* Product Liability
- -----------------------------------------------------------------------------
USAA - Thoreson
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
USAA Casualty Insurance Company a/s/o Bauer
* Product Liability
- -----------------------------------------------------------------------------
USF&G and Ronald Wilson
* Product Liability
- -----------------------------------------------------------------------------
Viking Adjusting Service - Card, Robert and Jan
* Product Liability
- -----------------------------------------------------------------------------
Walderon, William E. (State Farm)
* Product Liability
- -----------------------------------------------------------------------------
White, Francis
* Worker's Compensation
- -----------------------------------------------------------------------------
White, William A.
* Worker's Compensation
- -----------------------------------------------------------------------------
Williams, Helen, individually and as personal rep.
* Product Liability
- -----------------------------------------------------------------------------
Wiltse, Dale C.
* Product Liability
- -----------------------------------------------------------------------------
Winters, Beverly et al.
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
Wright's Tile & Floor Covering Co., Inc.
* Collection
- -----------------------------------------------------------------------------
Wright's Tile & Floor Covering Co., Inc.
* Collection
- -----------------------------------------------------------------------------
Wright, David "Duffy" and Diana
* Product Liability
- -----------------------------------------------------------------------------
Wysocki, Nancy
* Product Liability
- -----------------------------------------------------------------------------
<PAGE>
Coastline
Codisco, Inc. d/b/a Coastline Distributing of Atlanta v. Annette King,
d/b/a King Heating & Air Conditioning Service Company. Codisco, Inc. d/b/a
Coastline Distribution of Atlanta has sued Annette King, d/b/a King Heating
& Air Conditioning Service company in the State Court of Clayton County,
Georgia, Civil Action File No. 92CV2654C. Codisco seeks payment of an
outstanding debt in the principal amount of $23,840.65 (plus interest,
attorneys' fees and costs) on an open account. King has counterclaimed for
fraud, money had and received, restraint of trade, breach of contract and
slander, among other things.
On March 13, 1994 the trial court granted partial summary judgment to
Codisco. On October 14, 1994 the trial court granted summary judgment to
Codisco on all remaining issues. King has filed a Notice of Appeal. Both
parties have fully briefed the appeal. A ruling on the appeal is pending.
Coastline v. Advance Air Control, Inc., Larry Hodge & Terry Hodge. In
March, 1996 Codisco, d/b/a Coastline Distribution of New Port Richey, filed
suit against Advance Air and the Hodges (as guarantors) to collect an account
balance of $14,791.88. Advance Air has filed a counter-claim of unspecified
damages alleging that certain equipment sold to Advance by Coastline was
defective and that the defects caused Advance damages. Although damages are
not specified, discovery indicates that damages were minimal and amount to
less than the $14,791.88 account balance.
Robert Sorenson v. Coastline Distribution, Inc. In January, 1996,
Robert Sorenson, a former employee of Coastline, brought suit in the Federal
District Court for the Middle District of Florida, under the Americans with
Disabilities Act, alleging that his employment was terminated because he was
epileptic and that Coastline refused to accommodate him. Management disputes
this claim. Trial is set for March term of 1998. Sorenson seeks
reinstatement, backpay and attorney fees.
General Heating
Joseph Cantrell and Betty Cantrell v. Carrier Corp. and General Heating
and Cooling Company (as co-defendants), General Heating has been named as a
co-defendant in this products liability lawsuit. Total damages, according to
the complaint dated April 12, 1996, are $150,000.00. The plaintiffs are
seeking joint and several liability for General Heating and Carrier.
<PAGE>
SCHEDULE 2
to Receivables Purchase Agreement
CHANGES IN FINANCIAL CONDITION
<PAGE>
SCHEDULE 2
to
Receivables Purchase Agreement
dated as of July 25, 1996
among
INTER-CITY PRODUCTS CORPORATION (USA)
and certain subsidiaries, as Sellers
and
INTER-CITY PRODUCTS RECEIVABLES COMPANY, L.P. as Buyer
CHANGES IN FINANCIAL CONDITION
n/a
<PAGE>
SCHEDULE 3
to Receivables Purchase Agreement
OFFICES OF THE SELLERS WHERE
RECORDS ARE MAINTAINED
<PAGE>
SCHEDULE 3
to
Receivables Purchase Agreement
dated as of July 25, 1996
among
INTER-CITY PRODUCTS CORPORATION (USA)
and certain subsidiaries, as Sellers
and
INTER-CITY PRODUCTS RECEIVABLES COMPANY, L.P. as Buyer
PRINCIPAL PLACES OF BUSINESS AND CHIEF EXECUTIVE OFFICES
SELLER ADDRESS(ES)
Inter-City Products Corporation (USA) 650 Heil-Quaker Avenue
Lewisburg, TN 37091
1136 Heil-Quaker Blvd.
LaVergne, TN 37086
General Heating and Cooling Company 820 Atlantic Ave.
North Kansas City, MO 64116
Coastline Distribution, Inc. 601 Codisco Way
Sanford, FL 32771
Inter-City Products Partner Corporation 650 Heil-Quaker Avenue
Lewisburg, TN 37091
<PAGE>
SCHEDULE 4
to Receivables Purchase Agreement
LEGAL NAMES
TRADE NAMES
<PAGE>
SCHEDULE 4
to
Receivables Purchase Agreement
dated as of July 25, 1996
among
INTER-CITY PRODUCTS CORPORATION (USA)
and certain subsidiaries, as Sellers
and
INTER-CITY PRODUCTS RECEIVABLES COMPANY, L.P. as Buyer
(Page 1 of 2)
LEGAL NAMES, MERGERS AND CONSOLIDATIONS AND TRADE NAMES
INTER-CITY PRODUCTS CORPORATION (USA) ("ICP")
- ---------------------------------------------
ICP intends to finance selected receivables of certain of its
dealer/distributors under the name "HVAC FIRST COMPANY," an unincorporated
division of ICP.
GENERAL HEATING AND COOLING COMPANY ("GHC - DELAWARE")
- ------------------------------------------------------
ICP purchased the stock of GHC - Delaware's parent corporation, GHC Holdings,
Inc. pursuant to a stock purchase agreement dated as of May 31, 1996. The
shares of GHC Holdings have been held in escrow until July 25, 1996, when the
acquisition became effective.
GHC - Delaware was incorporated October 7, 1994 (under the name GHC
Acquisition, Inc.) to acquire certain assets of General Heating & Cooling
Company, a Missouri corporation ("GHC - Missouri"), Refrigeration Equipment
Company, a Missouri corporation, Refrigeration Equipment Company, Inc., a
Kansas corporation, H. Erlich & Sons Manufacturing Company, Inc., a Missouri
corporation and Heaven Engineering Company, a Missouri corporation.
Subsequent to the acquisition of GHC - Delaware, GHC - Missouri changed its
name to CHT Industries, Inc. The other companies from which GHC - Delaware
acquired assets at that time were dissolved.
GHC - Delaware adopted its present corporate name on December 15, 1994.
[GHC - Delaware continues to do business under the names (d/b/a's rather than
subdivisions) Refrigeration Equipment Company and Heaven Engineering
Company.]
<PAGE>
SCHEDULE 4
to
Receivables Purchase Agreement
dated as of July 25, 1996
among
INTER-CITY PRODUCTS CORPORATION (USA)
and certain subsidiaries, as Sellers
and
INTER-CITY PRODUCTS RECEIVABLES COMPANY, L.P. as Buyer
(Page 2 of 2)
COASTLINE DISTRIBUTION, INC. ("COASTLINE")
- ------------------------------------------
ICP purchased the stock of Coastline's parent corporation, CDS Holdings, Inc.
pursuant to a stock purchase agreement dated as of May 31, 1996. The shares
of CDS Holdings have been held in escrow until July 25, 1996, when the
acquisition became effective.
Coastline was incorporated November 9, 1992 (under the name CDS Acquisition,
Inc.) to succeed to certain assets and liabilities of Codisco, Inc., a
Florida corporation. Its name was changed at that time to Coastline
Distribution, Inc.
Coastline's stock was then sold by Codisco, Inc. to CDS Holdings, Inc. on
December 23, 1992. Coastline has two wholly-owned subsidiaries, Metal
Manufacturing, Inc., a Florida corporation, and C/M Lines, Inc., a Florida
corporation.
[Coastline has several business locations in Florida and Alabama and does
business under the name(s) "Coastline of (location)".]
--------
INTER-CITY PRODUCTS PARTNER CORPORATION ("PARTNERCO")
- -----------------------------------------------------
Partnerco is the general partner of Inter-City Products Receivables Company,
L.P., a Tennessee limited partnership formed July 22, 1996 between Partnerco,
as general partner, and ICP, as limited partner.
<PAGE>
SCHEDULE 5
to Receivables Purchase Agreement
SOFTWARE LICENSES
<PAGE>
SCHEDULE 5
to
Receivables Purchase Agreement
dated as of July 25, 1996
among
INTER-CITY PRODUCTS CORPORATION (USA)
and certain subsidiaries, as Sellers
and
INTER-CITY PRODUCTS RECEIVABLES COMPANY, L.P. as Buyer
SOFTWARE LICENSES
INTER-CITY PRODUCTS CORPORATION (USA) ("ICP")
- ---------------------------------------------
Dun & Bradstreet Software Services, Inc. ("D&B")
D&B Accounts Receivables System - IBM/MVS/CICS M Series Version
COASTLINE DISTRIBUTION, INC. ("COASTLINE")
- -------------------------------------------
Cincinnati Bell Information Systems, Inc. [f/k/a Information Systems
Development, Inc. ("ISD")]
ISD Distribution Management System Including: Order Entry, Accounts
Receivable, Inventory, Sales Analysis, Purchasing, Payroll, Accounts
Payable, General Ledger.
GENERAL HEATING AND COOLING COMPANY ("GHC - DELAWARE")
- ------------------------------------------------------
J&M Industries, Inc.
DMS II, Version 7.3, Base Package: Order Processing, Cash Box
Accounting, Family Pricing, Inventory Analysis, (Turn and Earn),
Purchasing/Forecasting, Product Hinging for Forecast, Sales Analysis,
Accounts Receivables, Accounts Payable, General Ledger, File Control,
Special Price Maintenance, Physical Inventory, Night Shift Manager.
Optional Modules: Interwarehouse Transfers, Satellite Branch Automatic
Replenishment, Bill of Materials/Work Order System, Vendor Claims and
Rebates, Warranty Return - Phase 1, Vendor Receivables, Advertising,
Incentives.
<PAGE>
INTER-CITY PRODUCTS CORPORATION (USA)
==========================================================================
CERTIFICATE PURCHASE AGREEMENT
(Series 1996-1, Class A)
dated as of July 25, 1996
among
INTER-CITY PRODUCTS RECEIVABLES COMPANY, L.P.,
INTER-CITY PRODUCTS CORPORATION (USA)
AS THE INITIAL SERVICER,
THE PURCHASERS DESCRIBED HEREIN,
and
THE CHICAGO CORPORATION,
as Agent
==========================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . .
2
ARTICLE II
PURCHASE AND SALE OF CERTIFICATES
SECTION 2.1 The Commitments; Percentages. . . . . . . . . . . . . . .
2
SECTION 2.2 Purchase Mechanics During Revolving Period. . . . . . . .
3
SECTION 2.3 Reduction of Stated Amounts . . . . . . . . . . . . . . .
4
SECTION 2.4 Certificates. . . . . . . . . . . . . . . . . . . . . . .
4
ARTICLE III
REDUCTIONS IN INVESTED AMOUNT
SECTION 3.1 Transferor's Right to Reduce Invested Amount. . . . . . .
5
SECTION 3.2 Mandatory Reduction of Invested Amount.. . . . . . . . . .
6
SECTION 3.3 Notice to Purchasers. . . . . . . . . . . . . . . . . . .
6
ARTICLE IV
TRANCHES, INTEREST AND FEES
SECTION 4.1 Tranches. . . . . . . . . . . . . . . . . . . . . . . . .
6
SECTION 4.2 Non-Usage and Minimum Usage Fees. . . . . . . . . . . . .
8
SECTION 4.3 Yield Protection. . . . . . . . . . . . . . . . . . . . .
8
SECTION 4.4 Illegality; Unavailability. . . . . . . . . . . . . . . .10
SECTION 4.5 Indemnity . . . . . . . . . . . . . . . . . . . . . . . .11
SECTION 4.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . .12
ARTICLE V
OTHER PAYMENT TERMS
SECTION 5.1 Time and Method of Payment. . . . . . . . . . . . . . . .13
SECTION 5.2 Pro Rata Treatment. . . . . . . . . . . . . . . . . . . .13
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
i
<PAGE>
SECTION 6.1 Transferor. . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 6.2 ICP . . . . . . . . . . . . . . . . . . . . . . . . . . .15
SECTION 6.3 Purchasers. . . . . . . . . . . . . . . . . . . . . . . .16
ARTICLE VII
CONDITIONS
SECTION 7.1 Conditions to Initial Purchase. . . . . . . . . . . . . .16
SECTION 7.2 Conditions to Each Purchase . . . . . . . . . . . . . . .20
SECTION 7.3 Conditions to Signing . . . . . . . . . . . . . . . . . .20
ARTICLE VIII
COVENANTS
SECTION 8.1 Affirmative Covenants . . . . . . . . . . . . . . . . . .21
SECTION 8.2 Transfers . . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 8.3 Procedure Letter and Report . . . . . . . . . . . . . . .22
ARTICLE IX
AGENT; REQUIRED PURCHASERS
SECTION 9.1 Appointment . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 9.2 Nature of Duties. . . . . . . . . . . . . . . . . . . . .22
SECTION 9.3 Lack of Reliance on Agent and Financial Advisor . . . . .23
SECTION 9.4 Certain Rights of Agent . . . . . . . . . . . . . . . . .23
SECTION 9.5 Reliance. . . . . . . . . . . . . . . . . . . . . . . . .23
SECTION 9.6 Indemnification . . . . . . . . . . . . . . . . . . . . .24
SECTION 9.7 Agent in its Individual Capacity. . . . . . . . . . . . .24
SECTION 9.8 Resignation by Agent. . . . . . . . . . . . . . . . . . .24
SECTION 9.9 Required Purchasers. . . . . . . . . . . . . . . . . . .25
SECTION 9.10 Agent Administration Fee . . . . . . . . . . . . . . . .25
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1 Amendments . . . . . . . . . . . . . . . . . . . . . . .25
SECTION 10.2 No Waiver; Remedies. . . . . . . . . . . . . . . . . . .26
SECTION 10.3 Successors and Assigns; Assignments. . . . . . . . . . .26
SECTION 10.4 Survival of Agreement. . . . . . . . . . . . . . . . . .29
SECTION 10.5 Expenses; Indemnification. . . . . . . . . . . . . . . .29
SECTION 10.6 Entire Agreement . . . . . . . . . . . . . . . . . . . .31
SECTION 10.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . .31
SECTION 10.8 No Third-Party Beneficiaries . . . . . . . . . . . . . .31
ii
<PAGE>
SECTION 10.9 Severability of Provisions . . . . . . . . . . . . . . .31
SECTION 10.10 Counterparts. . . . . . . . . . . . . . . . . . . . . .32
SECTION 10.11 Governing Law . . . . . . . . . . . . . . . . . . . . .32
SECTION 10.12 Tax Characterization. . . . . . . . . . . . . . . . . .32
SECTION 10.13 No Proceedings. . . . . . . . . . . . . . . . . . . . .32
iii
<PAGE>
SCHEDULE
SCHEDULE I Stated Amounts and Percentages
EXHIBITS
EXHIBIT A Form of Pooling and Servicing Agreement
EXHIBIT B Form of Receivables Purchase Agreement
EXHIBIT C Form of Series 1996-1 Supplement
EXHIBIT D Form of Assignment Agreement
APPENDIX
APPENDIX X Index of Additional Defined Terms
iv
<PAGE>
This CERTIFICATE PURCHASE AGREEMENT, dated as of July 25, 1996
(this "Agreement"), is made among INTER-CITY PRODUCTS RECEIVABLES COMPANY,
L.P., a Tennessee limited partnership ("Transferor"), INTER-CITY PRODUCTS
CORPORATION (USA), a Delaware corporation ("ICP", "Servicer" or "Initial
Servicer"), the purchasers named on the signatures pages of this Agreement
(together with their respective permitted assigns, the "Purchasers"), and
THE CHICAGO CORPORATION, as agent for the Purchasers (in that capacity,
together with any successors in that capacity, "Agent").
BACKGROUND
1. Transferor will enter into (a) a Pooling and Servicing
Agreement substantially in the form of Exhibit A (the "Pooling Agreement")
with Initial Servicer, as initial Servicer, and, LaSalle National Bank, a
national banking association, as trustee (in that capacity, together with
any successors in that capacity, the "Trustee"), (b) a Receivables Purchase
Agreement substantially in the form of Exhibit B and (c) a Series 1996-1
Supplement to the Pooling Agreement substantially in the form of Exhibit C
(the "Supplement"). Pursuant to the Pooling Agreement and the Supplement,
Transferor will obtain the Series 1996-1, Class A Certificates (the
"Certificates"), which will represent fractional undivided beneficial
interests in the assets of the Inter-City Products Receivables Master Trust
(the "Trust"), a trust to be organized pursuant to the Pooling Agreement.
2. Transferor wishes to sell the Certificates to the Purchasers
and obtain their commitment to purchase fractional undivided beneficial
interests in the assets of the Trust (each a "Trust Interest") that will be
evidenced by the Certificates. Subject to the terms and conditions of this
Agreement, each Purchaser is willing (a) to purchase a Certificate with an
initial Stated Amount in the amount set forth opposite its name on Schedule
I to this Agreement and (b) to agree to so make purchases of Trust
Interests up to the Stated Amount (as defined below) set forth opposite its
name on Schedule I. Initial Servicer has joined in this Agreement to
confirm certain representations, warranties and covenants for the benefit
of the Purchasers and the Agent.<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. Capitalized terms used and not otherwise
defined herein have the meanings assigned to them in the Supplement or, if
not defined in the Supplement, in Appendix A to the Pooling Agreement. An
index of terms defined directly in this Agreement is attached as Appendix
X.
ARTICLE II
PURCHASE AND SALE OF CERTIFICATES
SECTION 2.1 The Commitments; Percentages. Subject to the terms
and conditions of this Agreement, the Pooling Agreement and the Supplement,
each Purchaser agrees, severally and for itself alone, upon Transferor's
request (through Servicer), to make purchases (each a "Purchase") of Trust
Interests from time to time during the Revolving Period for the 1996-1
Certificates; provided, that no Purchaser will be required or permitted to
make a Purchase on any date if the funded principal amount of its
Certificate, after giving effect to the Purchase, would exceed the lesser
of (a) the Stated Amount of its Certificate and (b) its Class Percentage
multiplied by the Class A Invested Amount. In addition, no Purchaser will
be required or permitted to make a Purchase if, after giving effect thereto
(and any corresponding reduction to the Series Invested Amount pursuant to
Section 3.1), the Net Invested Amount would exceed the Base Amount. The
Purchases by the Purchasers shall be made ratably in accordance with their
respective Class Percentages; provided, that the failure of any Purchaser
to make any Purchase shall not relieve any other Purchaser of its
obligation to make Purchases hereunder. No Purchaser shall, however, be
responsible for the failure of any other Purchaser to make any Purchase.
Subject to the terms of this Agreement, the aggregate principal amount of a
Purchaser's investment represented by its Certificate may be increased or
decreased from time to time.
For purposes of this Agreement, (i) "Class Percentage" means, with
respect to each Purchaser, the percentage equivalent (carried out to twelve
decimal places) of a fraction, the numerator of which is the Stated Amount
of such Purchaser's Certificate and the denominator of which is the sum of
the Stated Amounts of all of the Purchasers' Certificates and (ii) "Series
Percentage" means, with respect to each Purchaser, the percentage
equivalent (carried out to
-2-
<PAGE>
twelve decimal places) of a fraction, the numerator of which is the Stated
Amount of such Purchaser's Certificate and the denominator of which is the
sum of the Stated Amounts for all of the Series 1996-1 Certificates. The
initial Class Percentages and Series Percentages of the initial Purchasers
are set forth opposite their names on Schedule I.
SECTION 2.2 Purchase Mechanics During Revolving Period. (a)
During the Revolving Period, whenever Transferor wishes the Purchasers to
make Purchases, it shall cause Servicer to notify the Agent and the Trustee
if the Trust Interests to be purchased initially will be (i) the one
permitted ABR Tranche, not later than 11:00 a.m., New York City time, two
Business Days prior to the date of the proposed Purchase and (ii) one of
the three permitted Eurodollar Tranches, not later than 11:00 a.m., New
York City time, three London/U.S. Business Days prior to the date of the
proposed Purchase; provided that the Trust Interests acquired in the
initial Purchase hereunder shall be the ABR Tranche unless the Servicer
notifies the Agent and obtains the prior written consent of the Agent at
least three London/U.S. Business Days prior to such initial Purchase to
allow such initial Purchase to constitute a Eurodollar Tranche; provided
further that the total number of Tranches may not exceed three at any one
time. Each notice shall be irrevocable and shall in each case refer to
this Agreement and specify (x) the aggregate purchase price for the
requested Purchases (which shall be in a minimum amount of $2,000,000 or a
greater integral multiple of $1,000,000 (or in the total unutilized amount
of the various Purchasers' Stated Amounts)), (y) whether the Trust
Interests to be purchased will be the ABR Tranche or a Eurodollar Tranche
and (z) the date of the Purchase (which shall be a London/U.S. Business
Day) and the amount thereof. The Agent shall promptly advise the
Purchasers of any notice given pursuant to this section and of the amount
of each Purchaser's Purchase. No requests that the Purchasers make
Purchases shall be made by the Transferor during the Amortization Period or
Early Amortization Period.
(b) After receiving notice from the Agent of any notice given
pursuant to subsection (a) and subject to the conditions in Article VII,
each Purchaser shall make a Purchase in the amount of its pro rata portion
of aggregate Purchases requested to be made, ratably according to its Class
Percentage, on the proposed date thereof by wire transfer in Dollars of
immediately available funds to Transferor.
(c) The Agent shall be entitled to receive from Collections a fee
(an "Administration Fee") equal to (i) the aggregate number of Purchases,
reductions in the Invested Amount of a Tranche, reductions in the Stated
Amount and modifications in the allocation of the Trust Interests among the
Eurodollar Tranches and the ABR Tranche occurring during any calendar month
in excess
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of two multiplied by (ii) $1,000. The Administration Fee shall be payable
in arrears on the Distribution Date following such calendar month. Such
Administration Fees shall constitute "Additional Amounts" for purposes of
the Supplement.
(d) Notwithstanding anything to the contrary, if any
Purchaser's funding source fails to provide it with funds necessary to make
a Purchase, such Purchaser shall not have any obligation under Section 2.1
to make such Purchase.
SECTION 2.3 Reduction of Stated Amounts. (a) Transferor may
reduce the Stated Amounts of the Certificates effective as of any
Distribution Date by delivering an irrevocable notice to the Agent and the
Trustee, not later than 11:00 a.m., New York City time, at least ten
Business Days prior to such Distribution Date; provided, that (i) each
partial reduction of the Stated Amounts shall be, in the aggregate for all
Certificates, in an integral multiple of $1,000,000; (ii) no partial
reduction shall be made that would reduce the aggregate Stated Amounts to
an amount less than the Class A Invested Amount at the time of the
reduction; and (iii) no such reduction shall be effected unless the
Commitment Reduction Fee is paid on the date of such reduction. Each
reduction in the Stated Amounts shall be made ratably among the Purchasers
in accordance with their respective Stated Amounts. The Agent shall
promptly advise the Purchasers of any notice given pursuant to this
section. Each reference in this Agreement to the "Stated Amount" of a
Certificate means the Stated Amount of the Certificate after giving effect
to any reductions made pursuant to this section.
(b) Each Purchaser shall be entitled to receive from Collections
a fee (a "Commitment Reduction Fee") determined for each reduction in the
Stated Amount (x) pursuant to this Section 2.3 or (y) upon the occurrence
of an Early Amortization Event (in which case the Stated Amount, for
purposes of this paragraph 2.3(b), will be deemed to be reduced to zero),
equal to the sum of (i) the product of (A) the amount of such reduction
multiplied by (B) the number of months or partial months from the date of
such reduction until the Expected Final Payment Date multiplied by (C)
0.03% and (ii) the product of (A) the lesser of (x) the amount of such
reduction or (y) $35,000,000 less the Stated Amount (after taking into
account such reduction, but in any event, not less than zero) multiplied by
(B) the number of months or partial months from the date of such reduction
until the Expected Final Payment Date multiplied by (C) 0.03%. The
Commitment Reduction Fee shall be payable on the Distribution Date such
reduction is effected.
SECTION 2.4 Certificates. The outstanding amounts of the
Purchases made by each Purchaser shall be evidenced by its Certificate, to
be issued on the Closing Date substantially in the form of Exhibit A (Part
I) to the Supplement.
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Each Purchaser shall and is hereby authorized to record on the grid
attached to its Certificate (or at its option, in its internal books and
records) the date and amount of each Purchase made by it, the amount of
each repayment of the principal amount represented by its Certificate, the
portions of its Purchases that are from time to time allocated to the ABR
Tranche and any Eurodollar Tranche, and any reductions to the Stated Amount
of its Certificate made pursuant to Section 2.3(a) (which shall be
conclusive absent manifest error); provided, that failure to make any
recordation on the grid or records or any error in the grid or records
shall not adversely affect the Purchaser's rights with respect to its
interest in the assets of the Trust and its right to receive interest in
respect of the outstanding principal amount of all Purchases made by the
Purchaser.
ARTICLE III
REDUCTIONS IN INVESTED AMOUNT
SECTION 3.1 Transferor's Right to Reduce Invested Amount. (a)
During the Revolving Period, if Transferor wishes to reduce the Class A
Invested Amount of any Tranche, Transferor shall notify the Agent and the
Trustee in writing, not later than 11:00 a.m., New York City time, three
London/U.S. Business Days prior to the date of the proposed reduction (and
state in such notice the desired amount of the reduction and to which
Tranche(s) such reduction would apply), and cause an amount of funds equal
to the desired amount of the reduction that are available for this purpose
in accordance with the terms of the Supplement to be transferred to the
Agent on the date of the proposed reduction, for the account of the
Purchasers (and application to the respective and ratable reduction of the
funded principal amount of the Certificate of each Purchaser); provided
that any reduction to the aggregate funded principal amounts represented by
the Certificates must be in a minimum amount of $1,000,000 (or the entire
funded principal amount, if less) or integral multiples thereof and the
remaining Class A Invested Amount, if any, must be equal to or greater than
$2,000,000; provided, further that the amount of the desired reduction (as
of the receipt of such notice by the Agent until such funds are transferred
to the Agent) shall not exceed the sum, without duplication, of the funds
that are then available to be applied to reduce the Class A Invested Amount
in accordance with the terms of the Supplement; provided, further, that no
repayment in respect of a Eurodollar Tranche on a day other than the last
day of the related Interest Period shall be permitted unless an amount of
funds equal to the Breakage Fee, if any, payable on the date of such
reduction has been transferred to the Agent on such date. In the event any
Tranche is reduced to zero on a date other than the last day of the
Interest Period applicable to such Tranche, then, notwithstanding anything
herein or in the Supplement to the contrary, such Tranche shall be deemed
to be in
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existence until the last day of such Interest Period for purposes of
calculating the number of outstanding Tranches and determining whether an
additional Eurodollar Tranche or ABR Tranche is available. Such Breakage
Fees shall constitute "Additional Amounts" for purposes of the Supplement.
(b) Notwithstanding the foregoing, any reduction in the Class A
Invested Amount shall only be effective if (i) the Base Amount is then
greater than the Net Invested Amount or (ii) the Transferor or Servicer
obtains the prior written consent from the Agent.
SECTION 3.2 Mandatory Reduction of Invested Amount. During the
Amortization Period or Early Amortization Period, Transferor shall notify
the Agent and the Trustee in writing, not later than 11:00 a.m., New York
City time, three London/U.S. Business Days prior to the Interest Payment
Date applicable to each Tranche that it will repay all or a portion of the
Invested Amount applicable to such Tranche and shall state in such
notice the amount of funds deposited in the Principal Funding Account as of
the time of such notice, and shall cause an amount of funds equal to the
lesser of (i) the principal amount of such Tranche and (ii) the amount of
funds deposited in the Principal Funding Account as of the time of such
notice, to be transferred to the Agent on the date of the reduction, for
the account of the Purchasers (and for application to the respective and
ratable reduction of the funded principal amount of the Certificate of each
Purchaser).
SECTION 3.3 Notice to Purchasers. The Agent shall promptly
advise the Purchasers of any notice received by the Agent pursuant to
Sections 3.1 or 3.2.
ARTICLE IV
TRANCHES, INTEREST AND FEES
SECTION 4.1 Tranches. (a) Each time Transferor requests the
Purchasers to make Purchases hereunder, Transferor will notify the Agent
and Servicer in writing as to whether the Trust Interests included in the
Purchase shall, in whole or in part, be deemed to be the one permitted ABR
Tranche or (subject to subsections (b)(iii) and (b)(iv) below) one of the
three permitted Eurodollar Tranches (subject to the limitation in Section
4.1 of the Supplement that the total number of Tranches may not exceed
three at any one time).
(b) Subject to the terms and conditions set forth in this section
and Sections 4.4 and 4.5, unless Transferor notifies Agent and Servicer to
the contrary on or before 11:00 a.m., New York City time, on the third
London/U.S.
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Business Day preceding the end of an Interest Period, subject to Section
3.1, (x) on the last day of such Interest Period, if such Interest Period
relates to the ABR Tranche, such ABR Tranche shall convert to a Eurodollar
Tranche (and such conversion shall be deemed to increase the number of
Eurodollar Tranches by one and reduce the number of ABR Tranches to zero)
and (y) on the last day of such Interest Period, if such Interest Period
relates to a Eurodollar Tranche, such Eurodollar Tranche shall continue as
a new Eurodollar Tranche (and such continuance shall not be deemed to
increase the number of Eurodollar Tranches), in each case, the Interest
Period for such Tranche shall commence immediately upon the termination of
the prior Interest Period; provided, that:
(i) subject to Section 4.4, each conversion or
continuation shall be made ratably among the Purchasers in
accordance with their respective amounts of the Purchases
comprising the converted or continued Tranche, and
(ii) if less than all of the outstanding amount of any
Tranche shall be converted or continued (i.e., if a portion of the
Class A Invested Amount is reduced pursuant to Article III), the
aggregate amount of the Tranche converted or continued shall be in
an amount equal to $2,000,000 or an integral multiple of
$1,000,000 in excess of $2,000,000.
(c) Subject to the terms and conditions set forth in this
section, if Transferor wishes to continue an existing ABR Tranche for the
subsequent Interest Period applicable to such Tranche, or convert an
existing Eurodollar Tranche into the ABR Tranche for the subsequent
Interest Period applicable to such Tranche, Transferor shall notify the
Agent in writing of such election not later than 11:00 a.m., New York City
time, on the third London/U.S. Business Day preceding the end of the
Interest Period applicable to the Tranche to be so continued or converted,
in which case the number of Eurodollar Tranches and ABR Tranches shall be
adjusted accordingly and the Interest Period for such Tranche shall
commence immediately upon the termination of the prior Interest Period;
provided, that each conversion or continuation shall be made ratably among
the Purchasers in accordance with their respective amounts of the Purchases
comprising the converted or continued Tranche.
(d) In accordance with Section 4.1 of the Supplement, each
Purchaser and the Agent will be entitled to receive additional interest (at
the rate specified therein) on amounts that are not paid when due under
this Agreement or under its Certificate.
(e) The Agent shall promptly advise the Purchasers of any notice
given pursuant to this section and of each Purchaser's portion of any
converted or continued Tranche.
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SECTION 4.2 Non-Usage and Minimum Usage Fees. (a) Each
Purchaser shall be entitled to receive from Collections a fee (a "Non-Usage
Fee") for the period from and including the date hereof, until the end of
the Revolving Period, equal to 0.55% per annum, on the daily average of (i)
the Stated Amount of its Certificate minus (ii) the amount represented by
the Purchaser's Class Percentage of the Class A Invested Amount. The Non-
Usage Fee shall be payable in arrears on each Distribution Date. The Non-
Usage Fee for any Distribution Date shall be calculated on the basis of the
actual number of days elapsed since the preceding Distribution Date (or, if
prior to the first subsequent Distribution Date after the Closing Date,
during the period from the Closing Date to such Distribution Date) over a
year of 360 days.
(b) Each Purchaser shall be entitled to receive from Collections
an annual fee (a "Minimum Usage Fee") determined as of each anniversary of
the First Issuance Date, equal to the product of (i) the difference between
(A) the quotient determined by dividing (x) the aggregate of the amounts
represented by the Purchaser's Class Percentage of the Class A Invested
Amount as of the end of each day in such period by (y) the number of days
in such period minus (B) the result of (1) $11,600,000 minus (2) the
weighted average Class B Invested Amount during such period multiplied by
(ii) 0.65%. The Minimum Usage Fee shall be payable in arrears on the first
Distribution Date following each anniversary of the First Issuance Date.
Such Minimum Usage Fees shall constitute "Additional Amounts" for purposes
of the Supplement.
SECTION 4.3 Yield Protection. (a) Notwithstanding any other
provision herein, if, after the date hereof, either:
(i) any law, rule or regulation (including any imposition
or increase of reserve requirements) or any interpretation or
administration of any law, rule or regulation by any Governmental
Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or
(ii) the compliance by a Purchaser with any guideline or
request from any central bank or other Governmental Authority or
quasi-governmental authority exercising control over banks or
financial institutions generally (whether or not having the force
of law),
shall subject a Purchaser to the imposition or modification of any reserve
(including any imposed by the Federal Reserve Board), special deposit or
similar requirement (including a reserve, special deposit or similar
requirement that takes
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the form of a tax) against assets of, deposits with or for the account of,
or credit extended by, the Purchaser or the office from time to time that
it designates to the Agent as the office through which it makes and
maintains its Purchases comprising part of a Eurodollar Tranche (as to each
Purchaser, its "LIBOR Office") or impose any other condition on a Purchaser
affecting its Eurodollar Tranches or its obligations hereunder, and as a
result of either of the foregoing there shall be any increase in the cost
to the Purchaser of agreeing to make or making, funding or maintaining
Purchases as Eurodollar Tranches, or there shall be a reduction in the
amount received or receivable by the Purchaser or its LIBOR Office, then,
upon written notice from the Purchaser to Transferor and Servicer (with a
copy to the Agent and the Trustee), signed by an officer of the Purchaser
with knowledge of and responsibility for such matters, and setting forth in
reasonable detail the calculation used to arrive at the amounts, additional
amounts sufficient to indemnify that Purchaser against the increased cost
or reduction in amounts received or receivable shall constitute "Additional
Amounts" for purposes of the Supplement, and the Purchaser shall be
entitled to receive these additional amounts solely from amounts allocated
thereto and paid pursuant to the Supplement.
(b) If a Purchaser shall reasonably determine that the adoption
after the date hereof of any law, rule or regulation regarding capital
adequacy or capital maintenance, or any change after the date hereof in any
of the foregoing or in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such Purchaser,
any of its lending offices or its holding company with any new or revised
request or directive regarding capital adequacy or capital maintenance
(whether or not having the force of law) of any such Governmental
Authority, central bank or comparable agency, has or would have the effect
of reducing the rate of return on the Purchaser's capital or the capital of
its holding company as a consequence of this Agreement, the commitment of
such Purchaser to make Purchases or the Purchases made by such Purchaser
pursuant hereto to a level below what the Purchaser or its holding company
could have achieved but for the adoption, change or compliance (taking into
consideration the Purchaser's policies, and the policies of its holding
company, with respect to capital adequacy), then, upon written notice from
the Purchaser to Transferor and Servicer (with a copy to the Agent), signed
by an officer of the Purchaser with knowledge of and responsibility for
such matters, and setting forth in reasonable detail the calculation used
to arrive at the amounts, any additional amounts as will compensate the
Purchaser or its holding company for the reduction shall constitute
"Additional Amounts" for purposes of the Supplement, and the Purchaser
shall be entitled to receive these additional amounts solely from amounts
allocated thereto and paid pursuant to the Supplement.
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(c) A Purchaser shall promptly notify Transferor, Servicer and
the Agent in writing of any event of which it has knowledge occurring after
the date hereof that will entitle it to compensation pursuant to this
section. A certificate of the Purchaser, signed by an officer of the
Purchaser with knowledge of and responsibility for such matters, and
setting forth in reasonable detail the calculation used to arrive at the
amounts necessary to compensate the Purchaser or its holding company as
specified in subsection (a) or (b), as the case may be, shall be delivered
to Transferor and Servicer and shall be conclusive absent manifest error.
(d) Failure on the part of a Purchaser to demand compensation for
any amounts as specified in subsection (a) or (b) with respect to any
period shall not constitute a waiver of its right to demand compensation
with respect to that period or any other period. The protection of this
section shall be available to the Purchasers regardless of any possible
contention of the invalidity or inapplicability of the law, rule,
regulation, guideline or other change or condition that shall have occurred
or been imposed.
(e) Promptly after giving any notice to Transferor pursuant to
this section, a Purchaser will seek to designate one of its offices located
at an address other than that previously designated pursuant to this
Agreement as the office from which its Purchases will be made after the
designation if it will avoid the need for, or materially reduce the amount
of, any payment to which the Purchaser would otherwise be entitled pursuant
to this section and will not, in the sole discretion of the Purchaser, be
otherwise disadvantageous to the Purchaser.
SECTION 4.4 Illegality; Unavailability. (a) In the event that on
any date any Purchaser shall have determined (which determination shall be
final and conclusive and binding upon all parties) that the making or
continuation of its Purchases as Eurodollar Tranches has become unlawful by
compliance by the Purchaser in good faith with any law, governmental rule,
regulation or order or has become impossible as a result of a contingency
occurring after the date hereof that materially and adversely affects its
interbank eurodollar market, then, and in any such event, such Purchaser
shall promptly give notice (by telephone confirmed in writing) to
Transferor, Servicer and the Agent (which notice the Agent shall promptly
transmit to each other Purchaser) of that determination. The obligation of
the affected Purchaser to make or maintain its Purchases as Eurodollar
Tranches during any such period shall be terminated at the earlier of the
termination of the Interest Period then in effect for any Eurodollar
Tranche or when required by law, and Transferor shall, no later than the
time specified for the termination, convert any Purchases of the affected
Purchaser that constitute part of any Eurodollar Tranche into ABR Tranches
(in which case, notwithstanding anything herein or in the Supplement to the
contrary, the number of ABR Tranches may be increased to up to three).
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(b) If, prior to the beginning of any Interest Period, the Agent
shall have determined (which determination shall be final and conclusive
and binding upon all parties) that: (i) Dollar deposits in the relevant
amount and for the Interest Period are not available in the relevant
interbank eurodollar market or (ii) by reason of circumstances affecting
the interbank eurodollar market, that adequate and fair means do not exist
for ascertaining the LIBOR rate applicable to a Eurodollar Tranche, then
the Agent shall promptly give notice of this determination to Transferor,
Servicer and each Purchaser. Thereafter, and continuing until the Agent
shall notify Transferor, Servicer and each Purchaser that the circumstances
giving rise to this determination no longer exist, (x) each Eurodollar
Tranche will, on the last day of the applicable Interest Period, convert
into a part of the ABR Tranche, (y) the right of Transferor to request
Eurodollar Tranches shall be suspended and (z) any Purchases requested to
be made as Eurodollar Tranches prior to such time but not yet made shall be
made as ABR Tranches.
SECTION 4.5 Indemnity. (a) If a Purchaser shall incur any
losses, expenses or liabilities (including any interest paid to lenders of
funds borrowed by it to fund any Purchase of a Certificate as a Eurodollar
Tranche and any loss sustained in connection with the re-deployment of such
funds) as a result of (i) the failure of a Purchase to be made on a date
specified therefor in a notice delivered by Transferor pursuant to Section
2.2 (other than any such failure resulting from the Purchaser's default in
the performance of its obligations hereunder) or (ii) any repayment,
including under Section 3.1, of any part of the Invested Amount allocated
to a Eurodollar Tranche on a date that is other than the date specified in
a notice of repayment given by Servicer, then, upon written notice (which
notice shall be signed by an officer of the Purchaser with knowledge of and
responsibility for such matters and shall set forth in reasonable detail
the basis for requesting the amounts) from the Purchaser to Transferor and
Servicer, additional amounts sufficient to indemnify the Purchaser against
the losses, expenses and liabilities, but not for any lost profits
associated therewith, shall constitute "Additional Amounts" for purposes of
the Supplement, and the Purchaser shall be entitled to receive these
additional amounts, solely from amounts allocated thereto and paid pursuant
to the Supplement.
(b) In the event the Class A Invested Amount allocable to any
Tranche is reduced on a day other than the last day of the Interest Period
applicable to such Tranche, each Purchaser shall be entitled to receive
from Collections a fee (a "Breakage Fee") which fee shall be payable on the
date of such reduction, in an amount equal to the product of (A) the amount
of such reduction multiplied by (B) the excess, if any, of (x) LIBOR plus
the Class A Certificate Spread (for a Eurodollar Tranche), the Alternate
Base Rate plus the Class A Certificate Spread (for an ABR Tranche) over (y)
the rate quoted by the Trustee on purchases of its
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commercial paper multiplied by (C) the number of days from the day of
determination to the last day of such Distribution Period divided by 360;
provided that if the Trustee's commercial paper ceases to be rated at least
"A-1+" by S&P or if such commercial paper is not available, then the Agent
may designate another commercial paper issuer for purposes of clause (y)
above.
Such Breakage Fees shall constitute "Additional Amounts" for purposes of
the Supplement.
SECTION 4.6 Taxes. (a) Any and all payments made to each
Purchaser under its Certificate shall be made free and clear of and without
deduction for any and all present or future taxes, levies, imposts, duties,
charges, fees, deductions or withholdings of any nature and whatever
called, by whomsoever, on whomsoever and wherever imposed, levied,
collected, withheld or assessed, excluding taxes imposed by the
jurisdiction in which that Purchaser's principal office (and/or the office
where it books its investment in its Certificate) is located on all or part
of the net income, profits or gains of that Purchaser (whether worldwide,
or only insofar as such income, profits or gains are considered to arise in
or to relate to a particular jurisdiction, or otherwise) (all the
nonexcluded taxes, levies, imposts, charges, deductions, withholdings and
liabilities being hereinafter referred to as "Taxes"). If Trustee or the
Agent are required by law to deduct or withhold any Taxes from or in
respect of any sum payable hereunder or under any Certificate to a
Purchaser, then the sum payable shall be increased by the amount necessary
to yield to such Purchaser (after payment of all Taxes) an amount equal to
the sum it would have received had no such deductions or withholdings been
made, and the additional amount shall constitute "Additional Amounts" for
purposes of the Supplement, and the Purchaser shall be entitled to receive
these additional amounts, solely from amounts allocated thereto and paid
pursuant to the Supplement.
(b) Whenever any Taxes are paid by Trustee pursuant to subsection
(a), as promptly as possible thereafter Servicer shall send to the relevant
Purchaser the original or a certified copy of an original official receipt
showing payment thereof (if any) or any other evidence of the payment as
may be available to Servicer through the exercise of its reasonable
efforts. If Trustee fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Purchaser the required receipts
or other required documentary evidence, the Purchaser shall be entitled to
receive, solely from amounts allocated with respect thereto and paid
pursuant to the Supplement, additional amounts necessary to indemnify it
for any incremental taxes, interest or penalties that may become payable by
the Purchaser as a result of any such failure, and the amounts shall
constitute "Additional Amounts" for purposes of the Supplement, and the
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Purchaser shall be entitled to receive these additional amounts, solely
from amounts allocated thereto and paid pursuant to the Supplement.
(c) On or before the date it becomes a party to this Agreement
(and, so long as it may properly do so, periodically thereafter, as
requested by Servicer, to keep forms up to date), each Purchaser, including
any Assignee, that is not a United States person (as defined in section
7701(a)(30) of the Internal Revenue Code), shall deliver to Trustee any
certificates, documents or other evidence that shall be required by the
Internal Revenue Code or Treasury Regulations issued pursuant thereto to
establish that, assuming the Certificates are properly characterized as
indebtedness for Federal income tax purposes, it is exempt from existing
United States Federal withholding (including backup withholding)
requirements, including (i) two original copies of Internal Revenue Service
Form 1001 or Form 4224 or successor applicable form, properly completed and
duly executed by the Purchaser or Assignee certifying that it is entitled
to receive payments under this Agreement or any Certificate without
deduction or withholding of any United States Federal income taxes, and
(ii) an original copy of Internal Revenue Service Form W-8 or W-9 or
applicable successor form, properly completed and duly executed; provided,
that if any Purchaser does not comply with this subsection 4.6(c), amounts
payable to such Purchaser under this Section 4.6 shall be limited to
amounts that would have been payable under this section if such Purchaser
had so complied.
ARTICLE V
OTHER PAYMENT TERMS
SECTION 5.1 Time and Method of Payment. All amounts payable to
any Purchaser hereunder or with respect to its Certificate shall be made to
such Purchaser by wire transfer of immediately available funds in Dollars
not later than 2:00 p.m., New York City time, on the date due. Any funds
received after that time will be deemed to have been received on the next
Business Day.
SECTION 5.2 Pro Rata Treatment. Each repayment of the principal
of the Certificates, each payment of interest thereon, each payment of the
Non-Usage Fee, each reduction of the Stated Amounts of the Certificates and
each conversion or continuation of any Tranche in respect of the
Certificates (except as otherwise required by Sections 4.3(c) and 4.4(b)
with respect to conversions) shall be allocated pro rata among the
Purchasers of the Certificates on the date of payment or reduction, in
accordance with their respective Class Percentages, in which case such
allocation shall be pro rata in accordance with funded principal amounts).
Each Purchaser agrees that in computing its portion of any
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Purchases to be made hereunder, the Agent may, in its discretion, round
each Purchaser's pro rata share of the Purchases to the next higher or
lower whole dollar amount.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1 Transferor. As of the Closing Date, Transferor
represents and warrants to the Purchasers and the Agent that each of its
representations and warranties in the Pooling Agreement and Purchase
Agreement is true and correct, as if made on the Closing Date, and further
represents and warrants that:
(a) no Early Amortization Event or Unmatured Early
Amortization Event exists;
(b) assuming the accuracy of each Purchaser's
representations set out in Section 6.3 and that no Purchaser (and
no Person acting on any Purchaser's behalf) has made a general
solicitation or general advertising within the meaning of the
Securities Act, the offer and sale of the Certificates in the
manner contemplated by this Agreement is a transaction exempt from
the registration requirements of the Securities Act, and the
Pooling Agreement is not required to be qualified under the Trust
Indenture Act of 1939, as amended;
(c) Transferor has not dealt with any financial advisor,
or other Person who may be entitled to any commission or
compensation in connection with the sale of the Certificates;
(d) no information supplied by or on behalf of
Transferor, ICP or any of its Subsidiaries to the Agent or the
Purchasers in connection with the Transaction Documents contains
any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or
therein not misleading in light of the circumstances under which
they were made; and
(e) the Certificates have been duly and validly
authorized by Transferor and, from and after the date on which the
Certificates are executed by Transferor and authenticated by the
Trustee in accordance with the terms of the Pooling Agreement and
the Supplement and delivered to and paid for by the Purchasers in
accordance with the terms of this Agreement, will be validly
issued and outstanding and will constitute valid and legally
binding obligations of the Trust entitled to the
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benefits of the Pooling Agreement and the Supplement and
enforceable against the Trust in accordance with their terms.
SECTION 6.2 ICP. As of the Closing Date, ICP represents and
warrants to the Purchasers and the Agent that:
(a) each of its representations and warranties in the
Pooling Agreement (in its capacity as Servicer) and the Purchase
Agreement (in its capacity as a Seller) is true and correct, as if
made on the Closing Date with the same effect as if made on that
date (unless specifically stated to relate to an earlier date);
(b) the audited consolidated balance sheet of ICP and its
consolidated Subsidiaries as at the end of ICP's most recent
fiscal year and the related statement of earnings, stockholders'
equity and cash flows of ICP and its consolidated Subsidiaries for
such fiscal year and the unaudited consolidated balance sheet of
ICP and its consolidated Subsidiaries as at the end of ICP's most
recent fiscal quarter and the related statement of earnings,
stockholders' equity and cash flows of ICP and its consolidated
Subsidiaries for such fiscal quarter, copies of which have been
furnished to the Trustee and each Purchaser, fairly present the
consolidated financial position and business of ICP and its
consolidated Subsidiaries as at the dates specified therein and
the consolidated results of the operations of ICP and its
consolidated Subsidiaries for the periods ended on such dates, all
in accordance with GAAP consistently applied throughout the
periods reflected therein;
(c) since January 1, 1996 through the Closing Date, (i)
there has been no material adverse change in the condition,
financial or otherwise, or the earnings, business affairs or
business prospects of Transferor or ICP whether or not arising in
the ordinary course of business, and (ii) there have been no
transactions entered into by Transferor, ICP or the Sellers that
are material with respect to the condition, financial or
otherwise, or the earnings, business affairs or business prospects
of Transferor or ICP; and
(d) no information supplied by or on behalf of
Transferor, ICP or any of its Subsidiaries to the Agent or the
Purchasers in connection with the Transaction Documents contains
any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or
therein not misleading in light of the circumstances under which
they were made.
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SECTION 6.3 Purchasers. As of the Closing Date (or such later
date on which it acquires its Certificate in accordance with Section 10.3),
each Purchaser represents and warrants (and each Assignee shall be deemed
to represent and warrant as of the date that its assignment becomes
effective) that it is an "accredited investor" as that term is defined in
any of paragraphs (1), (2), (3) or (7) of Rule 501(a) under the Securities
Act and is not purchasing its Certificate with a view to making a
distribution thereof (within the meaning of the Securities Act).
ARTICLE VII
CONDITIONS
SECTION 7.1 Conditions to Initial Purchase. The obligation of
each Purchaser to Purchase its Certificate shall be subject to the
satisfaction of the conditions precedent that
(a) the conditions precedent specified in Section 4.1 of
the Purchase Agreement and Sections 5.1 and 5.2 of the Class B
Certificate Purchase Agreement (other than those that relate to
this Agreement) shall be satisfied;
(b) the Agent shall have received, for the account of such
Purchaser, a duly executed and authenticated Certificate
registered in its name and in a Stated Amount equal to the amount
set out opposite its name on Schedule I to this Agreement;
(c) the Agent shall have received from the Transferor (i)
certain fees and reimbursement of any expenses referred to in
Section 10.5 for which invoices have been presented and (ii) an
arrangement fee in the amount of $350,000 ($100,000 of which the
Agent hereby acknowledges has already been paid) (the "Arrangement
Fee"); and such Purchaser shall have received from the Transferor
(x) certain fees and reimbursement of any expenses referred to in
Section 10.5 for which invoices have been presented and (y) a fee
(the "Commitment Fee") equal to the Stated Amount for its
Certificate multiplied by 0.55%;
(d) the Agent shall have received, for the account of
such Purchaser, an original (except as indicated below)
counterpart of the following (each of which, if not in a form
attached to this Agreement, shall be in form and substance
satisfactory to the Agent):
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(i) the Pooling Agreement, the Purchase Agreement
and the Guaranty, each of which shall be in full force and
effect, and all actions required to be taken under those
documents in connection with the issuance of the
Certificates shall have been taken;
(ii) photocopies of each Account Agreement;
(iii) a certificate of the Secretary, or an
Assistant Secretary, of each of Transferor, Servicer,
Guarantor and each Seller with respect to:
(A) attached copies of resolutions of
its Board of Directors (or, if applicable, its
managing body) then in full force and effect
authorizing the execution, delivery and
performance of the Transaction Documents,
(B) the incumbency and signatures of
those of its officers authorized to act with
respect to the Transaction Documents, and
(C) attached copies of its certificate
of incorporation and by-laws (or, if applicable,
its limited partnership agreement);
(iv) a certificate of an Authorized Officer of
each of Transferor, Servicer and each Seller as to the
satisfaction of the conditions precedent set forth in
Section 7.2, and a certificate of Transferor that the
representations and warranties of the Transferor set out
in this agreement are true and correct as of the date of
such initial purchase and that no Early Amortization Event
or Unmatured Early Amortization Event exists;
(v) a certificate of an appropriate officer of
Trustee stating that the Pooling Agreement has been duly
authorized, executed and delivered by Trustee and the
Certificates have been duly authenticated by Trustee in
accordance with the Pooling Agreement and an opinion of
counsel to Trustee as to related matters;
(vi) evidence that each of S&P and DCR has rated
the Class A Certificates "AAA";
(vii) the Daily Report for the Closing Date;
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(viii) agreed-upon procedures letter, in form and
substance satisfactory to the Agent, from Coopers &
Lybrand LLP with respect to certain historical information
provided by ICP relating to the Receivables;
(ix) copies of any management or other agreements
with regard to the administration of Transferor's
business, certified by an Authorized Officer of
Transferor;
(x) a pro forma balance sheet of Transferor as of
the date hereof, after giving effect to the transactions
contemplated by the Supplement, and a certificate of an
Authorized Officer of ICP as to the capitalization of
Transferor (the amount and type of which capitalization
shall be satisfactory to the Agent);
(xi) results of recent searches of the UCC
filing records and tax and ERISA and judgment lien records
in each jurisdiction in which a filing referred to in
subsection (xii) is to be made for filings against each
Seller (including any predecessors in interest to any
Seller going back five years) and Transferor, showing no
filings of record that cover any of the Receivables or the
other Transferred Assets other than (i) the financing
statements referred to in subsection (xii) (to the extent
shown in the searches) and (ii) any other filings as to
which the Agent has received signed UCC-3 termination
statements or pay-off letters in form and substance
satisfactory to it;
(xii) confirmation satisfactory to the Agent that
(x) the following have been placed with Lexis Document
Services or another filing service selected by the Agent
for filing, the filing to occur on the Closing Date or the
first Business Day thereafter and (y) any filing fees and
indebtedness taxes necessary to perfect or protect true
security interests by means of such filings have been paid
in full:
(A) UCC financing statements naming each
Seller, as seller/debtor, and Transferor, as
secured party/purchaser, in each office where the
filing is necessary for the perfection of the
sales or contribution of Receivables and Related
Assets by each Seller to Transferor;
(B) assignments of such existing UCC
financing statements to Trustee, as assignee of
the secured party, in each office where the filing
is necessary for the perfection
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of the sales of Receivables and Related Assets by
each Seller to Transferor; and
(C) UCC financing statements naming
Transferor, as seller/debtor, and Trustee, as
secured party/purchaser, in each office where the
filing is necessary for the perfection of the
transfers of Receivables and other Transferred
Assets by Transferor to Trustee;
(xiii) the following opinions addressed to the
Agent, the Purchaser and Trustee, and in each case as to
the matters and in such form and substance as shall be
satisfactory to the Agent, the Purchaser and Trustee:
(A) opinions of Steptoe and Johnson as
to certain corporate and securities matters
concerning ICP, Federal and state tax and UCC
matters, true sale and non-consolidation; and
(B) opinions of Tuke Yopp & Sweeney as
to certain corporate and securities matters
concerning General and Coastline, and Tennessee
limited partnership, Tennessee state tax and
Tennessee UCC matters; and
(C) opinions of White & Case and Lewis,
Rice & Fingersh as to certain state tax matters
under Florida law and Missouri law, respectively;
(xiv) evidence, reasonably satisfactory to the
Agent and the Purchaser, of the payment of all taxes, fees
and other governmental charges, if any, incidental to the
issuance of the Certificates and to the consummation of
the transactions contemplated hereunder and under the
Pooling Agreement;
(xv) a solvency certificate of the chief
financial officer of ICP with respect to the Sellers,
which opinion shall be addressed to the Agent and the
Purchasers and shall be in form and substance satisfactory
to the Agent;
(xvi) such sublicenses and assignments as the
Agent shall require with regard to all computer and data
recovery software used by Servicer or any Seller in
connection with the servicing of the Transferred Assets,
which sublicenses and assignments will permit any
substitute Servicer to use such software; and
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(xvii) any other information, certificates,
opinions and documents as the Agent may have reasonably
requested.
If the conditions specified above have not been fulfilled
on the date hereof, any condition specified in this Agreement shall not
have been fulfilled when and as required in this Agreement or waived by the
Purchasers, in each case a Purchaser's obligations to purchase the
Certificates pursuant to this Agreement may be terminated by notice to
Transferor. In addition, if, under the circumstances, it shall not be
feasible for the Purchasers to invest on the date the funds that are held
available by the Purchasers for the Purchase, Transferor and Servicer,
jointly and severally shall pay the Purchasers interest on the funds at the
Alternate Base Rate plus two percent from the date of the notice until the
next succeeding Business Day on which it is feasible for the Purchasers to
invest the funds in the Certificates. Nothing in this paragraph shall
operate to relieve Transferor from any of its obligations hereunder or
otherwise waive any of the Purchasers' rights against Transferor.
SECTION 7.2 Conditions to Each Purchase. The obligation of each
Purchaser to make any Purchase on any day (including those comprising the
initial Purchase) shall be subject to the Agent's receipt of the Daily
Report for that day and to the conditions precedent that on the date of the
Purchase, before and after giving effect thereto and to the application of
any proceeds therefrom, the following statements shall be true:
(a) the representations and warranties of Transferor and
Initial Servicer set out in this Agreement are true and accurate
as of that date with the same effect as though made on that date
(unless specifically stated to relate to an earlier date); and
(b) no Early Amortization Event or Unmatured Early
Amortization Event has occurred and is continuing.
The giving of any notice pursuant to Section 2.2 shall constitute
a representation and warranty by Transferor, ICP and Initial Servicer that
the foregoing statements (limited, in the case of subsection (a) to the
representations and warranties of the Person deemed to make the
representation and warranty referred to in this sentence) are true.
SECTION 7.3 Conditions to Signing. (a) Amounts received by the
Transferor from the initial Purchase shall be used to pay all expenses then
due and payable under the transaction documents.
(b) If the initial Purchase does not occur on the date hereof,
the Transferor shall nevertheless pay all transaction expenses on the date
hereof,
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including the Arrangement Fee, the Commitment Fee, all legal fees, Rating
Agency fees and Trustee fees.
ARTICLE VIII
COVENANTS
SECTION 8.1 Affirmative Covenants. Transferor and ICP (in its
capacity as a Seller, as Guarantor and as Initial Servicer) each severally
covenant and agree that, until the Certificates have been paid in full, it
will:
(a) duly and timely perform all of its covenants and
obligations under each Transaction Document to which it is a
party;
(b) with reasonable promptness deliver to each Purchaser
such information, documents, records or reports respecting the
Program or the Receivables as the Purchaser may from time to time
reasonably request;
(c) at the same time any report (including any Daily
Report, Monthly Report or annual auditors' report), notice or
other document is provided, or caused to be provided, by
Transferor or Servicer to Trustee under the Pooling Agreement,
provide the Agent and each Purchaser with a copy of the report;
(d) during regular business hours and (so long as no
Early Amortization Event has occurred and is continuing) upon two
Business Days prior written notice, permit the Agent (or such
other Person as the Agent may designate from time to time) and any
Required Person that is a Class A Holder, or their respective
agents or representatives (including certified public accountants
or other auditors), at the expense of the Servicer paid out of the
Servicing Fee, (i) to examine and make copies of and abstracts
from, and to conduct accounting reviews of, all Records in the
possession or under the control of Servicer, Transferor or any
Seller, including the related Contracts and purchase orders,
invoices and other agreements related thereto, and (ii) to visit
the offices and properties of Servicer, Transferor or any Seller
for the purpose of examining such materials described in clause
(i), and to discuss matters relating to the Receivables or the
Related Transferred Assets or the performance by Servicer,
Transferor or any Seller of their respective obligations under any
Transaction Document with any officer, employee or representative
of Servicer, Transferor or any Seller. The Agent may (but shall
not be obligated to) conduct, or cause its agents or
representatives to conduct, reviews of the types described in this
paragraph (each such review, a
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"Receivables Review") whenever the Agent, in its reasonable
judgment, deems any such review appropriate.
SECTION 8.2 Transfers. Purchaser agrees that it will not
transfer its Class A Certificate (or any portion thereof) to any Person
unless such Person shall have provided the Trustee and Transferor with a
certificate to the effect that such Person is an "accredited investor" as
that term is defined in any of paragraphs (1), (2), (3) or (7) of Rule
501(a) under the Securities Act and is not purchasing its Certificate with
a view to making a distribution thereof (within the meaning of the
Securities Act).
SECTION 8.3 Procedure Letter and Report. The Agent shall
receive, for the account of the Purchasers, on or before September 30,
1996, an agreed-upon procedures letter in form and substance similar to the
procedures letter delivered pursuant to Section 7.1(d)(viii) and a report
from Coopers & Lybrand L.L.P. of the type specified in Section 3.7(a)(i) of
the Pooling Agreement except that such report shall pertain only to
Receivables originated by General and Coastline during the period from the
Closing Date through August 31, 1996.
ARTICLE IX
AGENT; REQUIRED PURCHASERS
SECTION 9.1 Appointment. The Purchasers hereby designate The
Chicago Corporation as Agent. Each Purchaser hereby irrevocably authorizes
the Agent to take action on its behalf under the provisions of the
Transaction Documents and any other instruments and agreements referred to
therein and to exercise the powers and perform the duties hereunder and
thereunder that are specifically delegated to or required of the Agent by
the terms hereof and thereof, and any other powers as are reasonably
incidental thereto. The Agent may perform any of its duties by or through
its officers, directors, agents or employees.
SECTION 9.2 Nature of Duties. The Agent shall not have any duties
or responsibilities except those expressly set forth in this Agreement.
Neither the Agent nor any of its officers, directors, agents or employees
shall be liable for any action taken or omitted by it or them under any
Transaction Document or in connection herewith or therewith, unless caused
by their gross negligence or willful misconduct. The duties of the Agent
shall be mechanical and administrative in nature, the Agent shall not have
by reason of this Agreement a fiduciary relationship in respect of any
Purchaser, and nothing in any Transaction Document, expressed or implied,
is intended to or shall be construed as to impose
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upon the Agent any obligations in respect of any Transaction Document
except as expressly set forth herein.
SECTION 9.3 Lack of Reliance on Agent and Financial Advisor.
Independently and without reliance upon the Agent, each Purchaser, to the
extent it deems appropriate, has made and shall continue to make (a) its
own independent investigation of the financial condition and affairs of
Transferor, the Sellers, Servicer, Guarantor and the Trust in connection
with the making and the continuation of each Purchase and the taking or not
taking of any action in connection herewith and (b) its own appraisal of
the creditworthiness of Transferor, the Sellers, Guarantor and Servicer and
the merits and risks of an investment in the Certificates, and, except as
expressly provided in this Agreement, the Agent shall not have any duty or
responsibility, either initially or on a continuing basis, to provide any
Purchaser with any credit or other information with respect thereto,
whether coming into its possession before the making of a Purchase or at
any time or times thereafter. The Agent shall not be responsible to any
Purchaser for any recitals, statements, information, representations or
warranties herein or in any document, certificate or other writing
delivered in connection herewith or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, collectibility, priority
or sufficiency of the Transaction Documents or the financial condition of
Transferor, the Sellers, Guarantor, Servicer or the Trust or be required to
make any inquiry concerning either the performance or observance of any of
the terms, provisions or conditions of any Transaction Document, or the
financial condition of Transferor, the Sellers, Guarantor, Servicer or the
Trust or the existence or possible existence of any Early Amortization
Event or Unmatured Early Amortization Event.
SECTION 9.4 Certain Rights of Agent. If the Agent shall request
instructions from the Required Class A Purchasers (as defined below) with
respect to any act or action (including failure to act) in connection with
any Transaction Document, the Agent shall be entitled to refrain from
acting or taking the action unless and until the Agent shall have received
instructions from the Required Class A Purchasers, and the Agent shall not
incur liability to any Person by reason of so refraining. Without limiting
the foregoing, no Purchaser shall have any right of action whatsoever
against the Agent as a result of the Agent acting or refraining from acting
under any Transaction Document in accordance with the instructions of the
Required Class A Purchasers or for refraining to act in the absence of
instruction.
SECTION 9.5 Reliance. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution,
notice, statement, certificate, telex, teletype or telecopier message,
cablegram, radiogram, order or other document or telephone message signed,
sent or made by any Person that the
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Agent believed to be the proper Person. The Agent may consult with legal
counsel (including counsel for any Related Person), independent public
accountants and other experts selected by the Agent and shall not be liable
for any action taken or omitted to be taken in accordance with the advice
of such counsel, accountants or experts.
SECTION 9.6 Indemnification. To the extent the Agent is not
reimbursed and indemnified by Transferor or Servicer, the Purchasers will
reimburse and indemnify the Agent ratably in accordance with their
respective Series Percentages from and against any and all liabilities,
obligations, losses, damages, penalties, claims, actions, judgments, suits,
costs, expenses or disbursements of whatsoever kind or nature that may be
imposed on, asserted against or incurred or suffered by the Agent
(including fees and expenses of legal counsel, accountants and experts) in
performing its duties or as a result of any action taken or omitted to be
taken by the Agent under any Transaction Document or in any way relating to
or arising out of any Transaction Document; provided that no Purchaser
shall be liable for any portion of these liabilities, obligations, losses,
damages, penalties, claims, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's gross negligence or willful
misconduct (as determined by a court of competent jurisdiction in a final
and non-appealable order).
SECTION 9.7 Agent in its Individual Capacity. The Agent and its
Affiliates may accept deposits from, lend money to and generally engage in
any kind of banking, trust or other business with Transferor or Servicer or
any Related Person as if the Agent were not performing the duties specified
herein, and may accept fees and other consideration from Transferor or
Servicer for services in connection with this Agreement and otherwise
without having to account for the same to the Purchasers.
SECTION 9.8 Resignation by Agent. (a) The Agent may resign at
any time by giving notice to Transferor and the Purchasers. Such
resignation shall take effect upon the appointment of a successor Agent
pursuant to subsections (b) and (c) below or as otherwise provided below.
(b) Upon any notice of resignation of the Agent, the Required
Class A Purchasers shall appoint a successor Agent hereunder who shall be a
commercial bank or trust company, broker-dealer or other financial
institution reasonably acceptable to Transferor (it being understood and
agreed that each of ABN AMRO Securities (USA) Inc., ABN AMRO Bank, N.A. and
any Purchaser is deemed to be acceptable to Transferor).
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(c) If a successor Agent is not appointed pursuant to subsection
(b) within 30 days after the delivery of the notice referred to in
subsection (a), the resigning Agent, with the consent of Transferor, shall
then appoint a successor Agent who shall serve as Agent hereunder until the
time, if any, that the Required Class A Purchasers appoint a successor
Agent as provided above.
(d) If no successor Agent has been appointed pursuant to
subsection (b) or (c) above by the 60th day after the date notice of
resignation was given by the resigning Agent, such Agent's resignation
shall become effective and the Purchasers shall thereafter perform all the
duties of the Agent under the Transaction Documents until the time, if any,
that the Required Class A Purchasers appoint a successor Agent as provided
above.
SECTION 9.9 Required Purchasers. "Required Purchasers" means
Purchasers (defined for purposes of this Section 9.9 as Purchasers
hereunder and under the Certificate Purchase Agreement (Series 1996-1,
Class B) dated as of the date hereof, among Inter-City Products Receivables
Company, L.P., Inter-City Products Corporation (USA) and the Purchasers
described therein) having Series Percentages that aggregate over 50%.
"Required Class A Purchasers" means Purchasers having Class Percentages
that aggregate over 50%.
SECTION 9.10 Agent Administration Fee. The Agent shall be
entitled to receive a fee (an "Agent Administration Fee") of $5,000 per
annum payable in advance as of the Closing Date and each anniversary
thereof for rendering administrative services on behalf of the Purchasers.
The Agent shall also be entitled to receive reimbursement for traveling
expenses incurred in rendering such services. The Agent Administration Fee
and the reimbursement for related travel expenses shall constitute
"Additional Amounts" for purposes of the Supplement.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1 Amendments. Except as provided in Section 13.1(a) or
(b) of the Pooling Agreement, Transferor, ICP and Initial Servicer shall
not amend, waive or otherwise modify any provision of any Transaction
Document to which it is a party, consent to any departure therefrom, or
grant any waiver or consent thereunder, unless the same shall have been
consented to in writing by the Required Purchasers prior to the
effectiveness of the same; provided, however, that no amendment
modification, waiver or consent shall (a) decrease in any manner the amount
of, or delay the timing of, any allocation, payment or
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distribution in respect of any Certificate without the prior written
consent of each Purchaser affected thereby, (b) amend, modify or waive any
provision of this Agreement that requires the approval or consent of a
specified percentage of Purchasers without the prior written consent of
that percentage of Purchasers, (c) amend, modify or waive the provisions of
this section with respect to the rights of any Purchaser, or the Class
Percentage or Series Percentage of any Purchaser, without the consent of
that Purchaser, (d) waive any Early Amortization Event arising from a
Bankruptcy Event with respect to Transferor, ICP or any Seller without the
consent of each Purchaser, (e) amend or modify the Class Percentage of any
Purchaser, without its prior written consent, (f) waive any of the
requirements hereunder that the interests of Trustee in the Receivables and
the other Transferred Assets be perfected by appropriate UCC filings
without the prior written consent of each Purchaser or (g) amend, modify,
waive or otherwise affect the rights or duties of the Agent hereunder
without the prior written consent of the Agent; provided further that
neither the execution and delivery of a Supplement relating to a
refinancing of the Certificates as contemplated by Section 4.9 of the
Supplement relating to the Certificates, nor any other amendment to the
Transaction Documents in connection with such a refinancing, shall require
any consent from any Purchaser, so long as the prior or contemporaneous
repayment in full of the Certificates in accordance with Section 5.2 of the
Supplement relating to the Certificates is a condition to the issuance of
the refinancing certificates, and of the effectiveness of such related
amendment. Each Purchaser shall be bound by any modification, waiver or
consent authorized by this section.
SECTION 10.2 No Waiver; Remedies. Any waiver, consent or approval
given by any party hereto shall be effective only in the specific instance
and for the specific purpose for which given, and no waiver by a party of
any breach or default under this Agreement shall be deemed a waiver of any
other breach or default. No failure on the part of any party hereto to
exercise, and no delay in exercising, any right hereunder shall operate as
a waiver thereof; nor shall any single or partial exercise of any right
hereunder, or any abandonment or discontinuation of steps to enforce the
right, power or privilege, preclude any other or further exercise thereof
or the exercise of any other right. No notice to or demand on any party
hereto in any case shall entitle such party to any other or further notice
or demand in the same, similar or other circumstances. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 10.3 Successors and Assigns; Assignments. (a) This
Agreement shall be binding upon, and inure to the benefit of, Transferor,
Servicer, ICP, the Agent, the Purchasers and their respective successors
and assigns; provided that none of Transferor, Servicer or ICP may assign
its rights or obligations hereunder
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or in connection herewith or any interest herein (voluntarily, by operation
of law or otherwise) without the prior written consent of all the
Purchasers, except that Servicer may be terminated in accordance with
Sections 10.1 and 10.2 of the Pooling Agreement; and provided further, that
no Purchaser or Participant may transfer, pledge, assign, sell
participations in or otherwise encumber its rights or obligations hereunder
or any interest herein except as permitted under this section. The Agent
may (in its sole discretion) assign all or any portion of its rights
hereunder or under the Supplement and/or delegate all or any portion of its
duties hereunder or under the Supplement to one or more third parties, in
which case such assignee or delegee will be deemed the "Agent" with respect
to such assigned right or delegated duty for purposes of this Agreement and
the Supplement.
(b) Subject to the terms of Section 10.3(e), any Purchaser may
at any time assign to any Permitted Transferee or to one or more banks or
institutional investors (each, an "Assignee") all or any part of its
participating interests in all or any portion of its Certificate and its
obligations hereunder (its "Credit Exposure"); provided that (i) unless
assigned to an Affiliate of the Purchaser or to a Permitted Transferee, it
assigns all of its Credit Exposure or a portion of its Credit Exposure in
an amount not less than $5,000,000, (ii) such Assignee, other than an
existing Purchaser, an Affiliate of the Purchaser or a Permitted
Transferee, must be reasonably acceptable to the Agent, which acceptance
shall not be delayed or withheld unreasonably, (iii) if such Assignee is
not a United States person (as defined in section 7701(a)(30) of the
Internal Revenue Code), such Assignee shall satisfy the requirements of
Section 4.6(c), provided, that if such Assignee thereafter fails to comply
with the requirements of Section 4.6, amounts payable to it under Section
4.6 shall be limited to amounts that would be payable if such Assignee had
complied with Section 4.6(c), and (iv) such Assignee shall have certified
to the assigning Purchaser that such Assignee is an "accredited investor"
as that term is defined in any of paragraphs (1), (2), (3) or (7) of Rule
501(a) under the Securities Act.
In the event of any assignment, the Purchaser (x) shall comply
with Article VI of the Pooling Agreement; provided that no Opinion of
Counsel shall be required to be delivered pursuant to Section 6.3(e) of the
Pooling Agreement with respect to any transfer to a Permitted Transferee,
and (y) shall give notice to Transferor and the Agent and shall deliver to
the Agent, for acceptance and recording in its records, an assignment
agreement substantially in the form of Exhibit D together with a processing
and recordation fee of, in the case of assignments to a Purchaser or an
Affiliate of a Purchaser, $1,500 and, in cases of any other assignment,
$3,500. Within five Business Days of receipt thereof, the Agent shall, if
the assignment agreement has been fully executed by the Assignee and the
assignor Purchaser, is completed and is in substantially the form
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of Exhibit D, execute the assignment agreement and record the information
contained therein in its records. Upon the earlier of the expiration of
such five Business Day period or the date of the recording, the assignment
will become effective.
Transferor, Servicer, ICP, the Agent and the Purchasers agree to
extend the rights and benefits with respect to Transferor under this
Agreement to the Assignee to the extent the Assignee would have had if it
were a Purchaser that was an original signatory to this Agreement;
provided, that the parties hereto shall be entitled to continue to deal
solely and directly with the assignor Purchaser in connection with the
interests so assigned to the Assignee until the assignment agreement and
any required fee, as described above, shall have been delivered to the
Agent by the Purchaser and the Assignee and the assignment shall have
become effective. Upon the effective assignment of its Credit Exposure,
the Purchaser shall be relieved of its obligations hereunder to the extent
of the assignment.
(c) The sale or assignment by a Purchaser of any Credit Exposure
to any Assignee (each, a "Transferee") shall not be effective until it has
agreed to be bound by the provisions of Section 10.13 and has obtained the
prior written consent of the Agent. Transferor and, the Sellers, the
Servicer and ICP each authorize the Purchasers to disclose to any
Transferee and any prospective Transferee any and all information in their
possession concerning Transferor, the Sellers, the Servicer or ICP in
connection with the Transferee's credit evaluation of the Program prior to
entering into this Agreement.
(d) Notwithstanding any other provision set forth in this
Agreement, the Purchasers may at any time create a security interest in all
or any portion of their rights under this Agreement and the Certificates in
favor of any Federal Reserve Bank in accordance with Regulation A of the
Board of Governors of the Federal Reserve System.
(e) No transfer, assignment or other conveyance of, or sale of
any Credit Exposure of a Purchaser in, a Certificate shall be made unless
(i) the aggregate outstanding principal amount of all Certificates
transferred, or in which any Credit Exposure is sold, pursuant to such
transfer or sale is equal to a principal amount of Certificates that would
represent at least 2.1% of the total interests in partnership capital or
profits, within the meaning of Treasury Regulation Section 1.7704-1, and
(ii) after giving effect thereto, there shall be no more than 20 Private
Holders of Subject Instruments, as reasonably determined by Transferor. No
Certificate may be subdivided into an aggregate principal amount that would
represent less than 2.1% of the total interest in partnership capital or
profits as determined pursuant to the preceding sentence. Any attempted
transfer, assignment, conveyance, participation or subdivision in
contravention of the
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<PAGE>
preceding restrictions, as reasonably determined by the Transferor, shall
be void ab initio and the purported transferor, seller or subdivider of
such Certificate shall continue to be treated as the Certificateholder of
any such Certificate for all purposes of this Agreement.
(f) Each Affected Party with respect to each Purchaser shall be
entitled to receive additional payments pursuant to Sections 4.3, 4.5, 4.6,
and 10.5 as though it were a Purchaser and such Sections applied to its
interest in a Certificate or commitment to make or acquire interests in
Purchases; provided that such Affected Party shall not be entitled to
additional payments pursuant to Section 4.6 attributable to its failure to
satisfy the requirements of subsection 4.6(c) as if it were an Assignee.
(g) Each Affected Party claiming increased amounts described in
Sections 4.3, 4.5, 4.6 or 10.5 shall furnish, through its related
Purchaser, to the Trustee, the Agent, Servicer and Transferor a certificate
setting forth in reasonable detail the basis and amount of each request by
such Affected Party for any such amounts referred to in such Section, which
certificate will be prepared in accordance with the requirements of such
Section (if any). Determinations by an Affected Party of any increased
amounts referred to in such Sections shall be conclusive, absent
demonstrable error. Each Affected Party shall promptly notify, through its
related Purchaser, the Trustee, the Agent, Servicer and Transferor of the
occurrence of any event of which such Affected Party is aware that would be
likely to result in a demand for compensation pursuant to Section 4.3, 4.5,
4.6 or 10.5.
SECTION 10.4 Survival of Agreement. All covenants, agreements,
representations and warranties made herein and in the Certificates
delivered pursuant hereto shall survive the making and the repayment of the
Purchases and the execution and delivery of this Agreement and the
Certificates and shall continue in full force and effect until all
obligations have been paid in full and all commitments of the Purchasers
hereunder have been terminated. In addition, the obligations of Transferor
under Sections 2.2(b), 2.3(c), 4.2, 4.3, 4.5, 4.6, 9.10, and 10.5 and the
obligations of the Purchasers under Section 9.6 shall survive the
termination of this Agreement.
SECTION 10.5 Expenses; Indemnification. Transferor and ICP
jointly and severally shall pay on demand (a) all reasonable out-of-pocket
fees and expenses (including reasonable attorneys' fees and expenses) of
the Agent incurred in connection with the preparation, execution, delivery,
administration, amendment, modification and waiver of the Transaction
Documents and the making and repayment of the Purchases, including any
Servicer or collection agent fees paid to any third party for services
rendered to the Purchasers and the Agent in collecting the Receivables and
(b) all reasonable out-of-pocket fees and expenses
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<PAGE>
of the Purchasers and the Agent (including reasonable attorneys' fees and
expenses of their counsel) incurred in connection with performance by the
Agent of its administrative duties under this Agreement, any consulting
performed by the Agent at the request of the Transferor, and the
enforcement of the Transaction Documents against Transferor, Servicer,
Guarantor and the Sellers and in connection with any workout or
restructuring of the Transaction Documents. In addition, Transferor will
pay any and all stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing, recording or
enforcement of this Agreement or any payment made under the Transaction
Documents, and hereby indemnifies and saves the Agent and the Purchasers
harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay the taxes and fees.
Transferor and ICP jointly and severally agree to reimburse and indemnify
the Agent and each Purchaser and their respective officers, directors,
shareholders, controlling Persons, employees and agents (collectively, the
"Indemnitees") from and against any and all actions, judgments, costs,
expenses or disbursements of whatsoever kind or nature that may be imposed
on, asserted against or incurred or suffered by the Agent or the Purchasers
(including fees and expenses of legal counsel, accountants and experts) in
any way relating to or arising out of any Transaction Document. Additional
amounts sufficient to indemnify the Purchasers, Agent or other Indemnitees
under this Section 10.5 shall constitute "Additional Amounts" for purposes
of the Supplement, and the Purchasers, Agent or other Indemnities shall be
entitled to receive these additional amounts, solely from amounts allocated
thereto and paid pursuant to the Supplement.
Notwithstanding the foregoing (and with respect to clause (x)
below, without prejudice to the rights that an Indemnitee may have pursuant
to the other provisions of the Transaction Documents), in no event shall
any Indemnitee be indemnified against any amounts (w) resulting from gross
negligence or willful misconduct on the part of such Indemnitee (or any of
its officers, directors, employees, affiliates or agents) or the failure of
such Indemnitee to perform its obligations under the Transaction Documents,
(x) to the extent they include amounts in respect of Receivables and
reimbursement therefor that would constitute credit recourse to Servicer
for the amount of any Receivable or Related Transferred Asset not paid by
the related Obligor or (y) to the extent they are or result from lost
profits (other than any interest or prepayment premium or early termination
amount).
If for any reason the indemnification provided in this section is
unavailable to an Indemnitee or is insufficient to hold it harmless, then
Transferor and ICP jointly and severally shall contribute to the amount
paid by the Indemnitee as a result of any loss, claim, damage or liability
in a proportion that is appropriate to reflect not only the relative
benefits received by the Indemnitee on the one hand and Transferor and ICP
on the other hand, but also the relative fault of the
-30-
<PAGE>
Indemnitee (if any), Transferor and ICP and any other relevant equitable
considerations; provided that the Transferor shall not, and shall not be
obligated to, pay any amount pursuant to this Section unless and to the
extent that the Transferor has funds available to pay such amounts or funds
are allocated thereafter to the Transferor pursuant to the penultimate
paragraph of Section 4.3 or priority fifth of Section 4.4 of the
Supplement, and there shall be no recourse to Transferor for all or any
part of any amounts payable pursuant to this section if the funds are at
any time insufficient to make all or part of any such payments. Any amount
which Transferor does not pay pursuant to the operation of the preceding
sentence shall not constitute a claim (as defined in Sec. 101 of the
Bankruptcy Code) against or corporate obligation of Transferor for any such
insufficiency.
SECTION 10.6 Entire Agreement. This Agreement, together with the
documents delivered pursuant to Section 7.1 and the other Transaction
Documents, including the exhibits and schedules thereto, contains a final
and complete integration of all prior expressions by the parties hereto
with respect to the subject matter hereof and shall constitute the entire
agreement among the parties hereto with respect to the subject matter
hereof, superseding all previous oral statements and other writings with
respect thereto.
SECTION 10.7 Notices. All communications hereunder shall be in
writing and shall be deemed to have been duly given if personally
delivered, sent by overnight courier or mailed by registered mail, postage
prepaid and return receipt requested, or transmitted by facsimile
transmission and confirmed by a similar mailed writing to any party at the
address for that party set forth (a) on the signature page to this
Agreement, (b) in the case of the Trustee, LaSalle National Bank, ABS Trust
Services, 135 South LaSalle Street, Chicago, Illinois 60674, Attention:
Shashank Mishra, or (c) to another address as that party may designate in
writing to the Agent and Transferor.
SECTION 10.8 No Third-Party Beneficiaries. Nothing expressed
herein is intended or shall be construed to give any Person (other than the
parties hereto, and Assignees described in Section 10.3 and, to the extent
provided in Section 10.3, the other Affected Parties) any legal or
equitable right, remedy or claim under or in respect of this Agreement.
SECTION 10.9 Severability of Provisions. Any covenant, provision,
agreement or term of this Agreement that is prohibited or is held to be
void or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of the prohibition or unenforceability without
invalidating the remaining provisions of this Agreement.
-31-
<PAGE>
SECTION 10.10 Counterparts. This Agreement may be executed in any
number of counterparts (which may include facsimile) and by the different
parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original, and all of which together shall
constitute one and the same instrument.
SECTION 10.11 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
SECTION 10.12 Tax Characterization. Each party to this Agreement
(a) acknowledges that it is the intent of the parties to this Agreement
that, for purposes of Federal, applicable state and local income and
franchise and other taxes measured by or imposed on income, the
Certificates will be treated as evidence of indebtedness secured by the
Transferred Assets and the Trust will not be characterized as an
association (or publicly traded partnership) taxable as a corporation, (b)
agrees that the provisions of the Transaction Documents be construed to
further that intent, and (c) agrees to treat the Certificates, for purposes
of Federal, state and local income and franchise and other taxes measured
by or imposed on income, as indebtedness.
SECTION 10.13 No Proceedings. (a) Each of Servicer, the Agent
(solely in its capacity as such) and each Purchaser (solely in its capacity
as such) hereby agrees that it will not institute against Transferor, or
join any other Person in instituting against Transferor, any insolvency
proceeding (namely, any proceeding of the type referred to in the
definition of "Bankruptcy Event") so long as any Series 1996-1 Certificates
shall be outstanding or there shall not have elapsed one year plus one day
since the last day on which any Series 1996-1 Certificates shall have been
outstanding. The foregoing shall not limit the right of Servicer, the Agent
or any Purchaser to file any claim in or otherwise take any action with
respect to any insolvency proceeding that was instituted against Transferor
by any other Person.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their duly authorized officers and delivered as of
the day and year first above written.
INTER-CITY PRODUCTS
RECEIVABLES COMPANY, L.P.
By: Inter-City Products Partner
Corporation, its general partner
By: /s/ David P. Cain
------------------------------------
Title: Senior Vice President
Address: 650 Heil-Quaker Boulevard
Lewisburg, Tennessee 37091
Attention: David Cain
Telephone: (615) 270-4136
Facsimile: (615) 270-4220
INTER-CITY PRODUCTS CORPORATION (USA), as
Servicer
By: /s/ David P. Cain
------------------------------------
Title: Senior Vice President
Address: 650 Heil-Quaker Boulevard
Lewisburg, Tennessee 37091
Attention: David Cain
Telephone: (615) 270-4136
Facsimile: (615) 270-4220
<PAGE>
THE CHICAGO CORPORATION,
as Agent
By: /s/ Mike Woodhead
------------------------------------
Name: Mike Woodhead
Title: Senior Vice President
Address: 208 South LaSalle Street
Chicago, Illinois 60604
Attention: Mike Woodhead
Telephone: (312) 855-7555
Facsimile: (312) 553-6832
ANAGRAM FUNDING CORP.,
as a Purchaser
By: /s/ Andrew L.Stidd
------------------------------------
Name: Andrew L. Stidd
Title: President
Address:
Attention:
Telephone:
Facsimile:
<PAGE>
SCHEDULE I
to Certificate Purchase Agreement
Series 1996-1, Class A
AMOUNT OF EACH INITIAL PURCHASER'S CERTIFICATE
----------------------------------------------
Purchaser Stated Amount of Certificate
----------------------------
Anagram Funding Corp. $60,000,000.00
Class Percentage
----------------
Anagram Funding Corp. 100%
Series Percentage
-----------------
Anagram Funding Corp. 85.71%
<PAGE>
EXHIBIT A
to Certificate Purchase Agreement
Series 1996-1, Class A
FORM OF POOLING AND SERVICING AGREEMENT
Filed as Exhibit 10.1 to this Amendment No. 1 to Registration Statement on
Form S-4 (File No. 333-58837) and incorporated herein by this reference.
<PAGE>
EXHIBIT B
to Certificate Purchase Agreement
Series 1996-1, Class A
FORM OF RECEIVABLES PURCHASE AGREEMENT
Filed as Exhibit 10.3 to this Amendment No. 1 to Registration Statement on
Form S-4 (File No. 333-58837) and incorporated herein by this reference.
<PAGE>
EXHIBIT C
to Certificate Purchase Agreement
Series 1996-1, Class A
FORM OF SERIES 1996-1 SUPPLEMENT
Filed as Exhibit 10.2 to this Amendment No. 1 to Registration Statement on
Form S-4 (File No. 333-58837) and incorporated herein by this reference.
<PAGE>
EXHIBIT D
to Certificate Purchase Agreement
Series 1996-1, Class A
FORM OF ASSIGNMENT AGREEMENT
This ASSIGNMENT AGREEMENT, dated as of [____________] (this
"Agreement"), is made between ____________________ ("Assignor"), and
[_____________________] ("Assignee"). Except as otherwise defined herein,
capitalized terms have the meanings assigned to them in the Certificate
Purchase Agreement (as defined below).
BACKGROUND
A. Assignor is a party to the Certificate Purchase Agreement, dated
as of July 25, 1996 (as amended, supplemented or otherwise modified from time
to time, the "Certificate Purchase Agreement"), among INTER-CITY PRODUCTS
RECEIVABLES COMPANY, L.P., a Tennessee limited partnership ("Transferor"),
INTER-CITY PRODUCTS CORPORATION (USA), a Delaware corporation, the
Purchasers party thereto (including Assignor), and THE CHICAGO CORPORATION,
as Agent.
B. Assignor wishes to assign, and Assignee wishes to be so assigned,
Assignor's rights and obligations arising on and after the Effective Date (as
defined below) under the Certificate Purchase Agreement and its Certificate
including (a) its obligations to make Purchases (its "Credit Exposure") and
(b) its outstanding Purchases (the "Purchases").
C. Assignor and Assignee also wish (a) Assignee to assume the
obligations of Assignor under the Certificate Purchase Agreement with respect
to Assignee's Share (as defined below) to the extent of the rights assigned
and (b) Assignor to be released from the obligations assumed by Assignee.
D. Transferor and the Agent, by their execution hereof, are providing
their written consent to the assignment accomplished by this Agreement.
SECTION 1. Assignment. Effective on the Effective Date (as defined
below) and upon payment of the amount specified in Section 3(a), Assignor
hereby assigns and transfers to Assignee, without recourse, representation or
warranty of any kind, express or implied (except as provided in Sections 6(a)
and<PAGE>
(b)), and subject to Section 4(b), Assignee's Share (as specified in Annex I
hereto) (the "Assignee's Share") of all of Assignor's rights, title and
interest arising under (a) the Certificate Purchase Agreement relating to
Assignor's Credit Exposure including all rights and obligations with respect
to the Purchases attributable to Assignee's Share and (b) Assignor's
Certificate with respect to Assignee's Share as will result in Assignee
having from and after the Effective Date the Class Percentage ("Assignee's
Percentage") specified in Annex I.
SECTION 2. Assumption. Effective on the Effective Date, Assignee
hereby irrevocably purchases, assumes and takes from Assignor, and Assignor
is hereby expressly and absolutely released from, all of Assignor's
obligations arising under the Certificate Purchase Agreement relating to
Assignee's Share and of any outstanding Purchases attributable to Assignee's
Share. Assignee hereby agrees to be bound by the provisions of the
Certificate Purchase Agreement.
SECTION 3. Payment. In consideration of the assignment by Assignor
to Assignee as set forth above, Assignee agrees to pay to Assignor, in
Dollars and in immediately available funds, (a) on or prior to the Effective
Date, an amount specified by Assignor in writing on or prior to the Effective
Date that represents Assignee's Share attributable to the principal amount of
the Purchases made pursuant to the Certificate Purchase Agreement and
outstanding on the Effective Date, and (b) from time to time thereafter,
other amounts (if any) that Assignee has agreed in writing to pay to Assignor
after the Effective Date. In consideration of the assumption by Assignee,
Assignor agrees to pay to Assignee within two Business Days of the Effective
Date, an assignment fee (if any) that previously has been agreed to in
writing by both parties.
Notwithstanding anything to the contrary in this Agreement, if and
when Assignee receives or collects (x) any payment of principal or interest
relating to any Purchases or (y) any payment of fees that are required to be
paid to Assignor pursuant to this Agreement, then Assignee shall forward the
payment to Assignor.
To the extent payment of funds to Assignee or Assignor are not made
within two Business Days, each, as the case may be, shall be entitled to
recover the due amount, together with interest thereon at the Federal Funds
Rate per annum accruing from the date of payment or the date of receipt of
the funds by the other party.
SECTION 4. Effectiveness. (a)(i This Agreement shall become
effective on the date (the "Effective Date") on which it shall have been duly
executed by all parties and the Agent shall have recorded the information
contained herein in its records (or automatically upon the Agent's receipt of
this Agreement signed by Assignor and Assignee if not so recorded within five
Business Days of such
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<PAGE>
receipt) Assignor hereby notifies the Agent of the assignment, effective as
of the Effective Date, of Assignee's Share and any Purchases attributable to
the Assignee's Share, and directs the Agent to pay Assignee (A) any payment
of principal of, or interest on, any Purchase attributable to the Assignee's
Share of any Purchases and (B) any Non-Usage Fees attributable to the
Assignee's Share of the Credit Exposure. No (x) failure of either Assignee
or Assignor to settle any amount owed to the other (except with respect to
the payment of the processing and recordation fee to the Agent and the
payment due under Section 3(a)), (y) dispute respecting any other settlement,
including in respect of Transferor, or (z) bankruptcy, insolvency or other
condition whatsoever respecting any Person, shall in any way impair, reduce
or otherwise affect the effectiveness of this Agreement.
(ii Assignor, Assignee and the Agent each acknowledges and agrees
that from and after the Effective Date, the Agent shall make all payments
under the Certificate Purchase Agreement in respect of Assignee's Share
(including all payments of principal, interest and Non-Usage Fees with
respect thereto, whether or not the payments shall have accrued prior to or
after the Effective Date) to Assignee only. Assignor and Assignee hereby
agree further to make all appropriate adjustments in payments to either of
them under the Certificate Purchase Agreement for periods prior to the
Effective Date directly between themselves.
(b With respect to any Purchase attributable to Assignee's Share,
if and when Assignor receives or collects any payment of principal, interest,
Non-Usage Fees or Additional Amounts with respect to Assignee's Share for any
period commencing on or after the Effective Date, Assignor shall distribute
to Assignee the portion attributable to Assignee's Share, but only to the
extent it accrued on or after the Effective Date and was not theretofore paid
to Assignee by Transferor or otherwise. Any principal, interest, Non-Usage
Fees and Additional Amounts paid prior to the Effective Date shall be
retained by Assignor. Any principal, interest, Non-Usage Fees and Additional
Amounts received by Assignee that accrued prior to the Effective Date shall
be forwarded promptly, in the form received, to Assignor. Assignee recognizes
and agrees that (i) it shall receive no payment on account of any Agent's
fees or other amounts or expenses (including counsel fees) payable to the
Agent (in such capacities and for their own account), (ii) this Agreement
shall not operate to assign any rights or delegate any obligations of the
Agent (in such capacities), and (iii) notwithstanding anything to the
contrary in this Agreement, Assignor shall retain all of its rights to
indemnification under the Certificate Purchase Agreement for any events, acts
or omissions occurring prior to the Effective Date.
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<PAGE>
(c) The Agent, by its execution hereof, acknowledges the assignment
and agrees to make payments in respect of principal, interest, fees and
Additional Amounts as described in clause (a).
SECTION 5. Rights as Purchaser under Certificate Purchase Agreement.
In accordance with Section 10.3 of the Certificate Purchase Agreement, (a) as
of the Effective Date, Assignee will be a Purchaser under, and party to, the
Certificate Purchase Agreement and shall have (i) all of the rights and
obligations of a Purchaser (to the extent of the assignment and assumption of
Assignee's Share effected by this Agreement) and (ii) the addresses for (A)
notice purposes and (B) LIBOR Office as set forth in items 2 and 3,
respectively, of Annex I hereto and (b) promptly on or after the Effective
Date, Transferor will execute and deliver any documents and instruments that
Assignor or Assignee reasonably may require.
SECTION 6. Representations and Warranties. (a) Each of Assignor
and Assignee represents and warrants to the other as follows:
(i) it has full power and authority, and has taken all
action necessary, to execute and deliver this Agreement, to fulfill
the obligations hereunder and to consummate the transactions
contemplated hereby,
(ii) the making and performance of this Agreement and all
documents required to be executed and delivered hereunder do not and
will not violate any law or regulation of the jurisdiction of its
incorporation or any other applicable law or regulation,
(iii) this Agreement has been duly executed and delivered
and constitutes its legal, valid and binding obligation, enforceable
in accordance with its terms, and
(iv) all approvals, authorizations or other actions by, or
filing with, any Governmental Authority necessary for the validity
or enforceability of its obligations under this Agreement have been
obtained.
(b) Assignor represents and warrants to Assignee that Assignee's
Share and the Purchases attributable to Assignee's Share are not subject to
any liens or security interests created by Assignor.
(c) Except as set forth in subsections (a) and (b), Assignor makes
no representations or warranties, express or implied, to Assignee and shall
not be responsible to Assignee for (i) the execution, effectiveness,
genuineness, legality, validity, enforceability, collectibility, regulatory
status or sufficiency of the Certificate Purchase Agreement or any of the
other Transaction Documents, (ii)
-4-
<PAGE>
the perfection, priority, value or adequacy of any collateral security or
guaranty, (iii) the taking of any action, or the failure to take any action,
with respect to any of the Transaction Documents, (iv) any representations,
warranties, recitals or statements made in any of the Transaction Documents
or in any written or oral financial or other statements, instruments,
reports, certificates or documents made or furnished by Assignor to Assignee
or by or on behalf of Transferor or any of its Affiliates to Assignor or
Assignee in connection with the Transaction Documents and the transactions
contemplated thereby, (v) the financial or other condition of Transferor or
any other Person or (vi) any other matter having any relation to any of the
foregoing. Assignor shall not be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained in any of the Transaction Documents or the
existence or possible existence of any Unmatured Early Amortization Event,
Early Amortization Event or Servicer Default. Additionally, Assignor shall
not have any duty or responsibility either initially or on a continuing basis
to make any investigation or any appraisal on Assignee's behalf or to provide
Assignee with any credit or other information with respect thereto, whether
coming into Assignor's possession before the execution of the Certificate
Purchase Agreement or at any time thereafter. Assignor shall have no
responsibility with respect to the accuracy of, or the completeness of, any
information provided to Assignee, whether by Assignor or by or on behalf of
Transferor or any other Person obligated under the Certificate Purchase
Agreement or any related instrument or document.
(d) Assignee represents and warrants that (x) it has made its own
independent investigation of each of the foregoing matters, including the
financial condition and affairs of Transferor and its Affiliates, in
connection with the making of the Purchases and the execution of this
Agreement (including the solvency of Transferor and its Affiliates, their
ability to pay their respective debts as they mature and the capital of
Transferor and its Affiliates remaining after the closing under the
Transaction Documents and the consummation of the transactions contemplated
thereby) and has made and shall continue to make its own appraisal of the
creditworthiness of Transferor and its Affiliates, and (y) the
representations and warranties set forth in Section 6.3 of the Certificate
Purchase Agreement are true and correct with respect to the Assignee.
Assignee hereby agrees that it will not make any general solicitation or
general advertising for the offer or sale of the Certificates. Assignee (i)
confirms that it has received copies of the Transaction Documents together
with copies of certain other closing documents delivered in connection with
the Certificate Purchase Agreement, financial statements and any other
documents and information that it has requested or deemed appropriate to make
its own credit analysis and decision to enter into this Agreement and (ii)
agrees that it will, independently and without reliance upon the Agent,
Assignor or any other Purchaser and based on such documents
-5-
<PAGE>
and information as it shall deem appropriate at the time, continue to make
its own credit decisions in taking or not taking action under the Transaction
Documents.
(e) Assignee represents and warrants to Transferor that the
representations and warranties in Section 6.3 of the Certificate Purchase
Agreement are true and correct in respect of such Assignee as of the date
hereof.
SECTION 7. No Proceedings. Assignee hereby agrees to be bound by the
provisions of Section 10.13 of the Certificate Purchase Agreement.
SECTION 8. Withholding Taxes. [In accordance with Section 4.6 of the
Certificate Purchase Agreement, Assignee agrees to execute and deliver to the
Trustee, as Paying Agent, and the Agent, for delivery to Transferor, on or
before the Effective Date, (a) two original copies of Internal Revenue
Service Form 1001 or 4224 or successor applicable form, properly completed
and duly executed by the Assignee certifying that it is entitled to receive
payments under the Certificate Purchase Agreement and any Certificate without
deduction or withholding of any United States Federal income taxes, and (b)
an original copy of Internal Revenue Service Form W-8 or W-9 or applicable
successor form, properly completed and duly executed. Assignee represents and
warrants to Transferor and Assignor that, as of the Effective Date, it shall
be entitled to receive payments of principal and interest under its
Certificate, the Certificate Purchase Agreement and hereunder without
deduction for or on account of any taxes imposed by the United States of
America or any political subdivision thereof. In the event that, after
delivering the applicable form, Assignee shall cease to be exempt from
withholding and/or deduction of taxes, then the Agent may withhold and/or
deduct the applicable amount from any payments of principal, interest and any
fees to which Assignee otherwise would be entitled, and the Agent shall have
no liability whatsoever to Assignee for any such withholding or deduction.
Assignee shall indemnify Transferor and the Agent from and against all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs or expenses that result from Assignee's breach of such
representation and warranty.]1
SECTION 9. Miscellaneous. (a) Each of the parties hereto agrees to
take any action and execute and deliver any documents that any party hereto
reasonably may request from time to time in order to implement more fully the
purposes of this Agreement. Without limiting the generality of the foregoing,
Assignor and Assignee will cooperate in obtaining for Assignee a Certificate
(as well as a replacement Certificate for Assignor representing any retained
interest of Assignor).
- --------------------------
1/ If the Assignee is not a U.S. person within the meaning of Section
7701(a)(30) of the Internal Revenue Code.
-6-
<PAGE>
(b) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES.
(c) Except as otherwise set forth herein, this Agreement sets forth
the entire agreement between the parties relating to the subject matter
hereof, and no term or provision of this Agreement may be amended, changed,
waived, discharged or terminated orally or otherwise, except in a writing
signed by Assignor and Assignee.
(d) This Agreement may be executed in any number of counterparts and
by the different parties hereto in separate counterparts, each of which when
so executed shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
(e) Each of the parties hereto agrees that each party shall bear its
own expenses in connection with the preparation and execution of this
Agreement and the consummation of the Assignment described herein. Assignee
further agrees that it shall send a check in the amount of [$1,500] [3,500]
to the Agent on or prior to the Effective Date, as payment of the processing
and recordation fee described in Section 10.3(c) of the Certificate Purchase
Agreement. [Select correct amount in accordance with that Section.]
(f) All representations and warranties made, and indemnities
provided for, herein shall survive the consummation of the transactions
contemplated hereby.
(g) Assignor may at any time or from time to time grant assignments
in its rights and obligations under the Certificate Purchase Agreement and
its Certificate to other Persons, but not in the portions thereof assigned to
Assignee.
(h) This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns. Neither
Assignor nor Assignee may assign or transfer any of its rights or obligations
under this Agreement without the prior written consent of the other party.
The preceding sentence shall not limit the right of Assignee to assign all or
part of Assignee's Share in the manner contemplated by the Certificate
Purchase Agreement.
(i) Assignee acknowledges that all obligations of the Agent are
subject to Article IX of the Certificate Purchase Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers and delivered as of the
day and year first above written.
-----------------------------,
as Assignor
By:
---------------------------
Title:
------------------------
-----------------------------,
as Assignee
By:
---------------------------
Title:
------------------------
The undersigned hereby acknowledges the terms and provisions of this
Agreement, and agrees to make payments in respect of principal, interest and
fees as described in Section 4(a).
THE CHICAGO CORPORATION,
as Agent
By:
-------------------------------
Title:
----------------------------
<PAGE>
ANNEX I
to Assignment Agreement
Item 1. Assignee's Share:
(a) Assignee's Stated Amount $
(b) Assignee's Class Percentage %
Item 2. Address of Assignee for notice purposes:
----------------------------------------
----------------------------------------
----------------------------------------
Attention:
------------------------------
Telephone:
------------------------------
Facsimile:
------------------------------
Item 3. LIBOR Office of Assignee:
----------------------------------------
----------------------------------------
----------------------------------------
<PAGE>
APPENDIX X
to Certificate Purchase Agreement
Series 1996-1, Class A
INDEX OF ADDITIONAL DEFINED TERMS
Administration Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Agent Administration Fee. . . . . . . . . . . . . . . . . . . . . . . . 25
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Arrangement Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Assignee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Breakage Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Class Percentage. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Commitment Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Commitment Reduction Fee. . . . . . . . . . . . . . . . . . . . . . . . 4
Credit Exposure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ICP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Indemnitees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Initial Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
LIBOR Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Minimum Usage Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Non-Usage Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Pooling Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Purchase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Purchasers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Receivables Review. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Required Class A Purchasers . . . . . . . . . . . . . . . . . . . . . . 25
Required Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Series Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Stated Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Supplement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Transferee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Transferor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Trust Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
<PAGE>
INTER-CITY PRODUCTS CORPORATION (USA)
CERTIFICATE PURCHASE AGREEMENT
(Series 1996-1, Class B)
dated as of July 25, 1996
among
INTER-CITY PRODUCTS RECEIVABLES COMPANY, L.P.,
INTER-CITY PRODUCTS CORPORATION (USA)
AS THE INITIAL SERVICER,
and
ARGOS FUNDING CORP.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
PURCHASE AND SALE OF CERTIFICATE
SECTION 2.1 The Purchase; Percentages. . . . . . . . . . . . . . . . . 3
ARTICLE III
YIELD PROTECTION, ETC.
SECTION 3.1 Yield Protection . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3.2 Illegality; Unavailability . . . . . . . . . . . . . . . . 4
SECTION 3.3 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3.4 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.5 Early Termination Fee . . . . . . . . . . . . . . . . . . . 6
SECTION 3.6 Mandatory Reduction of Invested Amount. . . . . . . . . . . 6
ARTICLE IV
OTHER PAYMENT TERMS
SECTION 4.1 Time and Method of Payment . . . . . . . . . . . . . . . . 7
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 Transferor . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 5.2 ICP. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 5.3 Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VI
CONDITIONS
SECTION 6.1 Conditions to Purchase . . . . . . . . . . . . . . . . . . 9
SECTION 6.2 Payment of Expenses . . . . . . . . . . . . . . . . . . . .13
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<PAGE>
ARTICLE VII
COVENANTS
SECTION 7.1 Affirmative Covenants. . . . . . . . . . . . . . . . . . .13
SECTION 7.2 Transfers. . . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 7.3 Procedures Letter and Report . . . . . . . . . . . . . . .14
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . .15
SECTION 8.2 No Waiver; Remedies. . . . . . . . . . . . . . . . . . . .15
SECTION 8.3 Successors and Assigns; Assignments. . . . . . . . . . . .16
SECTION 8.4 Survival of Agreement. . . . . . . . . . . . . . . . . . .18
SECTION 8.5 Expenses; Indemnification. . . . . . . . . . . . . . . . .18
SECTION 8.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . .20
SECTION 8.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . .20
SECTION 8.8 No Third-Party Beneficiaries . . . . . . . . . . . . . . .20
SECTION 8.9 Severability of Provisions . . . . . . . . . . . . . . . .20
SECTION 8.10 Counterparts. . . . . . . . . . . . . . . . . . . . . . .20
SECTION 8.11 Governing Law . . . . . . . . . . . . . . . . . . . . . .21
SECTION 8.12 Tax Characterization. . . . . . . . . . . . . . . . . . .21
SECTION 8.13 No Proceedings. . . . . . . . . . . . . . . . . . . . . .21
SCHEDULE
SCHEDULE I Stated Amounts and Percentages
EXHIBITS
EXHIBIT A Form of Pooling and Servicing Agreement
EXHIBIT B Form of Receivables Purchase Agreement
EXHIBIT C Form of Series 1996-1 Supplement
EXHIBIT D Form of Assignment Agreement
APPENDIX
APPENDIX X Index of Additional Defined Terms
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<PAGE>
This CERTIFICATE PURCHASE AGREEMENT, dated as of July 25, 1996
(this "Agreement"), is made among INTER-CITY PRODUCTS RECEIVABLES
COMPANY, L.P., a Tennessee limited partnership ("Transferor"), INTER-
CITY PRODUCTS CORPORATION (USA), a Delaware corporation ("ICP",
"Servicer" or "Initial Servicer"), and ARGOS FUNDING CORP. (together
with its permitted assigns, the "Purchaser").
BACKGROUND
1. Transferor will enter into (a) a Pooling and Servicing
Agreement substantially in the form of Exhibit A (the "Pooling
Agreement") with Initial Servicer, as initial Servicer, and, LaSalle
National Bank, a national banking association, as trustee (in that
capacity, together with any successors in that capacity, the
"Trustee"), (b) a Receivables Purchase Agreement substantially in the
form of Exhibit B and (c) a Series 1996-1 Supplement to the Pooling
Agreement substantially in the form of Exhibit C (the "Supplement").
2. Pursuant to the Pooling Agreement and the Supplement,
Transferor will obtain the Series 1996-1, Class B Certificate in the
principal amount of $10,000,000 (the "Certificate"), which will
represent a fractional undivided beneficial interest in the assets of
the Inter-City Products Receivables Master Trust (the "Trust"), a trust
to be organized pursuant to the Pooling Agreement. Initial Servicer
has joined in this Agreement to confirm certain representations,
warranties and covenants for the benefit of the Purchaser.
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. Capitalized terms used and not
otherwise defined herein have the meanings assigned to them in the
Supplement or, if not defined in the Supplement, in Appendix A to the
Pooling Agreement. An index of terms defined directly in this
Agreement is attached as Appendix X.
ARTICLE II
PURCHASE AND SALE OF CERTIFICATE
SECTION 2.1 The Purchase; Percentages. On the date hereof,
the Transferor will issue and sell to the Purchaser and, subject to the
terms and
<PAGE>
conditions of this Agreement, the Pooling Agreement and the Supplement,
the Purchaser will purchase (such purchase being a "Purchase") from the
Transferor the Certificate for a purchase price equal to 99.45% of the
principal amount of such Certificate.
For purposes of this Agreement, (i) "Class Percentage" means
the percentage equivalent (carried out to twelve decimal places) of a
fraction, the numerator of which is the Stated Amount of the
Purchaser's Certificate and the denominator of which is the sum of the
Stated Amounts of all Class B Certificates and (ii) "Series Percentage"
means the percentage equivalent (carried out to twelve decimal places)
of a fraction, the numerator of which is the Stated Amount of the
Purchaser's Certificate and the denominator of which is the sum of the
Stated Amounts for all of the Series 1996-1 Certificates. The Class
Percentages and Series Percentages of the Purchaser are set forth
opposite its name on Schedule I.
ARTICLE III
YIELD PROTECTION, ETC.
SECTION 3.1 Yield Protection. (a) Notwithstanding any other
provision herein, if, after the date hereof, either:
(i) any law, rule or regulation (including any imposition or
increase of reserve requirements) or any interpretation or
administration of any law, rule or regulation by any
Governmental Authority, central bank or comparable agency
charged with the interpretation or administration thereof, or
(ii) the compliance by the Purchaser with any guideline or
request from any central bank or other Governmental Authority
or quasi-governmental authority exercising control over banks
or financial institutions generally (whether or not having the
force of law),
shall subject the Purchaser to the imposition or modification of any
reserve (including any imposed by the Federal Reserve Board), special
deposit or similar requirement (including a reserve, special deposit or
similar requirement that takes the form of a tax) against assets of,
deposits with or for the account of, or credit extended by, the
Purchaser or the office from time to time that it designates to the
Transferor as the office through which it makes and maintains its
Purchase (its "LIBOR Office") or impose any other condition on the
Purchaser affecting the Certificate or its obligations hereunder, and
as a result of either of the foregoing there shall be any increase in
the cost to the Purchaser of agreeing to make or
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<PAGE>
making, funding or maintaining its Purchase, or there shall be a
reduction in the amount received or receivable by the Purchaser or its
LIBOR Office, then, upon written notice from the Purchaser to
Transferor and Servicer (with a copy to the Trustee), signed by an
officer of the Purchaser with knowledge of and responsibility for such
matters, and setting forth in reasonable detail the calculation used to
arrive at the amounts, additional amounts sufficient to indemnify the
Purchaser against the increased cost or reduction in amounts received
or receivable shall constitute "Additional Amounts" for purposes of the
Supplement, and the Purchaser shall be entitled to receive these
additional amounts solely from amounts allocated thereto and paid
pursuant to the Supplement.
(b) If the Purchaser shall reasonably determine that the
adoption after the date hereof of any law, rule or regulation regarding
capital adequacy or capital maintenance, or any change after the date
hereof in any of the foregoing or in the interpretation or
administration thereof by any Governmental Authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or compliance by the Purchaser, any of its lending offices or
its holding company with any new or revised request or directive
regarding capital adequacy or capital maintenance (whether or not
having the force of law) of any such Governmental Authority, central
bank or comparable agency, has or would have the effect of reducing the
rate of return on the Purchaser's capital or the capital of its holding
company as a consequence of this Agreement or the Purchase made by the
Purchaser pursuant hereto to a level below what the Purchaser or its
holding company could have achieved but for the adoption, change or
compliance (taking into consideration the Purchaser's policies, and the
policies of its holding company, with respect to capital adequacy),
then, upon written notice from the Purchaser to Transferor and Servicer
(with a copy to the Trustee), signed by an officer of the Purchaser
with knowledge of and responsibility for such matters, and setting
forth in reasonable detail the calculation used to arrive at the
amounts, any additional amounts as will compensate the Purchaser or its
holding company for the reduction shall constitute "Additional Amounts"
for purposes of the Supplement, and the Purchaser shall be entitled to
receive these additional amounts solely from amounts allocated thereto
and paid pursuant to the Supplement.
(c) A Purchaser shall promptly notify Transferor and Servicer
in writing of any event of which it has knowledge occurring after the
date hereof that will entitle it to compensation pursuant to this
section. A certificate of the Purchaser, signed by an officer of the
Purchaser with knowledge of and responsibility for such matters, and
setting forth in reasonable detail the calculation used to arrive at
the amounts necessary to compensate the Purchaser or its holding
company as specified in subsection (a) or (b), as the case may be,
shall be delivered to Transferor and Servicer and shall be conclusive
absent manifest error.
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<PAGE>
(d) Failure on the part of the Purchaser to demand
compensation for any amounts as specified in subsection (a) or (b) with
respect to any period shall not constitute a waiver of its right to
demand compensation with respect to that period or any other period.
The protection of this section shall be available to the Purchaser
regardless of any possible contention of the invalidity or
inapplicability of the law, rule, regulation, guideline or other change
or condition that shall have occurred or been imposed.
SECTION 3.2 Illegality; Unavailability. (a) In the event that
on any date the Purchaser shall have determined (which determination
shall be final and conclusive and binding upon all parties) that the
making or continuation of its Purchase has become unlawful by
compliance by the Purchaser in good faith with any law, governmental
rule, regulation or order or has become impossible as a result of a
contingency occurring after the date hereof that materially and
adversely affects its interbank eurodollar market, then, and in any
such event, the Purchaser shall promptly give notice (by telephone
confirmed in writing) to Transferor and Servicer of that determination.
The obligation of the affected Purchaser to make or maintain its
Purchase as a Eurodollar Tranche during any such period shall be
terminated at the earlier of the termination of the Interest Period
then in effect for the Eurodollar Tranche or when required by law, and
Transferor shall, no later than the time specified for the termination,
convert the Purchase into an ABR Tranche.
(b) If, prior to the beginning of any Distribution Period, the
Purchaser shall have determined (which determination shall be final and
conclusive and binding upon all parties) that: (i) Dollar deposits in
the relevant amount and for the Distribution Period are not available
in the relevant interbank eurodollar market or (ii) by reason of
circumstances affecting the interbank eurodollar market, that adequate
and fair means do not exist for ascertaining the LIBOR rate applicable
to the Eurodollar Tranche, then the Purchaser shall promptly give
notice of this determination to Transferor, Servicer and the Purchaser.
Thereafter, and continuing until the Purchaser shall notify Transferor
and Servicer that the circumstances giving rise to this determination
no longer exist, (x) the Eurodollar Tranche will, on the last day of
the applicable Distribution Period, convert into an ABR Tranche, and
(y) the right of Transferor to request a Eurodollar Tranche shall be
suspended.
SECTION 3.3 Indemnity. (a) If the Purchaser shall incur any
losses, expenses or liabilities (including any interest paid to lenders
of funds borrowed by it to fund its Purchase of the Certificate as a
Eurodollar Tranche and any loss sustained in connection with the re-
deployment of such funds) as a result of (i) the failure of the
Purchase to be made on the date hereof (other than any such failure
resulting from the Purchaser's default in the performance of its
obligations hereunder) or (ii) any repayment of the Certificate on a
date that is other than the
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<PAGE>
last day of the Distribution Period applicable thereto, then, upon
written notice (which notice shall be signed by an officer of the
Purchaser with knowledge of and responsibility for such matters and
shall set forth in reasonable detail the basis for requesting the
amounts) from the Purchaser to Transferor and Servicer, additional
amounts sufficient to indemnify the Purchaser against the losses,
expenses and liabilities, but not for any lost profits associated
therewith, shall constitute "Additional Amounts" for purposes of the
Supplement, and the Purchaser shall be entitled to receive these
additional amounts, solely from amounts allocated thereto and paid
pursuant to the Supplement.
SECTION 3.4 Taxes. (a) Any and all payments made to the
Purchaser under the Certificate shall be made free and clear of and
without deduction for any and all present or future taxes, levies,
imposts, duties, charges, fees, deductions or withholdings of any
nature and whatever called, by whomsoever, on whomsoever and wherever
imposed, levied, collected, withheld or assessed, excluding taxes
imposed by the jurisdiction in which the Purchaser's principal office
(and/or the office where it books its investment in the Certificate) is
located on all or part of the net income, profits or gains of the
Purchaser (whether worldwide, or only insofar as such income, profits
or gains are considered to arise in or to relate to a particular
jurisdiction, or otherwise) (all the nonexcluded taxes, levies,
imposts, charges, deductions, withholdings and liabilities being
hereinafter referred to as "Taxes"). If Trustee is required by law to
deduct or withhold any Taxes from or in respect of any sum payable
hereunder or under any Certificate to the Purchaser, then the sum
payable shall be increased by the amount necessary to yield to the
Purchaser (after payment of all Taxes) an amount equal to the sum it
would have received had no such deductions or withholdings been made,
and the additional amount shall constitute "Additional Amounts" for
purposes of the Supplement, and the Purchaser shall be entitled to
receive these additional amounts, solely from amounts allocated thereto
and paid pursuant to the Supplement.
(b) Whenever any Taxes are paid by Trustee pursuant to
subsection (a), as promptly as possible thereafter Servicer shall send
to the Purchaser the original or a certified copy of an original
official receipt showing payment thereof (if any) or any other evidence
of the payment as may be available to Servicer through the exercise of
its reasonable efforts. If Trustee fails to pay any Taxes when due to
the appropriate taxing authority or fails to remit to the Purchaser the
required receipts or other required documentary evidence, the Purchaser
shall be entitled to receive, solely from amounts allocated with
respect thereto and paid pursuant to the Supplement, additional amounts
necessary to indemnify it for any incremental taxes, interest or
penalties that may become payable by the Purchaser as a result of any
such failure, and the amounts shall constitute "Additional Amounts" for
purposes of the Supplement, and the Purchaser shall be entitled to
-5-
<PAGE>
receive these additional amounts, solely from amounts allocated thereto
and paid pursuant to the Supplement.
(c) On or before the date any Assignee becomes a party to this
Agreement (and, so long as it may properly do so, periodically
thereafter, as requested by Servicer, to keep forms up to date), if
such Assignee is not a United States person (as defined in section
7701(a)(30) of the Internal Revenue Code), it shall deliver to Trustee
any certificates, documents or other evidence that shall be required by
the Internal Revenue Code or Treasury Regulations issued pursuant
thereto to establish that, assuming the Certificates are properly
characterized as indebtedness for Federal income tax purposes, it is
exempt from existing United States Federal withholding (including
backup withholding) requirements, including (i) two original copies of
Internal Revenue Service Form 1001 or Form 4224 or successor applicable
form, properly completed and duly executed by the Assignee certifying
that it is entitled to receive payments under this Agreement or any
Certificate without deduction or withholding of any United States
Federal income taxes, and (ii) an original copy of Internal Revenue
Service Form W-8 or W-9 or applicable successor form, properly
completed and duly executed; provided, that if any Assignee does not
comply with this subsection (c), amounts payable to such Assignee under
this Section 3.4 shall be limited to amounts that would have been
payable under this section if such Assignee had so complied.
SECTION 3.5 Early Termination Fee. If for any reason all or
any portion of the Invested Amount of Class B Certificates is reduced
at any time before July 1, 2001, the Purchaser shall be entitled to
receive from Collections a fee (an "Early Termination Fee") equal to
the product of (A) the amount of such reduction in the Invested Amount
of such Purchaser's Class B Certificate multiplied by (B) the number of
months or partial months from the date of such reduction until the
Expected Final Payment Date multiplied by (C) 0.30%. The Early
Termination Fee shall be payable on the date such reduction is effected
and shall constitute "Additional Amounts" for purposes of the
Supplement, and the Purchaser shall be entitled to receive these
additional amounts, solely from amounts allocated thereto and paid
pursuant to the Supplement.
SECTION 3.6 Mandatory Reduction of Invested Amount. During the
Amortization Period or Early Amortization Period, Transferor shall
notify the Agent and the Trustee in writing, not later than 11:00 a.m.,
New York City time, ten London/U.S. Business Days prior to each
Distribution Date that it will repay all or a portion of the Class B
Invested Amount (if required under the Supplement) and shall state in
such notice (x) the amount of funds deposited in the Principal Funding
Account as of the time of such notice and (y) the Class A Invested
Amount as of the time of such notice, and shall cause an amount of
funds equal to the lesser of (i) the principal amount of the Class B
Certificate and
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<PAGE>
(ii) the amount of funds deposited in the Principal Funding Account as
of the time of such notice which are available for application to the
principal amount of the Class B Certificate pursuant to the terms of
the Supplement, to be transferred to the Purchaser for reduction of the
funded principal amount of the Class B Certificate.
ARTICLE IV
OTHER PAYMENT TERMS
SECTION 4.1 Time and Method of Payment. All amounts payable
to the Purchaser or with respect to the Certificate shall be made to
the Purchaser by wire transfer of immediately available funds in
Dollars not later than 2:00 p.m., New York City time, on the date due.
Any funds received after that time will be deemed to have been received
on the next Business Day.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 Transferor. As of the Closing Date, Transferor
represents and warrants to the Purchaser that each of its
representations and warranties in the Pooling Agreement and Purchase
Agreement is true and correct, as if made on the Closing Date, and
further represents and warrants that:
(a) no Early Amortization Event or Unmatured Early
Amortization Event exists;
(b) assuming the accuracy of the Purchaser's representations
set out in Section 5.3 and that the Purchaser (and each Person
acting on the Purchaser's behalf) has not made a general
solicitation or general advertising within the meaning of the
Securities Act, the offer and sale of the Certificate in the
manner contemplated by this Agreement is a transaction exempt
from the registration requirements of the Securities Act, and
the Pooling Agreement is not required to be qualified under the
Trust Indenture Act of 1939, as amended;
(c) Transferor has not dealt with any financial advisor, or
other Person who may be entitled to any commission or
compensation in connection with the sale of the Certificate;
-7-
<PAGE>
(d) no information supplied by or on behalf of Transferor, ICP
or any of its Subsidiaries to the Purchaser in connection with
the Transaction Documents contains any untrue statement of a
material fact or omits to state a material fact necessary to
make the statements contained herein or therein not misleading
in light of the circumstances under which they were made; and
(e) the Certificate has been duly and validly authorized by
Transferor and, from and after the date on which the
Certificate is executed by Transferor and authenticated by the
Trustee in accordance with the terms of the Pooling Agreement
and the Supplement and delivered to and paid for by the
Purchaser in accordance with the terms of this Agreement, will
be validly issued and outstanding and will constitute a valid
and legally binding obligation of the Trust entitled to the
benefits of the Pooling Agreement and the Supplement and
enforceable against the Trust in accordance with its terms.
SECTION 5.2 ICP. As of the Closing Date, ICP represents and
warrants to the Purchaser that:
(a) each of its representations and warranties in the Pooling
Agreement (in its capacity as Servicer) and the Purchase
Agreement (in its capacity as a Seller) is true and correct, as
if made on the Closing Date with the same effect as if made on
that date (unless specifically stated to relate to an earlier
date);
(b) the audited consolidated balance sheet of ICP and its
consolidated Subsidiaries as at the end of ICP's most recent
fiscal year and the related statement of earnings,
stockholders' equity and cash flows of ICP and its consolidated
Subsidiaries for such fiscal year and the unaudited
consolidated balance sheet of ICP and its consolidated
Subsidiaries as at the end of ICP's most recent fiscal quarter
and the related statement of earnings, stockholders' equity and
cash flows of ICP and its consolidated Subsidiaries for such
fiscal quarter, copies of which have been furnished to the
Trustee and the Purchaser, fairly present the consolidated
financial position and business of ICP and its consolidated
Subsidiaries as at the dates specified therein and the
consolidated results of the operations of ICP and its
consolidated Subsidiaries for the periods ended on such dates,
all in accordance with GAAP consistently applied throughout the
periods reflected therein;
(c) since January 1, 1996 through the Closing Date, (i) there
has been no material adverse change in the condition, financial
or otherwise, or the earnings, business affairs or business
prospects of Transferor or
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ICP whether or not arising in the ordinary course of business,
and (ii) there have been no transactions entered into by
Transferor, ICP or the Sellers that are material with respect
to the condition, financial or otherwise, or the earnings,
business affairs or business prospects of Transferor or ICP;
and
(d) no information supplied by or on behalf of Transferor, ICP
or any of its Subsidiaries to the Purchaser in connection with
the Transaction Documents contains any untrue statement of a
material fact or omits to state a material fact necessary to
make the statements contained herein or therein not misleading
in light of the circumstances under which they were made.
SECTION 5.3 Purchaser. As of the Closing Date, the Purchaser
represents and warrants (and each Assignee shall be deemed to represent
and warrant as of the date that its assignment becomes effective) that
it is an "accredited investor" as that term is defined in any of
paragraphs (1), (2), (3) or (7) of Rule 501(a) under the Securities Act
and is not purchasing its Certificate with a view to making a
distribution thereof (within the meaning of the Securities Act).
ARTICLE VI
CONDITIONS
SECTION 6.1 Conditions to Purchase. The obligation of the
Purchaser to Purchase the Certificate shall be subject to the
satisfaction of the conditions precedent that
(a) the conditions precedent specified in Section 4.1 of the
Purchase Agreement and Sections 7.1 and 7.2 of the Class A
Certificate Purchase Agreement (other than those that relate to
this Agreement) shall be satisfied;
(b) the Purchaser shall have received a duly executed and
authenticated Certificate registered in its name and in a
Stated Amount equal to $10,000,000;
(c) the Purchaser shall have received (i) certain fees and
reimbursement of any expenses referred to in Section 8.5 for
which invoices have been presented; and
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(d) the Purchaser shall have received an original (except as
indicated below) counterpart of the following (each of which,
if not in a form attached to this Agreement, shall be in form
and substance satisfactory to the Purchaser):
(i) the Pooling Agreement, the Purchase Agreement and the
Guaranty, each of which shall be in full force and effect, and
all actions required to be taken under those documents in
connection with the issuance of the Certificate shall have been
taken;
(ii) photocopies of each Account Agreement;
(iii) a certificate of the Secretary, or an Assistant
Secretary, of each of Transferor, Servicer, Guarantor and each
Seller with respect to:
(A) attached copies of resolutions of its Board of Directors
(or, if applicable, its managing body) then in full force and
effect authorizing the execution, delivery and performance of
the Transaction Documents,
(B) the incumbency and signatures of those of its officers
authorized to act with respect to the Transaction Documents,
and
(C) attached copies of its certificate of incorporation and
by-laws (or, if applicable, its limited partnership agreement);
(iv) a certificate of an Authorized Officer of each of
Transferor, Servicer and each Seller as to the satisfaction of
the conditions precedent set forth in Section 6.1, and a
certificate of Transferor that the representations and
warranties of the Transferor set out in this agreement are true
and correct as of the date of such initial purchase and that no
Early Amortization Event or Unmatured Early Amortization Event
exists;
(v) a certificate of an appropriate officer of Trustee stating
that the Pooling Agreement has been duly authorized, executed
and delivered by Trustee and the Certificate has been duly
authenticated by Trustee in accordance with the Pooling
Agreement and an opinion of counsel to Trustee as to related
matters;
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(vi) evidence that each of S&P and DCR has rated the Class B
Certificate "A";
(vii) the Daily Report for the Closing Date;
(viii) agreed-upon procedures letter, in form and substance
satisfactory to the Purchaser, from Coopers & Lybrand LLP with
respect to certain historical information provided by ICP
relating to the Receivables;
(ix) copies of any management or other agreements with regard
to the administration of Transferor's business, certified by an
Authorized Officer of Transferor;
(x) a pro forma balance sheet of Transferor as of the date
hereof, after giving effect to the transactions contemplated by
the Supplement, and a certificate of an Authorized Officer of
ICP as to the capitalization of Transferor (the amount and type
of which capitalization shall be satisfactory to the
Purchaser);
(xi)results of recent searches of the UCC filing records and
tax and ERISA and judgment lien records in each jurisdiction in
which a filing referred to in subsection (xii) is to be made
for filings against each Seller (including any predecessors in
interest to any Seller going back five years) and Transferor,
showing no filings of record that cover any of the Receivables
or the other Transferred Assets other than (i) the financing
statements referred to in subsection (xii) (to the extent shown
in the searches) and (ii) any other filings as to which the
Purchaser has received signed UCC-3 termination statements or
pay-off letters in form and substance satisfactory to it;
(xii) confirmation satisfactory to the Purchaser that (x) the
following have been placed with Lexis Document Services or
another filing service selected by the Purchaser for filing,
the filing to occur on the Closing Date or the first Business
Day thereafter and (y) any filing fees and indebtedness taxes
necessary to perfect or protect true security interests by
means of such filings have been paid in full:
(A) UCC financing statements naming each Seller, as
seller/debtor, and Transferor, as secured party/purchaser, in
each office where the filing is necessary
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for the perfection of the sales or contribution of Receivables
and Related Assets by each Seller to Transferor;
(B) assignments of such existing UCC financing statements to
Trustee, as assignee of the secured party, in each office where
the filing is necessary for the perfection of the sales of
Receivables and Related Assets by each Seller to Transferor;
and
(C) UCC financing statements naming Transferor, as
seller/debtor, and Trustee, as secured party/purchaser, in each
office where the filing is necessary for the perfection of the
transfers of Receivables and other Transferred Assets by
Transferor to Trustee;
(xiii) the following opinions addressed to the Purchaser and
Trustee, and in each case as to the matters and in such form
and substance as shall be satisfactory to the Purchaser and
Trustee:
(A) opinions of Steptoe and Johnson as to certain corporate
and securities matters concerning ICP, Federal and state tax
and UCC matters, true sale and non-consolidation;
(B) opinions of Tuke Yopp & Sweeney as to certain corporate
and securities matters concerning General and Coastline, and
Tennessee limited partnership, Tennessee state tax and
Tennessee UCC matters; and
(C)opinions of White & Case and Lewis, Rice & Fingersh as to
certain state tax matters under Florida law and Missouri law,
respectively;
(xiv) evidence, reasonably satisfactory to the Purchaser, of
the payment of all taxes, fees and other governmental charges,
if any, incidental to the issuance of the Certificates and to
the consummation of the transactions contemplated hereunder and
under the Pooling Agreement;
(xv) a solvency certificate of the chief financial officer of
ICP with respect to the Sellers, which opinion shall be
addressed to the Purchaser and shall be in form and substance
satisfactory to the Purchaser;
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(xvi) such sublicenses and assignments as the Purchaser shall
require with regard to all computer and data recovery software
used by Servicer or any Seller in connection with the servicing
of the Transferred Assets, which sublicenses and assignments
will permit any substitute Servicer to use such software; and
(xvii) any other information, certificates, opinions and
documents as the Purchaser may have reasonably requested.
If the conditions specified above have not been fulfilled on
the date hereof, any condition specified in this Agreement shall not
have been fulfilled when and as required in this Agreement or waived by
the Purchaser, in each case the Purchaser's obligations to purchase the
Certificate pursuant to this Agreement may be terminated by notice to
Transferor. In addition, if, under the circumstances, it shall not be
feasible for the Purchaser to invest on the date the funds that are
held available by the Purchaser for the Purchase, Transferor and
Servicer, jointly and severally, shall pay the Purchaser interest on
the funds at the Alternate Base Rate plus two percent from the date of
the notice until the next succeeding Business Day on which it is
feasible for the Purchaser to invest the funds in the Certificates.
Nothing in this paragraph shall operate to relieve Transferor from any
of its obligations hereunder or otherwise waive any of the Purchaser's
rights against Transferor.
SECTION 6.2 Payment of Expenses. (a) Amounts received by the
Transferor from the Purchase shall be used to pay all expenses then due
and payable under the Transaction Documents.
(b)If the Purchase does not occur on the date hereof, the
Transferor shall nevertheless pay all transaction expenses on the date
hereof, including all legal fees, Rating Agency fees and Trustee fees.
ARTICLE VII
COVENANTS
SECTION 7.1 Affirmative Covenants. Transferor and ICP (in its
capacity as a Seller, as Guarantor and as Initial Servicer) each
severally covenant and agree that, until the Certificate has been paid
in full, it will:
(a) duly and timely perform all of its covenants and
obligations under each Transaction Document to which it is a
party;
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(b) with reasonable promptness deliver to the Purchaser such
information, documents, records or reports respecting the
Program or the Receivables as the Purchaser may from time to
time reasonably request;
(c) at the same time any report (including any Daily Report,
Monthly Report or annual auditors' report), notice or other
document is provided, or caused to be provided, by Transferor
or Servicer to Trustee under the Pooling Agreement, provide the
Purchaser with a copy of the report;
(d)during regular business hours and (so long as no Early
Amortization Event has occurred and is continuing) upon two
Business Days prior written notice, permit the Purchaser (or
such other Person as the Purchaser may designate from time to
time), or their respective agents or representatives (including
certified public accountants or other auditors), at the expense
of the Servicer paid out of the Servicing Fee, (i) to examine
and make copies of and abstracts from, and to conduct
accounting reviews of, all Records in the possession or under
the control of Servicer, Transferor or any Seller, including
the related Contracts and purchase orders, invoices and other
agreements related thereto, and (ii) to visit the offices and
properties of Servicer, Transferor or any Seller for the
purpose of examining such materials described in clause (i),
and to discuss matters relating to the Receivables or the
Related Transferred Assets or the performance by Servicer,
Transferor or any Seller of their respective obligations under
any Transaction Document with any officer, employee or
representative of Servicer, Transferor or any Seller. The
Purchaser may (but shall not be obligated to) conduct, or cause
its agents or representatives to conduct, reviews of the types
described in this paragraph (each such review, a "Receivables
Review") whenever the Purchaser, in its reasonable judgment,
deems any such review appropriate.
SECTION 7.2 Transfers. Purchaser agrees that it will not
transfer its Certificate (or any portion thereof) to any Person unless
such Person shall have provided the Trustee and Transferor with a
certificate to the effect that such Person is an "accredited investor"
as that term is defined in any of paragraphs (1), (2), (3) or (7) of
Rule 501(a) under the Securities Act and is not purchasing its
Certificate with a view to making a distribution thereof (within the
meaning of the Securities Act).
SECTION 7.3 Procedures Letter and Report. The Agent shall
receive, for the account of the Purchasers, on or before September 30,
1996, an agreed-upon procedures letter in form and substance similar to
the procedures letter delivered pursuant to Section 6.1(d)(viii) and a
report from Coopers & Lybrand L.L.P. of the type specified in Section
3.7(a)(i) of the Pooling Agreement except
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that such report shall pertain only to Receivables originated by
General and Coastline during the period from the Closing Date through
August 31, 1996.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.1 Amendments. Except as provided in Section 13.1(a)
or (b) of the Pooling Agreement, Transferor, ICP and Initial Servicer
shall not amend, waive or otherwise modify any provision of any
Transaction Document to which it is a party, consent to any departure
therefrom, or grant any waiver or consent thereunder, unless the same
shall have been consented to in writing by Purchasers (defined for
purposes of this sentence as the Purchaser hereunder and under the
Certificate Purchase Agreement (Series 1996-1, Class A) dated as of the
date hereof, among Inter-City Products Receivables Company, L.P.,
Inter-City Products Corporation (USA) and the Purchasers described
therein) having Series Percentages that aggregate over 50% prior to the
effectiveness of the same; provided, however, that no amendment
modification, waiver or consent shall (a) decrease in any manner the
amount of, or delay the timing of, any allocation, payment or
distribution in respect of the Certificate without the prior written
consent of the Purchaser, (b) amend, modify or waive the provisions of
this section with respect to the rights of the Purchaser, or the Class
Percentage or Series Percentage of the Purchaser, without the consent
of the Purchaser, (d) waive any Early Amortization Event arising from a
Bankruptcy Event with respect to Transferor, ICP or any Seller without
the consent of the Purchaser, (e) amend or modify the Class Percentage
of the Purchaser, without its prior written consent, or (f) waive any
of the requirements hereunder that the interests of Trustee in the
Receivables and the other Transferred Assets be perfected by
appropriate UCC filings without the prior written consent of the
Purchaser; provided further that neither the execution and delivery of
a Supplement relating to a refinancing of the Certificate as
contemplated by Section 4.9 of the Supplement relating to the
Certificate, nor any other amendment to the Transaction Documents in
connection with such a refinancing, shall require any consent from the
Purchaser, so long as the prior or contemporaneous repayment in full of
the Certificate in accordance with Section 5.2 of the Supplement
relating to the Certificates is a condition to the issuance of the
refinancing certificates, and of the effectiveness of such related
amendment. The Purchaser shall be bound by any modification, waiver or
consent authorized by this section.
SECTION 8.2 No Waiver; Remedies. Any waiver, consent or
approval given by any party hereto shall be effective only in the
specific instance and for the specific purpose for which given, and no
waiver by a party of any breach or
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default under this Agreement shall be deemed a waiver of any other
breach or default. No failure on the part of any party hereto to
exercise, and no delay in exercising, any right hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any
right hereunder, or any abandonment or discontinuation of steps to
enforce the right, power or privilege, preclude any other or further
exercise thereof or the exercise of any other right. No notice to or
demand on any party hereto in any case shall entitle such party to any
other or further notice or demand in the same, similar or other
circumstances. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 8.3 Successors and Assigns; Assignments. (a) This
Agreement shall be binding upon, and inure to the benefit of,
Transferor, Servicer, ICP, the Purchaser and their respective
successors and assigns; provided that none of Transferor, Servicer or
ICP may assign its rights or obligations hereunder or in connection
herewith or any interest herein (voluntarily, by operation of law or
otherwise) without the prior written consent of the Purchaser, except
that Servicer may be terminated in accordance with Sections 10.1 and
10.2 of the Pooling Agreement; and provided further, that the Purchaser
may not transfer, pledge, assign, sell participations in or otherwise
encumber its rights or obligations hereunder or any interest herein
except as permitted under this section.
(b) Subject to the terms of Section 8.3(e), the Purchaser may
at any time assign to any Permitted Transferee or to one or more banks
or institutional investors (each, an "Assignee") all or any part of its
participating interests in all or any portion of the Certificate and
its obligations hereunder (its "Credit Exposure"); provided that (i)
unless assigned to an Affiliate of the Purchaser or to a Permitted
Transferee, it assigns all of its Credit Exposure or a portion of its
Credit Exposure in an amount not less than $5,000,000, (ii) if such
Assignee is not a United States person (as defined in section
7701(a)(30) of the Internal Revenue Code), such Assignee shall satisfy
the requirements of Section 3.4(c), provided, that if such Assignee
thereafter fails to comply with the requirements of Section 3.4,
amounts payable to it under Section 3.4 shall be limited to amounts
that would be payable if such Assignee had complied with Section
3.4(c), and (iv) such Assignee shall have certified to the Purchaser
that such Assignee is an "accredited investor" as that term is defined
in any of paragraphs (1), (2), (3) or (7) of Rule 501(a) under the
Securities Act.
In the event of any assignment, the Purchaser (x) shall comply
with Article VI of the Pooling Agreement; provided that no Opinion of
Counsel shall be required to be delivered pursuant to Section 6.3(e) of
the Pooling Agreement with respect to any transfer to a Permitted
Transferee, and (y) shall give notice to Transferor and shall deliver
to the Transferor, for acceptance and recording in its
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records, an assignment agreement substantially in the form of Exhibit
D. Within five Business Days of receipt thereof, the Transferor shall,
if the assignment agreement has been fully executed by the Assignee and
the Purchaser, is completed and is in substantially the form of Exhibit
D, execute the assignment agreement and record the information
contained therein in its records. Upon the earlier of the expiration of
such five Business Day period or the date of the recording, the
assignment will become effective.
Transferor, Servicer, ICP and the Purchaser agree to extend the
rights and benefits with respect to Transferor under this Agreement to
the Assignee to the extent the Assignee would have had if it were the
Purchaser that was an original signatory to this Agreement; provided,
that the parties hereto shall be entitled to continue to deal solely
and directly with the assignor Purchaser in connection with the
interests so assigned to the Assignee until the assignment agreement
and any required fee, as described above, shall have been delivered to
the Transferor by the Purchaser and the Assignee and the assignment
shall have become effective. Upon the effective assignment of its
Credit Exposure, the Purchaser shall be relieved of its obligations
hereunder to the extent of the assignment.
(c) The sale or assignment by the Purchaser of any Credit
Exposure to any Assignee (each, a "Transferee") shall not be effective
until it has agreed to be bound by the provisions of this Agreement.
Transferor and, the Sellers, the Servicer and ICP each authorize the
Purchaser to disclose to any Transferee and any prospective Transferee
any and all information in its possession concerning Transferor, the
Sellers, the Servicer or ICP in connection with the Transferee's credit
evaluation of the Program prior to entering into this Agreement.
(d) Notwithstanding any other provision set forth in this
Agreement, the Purchaser may at any time create a security interest in
all or any portion of its rights under this Agreement and the
Certificate in favor of any Federal Reserve Bank in accordance with
Regulation A of the Board of Governors of the Federal Reserve System.
(e) No transfer, assignment or other conveyance of, or sale of
any Credit Exposure of the Purchaser in, the Certificate shall be made
unless (i) the aggregate outstanding principal amount of the
Certificate transferred, or in which any Credit Exposure is sold,
pursuant to such transfer or sale is equal to a principal amount of
Certificates that would represent at least 2.1% of the total interests
in partnership capital or profits, within the meaning of Treasury
Regulation Section 1.7704-1, and (ii) after giving effect thereto,
there shall be no more than 20 Private Holders of Subject Instruments,
as reasonably determined by Transferor. No Certificate may be
subdivided into an aggregate principal amount that would represent less
than 2.1% of the total interest in partnership capital or profits as
determined pursuant to the preceding sentence. Any
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attempted transfer, assignment, conveyance, participation or
subdivision in contravention of the preceding restrictions, as
reasonably determined by the Transferor, shall be void ab initio and
the purported transferor, seller or subdivider of such Certificate
shall continue to be treated as the Certificateholder of any such
Certificate for all purposes of this Agreement.
(f) Each Affected Party with respect to the Purchaser shall be
entitled to receive additional payments pursuant to this Agreement as
though it were a Purchaser and this Agreement applied to its interest
in a Certificate or commitment to make or acquire interests in
Purchases; provided that such Affected Party shall not be entitled to
additional payments pursuant to Section 3.4 attributable to its failure
to satisfy the requirements of subsection 3.4(c) as if it were an
Assignee.
(g) Each Affected Party claiming increased amounts described
in this Agreement shall furnish, through its related Purchaser, to the
Trustee, Servicer and Transferor a certificate setting forth in
reasonable detail the basis and amount of each request by such Affected
Party for any such amounts referred to in this Agreement, which
certificate will be prepared in accordance with the requirements of
this Agreement (if any). Determinations by an Affected Party of any
increased amounts referred to in this Agreement shall be conclusive,
absent demonstrable error. Each Affected Party shall promptly notify,
through its related Purchaser, the Trustee, Servicer and Transferor of
the occurrence of any event of which such Affected Party is aware that
would be likely to result in a demand for compensation pursuant to this
Agreement.
SECTION 8.4 Survival of Agreement. All covenants, agreements,
representations and warranties made herein and in the Certificate
delivered pursuant hereto shall survive the making and the repayment of
the Purchase and the execution and delivery of this Agreement and the
Certificate and shall continue in full force and effect until all
obligations have been paid in full and all commitments of the Purchaser
hereunder have been terminated. In addition, the obligations of
Transferor under Sections 3.2, 3.3, 3.4, 3.5 and 8.5 shall survive the
termination of this Agreement.
SECTION 8.5 Expenses; Indemnification. Transferor and ICP
jointly and severally shall pay on demand (a) all reasonable out-of-
pocket fees and expenses (including reasonable attorneys' fees and
expenses) of the Purchaser incurred in connection with the preparation,
execution, delivery, administration, amendment, modification and waiver
of the Transaction Documents and the making and repayment of the
Purchase, including any Servicer or collection agent fees paid to any
third party for services rendered to the Purchaser in collecting the
Receivables and (b) all reasonable out-of-pocket fees and expenses of
the Purchaser (including reasonable attorneys' fees and expenses of its
counsel)
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incurred in connection with performance by the Agent of its
administrative duties under this Agreement, any consulting performed by
the Agent at the request of the Transferor, and the enforcement of the
Transaction Documents against Transferor, Servicer, Guarantor and the
Sellers and in connection with any workout or restructuring of the
Transaction Documents. In addition, Transferor will pay any and all
stamp and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing, recording or
enforcement of this Agreement or any payment made under the Transaction
Documents, and hereby indemnifies and saves the Purchaser harmless from
and against any and all liabilities with respect to or resulting from
any delay in paying or omission to pay the taxes and fees. Transferor
and ICP jointly and severally agree to reimburse and indemnify the
Purchaser and its officers, directors, shareholders, controlling
Persons, employees and agents (collectively, the "Indemnitees") from
and against any and all actions, judgments, costs, expenses or
disbursements of whatsoever kind or nature that may be imposed on,
asserted against or incurred or suffered by the Purchaser (including
fees and expenses of legal counsel, accountants and experts) in any way
relating to or arising out of any Transaction Document. Additional
amounts sufficient to indemnify the Purchaser or other Indemnitees
under this Section 8.5 shall constitute "Additional Amounts" for
purposes of the Supplement, and the Purchaser or other Indemnities
shall be entitled to receive these additional amounts, solely from
amounts allocated thereto and paid pursuant to the Supplement.
Notwithstanding the foregoing (and with respect to clause (x)
below, without prejudice to the rights that an Indemnitee may have
pursuant to the other provisions of the Transaction Documents), in no
event shall any Indemnitee be indemnified against any amounts (w)
resulting from gross negligence or willful misconduct on the part of
such Indemnitee (or any of its officers, directors, employees,
affiliates or agents) or the failure of such Indemnitee to perform its
obligations under the Transaction Documents, (x) to the extent they
include amounts in respect of Receivables and reimbursement therefor
that would constitute credit recourse to Servicer for the amount of any
Receivable or Related Transferred Asset not paid by the related Obligor
or (y) to the extent they are or result from lost profits (other than
any interest or prepayment premium or early termination amount).
If for any reason the indemnification provided in this section
is unavailable to an Indemnitee or is insufficient to hold it harmless,
then Transferor and ICP jointly and severally shall contribute to the
amount paid by the Indemnitee as a result of any loss, claim, damage or
liability in a proportion that is appropriate to reflect not only the
relative benefits received by the Indemnitee on the one hand and
Transferor and ICP on the other hand, but also the relative fault of
the Indemnitee (if any), Transferor and ICP and any other relevant
equitable
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considerations; provided that the Transferor shall not, and shall not
be obligated to, pay any amount pursuant to this Section unless and to
the extent that the Transferor has funds available to pay such amounts
or funds are allocated thereafter to the Transferor pursuant to the
penultimate paragraph of Section 4.3 or priority fifth of Section 4.4
of the Supplement, and there shall be no recourse to Transferor for all
or any part of any amounts payable pursuant to this section if the
funds are at any time insufficient to make all or part of any such
payments. Any amount which Transferor does not pay pursuant to the
operation of the preceding sentence shall not constitute a claim (as
defined in Sec. 101 of the Bankruptcy Code) against or corporate
obligation of Transferor for any such insufficiency.
SECTION 8.6 Entire Agreement. This Agreement, together with
the documents delivered pursuant to Section 6.1 and the other
Transaction Documents, including the exhibits and schedules thereto,
contains a final and complete integration of all prior expressions by
the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect
to the subject matter hereof, superseding all previous oral statements
and other writings with respect thereto.
SECTION 8.7 Notices. All communications hereunder shall be in
writing and shall be deemed to have been duly given if personally
delivered, sent by overnight courier or mailed by registered mail,
postage prepaid and return receipt requested, or transmitted by
facsimile transmission and confirmed by a similar mailed writing to any
party at the address for that party set forth (a) on the signature page
to this Agreement or (b) to another address as that party may designate
in writing to the Purchaser and Transferor.
SECTION 8.8 No Third-Party Beneficiaries. Nothing expressed
herein is intended or shall be construed to give any Person (other than
the parties hereto, and Assignees described in Section 8.3 and, to the
extent provided in Section 8.3, the other Affected Parties) any legal
or equitable right, remedy or claim under or in respect of this
Agreement.
SECTION 8.9 Severability of Provisions. Any covenant,
provision, agreement or term of this Agreement that is prohibited or is
held to be void or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of the prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement.
SECTION 8.10 Counterparts. This Agreement may be executed in
any number of counterparts (which may include facsimile) and by the
different parties hereto in separate counterparts, each of which when
so executed shall be deemed
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to be an original, and all of which together shall constitute one and
the same instrument.
SECTION 8.11 Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
SECTION 8.12 Tax Characterization. Each party to this
Agreement (a) acknowledges that it is the intent of the parties to this
Agreement that, for purposes of Federal, applicable state and local
income and franchise and other taxes measured by or imposed on income,
the Certificate will be treated as evidence of indebtedness secured by
the Transferred Assets and the Trust will not be characterized as an
association (or publicly traded partnership) taxable as a corporation,
(b) agrees that the provisions of the Transaction Documents be
construed to further that intent, and (c) agrees to treat the
Certificate, for purposes of Federal, state and local income and
franchise and other taxes measured by or imposed on income, as
indebtedness.
SECTION 8.13 No Proceedings. (a) Each of Servicer and the
Purchaser (solely in its capacity as such) hereby agrees that it will
not institute against Transferor, or join any other Person in
instituting against Transferor, any insolvency proceeding (namely, any
proceeding of the type referred to in the definition of "Bankruptcy
Event") so long as any Series 1996-1 Certificates shall be outstanding
or there shall not have elapsed one year plus one day since the last
day on which any Series 1996-1 Certificates shall have been
outstanding. The foregoing shall not limit the right of Servicer or the
Purchaser to file any claim in or otherwise take any action with
respect to any insolvency proceeding that was instituted against
Transferor by any other Person.
* * * * *
-21-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their duly authorized officers and delivered as of
the day and year first above written.
INTER-CITY PRODUCTS
RECEIVABLES COMPANY, L.P.
By: Inter-City Products Partner
Corporation, its general
partner
By:
-----------------------------
Name: David Cain
Title: Senior Vice President
Address: 650 Heil-Quaker Blvd.
Lewisburg, Tennessee 37091
Attention: David Cain
Telephone: (615) 270-4136
Facsimile: (615) 270-4220
INTER-CITY PRODUCTS CORPORATION
(USA), as Servicer
By:
-----------------------------
Name: David Cain
Title: Senior Vice President
Address: 650 Heil-Quaker Blvd.
Lewisburg, Tennessee 37091
Attention: David Cain
Telephone: (615) 270-4136
Facsimile: (615) 270-4220
ARGOS FUNDING CORP.,
as the Purchaser
By:
-----------------------
Name:
-----------------------
Title:
---------------------
Address:
Attention:
Telephone:
Facsimile:
<PAGE>
EXHIBIT A
to Certificate Purchase Agreement
Series 1996-1, Class B
FORM OF POOLING AND SERVICING AGREEMENT
Filed as Exhibit 10.1 to this Amendment No. 1 to Registration Statement on
Form S-4 (File No. 333-58837) and incorporated herein by this reference.
<PAGE>
EXHIBIT B
to Certificate Purchase Agreement
Series 1996-1, Class B
FORM OF RECEIVABLES PURCHASE AGREEMENT
Filed as Exhibit 10.3 to this Amendment No. 1 to Registration Statement on
Form S-4 (File No. 333-58837) and incorporated herein by this reference.
<PAGE>
EXHIBIT C
to Certificate Purchase Agreement
Series 1996-1, Class B
FORM OF SERIES 1996-1 SUPPLEMENT
Filed as Exhibit 10.2 to this Amendment No. 1 to Registration Statement on
Form S-4 (File No. 333-58837) and incorporated herein by this reference.
<PAGE>
EXHIBIT D
to Certificate Purchase Agreement
Series 1996-1, Class B
FORM OF ASSIGNMENT AGREEMENT
This ASSIGNMENT AGREEMENT, dated as of [____________] (this "Agreement"),
is made between ____________________ ("Assignor"), and
[_____________________] ("Assignee"). Except as otherwise defined herein,
capitalized terms have the meanings assigned to them in the Certificate
Purchase Agreement (as defined below).
BACKGROUND
A. Assignor is a party to the Certificate Purchase Agreement,
dated as of July 25, 1996 (as amended, supplemented or otherwise modified
from time to time, the "Certificate Purchase Agreement"), among INTER-CITY
PRODUCTS RECEIVABLES COMPANY, L.P., a Tennessee limited partnership
("Transferor"), INTER-CITY PRODUCTS CORPORATION (USA), a Delaware
corporation, and the Purchaser party thereto (including Assignor).
B. Assignor wishes to assign, and Assignee wishes to be so
assigned, Assignor's rights and obligations arising on and after the
Effective Date (as defined below) under the Certificate Purchase Agreement
and its Certificate including (a) its obligations to make Purchases (its
"Credit Exposure") and (b) its outstanding Purchases (the "Purchases").
C. Assignor and Assignee also wish (a) Assignee to assume the
obligations of Assignor under the Certificate Purchase Agreement with
respect to Assignee's Share (as defined below) to the extent of the rights
assigned and (b) Assignor to be released from the obligations assumed by
Assignee.
D. Transferor, by its execution hereof, are providing its written
consent to the assignment accomplished by this Agreement.
SECTION 1. Assignment. Effective on the Effective Date (as
defined below) and upon payment of the amount specified in Section 3(a),
Assignor hereby assigns and transfers to Assignee, without recourse,
representation or warranty of any kind, express or implied (except as
provided in Sections 6(a) and (b)), and subject to Section 4(b), Assignee's
Share (as specified in Annex I hereto)<PAGE>
(the "Assignee's Share") of all of Assignor's rights, title and interest
arising under (a) the Certificate Purchase Agreement relating to Assignor's
Credit Exposure including all rights and obligations with respect to the
Purchases attributable to Assignee's Share and (b) Assignor's Certificate
with respect to Assignee's Share as will result in Assignee having from and
after the Effective Date the Class Percentage ("Assignee's Percentage")
specified in Annex I.
SECTION 2. Assumption. Effective on the Effective Date, Assignee
hereby irrevocably purchases, assumes and takes from Assignor, and Assignor
is hereby expressly and absolutely released from, all of Assignor's
obligations arising under the Certificate Purchase Agreement relating to
Assignee's Share and of any outstanding Purchases attributable to
Assignee's Share. Assignee hereby agrees to be bound by the provisions of
the Certificate Purchase Agreement.
SECTION 3. Payment. In consideration of the assignment by
Assignor to Assignee as set forth above, Assignee agrees to pay to
Assignor, in Dollars and in immediately available funds, (a) on or prior to
the Effective Date, an amount specified by Assignor in writing on or prior
to the Effective Date that represents Assignee's Share attributable to the
principal amount of the Purchases made pursuant to the Certificate Purchase
Agreement and outstanding on the Effective Date, and (b) from time to time
thereafter, other amounts (if any) that Assignee has agreed in writing to
pay to Assignor after the Effective Date. In consideration of the
assumption by Assignee, Assignor agrees to pay to Assignee within two
Business Days of the Effective Date, an assignment fee (if any) that
previously has been agreed to in writing by both parties.
Notwithstanding anything to the contrary in this Agreement, if and
when Assignee receives or collects (x) any payment of principal or interest
relating to any Purchases or (y) any payment of fees that are required to
be paid to Assignor pursuant to this Agreement, then Assignee shall forward
the payment to Assignor.
To the extent payment of funds to Assignee or Assignor are not
made within two Business Days, each, as the case may be, shall be entitled
to recover the due amount, together with interest thereon at the Federal
Funds Rate per annum accruing from the date of payment or the date of
receipt of the funds by the other party.
SECTION 4. Effectiveness. (a)(ii This Agreement shall become
effective on the date (the "Effective Date") on which it shall have been
duly executed by all parties and the Transferor shall have recorded the
information contained herein in its records (or automatically upon the
Transferor's receipt of this Agreement signed by Assignor and Assignee if
not so recorded within five Business Days of such receipt) Assignor hereby
notifies the Transferor of the assignment, effective
-2-
<PAGE>
as of the Effective Date, of Assignee's Share and any Purchases
attributable to the Assignee's Share, and directs the Transferor to pay
Assignee any payment of principal of, or interest on, any Purchase
attributable to the Assignee's Share of any Purchases. No (x) failure of
either Assignee or Assignor to settle any amount owed to the other (except
with respect to the payment of the processing and recordation fee to the
Transferor and the payment due under Section 3(a)), (y) dispute respecting
any other settlement, including in respect of Transferor, or (z)
bankruptcy, insolvency or other condition whatsoever respecting any Person,
shall in any way impair, reduce or otherwise affect the effectiveness of
this Agreement.
(iii) Assignor, Assignee and the Transferor each acknowledges and
agrees that from and after the Effective Date, the Transferor shall make
all payments under the Certificate Purchase Agreement in respect of
Assignee's Share (including all payments of principal and interest with
respect thereto, whether or not the payments shall have accrued prior to or
after the Effective Date) to Assignee only. Assignor and Assignee hereby
agree further to make all appropriate adjustments in payments to either of
them under the Certificate Purchase Agreement for periods prior to the
Effective Date directly between themselves.
(b) With respect to any Purchase attributable to Assignee's
Share, if and when Assignor receives or collects any payment of principal,
interest or Additional Amounts with respect to Assignee's Share for any
period commencing on or after the Effective Date, Assignor shall distribute
to Assignee the portion attributable to Assignee's Share, but only to the
extent it accrued on or after the Effective Date and was not theretofore
paid to Assignee by Transferor or otherwise. Any principal, interest and
Additional Amounts paid prior to the Effective Date shall be retained by
Assignor. Any principal, interest and Additional Amounts received by
Assignee that accrued prior to the Effective Date shall be forwarded
promptly, in the form received, to Assignor. Assignee recognizes and agrees
that notwithstanding anything to the contrary in this Agreement, Assignor
shall retain all of its rights to indemnification under the Certificate
Purchase Agreement for any events, acts or omissions occurring prior to the
Effective Date.
(c) The Transferor, by its execution hereof, acknowledges the
assignment and agrees to make payments in respect of principal, interest,
fees and Additional Amounts as described in clause (a).
SECTION 5. Rights as Purchaser under Certificate Purchase
Agreement. In accordance with Section 8.3 of the Certificate Purchase
Agreement, (a) as of the Effective Date, Assignee will be a Purchaser
under, and party to, the Certificate Purchase Agreement and shall have (i)
all of the rights and obligations
-3-
<PAGE>
of a Purchaser (to the extent of the assignment and assumption of
Assignee's Share effected by this Agreement) and (ii) the addresses for (A)
notice purposes and (B) LIBOR Office as set forth in items 2 and 3,
respectively, of Annex I hereto and (b) promptly on or after the Effective
Date, Transferor will execute and deliver any documents and instruments
that Assignor or Assignee reasonably may require.
SECTION 6. Representations and Warranties. (a) Each of Assignor
and Assignee represents and warrants to the other as follows:
(i) it has full power and authority, and has taken all action
necessary, to execute and deliver this Agreement, to fulfill the
obligations hereunder and to consummate the transactions
contemplated hereby,
(ii) the making and performance of this Agreement and all
documents required to be executed and delivered hereunder do not
and will not violate any law or regulation of the jurisdiction of
its incorporation or any other applicable law or regulation,
(iii) this Agreement has been duly executed and delivered and
constitutes its legal, valid and binding obligation, enforceable
in accordance with its terms, and
(iv) all approvals, authorizations or other actions by, or filing
with, any Governmental Authority necessary for the validity or
enforceability of its obligations under this Agreement have been
obtained.
(b) Assignor represents and warrants to Assignee that Assignee's
Share and the Purchases attributable to Assignee's Share are not subject to
any liens or security interests created by Assignor.
(c) Except as set forth in subsections (a) and (b), Assignor
makes no representations or warranties, express or implied, to Assignee and
shall not be responsible to Assignee for (i) the execution, effectiveness,
genuineness, legality, validity, enforceability, collectibility, regulatory
status or sufficiency of the Certificate Purchase Agreement or any of the
other Transaction Documents, (ii) the perfection, priority, value or
adequacy of any collateral security or guaranty, (iii) the taking of any
action, or the failure to take any action, with respect to any of the
Transaction Documents, (iv) any representations, warranties, recitals or
statements made in any of the Transaction Documents or in any written or
oral financial or other statements, instruments, reports, certificates or
documents made or furnished by Assignor to Assignee or by or on behalf of
Transferor or any of its Affiliates to Assignor or Assignee in connection
with the Transaction Documents and the transactions contemplated thereby,
(v) the financial or other
-4-
<PAGE>
condition of Transferor or any other Person or (vi) any other matter having
any relation to any of the foregoing. Assignor shall not be required to
ascertain or inquire as to the performance or observance of any of the
terms, conditions, provisions, covenants or agreements contained in any of
the Transaction Documents or the existence or possible existence of any
Unmatured Early Amortization Event, Early Amortization Event or Servicer
Default. Additionally, Assignor shall not have any duty or responsibility
either initially or on a continuing basis to make any investigation or any
appraisal on Assignee's behalf or to provide Assignee with any credit or
other information with respect thereto, whether coming into Assignor's
possession before the execution of the Certificate Purchase Agreement or at
any time thereafter. Assignor shall have no responsibility with respect to
the accuracy of, or the completeness of, any information provided to
Assignee, whether by Assignor or by or on behalf of Transferor or any other
Person obligated under the Certificate Purchase Agreement or any related
instrument or document.
(d) Assignee represents and warrants that (x) it has made its own
independent investigation of each of the foregoing matters, including the
financial condition and affairs of Transferor and its Affiliates, in
connection with the making of the Purchases and the execution of this
Agreement (including the solvency of Transferor and its Affiliates, their
ability to pay their respective debts as they mature and the capital of
Transferor and its Affiliates remaining after the closing under the
Transaction Documents and the consummation of the transactions contemplated
thereby) and has made and shall continue to make its own appraisal of the
creditworthiness of Transferor and its Affiliates, and (y) the
representations and warranties set forth in Section 5.3 of the Certificate
Purchase Agreement are true and correct with respect to the Assignee.
Assignee hereby agrees that it will not make any general solicitation or
general advertising for the offer or sale of the Certificates. Assignee
(i) confirms that it has received copies of the Transaction Documents
together with copies of certain other closing documents delivered in
connection with the Certificate Purchase Agreement, financial statements
and any other documents and information that it has requested or deemed
appropriate to make its own credit analysis and decision to enter into this
Agreement and (ii) agrees that it will, independently and without reliance
upon the Transferor, Assignor or any other Purchaser and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under the Transaction Documents.
(e) Assignee represents and warrants to Transferor that the
representations and warranties in Section 5.3 of the Certificate Purchase
Agreement are true and correct in respect of such Assignee as of the date
hereof.
-5-
<PAGE>
SECTION 7. No Proceedings. Assignee hereby agrees to be bound by
the provisions of Section 8.13 of the Certificate Purchase Agreement.
SECTION 8. Withholding Taxes. [In accordance with Section 3.4 of
the Certificate Purchase Agreement, Assignee agrees to execute and deliver
to the Trustee, as Paying Agent, and the Transferor, on or before the
Effective Date, (a) two original copies of Internal Revenue Service Form
1001 or 4224 or successor applicable form, properly completed and duly
executed by the Assignee certifying that it is entitled to receive payments
under the Certificate Purchase Agreement and any Certificate without
deduction or withholding of any United States Federal income taxes, and (b)
an original copy of Internal Revenue Service Form W-8 or W-9 or applicable
successor form, properly completed and duly executed. Assignee represents
and warrants to Transferor and Assignor that, as of the Effective Date, it
shall be entitled to receive payments of principal and interest under its
Certificate, the Certificate Purchase Agreement and hereunder without
deduction for or on account of any taxes imposed by the United States of
America or any political subdivision thereof. In the event that, after
delivering the applicable form, Assignee shall cease to be exempt from
withholding and/or deduction of taxes, then the Transferor may withhold
and/or deduct the applicable amount from any payments of principal,
interest and any fees to which Assignee otherwise would be entitled, and
the Transferor shall have no liability whatsoever to Assignee for any such
withholding or deduction. Assignee shall indemnify Transferor from and
against all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs or expenses that result from Assignee's breach of
such representation and warranty.]1
SECTION 9. Miscellaneous. (a) Each of the parties hereto agrees
to take any action and execute and deliver any documents that any party
hereto reasonably may request from time to time in order to implement more
fully the purposes of this Agreement. Without limiting the generality of
the foregoing, Assignor and Assignee will cooperate in obtaining for
Assignee a Certificate (as well as a replacement Certificate for Assignor
representing any retained interest of Assignor).
(b) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES.
_______________
1/ If the Assignee is not a person within the meaning of Section
7701(a)(30) of the Internal Revenue Code.
-6-
<PAGE>
(c) Except as otherwise set forth herein, this Agreement sets
forth the entire agreement between the parties relating to the subject
matter hereof, and no term or provision of this Agreement may be amended,
changed, waived, discharged or terminated orally or otherwise, except in a
writing signed by Assignor and Assignee.
(d) This Agreement may be executed in any number of counterparts
and by the different parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
(e) Each of the parties hereto agrees that each party shall bear
its own expenses in connection with the preparation and execution of this
Agreement and the consummation of the Assignment described herein.
(f) All representations and warranties made, and indemnities
provided for, herein shall survive the consummation of the transactions
contemplated hereby.
(g) Assignor may at any time or from time to time grant
assignments in its rights and obligations under the Certificate Purchase
Agreement and its Certificate to other Persons, but not in the portions
thereof assigned to Assignee.
(h) This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns. Neither
Assignor nor Assignee may assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of the
other party. The preceding sentence shall not limit the right of Assignee
to assign all or part of Assignee's Share in the manner contemplated by the
Certificate Purchase Agreement.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their duly authorized officers and delivered as of
the day and year first above written.
-----------------------------,
as Assignor
By:
---------------------------
Title:
------------------------
-----------------------------,
as Assignee
By:
---------------------------
Title:
------------------------
The undersigned hereby acknowledges the terms and provisions of
this Agreement, and agrees to make payments in respect of principal,
interest and fees as described in Section 4(a).
INTER-CITY PRODUCTS RECEIVABLES COMPANY, L.P.
By: Inter-City Products Partner Corporation
By:
------------------------------------
Title:
---------------------------------
-8-
<PAGE>
ANNEX I
to Assignment Agreement
Item 1. Assignee's Share:
(a) Assignee's Stated Amount $______________
(b) Assignee's Class Percentage _____________%
Item 2. Address of Assignee for notice purposes:
Attention:
Telephone:
Facsimile:
Item 3. LIBOR Office of Assignee:
<PAGE>
SCHEDULE I
to Certificate Purchase Agreement
Series 1996-1, Class B
AMOUNT OF EACH INITIAL PURCHASER'S CERTIFICATE
Purchaser Invested Amount of Certificate
---------- ------------------------------
Argos Funding Corp. $10,000,000.00
Class Percentage
----------------
Argos Funding Corp. 100%
Series Percentage
-----------------
Argos Funding Corp. 14.29%
<PAGE>
APPENDIX X
to Certificate Purchase Agreement
Series 1996-1, Class B
INDEX OF ADDITIONAL DEFINED TERMS
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Assignee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Bankruptcy Event. . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Class Percentage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Credit Exposure . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Early Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ICP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Indemnitees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Initial Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
LIBOR Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Pooling Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Purchase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Receivables Review. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Series Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Supplement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Transferee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Transferor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
<PAGE>
FIRST AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT
and
SECOND AMENDMENT TO CERTIFICATE PURCHASE AGREEMENT
(Series 1996-1, Class A)
This First Amendment to the Receivables Purchase Agreement and
Second Amendment to the Certificate Purchase Agreement (Series 1996-1,
Class A) (this "Amendment") dated as of January 27, 1997, is made among
INTER-CITY PRODUCTS CORPORATION (USA), a Delaware corporation ("ICP" or
"Initial Servicer"), INTER-CITY PRODUCTS PARTNER CORPORATION, a
Delaware corporation ("ICPPC"), GENERAL HEATING AND COOLING COMPANY, a
Delaware corporation ("General"), COASTLINE DISTRIBUTION, INC. a
Delaware corporation ("Coastline" and, together with ICP, ICPPC and
General, the "Sellers"), INTER-CITY PRODUCTS RECEIVABLES COMPANY, L.P.,
a Tennessee limited partnership ("Buyer" or "Transferor"), ANAGRAM
FUNDING CORP., a Delaware corporation ("Anagram" and, together with its
permitted assigns, the "Purchaser(s)"), and ABN AMRO CHICAGO
CORPORATION (as successor to The Chicago Corporation), as agent for the
Purchaser(s) (in that capacity, together with any successors in that
capacity, "Agent").
REFERENCE IS MADE to (i) the Receivables Purchase Agreement
(the "Receivables Purchase Agreement") dated as of July 25, 1996, among
Sellers and Buyer and (ii) the Certificate Purchase Agreement (Series
1996-1, Class A) dated as of July 25, 1996, among Transferor, Initial
Servicer, Anagram and Agent (as amended by the First Amendment to the
Certificate Purchase Agreement (Series 1996-1, Class A) dated as of
December 1, 1996, the "1996-1 Class A Certificate Purchase Agreement").
WHEREAS, Section 10.1 of the Receivables Purchase Agreement
provides that the Receivables Purchase Agreement may be amended by
Sellers and Buyer.
WHEREAS, Section 10.1 of the 1996-1 Class A Certificate
Purchase Agreement provides that the 1996-1 Class A Certificate
Purchase Agreement may be amended by Transferor, ICP and Initial
Servicer if such amendment is consented to in writing by the Required
Purchasers (as defined therein).
WHEREAS, pursuant to (i) the Stock and Asset Purchase Agreement
dated as of January 27, 1997 between ICP and A&C Distributors, Inc.
(the "Purchase Agreement"), ICP is selling certain branches engaged in
the business of selling air conditioning and heating parts and
equipment as distributors ("Sold Branches") and ICP is selling its
equity interest in Coastline.
WHEREAS, the parties hereto wish to amend the Receivables
Purchase Agreement and the 1996-1 Class A Certificate Purchase
Agreement.
<PAGE>
NOW, THEREFORE, it is hereby agreed that, effective as of the
opening of business on January 27, 1997:
1.Attached hereto as Exhibit A is a Bill of Sale dated as of
the date hereof between Inter-City Products Corporation (USA) ("ICP")
and LaSalle National Bank, as Trustee ("Trustee") of the Inter-City
Products Receivables Master Trust (the "Trust") (the "Branch Bill of
Sale"), and attached hereto as Exhibit B is a Bill of Sale dated as of
the date hereof between Coastline Distribution, Inc. ("Coastline") and
Trustee (the "Coastline Bill of Sale"), pursuant to which certain
receivables of the Trust shall be sold to ICP and Coastline,
respectively.
(a)Notwithstanding the provisions of the Receivables Purchase
Agreement, the Acquired Receivables, as defined in each Bill of Sale,
may be purchased by the Buyer thereunder in accordance with the terms
of the respective Bill of Sale.
(b)Coastline shall no longer be a Seller under the Receivables
Purchase Agreement and upon payment of the consideration provided in
the Coastline Bill of Sale, Coastline shall have no further obligations
under the Receivables Purchase Agreement.
(c)ICP represents and warrants that the Acquired Receivables
being purchased by it pursuant to the Branch Bill of Sale are
receivables originated by the Sold Branches and such Sold Branches have
been sold by ICP pursuant to the Purchase Agreement.
(d)Coastline represents and warrants that the Acquired
Receivables being purchased by it pursuant to the Coastline Bill of
Sale are receivables originated by Coastline and that Coastline has
been sold by ICP pursuant to the Purchase Agreement.
2.Section 4.2(a) of the 1996-1 Class A Certificate Purchase
Agreement is hereby amended as follows:
The reference to "0.65%" is hereby deleted and replaced with
"0.80%".
3.Section 2.3(b)(i)(C) of the 1996-1 Class A Certificate
Purchase Agreement is hereby amended as follows:
The reference to "0.03%" is hereby deleted and replaced with
"0.06%".
4.The terms of the Receivables Purchase Agreement and the 1996-
1 Class A Certificate Purchase Agreement shall continue in full force
and effect as amended and modified by this Amendment.
5.This Amendment may be executed in several counterparts, and
all so executed shall constitute one and the same Amendment.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused his
Amendment to be executed on their behalf by their officers duly
authorized thereunto, as of the day and year first above written.
INTER-CITY PRODUCTS CORPORATION
(USA)
By: _________________________
Name:
Title:
INTER-CITY PRODUCTS PARTNER
CORPORATION
By: _________________________
Name:
Title:
GENERAL HEATING AND COOLING
COMPANY
By: _________________________
Name:
Title:
COASTLINE DISTRIBUTION, INC.
By: _________________________
Name:
Title:
INTER-CITY PRODUCTS RECEIVABLES
COMPANY, L.P.
By: Inter-City Products Partner
Corporation
Its: General Partner
By: _________________________
Name:
Title:
ANAGRAM FUNDING CORP.
By: _________________________
Name:
Title:
ABN AMRO CHICAGO CORPORATION
By: _________________________
Name:
Title:
<PAGE>
EXHIBIT A
FORM OF
BILL OF SALE
THIS BILL OF SALE (this "Bill of Sale") dated as of January 27, 1997, is
made among Inter-City Products Corporation (USA) ("ICP"), a Delaware
corporation ("Buyer"), and LaSalle National Bank, as Trustee of the Inter-
City Products Receivables Master Trust ("Seller").
WHEREAS, ICP is a party to a Receivables Purchase Agreement dated as of
July 25, 1996 among ICP, Inter-City Products Partner Corporation, a Delaware
corporation, certain subsidiaries of ICP and Inter-City Products Receivables
Company, L.P., a Tennessee limited partnership ("ICPRC")(the "Receivables
Purchase Agreement"), whereby ICP sells, transfers, assigns, sets over and
conveys to ICPRC certain of its receivables. Capitalized terms used but not
defined herein have the meanings ascribed to them in the Receivables Purchase
Agreement.
WHEREAS, pursuant to a Pooling and Servicing Agreement dated as of July
25, 1996 among ICPRC, ICP and Seller, ICPRC transfers its interests in the
receivables it purchases pursuant to the Receivables Purchase Agreement to
Seller.
NOW, THEREFORE, the parties hereto agree as follows:
1. Seller hereby sells, transfers, assigns, sets over and conveys to
Buyer, its successors and assigns, to have and to hold forever, all of the
receivables described on the attached ACQUIRED RECEIVABLES SCHEDULE (the
"Acquired Receivables").
2. Seller shall deliver to Buyer UCC-3 Financing Statements (i)
executed by ICPRC as secured party/purchaser releasing the Acquired
Receivables from the collateral described in the UCC-1 Financing Statements
filed on or about July 25, 1996 of ICP as seller/debtor and (ii) executed by
Trustee as secured/party purchaser releasing the Acquired Receivables from
the collateral described in the UCC-1 Financing Statements of ICPRC as
seller/debtor.
3. As consideration for the purchase of Acquired Receivables, Buyer
shall deliver $ by wire transfer of immediately available funds to
an account designated by Seller.
4. Seller, by its execution of this Bill of Sale, by its acceptance of
this Bill of Sale, each hereby acknowledges and agrees that neither the
representations nor warranties nor the rights and remedies of any party under
the Receivables Purchase Agreement shall be deemed enlarged, modified or
altered in any way by this instrument.
<PAGE>
IN WITNESS WHEREOF, the Seller and the Buyer have caused this instrument
to be duly executed under seal as of and on the date first above written.
LASALLE NATIONAL BANK, as Trustee
By:
--------------------------------
Its:
-------------------------------
INTER-CITY PRODUCTS
CORPORATION (USA)
By:
--------------------------------
Its:
-------------------------------
<PAGE>
EXHIBIT B
FORM OF
BILL OF SALE
THIS BILL OF SALE (this "Bill of Sale") dated as of January 27, 1997, is
made among Coastline Distribution, Inc. ("CDI"), a Delaware corporation
("Buyer"), and LaSalle National Bank, as Trustee of the Inter-City Products
Receivables Master Trust ("Seller").
WHEREAS, CDI is a party to a Receivables Purchase Agreement dated as of
July 25, 1996 among ICP, Inter-City Products Partner Corporation, a Delaware
corporation, CDI, certain subsidiaries of ICP and Inter-City Products
Receivables Company, L.P., a Tennessee limited partnership ("ICPRC")(the
"Receivables Purchase Agreement"), whereby CDI sells, transfers, assigns,
sets over and conveys to ICPRC certain of its receivables. Capitalized terms
used but not defined herein have the meanings ascribed to them in the
Receivables Purchase Agreement.
WHEREAS, pursuant to a Pooling and Servicing Agreement dated as of July
25, 1996 among ICPRC, ICP and Seller, ICPRC transfers its interests in the
receivables it purchases pursuant to the Receivables Purchase Agreement to
Seller.
NOW, THEREFORE, the parties hereto agree as follows:
1. Seller hereby sells, transfers, assigns, sets over and conveys to
Buyer, its successors and assigns, to have and to hold forever, all of the
receivables described on the attached ACQUIRED RECEIVABLES SCHEDULE (the
"Acquired Receivables").
2. Seller shall deliver to Buyer UCC-3 Financing Statements (i)
executed by ICPRC as secured party/purchaser releasing the Acquired
Receivables from the collateral described in the UCC-1 Financing Statements
filed on or about July 25, 1996 of CDI as seller/debtor and (ii) executed by
Trustee as secured/party purchaser releasing the Acquired Receivables from
the collateral described in the UCC-1 Financing Statements of ICPRC as
seller/debtor.
3. As consideration for the purchase of Acquired Receivables, Buyer
shall deliver (i) $ by wire transfer of immediately available funds
to an account designated by Seller and (ii) the Buyer Note dated as of July
25, 1996 between ICPRC and CDI to ICPRC with an outstanding balance of
principal and accrued interest thereon of $ as of the date hereof.
Such Buyer Note shall be deemed canceled upon such delivery.
4. Seller, by its execution of this Bill of Sale, by its acceptance of
this Bill of Sale, each hereby acknowledges and agrees that neither the
representations nor warranties nor the rights and remedies of any party under
the Receivables Purchase Agreement shall be deemed enlarged, modified or
altered in any way by this instrument.
<PAGE>
IN WITNESS WHEREOF, the Seller and the Buyer have caused this instrument
to be duly executed under seal as of and on the date first above written.
LASALLE NATIONAL BANK, as Trustee
By:
--------------------------------
Its:
-------------------------------
COASTLINE DISTRIBUTION, INC.
By:
--------------------------------
Its:
-------------------------------
<PAGE>
SECOND AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT
This Second Amendment to the Receivables Purchase Agreement
(this "Amendment") dated as of September ___, 1997, is made among
INTERNATIONAL COMFORT PRODUCTS CORPORATION (USA), (formerly known as
Inter-City Products Corporation (USA)), a Delaware corporation ("ICP"),
INTER-CITY PRODUCTS PARTNER CORPORATION, a Delaware corporation
("ICPPC"), GENERAL HEATING AND COOLING COMPANY, a Delaware corporation
("General" and, together with ICP and ICPPC, the "Sellers"), INTER-CITY
PRODUCTS RECEIVABLES COMPANY, L.P., a Tennessee limited partnership
("Buyer"), and ANAGRAM ASSET MANAGEMENT, L.L.C., as agent ("Agent").
REFERENCE IS MADE to the Receivables Purchase Agreement (as
amended by a First Amendment to Receivables Purchase Agreement and
Second Amendment to Certificate Purchase Agreement dated as of January
27, 1997, the "Receivables Purchase Agreement") dated as of July 25,
1996, among Sellers and Buyer.
WHEREAS, Section 10.1 of the Receivables Purchase Agreement
provides that the Receivables Purchase Agreement may be amended by
Sellers and Buyer, provided that the Modification Condition has been
satisfied with respect to such amendment.
WHEREAS, pursuant to (i) the Asset Purchase Agreement dated as
of September 17, 1997 between ICP and General, as sellers, and Pameco
Corporation, a Georgia corporation ("Pameco") (the "Purchase
Agreement"), ICP is selling certain assets of certain branches engaged
in the business of selling air conditioning and heating parts and
equipment as distributors and General is selling all or substantially
all of its assets to Pameco.
WHEREAS, the parties hereto wish to amend the Receivables
Purchase Agreement.
NOW, THEREFORE, it is hereby agreed that, effective as of the
opening of business on September 30, 1997:
1.Attached hereto as Exhibit A is a Bill of Sale dated as of
the date hereof between General and LaSalle National Bank, as Trustee
("Trustee") of the Inter-City Products Receivables Master Trust (the
"Trust") (the "General Bill of Sale"), pursuant to which certain
receivables of the Trust shall be sold to General. Attached hereto as
Exhibit B is a Bill of Sale dated as of the date hereof between ICP and
the Trustee (the "ICP Bill of Sale"), and together with the General
Bill of Sale, the "Bill(s) of Sale"), pursuant to which certain
receivables of the Trust shall be sold to ICP.<PAGE>
(a)Notwithstanding the provisions of the Receivables Purchase
Agreement, the Acquired Receivables, as defined in each Bill of Sale,
may be purchased by the buyer thereunder in accordance with the terms
of the respective Bill of Sale.
(b)General shall no longer be a Seller under the Receivables
Purchase Agreement and upon payment of the consideration provided in
the General Bill of Sale, General shall have no further obligations
under the Receivables Purchase Agreement.
(c)General represents and warrants that the Acquired
Receivables being purchased by it pursuant to the Bill of Sale are
receivables originated by General and that General has sold
substantially all of its assets to Pameco. ICP represents and warrants
that the Acquired Receivables being purchased by it pursuant to the ICP
Bill of Sale are receivables originated by the ICP and such receivables
have been sold by ICP pursuant to the Purchase Agreement.
2.The terms of the Receivables Purchase Agreement shall
continue in full force and effect as amended and modified by this
Amendment.
3.This Amendment may be executed in several counterparts, and
all so executed shall constitute one and the same Amendment.
* * * * * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed on their behalf by their officers duly
authorized thereunto, as of the day and year first above written.
INTERNATIONAL COMFORT PRODUCTS
CORPORATION (USA)
By:___________________________
Name:
Title:
INTER-CITY PRODUCTS PARTNER
CORPORATION
By:___________________________
Name:
Title:
GENERAL HEATING AND COOLING
COMPANY
By:___________________________
Name:
Title:
INTER-CITY PRODUCTS RECEIVABLES
COMPANY, L.P.
By:Inter-City Products
Partner Corporation
Its:General Partner
By:___________________________
Name:
Title:
ANAGRAM ASSET MANAGEMENT, L.L.C.
By:____________________________
Name:
Title:
<PAGE>
EXHIBIT A
FORM OF
BILL OF SALE
(General Heating and Cooling Company)
THIS BILL OF SALE (this "Bill of Sale") dated as of September , 1997,
is made among General Heating and Cooling Company ("General"), a Delaware
corporation ("Buyer"), and LaSalle National Bank, as Trustee of the Inter-
City Products Receivables Master Trust ("Seller").
WHEREAS, General is a party to a Receivables Purchase Agreement dated as
of July 25, 1996 among International Comfort Products Corporation (USA), a
Delaware corporation ("ICP"), Inter-City Products Partner Corporation, a
Delaware corporation, General and Inter-City Products Receivables Company,
L.P., a Tennessee limited partnership ("ICPRC")(the "Receivables Purchase
Agreement"), whereby General sells, transfers, assigns, sets over and conveys
to ICPRC certain of its receivables. Capitalized terms used but not defined
herein have the meanings ascribed to them in the Receivables Purchase
Agreement.
WHEREAS, pursuant to a Pooling and Servicing Agreement dated as of July
25, 1996 among ICPRC, ICP and Seller, ICPRC transfers its interests in the
receivables it purchases pursuant to the Receivables Purchase Agreement to
Seller.
NOW, THEREFORE, the parties hereto agree as follows:
1. Seller hereby sells, transfers, assigns, sets over and conveys to
Buyer, its successors and assigns, to have and to hold forever, all of the
receivables described on the attached ACQUIRED RECEIVABLES SCHEDULE (the
"Acquired Receivables").
2. Seller shall deliver to Buyer UCC-3 Financing Statements (i)
executed by ICPRC as secured party/purchaser releasing the Acquired
Receivables from the collateral described in the UCC-1 Financing Statements
filed on or about July 25, 1996 of ICP as seller/debtor and (ii) executed by
Trustee as secured/party purchaser releasing the Acquired Receivables from
the collateral described in the UCC-1 Financing Statements of ICPRC as
seller/debtor.
3. As consideration for the purchase of Acquired Receivables, Buyer
shall deliver (i) $ by wire transfer of immediately available funds
to an account designated by Seller and (ii) the Buyer Note dated as of July
25, 1996 between ICPRC and CDI to ICPRC with an outstanding balance of
principal and accrued interest thereon of $ as of the date hereof.
Such Buyer Note shall be deemed canceled upon such delivery.
4. Seller, by its execution of this Bill of Sale, by its acceptance of
this Bill of Sale, each hereby acknowledges and agrees that neither the
representations nor warranties nor the rights and remedies of any party under
the Receivables Purchase Agreement shall be deemed enlarged, modified or
altered in any way by this instrument.
<PAGE>
IN WITNESS WHEREOF, the Seller and the Buyer have caused this instrument
to be duly executed under seal as of and on the date first above written.
LASALLE NATIONAL BANK, as Trustee
By:
--------------------------------
Its:
-------------------------------
GENERAL HEATING AND COOLING COMPANY
By:
--------------------------------
Its:
-------------------------------
<PAGE>
EXHIBIT B
FORM OF
BILL OF SALE
(International Comfort Products Corporation (USA))
THIS BILL OF SALE (this "Bill of Sale") dated as of September , 1997,
is made among International Comfort Products Corporation (USA) (formerly
known as Inter-City Products Corporation (USA))("ICP"), a Delaware
corporation ("Buyer"), and LaSalle National Bank, as Trustee of the Inter-
City Products Receivables Master Trust ("Seller").
WHEREAS, ICP is a party to a Receivables Purchase Agreement dated as of
July 25, 1996 among ICP, Inter-City Products Partner Corporation, a Delaware
corporation, certain subsidiaries of ICP and Inter-City Products Receivables
Company, L.P., a Tennessee limited partnership ("ICPRC")(the "Receivables
Purchase Agreement"), whereby ICP sells, transfers, assigns, sets over and
conveys to ICPRC certain of its receivables. Capitalized terms used but not
defined herein have the meanings ascribed to them in the Receivables Purchase
Agreement.
WHEREAS, pursuant to a Pooling and Servicing Agreement dated as of July
25, 1996 among ICPRC, ICP and Seller, ICPRC transfers its interests in the
receivables it purchases pursuant to the Receivables Purchase Agreement to
Seller.
NOW, THEREFORE, the parties hereto agree as follows:
1. Seller hereby sells, transfers, assigns, sets over and conveys to
Buyer, its successors and assigns, to have and to hold forever, all of the
receivables described on the attached ACQUIRED RECEIVABLES SCHEDULE (the
"Acquired Receivables").
2. Seller shall deliver to Buyer UCC-3 Financing Statements (i)
executed by ICPRC as secured party/purchaser releasing the Acquired
Receivables from the collateral described in the UCC-1 Financing Statements
filed on or about July 25, 1996 of CDI as seller/debtor and (ii) executed by
Trustee as secured/party purchaser releasing the Acquired Receivables from
the collateral described in the UCC-1 Financing Statements of ICPRC as
seller/debtor.
3. As consideration for the purchase of Acquired Receivables, Buyer
shall deliver $ by wire transfer of immediately available funds to
an account designated by Seller.
4. Seller, by its execution of this Bill of Sale, by its acceptance of
this Bill of Sale, each hereby acknowledges and agrees that neither the
representations nor warranties nor the rights and remedies of any party under
the Receivables Purchase Agreement shall be deemed enlarged, modified or
altered in any way by this instrument.
<PAGE>
IN WITNESS WHEREOF, the Seller and the Buyer have caused this instrument
to be duly executed under seal as of and on the date first above written.
LASALLE NATIONAL BANK, as Trustee
By:
--------------------------------
Its:
-------------------------------
INTERNATIONAL COMFORT PRODUCTS
CORPORATION (USA)
By:
--------------------------------
Its:
-------------------------------
<PAGE>
LOAN AND SECURITY AGREEMENT
Dated as of July 18, 1997
Between
INTERNATIONAL COMFORT PRODUCTS
CORPORATION (USA)
(the Borrower)
and
NATIONSBANK, N.A.
(the Lender)
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Other Referential Provisions. . . . . . . . . . . .13
Section 1.3 Exhibits and Schedules. . . . . . . . . . . . . . .13
ARTICLE 2 - REVOLVING CREDIT FACILITY . . . . . . . . . . . . . . . . .14
Section 2.1 Revolving Credit Loans. . . . . . . . . . . . . . .14
Section 2.2 Manner of Borrowing Revolving Credit Loans. . . . .14
Section 2.3 Repayment of Revolving Credit Loans . . . . . . . .15
Section 2.4 Revolving Credit Note . . . . . . . . . . . . . . .15
Section 2.5 Extension of Facility . . . . . . . . . . . . . . .15
Section 2.6 Effectiveness of Revolving Credit Facility. . . . .15
Section 2.7 Letters of Credit . . . . . . . . . . . . . . . . .16
ARTICLE 3 - GENERAL LOAN PROVISIONS . . . . . . . . . . . . . . . . . .16
Section 3.1 Interest. . . . . . . . . . . . . . . . . . . . . .16
Section 3.2 Fees. . . . . . . . . . . . . . . . . . . . . . . .18
Section 3.3 Notice of Conversion or Continuation of Loans . . .19
Section 3.4. Conversion or Continuation . . . . . . . . . . . .19
Section 3.5 Duration of Interest Periods; Maximum Number of
LIBOR Loans; Minimum Increments . . . . . . . . . . . . . . . .19
Section 3.6 Changed Circumstances . . . . . . . . . . . . . . .20
Section 3.7 Payments Not at End of Interest Period;
Failure to Borrow . . . . . . . . . . . . . . . . .20
Section 3.8 Increased Costs and Reduced Returns . . . . . . . .21
Section 3.9 Manner of Payment . . . . . . . . . . . . . . . . .21
Section 3.10 Statements of Account. . . . . . . . . . . . . . .21
Section 3.11 Termination of Agreement . . . . . . . . . . . . .21
ARTICLE 4 - CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . .22
Section 4.1 Conditions Precedent to Initial Loan. . . . . . . .22
Section 4.2 All Loans . . . . . . . . . . . . . . . . . . . . .24
Section 4.3 Revolving Credit Facility B . . . . . . . . . . . .24
Section 4.4 Revolving Credit Facility C . . . . . . . . . . . .25
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF THE BORROWER. . . . . . .25
Section 5.1 Representations and Warranties. . . . . . . . . . .25
Section 5.2 Survival of Representations and Warranties, Etc . .29
ARTICLE 6 - SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . .29
Section 6.1 Security Interest . . . . . . . . . . . . . . . . .29
Section 6.2 Continued Priority of Security Interest . . . . . .29
ARTICLE 7 - COLLATERAL COVENANTS. . . . . . . . . . . . . . . . . . . .30
Section 7.1 Collection of Receivables . . . . . . . . . . . . .30
Section 7.2 Sales of Inventory. . . . . . . . . . . . . . . . .30
Section 7.3 Returned Goods. . . . . . . . . . . . . . . . . . .30
Section 7.4 Ownership and Defense of Title. . . . . . . . . . .30
Section 7.5 Insurance . . . . . . . . . . . . . . . . . . . . .31
Section 7.6 Location of Offices and Collateral. . . . . . . . .31
Section 7.7 Records Relating to Collateral. . . . . . . . . . .32
Section 7.8 Inspection. . . . . . . . . . . . . . . . . . . . .32
Section 7.9 Maintenance of Equipment 32
This Table of contents is included for reference purposes only and does
not constitute part of the Loan and Security Agreement.<PAGE>
Section 7.10 Information and Reports. . . . . . . . . . . . . .32
Section 7.11 Power of Attorney. . . . . . . . . . . . . . . . .33
ARTICLE 8 - AFFIRMATIVE COVENANTS 33
Section 8.1 Preservation of Corporate Existence and Similar
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Section 8.2 Compliance with Applicable Law. . . . . . . . . . .33
Section 8.3 Conduct of Business . . . . . . . . . . . . . . . .33
Section 8.4 Payment of Taxes and Claims . . . . . . . . . . . .33
Section 8.5 Accounting Methods and Financial Records. . . . . .33
Section 8.6 Use of Proceeds . . . . . . . . . . . . . . . . . .33
Section 8.7 Accuracy of Information . . . . . . . . . . . . . .34
ARTICLE 9 - INFORMATION . . . . . . . . . . . . . . . . . . . . . . . .34
Section 9.1 Financial Statements. . . . . . . . . . . . . . . .34
Section 9.2 Discussions With Accountants. . . . . . . . . . . .34
Section 9.3 Officer's Certificate . . . . . . . . . . . . . . .34
Section 9.4 Copies of Other Reports . . . . . . . . . . . . . .35
Section 9.5 Notice of Litigation and Other Matters. . . . . . .35
Section 9.6 ERISA . . . . . . . . . . . . . . . . . . . . . . .35
ARTICLE 10 - NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . .36
Section 10.1 Financial Ratios . . . . . . . . . . . . . . . . .36
Section 10.2 Merger, Consolidation and Sale of Assets.. . . . .37
Section 10.3 Investments. . . . . . . . . . . . . . . . . . . .37
Section 10.4 Benefit Plans. . . . . . . . . . . . . . . . . . .37
Section 10.5 Amendments of Other Agreements . . . . . . . . . .37
Section 10.6 Minimum Availability . . . . . . . . . . . . . . .37
Section 10.7 Capital Expenditures . . . . . . . . . . . . . . .37
Section 10.8 Receivables Transfers. . . . . . . . . . . . . . .37
ARTICLE II - DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . .37
Section 11.1 Events of Default. . . . . . . . . . . . . . . . .37
Section 11.2 Remedies . . . . . . . . . . . . . . . . . . . . .39
Section 11.3 Application of Proceeds. . . . . . . . . . . . . .41
Section 11.4 Power of Attorney. . . . . . . . . . . . . . . . .41
Section 11.5 Miscellaneous Provisions Concerning Remedies . . .42
Section 11.6 Trademark License. . . . . . . . . . . . . . . . .42
ARTICLE 12 - MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . .42
Section 12.1 Notices. . . . . . . . . . . . . . . . . . . . . .42
Section 12.2 Expenses . . . . . . . . . . . . . . . . . . . . .43
Section 12.3 Stamp and Other Taxes. . . . . . . . . . . . . . .44
Section 12.4 Setoff . . . . . . . . . . . . . . . . . . . . . .44
Section 12.5 Litigation . . . . . . . . . . . . . . . . . . . .44
Section 12.6 Waiver of Rights . . . . . . . . . . . . . . . . .44
Section 12.7 Reversal of Payments . . . . . . . . . . . . . . .45
Section 12.8 Injunctive Relief. . . . . . . . . . . . . . . . .45
Section 12.9 Accounting Matters. . . . . . . . . . . . . . . .45
Section 12.10 Assignment; Participation . . . . . . . . . . . .45
Section 12.11 Amendments. . . . . . . . . . . . . . . . . . . .45
Section 12.12 Performance of Borrower's Duties. . . . . . . . .45
Section 12.13 Indemnification . . . . . . . . . . . . . . . . .46
Section 12.14 All Powers Coupled with Interest. . . . . . . . .46
Section 12.15 Survival. . . . . . . . . . . . . . . . . . . . .46
Section 12.16 Severability of Provisions. . . . . . . . . . . .46
Section 12.17 Governing Law . . . . . . . . . . . . . . . . . .46
Section 12.18 Counterparts. . . . . . . . . . . . . . . . . . .46
Section 12.19 Reproduction of Documents . . . . . . . . . . . .46
Section 12.20 Funds Transfer Services . . . . . . . . . . . . .47
Section 12.21 Consent to Advertising and Publicity. . . . . . .47
Section 12.22 Final Agreement. . . . . . . . . . . . . . . . .47
<PAGE>
EXHIBITS AND SCHEDULES
EXHIBIT A FORM OF REVOLVING CREDIT NOTE
EXHIBIT B FORM OF BORROWING BASE CERTIFICATE
EXHIBIT C FORM OF OFFICER'S CERTIFICATE
SCHEDULE 1.1A LETTER OF CREDIT FEES
SCHEDULE 5.1(A) JURISDICTIONS IN WHICH BORROWER IS QUALIFIED
AS A FOREIGN CORPORATION
SCHEDULE 5.1(B) BORROWER'S CAPITAL STOCK
SCHEDULE 5.1(E) BORROWER'S BUSINESS
SCHEDULE 5.1(F) EXCEPTIONS TO GOVERNMENTAL APPROVALS
SCHEDULE 5.1(G) NON LIEN TITLE EXCEPTIONS AND DEFECTS
AND PROPERTY DISPOSED OF OUT OF ORDINARY
COURSE OF BUSINESS
SCHEDULE 5.1(H) LIENS
SCHEDULE 5.1(I) INDEBTEDNESS FOR MONEY BORROWED AND
GUARANTIES
SCHEDULE 5.1(J) LITIGATION
SCHEDULE 5.1(K) TAX RETURNS AND PAYMENTS
SCHEDULE 5.1(O) ERISA
SCHEDULE 5.1(S) LOCATION OF CHIEF EXECUTIVE OFFICE
SCHEDULE 5.1(T) LOCATIONS OF INVENTORY
SCHEDULE 5.1(V) CORPORATE AND FICTITIOUS NAMES
SCHEDULE 5.1(Y) EMPLOYEE RELATIONS
SCHEDULE 5.1(Z) PROPRIETARY RIGHTS
SCHEDULE 8.6 USE OF PROCEEDS
<PAGE>
LOAN AND SECURITY AGREEMENT
Dated as of July 18, 1997
INTERNATIONAL COMFORT PRODUCTS CORPORATION (USA), a Delaware
corporation, and NATIONSBANK, N.A., a national banking association,
agree as follows:
ARTICLE 1 - DEFINITIONS
Section 1.1 Definitions. For the purposes of this Agreement:
"ABN AMRO" means ABN AMRO Chicago Corporation, a Delaware
corporation, and its successors and assigns.
"Acquire" or "Acquisition", as applied to any Business Unit or
Investment, means the acquiring or acquisition of such Business Unit or
Investment by purchase, exchange, issuance of stock or other
securities, or by merger, reorganization or any other method.
"Affiliate" means, with respect to a Person, (a) any officer,
director, employee or managing agent of such Person, (b) any spouse,
parents, brothers, sisters, children and grandchildren of such Person,
(c) any association, partnership, trust, entity or enterprise in which
such Person is a director, officer or general partner, (d) any other
Person that, (i) directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common
control with, such given Person, (ii) directly or indirectly
beneficially owns or holds 10% or more of any class of voting stock or
partnership or other interest of such Person or any Subsidiary of such
Person, or (iii) 10% or more of the voting stock or partnership or
other interest of which is directly or indirectly beneficially owned or
held by such Person or a Subsidiary of such 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 ownership of voting securities or partnership or other
interests, by contract or otherwise.
"Agreement" means this Agreement, including the Exhibits and
Schedules hereto, and all amendments, modifications and supplements
hereto and thereto and restatements hereof and thereof.
"Agreement Date" means the date as of which this Agreement is
dated.<PAGE>
"Assignment of Receivables Securitization Proceeds" means the
Assignment of Receivables Securitization Proceeds, dated on or about
the Effective Date, executed by the Borrower, GHC, the Receivables
Purchaser and the Lender, pursuant to which, among other things, (a)
the Borrower and GHC grant the Lender a first priority security
interest in their right to receive proceeds from the sale and
securitization of accounts receivable contemplated by the Receivables
Purchase Agreement, and (b) the Receivables Purchaser agrees to remit
such proceeds to the Lender on behalf of the Borrower and GHC.
"Availability" means, as of the date of determination, the amount
of Revolving Credit Loans available to be borrowed by the Borrower
hereunder in accordance with Section 2.1 less the sum of the
outstanding principal balance of all Revolving Credit Loans hereunder
as of such date.
"Benefit Plan" means an employee benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan) in respect of which a
Person or any Related Company is, or within the immediately preceding 6
years was, an "employer" as defined in Section 3(5) of ERISA, including
such plans as may be established after the Agreement Date.
"Blocked Account Agreement" means the letter agreement, dated on or
about the date hereof, among the Lender, the Borrower, ICPPC, GHC, the
Receivables Purchaser, the Receivables Trustee, ABN AMRO, and LaSalle
National Bank, with respect to the transfer of funds from the Master
Collection Account to the Receivables Purchaser Account (as such terms
are defined therein) and from the Receivables Purchaser Account to
NationsBank for application against the Secured Obligations, and any
substitute agreement acceptable to the Lender with respect to the
subject matter thereof.
"Borrower" means International Comfort Products Corporation (USA),
a Delaware corporation, and its successors and assigns.
"Borrowing Base" means at any time an amount equal to the sum of:
(a) 50% (or such lesser percentage as the Lender may determine
from time to time in its reasonable credit judgment) of the lesser of
cost (computed on a first-in-first-out basis) and fair market value of
Eligible Inventory at such time, plus
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(b) the lesser of
(i) 50% (or such lesser percentage as Lender may
determine from time to time in its reasonable credit judgment)
of the aggregate undrawn amount of all documentary Letters of
Credit outstanding at such time with respect to the Borrower's
acquisition of Eligible Inventory; and
(ii) $7,500,000, minus
(c) the Letter of Credit Reserve and such other reserves as the
Lender may determine from time to time in the exercise of its
reasonable credit judgment.
"Borrowing Base Certificate" means a certificate in the form of
Exhibit B attached hereto.
"Business Day" means (a) any day other than a Saturday, Sunday or
other day on which banks in the city in which the principal office of
the Lender is located are authorized to close, and (b) in respect of
any determination with respect to a LIBOR Loan, any day referred to in
clause (a) that is also a day on which tradings are conducted in the
London interbank eurodollar market.
"Business Unit" means the assets constituting the business, or a
division or operating unit thereof, of any Person.
"Capital Expenditures" means, with respect to any Person, all
expenditures made and liabilities incurred for the acquisition of
assets (other than assets which constitute a Business Unit) which are
not, in accordance with GAAP, treated as expense items for such Person
in the year made or incurred or as a prepaid expense applicable to a
future year or years.
"Capitalized Lease" means a lease that is required to be cap-
italized for financial reporting purposes in accordance with GAAP.
"Capitalized Lease Obligation" means Indebtedness represented by
obligations under a Capitalized Lease, and the amount of such
Indebtedness
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<PAGE>
shall be the capitalized amount of such obligations determined in
accordance with GAAP.
"Cash" means Dollars or Cash Equivalents.
"Cash Equivalents" means, at any time:
(a) any evidence of full recourse Indebtedness, maturing not
more than one year after such time, to the extent issued or guaranteed
by the United States Government;
(b) commercial paper, maturing not more than nine months from
the date of issuance and rated A-1 by Standard & Poor's Corporation or
P-1 by Moody's Investors Service, Inc., issued by a corporation (except
an Affiliate of the Borrower) organized under the laws of any State of
the United States or of the District of Columbia;
(c) any deposit or account, including any certificate of
deposit, eurodollar time deposit or acceptance, maturing not more than
one year after such time, issued by any commercial banking institution
which is a member of the Federal Reserve System and which has a
combined capital of and surplus and undivided profits of not less than
$250,000,000; or
(d) any repurchase agreement entered into with any commercial
banking institution of the nature referred to in clause (c), secured by
a fully perfected security interest in any obligation of the type
described in any of clauses (a) through (c), having a market value at
the time such repurchase agreement is entered into of not less than
100% of the repurchase obligation thereunder of such commercial banking
institution.
"Change of Control" means (a) the direct or indirect sale, lease,
exchange or other transfer of all or substantially all of the assets of
Holdings to any Person or entity or group of Persons or entities acting
in concert as a partnership or other group (a "Group of Persons") other
than an Affiliate of Holdings, (b) the merger or consolidation of
Holdings with or into another corporation with the effect that the then
existing shareholders of Holdings hold less than 50% of the combined
voting power of the then outstanding securities of the surviving
corporation of such merger or the corporation resulting from such
consolidation ordinarily (and apart from rights arising under special
circumstances) having the right to vote in the election of directors,
(c) the replacement of a majority of the Board of Directors of
Holdings, over a one-year period,
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from the directors who constituted the Board of Directors at the
beginning of such period, and such replacement shall not have been
approved by the Board of Directors of Holdings as constituted at the
beginning of such period (together with any new directors whose
election by such Board or whose nomination for election by the
stockholders of Holdings was approved by a vote of 66-2/3% of the
directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election
was previously so approved), (d) a Person or group of persons (other
than Permitted Holders or an Affiliate of one or more Permitted
Holders) shall, as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases or otherwise, have become the
beneficial owner (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) of securities of Holdings
representing 50% or more of the combined voting power of the then
outstanding securities of Holdings ordinarily (and apart from rights
arising under special circumstances) having the right to vote in the
election of directors, or (v) Holdings fails to own, directly or
indirectly, 80% of the voting stock (stock of the Borrower entitled
ordinarily to vote in the election of directors) of the Borrower.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" means and includes all of the Borrower's right, title
and interest in and to each of the following, wherever located and
whether now or hereafter existing or now owned or hereafter acquired or
arising:
(a) all Inventory,
(b) all collateral subject to the Assignment of Receivables
Securitization Proceeds,
(c) all Contract Rights and General Intangibles necessary or
helpful in the realization on the collateral described in clauses (a)
and (b) above or the liquidation thereof,
(d) all documents of title, policies and certificates of
insurance, securities, chattel paper and other documents and instru-
ments evidencing or pertaining to any and all items of Inventory,
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<PAGE>
(e) all files, correspondence, computer programs, tapes, disks
and related data processing software which contain information
identifying or pertaining to any of the Collateral or showing the
amounts thereof or otherwise necessary or helpful in the realization
thereon or the liquidation thereof,
(f) all cash deposited with the Lender or any Affiliate thereof
or which the Lender is entitled to retain or otherwise possess as
collateral pursuant to the provisions of this Agreement or any of the
Security Documents, and
(g) any and all products and cash and non-cash proceeds of the
foregoing (including, but not limited to, any claims to any items
referred to in this definition and any claims against third parties for
loss of, damage to or destruction of any or all of the Collateral or
for proceeds payable under or unearned premiums with respect to
policies of insurance) in whatever form, including, but not limited to,
cash, negotiable instruments and other instruments for the payment of
money, accounts receivable, chattel paper, security agreements and
other documents, but
(h) expressly excluding from the definition of "Collateral" all
"Intellectual Property," as that term is defined as of the date hereof
in the Intellectual Property Security Agreement dated as of March 11,
1993 between the Borrower and the Indenture Trustee.
"Consolidated Subsidiary" means each of the Borrower's Subsidiaries
whose accounts are at the time in question in accordance with GAAP
consolidated with those of the Borrower.
"Contract Rights" means and includes, as to any Person, all of such
Person's then owned or existing and future acquired or arising rights
under contracts not yet earned by performance and not evidenced by an
instrument or chattel paper, to the extent that the same may lawfully
be assigned.
"Default" means any of the events specified in Section 11.1 that,
with the passage of time or giving of notice or both, would constitute
an Event of Default.
"Default Margin" means 3%.
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"Disbursement Account" means the account maintained by and in the
name of the Borrower with the Lender for the purpose of disbursing
Revolving Credit Loan proceeds and amounts credited thereto pursuant to
Sections 2.2(b)(i) and 7.1(b)(ii).
"Dollar" and "$" means freely transferable United States dollars.
"EBIT" means Net Income before provision for Interest Expense and
income taxes.
"EBITDA" means Net Income before provision for Interest Expense,
income taxes, depreciation expense and amortization.
"Effective Date" means the later of (a) the Agreement Date, and (b)
the first date on which all of the conditions set forth in Section 4.1
shall have been fulfilled or waived by the Lender.
"Effective Interest Rate" means the rate of interest per annum on
the Loans in effect from time to time pursuant to the provisions of
Section 3.1(a), (b) and (c).
"Eligible Inventory" means items of Inventory of the Borrower held
for sale in the ordinary course of the business of the Borrower (but
not including packaging or shipping materials or maintenance supplies)
which are deemed by the Lender in the exercise of its reasonable credit
judgment to be eligible for inclusion in the calculation of the
Borrowing Base. Unless otherwise approved in writing by the Lender, no
Inventory shall be deemed to be Eligible Inventory unless it meets all
of the following requirements: (a) such Inventory is owned by the
Borrower, is subject to the Security Interest, which is perfected as to
such Inventory, and is subject to no other Lien whatsoever other than a
Permitted Lien; (b) such Inventory consists of finished goods or
service parts and does not consist of raw materials, work-in-process,
supplies or consigned goods; (c) such Inventory is in good condition
and meets all standards applicable to such goods, their use or sale
imposed by any governmental agency, or department or division thereof,
having regulatory authority over such matters; (d) such Inventory is
currently either usable or saleable, at prices approximating at least
the cost thereof, in the normal course of the Borrower's business; (e)
such Inventory is not obsolete or returned or repossessed or used goods
taken in trade; (f) such Inventory is located at one of the locations
listed in Schedule 5.1(t); (g) such Inventory is in the possession and
control of the Borrower and not any third party, or,
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<PAGE>
if located in a warehouse or other facility leased by the Borrower, the
warehouseman or lessor has delivered to the Lender a waiver and consent
in form and substance satisfactory to the Lender; and (h) such
Inventory is not subject to any bill and hold sale arrangement or any
similar arrangement.
"Environmental Laws" means all federal, state, local and foreign
laws now or hereafter in effect relating to pollution or protection of
the environment, including laws relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants, chemicals
or industrial, toxic or hazardous substances or wastes into the
environment (including, without limitation, ambient air, surface water,
ground water or land) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, removal,
transport or handling of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes, and any and all
regulations, notices or demand letters issued, entered, promulgated or
approved thereunder.
"Equipment" means and includes, as to any Person, all of such
Person's then owned or existing and future acquired or arising
machinery, apparatus, equipment, motor vehicles, tractors, trailers,
rolling stock, fittings, and other tangible personal property (other
than Inventory) of every kind and description used in such Person's
business operations or owned by such Person or in which such Person has
an interest and all parts, accessories and special tools and all
increases and accessions thereto and substitutions and replacements
therefor.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as in effect from time to time, and any successor statute.
"Event of Default" means any of the events specified in Section
11.1.
"Financing Statements" means the Uniform Commercial Code financing
statements executed and delivered by (a) the Borrower to the Lender,
naming the Lender as secured party and the Borrower as debtor, in
connection with this Agreement, and (b) the Borrower and GHC to the
Lender, naming the Lender as secured party and the Borrower and GHC as
debtor, in connection with the Assignment of Receivables Securitization
Proceeds.
"Funded Indebtedness" means (a) the amount outstanding under the
Revolving Credit Facility as of the date of determination, plus (b) the
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<PAGE>
outstanding balance on the Senior Secured Notes as of the date of
determination, plus, without duplication, (c) Indebtedness for Money
Borrowed having a maturity of more than 12 months from the date of the
most recent balance sheet of the Borrower or having a maturity of less
than 12 months from the date of such balance sheet but by its terms
being renewable or extendible beyond 12 months from the date of such
balance sheet at the option of the Person liable thereon, plus, without
duplication, (d) all Liabilities appearing on the most recent balance
sheet of the Borrower with respect to the Receivables Purchase
Documents, minus (e) unrestricted Cash.
"GAAP" means generally accepted accounting principles consistently
applied and maintained throughout the period indicated and consistent
with the prior financial practice of the Person referred to.
"General Intangibles" means, as to any Person, all of such Person's
then owned or existing and future acquired or arising general
intangibles, choses in action and causes of action and all other
intangible personal property of such Person of every kind and nature
(other than accounts receivable and Intellectual Property), including,
without limitation, corporate or other business records, computer soft-
ware, customer lists, registrations, licenses, franchises, rights and
claims against carriers and shippers, rights to indemnification,
property, casualty or any similar type of insurance, and any proceeds
thereof.
"GHC" means General Heating and Cooling Company, a Delaware
corporation, and its successors and assigns.
"Governmental Approvals" means all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings with,
and reports to, all governmental bodies, whether federal, state, local,
foreign national or provincial, and all agencies thereof.
"Governmental Authority" means any government or political
subdivision or any agency, authority, bureau, central bank, commission,
department or instrumentality of either, or any court, tribunal, grand
jury or arbitrator, in each case whether foreign or domestic.
"Guaranty", "Guaranteed" or to "Guarantee," as applied to any
obligation of another Person shall mean and include
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<PAGE>
(a) a guaranty (other than by endorsement of negotiable instru-
ments for collection in the ordinary course of business), directly or
indirectly, in any manner, of any part or all of such obligation of
such other Person, and
(b) an agreement, direct or indirect, contingent or otherwise,
and whether or not constituting a guaranty, the practical effect of
which is to assure the payment or performance (or payment of damages in
the event of nonperformance) of any part or all of such obligation of
such other Person whether by (i) the purchase of securities or
obligations, (ii) the purchase, sale or lease (as lessee or lessor) of
property or the purchase or sale of services primarily for the purpose
of enabling the obligor with respect to such obligation to make any
payment or performance (or payment of damages in the event of
nonperformance) of or on account of any part or all of such obligation
or to assure the owner of such obligation against loss, (iii) the
supplying of funds to, or in any other manner investing in, the obligor
with respect to such obligation, (iv) repayment of amounts drawn down
by beneficiaries of letters of credit, or (v) the supplying of funds to
or investing in a Person on account of all or any part of such Person's
obligation under a guaranty of any obligation or indemnifying or
holding harmless, in any way, such Person against any part or all of
such obligation.
"Holdings" means International Comfort Products Corporation, a
corporation existing under the Canada Business Corporation Act, and its
successors and assigns.
"ICPPC" means International Comfort Products Partner Corporation, a
Delaware corporation, and its successors and assigns.
"Indebtedness" of any Person means, without duplication, (a)
Liabilities, (b) all obligations for money borrowed or for the deferred
purchase price of property or services or in respect of reimbursement
obligations under letters of credit, (c) all obligations represented by
bonds, debentures, notes and accepted drafts that represent extensions
of credit, (d) Capitalized Lease Obligations, (e) all obligations
(including, during the noncancellable term of any lease in the nature
of a title retention agreement, all future payment obligations under
such lease discounted to their present value in accordance with GAAP)
secured by any Lien to which any property or asset owned or held by
such Person is subject, whether or not the obligation secured thereby
shall have been assumed by such Person, (f) all obligations of other
Persons which such Person has Guaranteed, including, but not limited
to, all obligations of such Person consisting of recourse liability
with respect to accounts receivable sold or otherwise disposed of by
such Person, and (g) in the case of the Borrower (without duplication)
the Loans.
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"Indenture Trustee" means United States Trust Company of New York,
a New York banking corporation, in its capacity as trustee under the
Senior Secured Notes Indenture, and its successors and assigns.
"Initial Loans" means the Revolving Credit Loan made to the
Borrower on the Effective Date.
"Intellectual Property" means, as to any Person, all of such
Person's then owned existing and future acquired or arising patents,
patent rights, copyrights, works which are the subject of copyrights,
trademarks, service marks, trade names, trade styles, patent, trademark
and service mark applications, and all licenses and rights related to
any of the foregoing and all other rights under any of the foregoing,
all extensions, renewals, reissues, divisions, continuations and
continuations-in-part of any of the foregoing and all rights to sue for
past, present and future infringements of any of the foregoing.
"Interbank Offered Rate" means, with respect to any LIBOR Loan for
the Interest Period applicable thereto, the average (rounded upward to
the nearest one-sixteenth (1/16) of one percent) per annum rate of
interest determined by the Lender (each such determination to be
conclusive and binding absent manifest error) as of two Business Days
prior to the first day of such Interest Period from Telerate Page 3750
as the effective rate at which deposits in immediately available funds
in Dollars are being offered or quoted to major banks in the interbank
market for eurodollar deposits for a term comparable to such Interest
Period and in the amount of the LIBOR Loan. If such rate is
unavailable from such service, then such rate may be determined by the
Lender from any other interest rate reporting service of recognized
standing that the Lender shall select.
"Intercreditor Agreement re Receivables" means the Intercreditor
Agreement re Receivables, dated on or about the Effective Date, among
the Lender, the Borrower, ICPPC, GHC, the Receivables Purchaser, the
Receivables Trustee and ABN AMRO.
"Interest Expense" means interest on Indebtedness during the period
for which computation is being made, plus, without duplication, the
discount on the Receivables sold pursuant to the Receivables Purchase
Documents during such period; excluding, however, interest paid in kind
and the amortization of fees and costs incurred with respect to the
closing of loans which have been capitalized as transaction costs.
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"Interest Payment Date" means the first day of each calendar month
commencing on August 1, 1997 and continuing thereafter until the
Secured Obligations have been irrevocably paid in full.
"Interest Period" means, with respect to each LIBOR Loan, the
period commencing on the date of the making or continuation of or
conversion to such LIBOR Loan and ending one, two, three, or six months
thereafter, as the Borrower may elect in the applicable Notice of
Borrowing or Notice of Conversion or Continuation; provided, that:
(a) any Interest Period that would otherwise end on a
day that is not a Business Day shall, subject to the provisions
of clause (c) below, be extended to the next succeeding
Business Day unless such Business Day falls in the next
calendar month, in which case such Interest Period shall end on
the immediately preceding Business Day;
(b) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end
of such Interest Period) shall, subject to clause (c) below,
end on the last Business Day of a calendar month;
(c) any Interest Period that would otherwise end after
the Termination Date shall end on the Termination Date; and
(d) notwithstanding clause (c) above, no Interest Period
shall have a duration of less than one month, and, if any
applicable Interest Period would be for a shorter period, such
Interest Period shall not be available hereunder.
"Inventory" means and includes, as to any Person, all of such
Person's then owned or existing and future acquired or arising (a)
goods intended for sale or lease or for display or demonstration, (b)
work in process, (c) raw materials and other materials and supplies of
every nature and description used or which might be used in connection
with the manufacture, packing, shipping, advertising, selling, leasing
or furnishing of goods or otherwise used or consumed in the conduct of
business, and (d) documents evidencing and General Intangibles relating
to any of the foregoing.
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"Investment" means, with respect to any Person: (a) the direct or
indirect purchase or acquisition of any beneficial interest in, any
share of capital stock of, evidence of Indebtedness of or other
security issued by any other Person, (b) any loan, advance or extension
of credit to, or contribution to the capital of, any other Person,
excluding advances to employees in the ordinary course of business for
business expenses and any of the foregoing contemplated by the
Receivables Purchase Agreement, or (c) any commitment or option to take
any of the actions described in clauses (a) or (b) above.
"Lender" means NationsBank, N.A., a national banking association,
and its successors and assigns.
"Lender's Office" means the office of the Lender specified in or
determined in accordance with the provisions of Section 12.1(c).
"Letter of Credit" means any letter of credit issued by the Lender
for the account of the Borrower.
"Letter of Credit Documents" means each of the documents,
agreements and other writings required by the Lender to be executed
and/or delivered in connection with the issuance of a Letter of Credit,
including, without limitation, each letter of credit application and
reimbursement agreement.
"Letter of Credit Facility" means, at any time, obligations arising
under Letters of Credit in an aggregate face amount not to exceed
$15,000,000 incurred pursuant to Section 2.7.
"Letter of Credit Fees" means fees charged by the Lender in
connection with the issuance of a Letter of Credit determined in
accordance with Schedule 1.1A attached hereto.
"Letter of Credit Reserve" means, at any time, 100% of the sum of
(i) the aggregate undrawn amount of all Letters of Credit outstanding
at such time, plus (ii) the aggregate amount of all drawings under
Letters of Credit for which the Lender has not been reimbursed.
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"Liabilities" means all liabilities of a Person determined in
accordance with GAAP and includable on a balance sheet of such Person
prepared in accordance with GAAP.
"LIBOR" means, with respect to the Interest Period applicable
thereto, a simple per annum interest rate determined pursuant to the
following formula:
LIBOR = Interbank Offered Rate
1 - LIBOR Reserve Percentage
LIBOR shall be adjusted automatically as of the effective date of any
change in the LIBOR Reserve Percentage.
"LIBOR Loan" means any Revolving Credit Loan bearing interest at
the time in question determined with reference to LIBOR.
"LIBOR Reserve Percentage" means, for any day, that percentage
(expressed as a decimal) which is in effect from time to time under
Regulation D of the Board of Governors of the Federal Reserve System,
as such regulation may be amended from time to time, or any successor
regulation, as the maximum reserve requirement (including, without
limitation, any basic, supplemental, emergency, special or marginal
reserves) applicable to any member bank with respect to Eurocurrency
liabilities as that term is defined in Regulation D (or against any
other category of liabilities that includes deposits by reference to
which the interest rate of any LIBOR Loan is determined), whether or
not Lender has any Eurocurrency liabilities subject to such reserve
requirement at that time. All LIBOR Loans shall be deemed to
constitute Eurocurrency liabilities and as such shall be deemed subject
to reserve requirements without the benefit of credits for proration,
exceptions or offsets that may be available from time to time to
Lender.
"Lien" as applied to the property of any Person means: (a) any
mortgage, deed to secure debt, deed of trust, lien, pledge, charge,
lease constituting a Capitalized Lease Obligation, conditional sale or
other title retention agreement, or other security interest, security
title or encumbrance of any kind in respect of any property of such
Person or upon the income or profits therefrom, (b) any arrangement,
express or implied, under which any property of such Person is
transferred, sequestered or otherwise identified for the purpose of
subjecting the same to the payment
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of Indebtedness or performance of any other obligation in priority to
the payment of the general, unsecured creditors of such Person, (c) any
Indebtedness which is unpaid more than 30 days after the same shall
have become due and payable and which if unpaid might by law
(including, but not limited to, bankruptcy and insolvency laws) or
otherwise be given any priority whatsoever over general unsecured
creditors of such Person, and (d) the filing of, or any agreement to
give, any financing statement under the UCC or its equivalent in any
jurisdiction.
"Loan" means any Revolving Credit Loan.
"Loan Documents" means, collectively, this Agreement, the Note, the
Security Documents and each other instrument, agreement and document
executed and delivered by the Borrower or GHC in connection with this
Agreement and each other instrument, agreement or document referred to
herein or contemplated hereby executed by or on behalf of the Borrower
or GHC evidencing, documenting or certifying matters in connection
herewith.
"Materially Adverse Effect" means any act, omission, event or
undertaking which would, singly or in the aggregate, have a materially
adverse effect upon (a) the business, assets, properties, liabilities,
condition (financial or otherwise), results of operations or business
prospects of the Borrower or upon the Borrower because of its effect on
any of its Subsidiaries, (b) upon the ability of the Borrower or GHC to
perform any obligations under this Agreement or any other Loan Document
to which it is a party, or (c) the legality, validity, binding effect,
enforceability or admissibility into evidence of any Loan Document or
the ability of Lender to enforce any material rights or remedies under
or in connection with any Loan Document; in any case, whether resulting
from any single act, omission, situation, status, event, or
undertaking, together with other such acts, omissions, situations, sta-
tuses, events, or undertakings .
"Money Borrowed" means, as applied to Indebtedness, (a)
Indebtedness for money borrowed, (b) Indebtedness, whether or not in
any such case the same was for money borrowed, (i) represented by notes
payable and drafts accepted, that represent extensions of credit, (ii)
constituting obligations evidenced by bonds, debentures, notes or
similar instruments, or (iii) upon which interest charges are
customarily paid (other than trade Indebtedness) or that was issued or
assumed as full or partial payment for property, (c) Indebtedness that
constitutes a Capitalized Lease Obligation, and (d) Indebtedness that
is such by virtue of clause (f) of the definition thereof, but only to
the extent that the obligations Guaranteed are obligations that would
constitute Indebtedness for Money Borrowed.
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"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which the Borrower or a Related Company
is required to contribute or has contributed within the immediately
preceding 6 years.
"Net Income" or "Net Loss" means, as applied to any Person, the net
income (or net loss) of such Person for the period in question after
giving effect to deduction of or provision for all operating expenses,
all taxes and reserves (including reserves for deferred taxes and all
other proper deductions), all determined in accordance with GAAP,
provided that there shall be excluded: (a) the net income (or net loss)
of any Person accrued prior to the date it becomes a Subsidiary of, or
is merged into or consolidated with, the Person whose Net Income is
being determined or a Subsidiary of such Person, (b) the net income (or
net loss) of any Person in which the Person whose Net Income is being
determined or any Subsidiary of such Person has an ownership interest,
except, in the case of net income, to the extent that any such income
has actually been received by such Person or such Subsidiary in the
form of cash dividends or similar distributions, (c) any restoration of
any contingency reserve, except to the extent that provision for such
reserve was made out of income during such period, (d) any net gains or
losses on the sale or other disposition, not in the ordinary course of
business, of Investments, Business Units and other capital assets,
provided that there shall also be excluded any related charges for
taxes thereon, (e) any net gain arising from the collection of the
proceeds of any insurance policy, (f) any write-up of any asset, and
(g) any other extraordinary item.
"Net Worth" of any Person means the total shareholders' equity
(including capital stock, additional paid-in capital and retained
earnings, after deducting treasury stock) which would appear as such on
a balance sheet of such Person prepared in accordance with GAAP.
"Note" means the Revolving Credit Note made by the Borrower payable
to the order of the Lender evidencing the obligation of the Borrower to
pay the aggregate unpaid principal amount of all Revolving Credit Loans
made to it by the Lender (and any promissory note or notes that may be
issued from time to time in substitution, renewal, extension,
replacement or exchange therefor, whether payable to the Lender or a
different lender, whether issued in connection with a Person becoming a
lender after the Effective Date or otherwise), substantially in the
form of Exhibit A hereto, with all blanks properly completed.
"Notice of Borrowing" has the meaning set forth in Section
2.2(a)(iii).
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"Notice of Conversion or Continuation" has the meaning set forth in
Section 3.3.
"Obligor" means the Borrower, each party to the Security Documents
(other than the Lender), and each other party at any time primarily or
secondarily, directly or indirectly, liable on any of the Secured
Obligations.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor agency.
"Permitted Holders" means any individuals who are executive
officers of the Borrower on the Agreement Date.
"Permitted Investments" means Investments in: (a) negotiable
certificates of deposit, time deposits and banker's acceptances issued
by the Lender or any Affiliate of the Lender or by any United States
bank or trust company having capital, surplus and undivided profits in
excess of $250,000,000, (b) any direct obligation of the United States
of America or any agency or instrumentality thereof which has a
remaining maturity at the time of purchase of not more than one year
and repurchase agreements relating to the same, (c) sales on credit in
the ordinary course of business on terms customary in the industry, (d)
notes, accepted in the ordinary course of business, evidencing overdue
accounts receivable arising in the ordinary course of business, and (e)
the "Buyer Note" delivered by the Receivables Purchaser to the Borrower
under the Receivables Purchase Agreement.
"Permitted Liens" means: (a) Liens securing taxes, assessments and
other governmental charges or levies (excluding any Lien imposed
pursuant to any of the provisions of ERISA) or the claims of
materialmen, mechanics, carriers, warehousemen or landlords for labor,
materials, supplies or rentals incurred in the ordinary course of busi-
ness, but (i) in all cases, only if payment shall not at the time be
required to be made in accordance with Section 8.4, and (ii) in the
case of warehousemen or landlords controlling locations where Inventory
is located, only if such liens have been waived or subordinated to the
Security Interest in a manner satisfactory to the Lender; (b) Liens of
the Lender arising under this Agreement and the other Loan Documents;
(c) Liens arising out of or resulting from any judgment or award, the
time for the appeal or petition for rehearing of which shall not have
expired, or in respect of which the Borrower is fully protected by
insurance or in respect of which the Borrower shall at any time in good
faith be prosecuting an appeal or proceeding for a review and in
respect of which a stay of execution pending such appeal or proceeding
for review shall have been secured, and as to
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which appropriate reserves have been established on the books of the
Borrower; and (d) Liens on accounts receivable and other "Trust Assets"
(as defined in the Intercreditor Agreement re Receivables) securing
Indebtedness under the Receivables Purchase Agreement, provided the
Person holding such Lien has entered into an intercreditor agreement
with the Lender, in form acceptable to the Lender, subordinating any
Lien such Person may have in proceeds from the liquidation of Inventory
to the Lender's Lien therein.
"Person" means an individual, corporation, partnership, assoc-
iation, trust or unincorporated organization or a government or any
agency or political subdivision thereof.
"Prime Rate" means during the period from the Effective Date
through the last day of the month in which the Effective Date falls,
the per annum rate of interest publicly announced by the Lender at its
principal office as its "prime rate" as in effect on the Effective
Date, and thereafter during each succeeding calendar month, means such
"prime rate" as in effect on the last Business Day of the immediately
preceding calendar month. Any change in an interest rate resulting
from a change in the Prime Rate shall become effective as of 12:01 a.m.
on the first day of the month following the month in which such change
was announced. The Prime Rate is a reference used by the Lender in
determining interest rates on certain loans and is not intended to be
the lowest rate of interest charged on any extension of credit to any
debtor.
"Prime Rate Loan" means a Revolving Credit loan bearing interest at
the time in question determined with reference to the Prime Rate.
"Receivables Purchase Agreement" means the Receivables Purchase
Agreement, dated as of July 25, 1996, among the Borrower, ICPPC, GHC
and the Receivables Purchaser.
"Receivables Purchase Documents" means the Receivables Purchase
Agreement and the other documents executed in connection therewith.
"Receivables Purchaser" means International Comfort Products
Receivables Company, L.P., a Tennessee limited partnership, and its
successors and assigns.
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"Receivables Trustee" means LaSalle National Bank, a national
banking association, in its capacity as trustee under the Pooling
Agreement (as defined in the Receivables Purchase Agreement), and its
successor and assigns.
"Related Company" means, as to any Person, any (a) corporation
which is a member of the same controlled group of corporations (within
the meaning of Section 414(b) of the Code) as such Person, (b) part-
nership or other trade or business (whether or not incorporated) under
common control (within the meaning of Section 414(c) of the Code) with
such Person, or (c) member of the same affiliated service group (within
the meaning of Section 414(m) of the Code) as such Person or any
corporation described in clause (a) above or any partnership, trade or
business described in clause (b) above.
"Revolving Credit Facility" means (a) until Revolving Credit
Facility B becomes effective in accordance with Section 2.6(b),
$15,000,000, (b) thereafter, until Revolving Credit Facility C becomes
effective in accordance with Section 2.6(c), $30,000,000, and (c)
thereafter, $45,000,000.
"Revolving Credit Facility A" means the facility for up to
$15,000,000 in principal amount of Revolving Credit Loans.
"Revolving Credit Facility B" means the facility for up to
$15,000,000 in principal amount of Revolving Credit Loans in addition
to the Revolving Credit Loans available under Revolving Credit
Facility A.
"Revolving Credit Facility C" means the facility for up to
$15,000,000 in principal amount of Revolving Credit Loans in addition
to the Revolving Credit Loans available under Revolving Credit
Facility A and Revolving Credit Facility B.
"Revolving Credit Loans" means loans made to the Borrower pursuant
to Section 2.1.
"Schedule of Inventory" means a schedule delivered by the Borrower
to the Lender pursuant to the provisions of Section 7.10(a).
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"Secured Obligations" means, in each case whether now in existence
or hereafter arising, (a) the principal of and interest and premium, if
any, on the Loans, (b) all reimbursement and other obligations relating
to Letters of Credit, and (c) all indebtedness, liabilities,
obligations, overdrafts, covenants and duties of the Borrower (i) to
the Lender of every kind, nature and description, direct or indirect,
absolute or contingent, due or not due, contractual or tortious,
liquidated or unliquidated, and whether or not evidenced by any note
and whether or not for the payment of money under or in respect of this
Agreement, the Note or any of the other Loan Documents and (ii) to any
Affiliate of the Lender arising directly as a result of any service to
(or by or on behalf of) or relationship with the Borrower or the Lender
in connection with the Loans or this Agreement, including without
limitation any operating or checking account relationships.
"Security Documents" means each of (a) the Financing Statements,
(b) the Assignment of Receivables Securitization Proceeds, and (c) each
other writing executed and delivered by any Person securing the Secured
Obligations or evidencing such security.
"Security Interest" means the Liens of the Lender on and in the
Collateral effected hereby or by any of the Security Documents or
pursuant to the terms hereof or thereof.
"Senior Secured Notes" means the 9-3/4% Senior Secured Notes due
2000 issued by the Borrower pursuant to the Senior Secured Notes
Indenture in the original principal amount of $140,000,000.
"Senior Secured Notes Documents" means the Senior Secured Notes
Indenture and the other documents executed in connection therewith.
"Senior Secured Notes Indenture" means the Indenture, dated as of
March 1, 1993, between the Borrower and the Indenture Trustee pursuant
to which the Borrower issued the Senior Secured Notes.
"Subordinated Indebtedness" means any Indebtedness for Money
Borrowed of the Borrower which is subordinated to the Secured
Obligations on terms and conditions acceptable to the Lender in its
sole discretion.
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"Subsidiary" when used to determine the relationship of a Person to
another Person, means a Person of which an aggregate of 50% or more of
the stock of any class or classes or 50% or more of other ownership
interests is owned of record or beneficially by such other Person or by
one or more Subsidiaries of such other Person or by such other Person
and one or more Subsidiaries of such Person, (i) if the holders of such
stock or other ownership interests (A) are ordinarily, in the absence
of contingencies, entitled to vote for the election of a majority of
the directors (or other individuals performing similar functions) of
such Person, even though the right so to vote has been suspended by the
happening of such a contingency, or (B) are entitled, as such holders,
to vote for the election of a majority of the directors (or individuals
performing similar functions) of such Person, whether or not the right
so to vote exists by reason of the happening of a contingency, or (ii)
in the case of such other ownership interests, if such ownership
interests constitute a majority voting interest.
"Tangible Net Worth" means, as applied to any Person, the Net Worth
of such Person at the time in question, after deducting therefrom all
accounts receivable and other obligations due from Affiliates (provided
that, to and including December 30, 1997, up to $10,000,000 of
receivables due from International Comfort Products Corporation
(Canada) may be included in "Tangible Net Worth") and the amount of all
intangible items reflected therein, including all unamortized debt
discount and expense, unamortized research and development expense,
unamortized deferred charges, goodwill, Intellectual Property,
unamortized excess cost of investment in Subsidiaries over equity at
dates of acquisition, and all similar items which should properly be
treated as intangibles in accordance with GAAP.
"Termination Date" means the earlier of July 23, 1999 or such later
date to which the termination of the Revolving Credit Facility shall be
extended pursuant to Section 2.5.
"Termination Event" means (a) a "Reportable Event" as defined in
Section 4043(b) of ERISA, but excluding any such event as to which the
provision for 30 days' notice to the PBGC is waived under applicable
regulations, (b) the filing of a notice of intent to terminate a
Benefit Plan or the treatment of a Benefit Plan amendment as a
termination under Section 4041 of ERISA, or (c) the institution of
proceedings to terminate a Benefit Plan by the PBGC under Section 4042
of ERISA (other than a standard termination under ERISA Section
4041(b)) or the appointment of a trustee to administer any Benefit
Plan.
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"Type" means, with respect to a Loan, its classification as a LIBOR
Loan or Prime Rate Loan.
"UCC" means the Uniform Commercial Code as in effect from time to
time in the State of Georgia.
"Unfunded Vested Accrued Benefits" means, with respect to any
Benefit Plan at any time, the amount (if any) by which (a) the present
value of all vested nonforfeitable benefits under such Benefit Plan
exceeds (b) the fair market value of all Benefit Plan assets allocable
to such benefits, as determined using such reasonable actuarial
assumptions and methods as are specified in the Schedule B (Actuarial
Information) to the most recent Annual Report (Form 5500) filed with
respect to such Benefit Plan.
Section 1.2 Other Referential Provisions.
(a) All terms in this Agreement, the Exhibits and Schedules
hereto shall have the same defined meanings when used in any other Loan
Documents, unless the context shall require otherwise.
(b) Except as otherwise expressly provided herein, all
accounting terms not specifically defined or specified herein shall
have the meanings generally attributed to such terms under GAAP
including, without limitation, applicable statements and
interpretations issued by the Financial Accounting Standards Board and
bulletins, opinions, interpretations and statements issued by the
American Institute of Certified Public Accountants or its committees.
(c) All personal pronouns used in this Agreement, whether used
in the masculine, feminine or neuter gender, shall include all other
genders; the singular shall include the plural, and the plural shall
include the singular.
(d) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provisions of this
Agreement.
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(e) Titles of Articles and Sections in this Agreement are for
convenience only, do not constitute part of this Agreement and neither
limit nor amplify the provisions of this Agreement, and all references
in this Agreement to Articles, Sections, Subsections, paragraphs,
clauses, subclauses, Schedules or Exhibits shall refer to the corres-
ponding Article, Section, Subsection, paragraph, clause or subclause
of, or Schedule or Exhibit attached to, this Agreement, unless specific
reference is made to the articles, sections or other subdivisions or
divisions of , or to schedules or exhibits to, another document or
instrument.
(f) Each definition of a document in this Agreement shall
include such document as amended, modified, supplemented or restated
from time to time in accordance with the terms of this Agreement.
(g) Except where specifically restricted, reference to a party
to a Loan Document includes that party and its successors and assigns
permitted hereunder or under such Loan Document.
(h) Unless otherwise specifically stated, whenever a time is
referred to in this Agreement or in any other Loan Document, such time
shall be the local time in the city in which the principal office of
Lender is located.
(i) Whenever the phrase "to the knowledge of the Borrower" or
words of similar import relating to the knowledge of the Borrower are
used herein, such phrase shall mean and refer to (i) the actual
knowledge of the President or chief financial officer or (ii) the
knowledge that such officers would have obtained if they had engaged in
good faith in the diligent performance of their duties, including the
making of such reasonable specific inquiries as may be necessary of the
appropriate persons in a good faith attempt to ascertain the accuracy
of the matter to which such phrase relates.
(j) The terms accounts, chattel paper, documents, equipment,
instruments, general intangibles and inventory, as and when used
(without being capitalized) in this Agreement or the Security
Documents, shall have the meanings given those terms in the UCC.
Section 1.3 Exhibits and Schedules. All Exhibits and Schedules
attached hereto are by reference made a part hereof.
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ARTICLE 2 - REVOLVING CREDIT FACILITY
Section 2.1 Revolving Credit Loans. Upon the terms and subject
to the conditions of, and in reliance upon the representations and
warranties made under, this Agreement, the Lender shall make Revolving
Credit Loans to the Borrower from time to time from the Effective Date
to the Termination Date, as requested by the Borrower in accordance
with the terms of Section 2.2, in an aggregate principal amount
outstanding not to exceed at any time the lesser of (a) the Revolving
Credit Facility minus the Letter of Credit Reserve and (b) the
Borrowing Base. It is expressly understood and agreed that the Lender
may and at present intends to use the lesser of the amounts referred to
in the foregoing subclauses (a) and (b) as a maximum ceiling on
Revolving Credit Loans; provided, however, that it is agreed that
should Revolving Credit Loans exceed the ceiling so determined or any
other limitation set forth in this Agreement, such Revolving Credit
Loans shall nevertheless constitute Secured Obligations and, as such,
shall be entitled to all benefits thereof and security therefor. The
principal amount of any Revolving Credit Loan which is repaid may be
reborrowed by the Borrower in accordance with the terms of this Section
2.1. The Lender is hereby authorized to record each repayment of
principal of the Revolving Credit Loans in its books and records, such
books and records constituting prima facie evidence of the accuracy of
the information contained therein.
Section 2.2 Manner of Borrowing Revolving Credit Loans.
Borrowings of the Revolving Credit Loans shall be made as follows:
(a) Requests for Borrowing.
(i) Prime Rate Loans. A request for the borrowing of a
Prime Rate Revolving Credit Loan shall be made, or shall be
deemed to be made, in the following manner:
(A)
the Borrower may request a Prime Rate Revolving Credit Loan by
notifying the Lender, before 12:00 noon (Eastern time) on the
proposed borrowing date (10:00 a.m. (Eastern time) in the case
of the last Business Day of each calendar month), of its
intention to borrow, specifying the effective date and amount
of such proposed Prime Rate Revolving Credit Loan;
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(B)
whenever a check is presented to the Lender for payment against
the Disbursement Account in an amount greater than the then
available balance in such account, such presentation shall be
deemed to be a request for a Prime Rate Revolving Credit Loan
on the date of such notice in an amount equal to the excess of
such check over such available balance, and such request shall
be irrevocable;
(C)
unless payment is otherwise made by the Borrower, the becoming
due of any amount required to be paid under this Agreement or
the Note as interest shall be deemed to be a request for a
Prime Rate Revolving Credit Loan on the due date in the amount
required to pay such interest, and such request shall be
irrevocable;
(D)
unless payment is otherwise made by the Borrower, the maturity
of any Secured Obligation required to be paid shall be deemed
to be a request for a Prime Rate Revolving Credit Loan on the
due date in the amount required to pay such Secured Obligation,
and such request shall be irrevocable; and
(E)
whenever a drawing is made under a Letter of Credit and the
Borrower fails to reimburse the Lender therefor, such failure
to reimburse shall be deemed to be a request for a Prime Rate
Revolving Credit Loan on the date such notification is received
in the amount so unreimbursed, and such request shall be
irrevocable.
(ii) LIBOR Loans. The Borrower may request a LIBOR Loan
by notifying the Lender (which notice shall be irrevocable) not
later than 12:00 noon (Eastern time) on the date two Business
Days before the day on which the requested LIBOR Loan is to be
made, specifying the effective date and amount of such LIBOR
Loan and the duration of the applicable Interest Period;
provided that, notwithstanding anything to the contrary
contained in this Agreement, if an Event of Default exists the
Borrower shall not have the right to request LIBOR Loans.
(iii) Notice of Borrowing. Any request for a Prime Rate
Loan under Section 2.2(a)(i)(A) or a LIBOR Loan under Section
2.2(a)(ii) (a "Notice of Borrowing") shall be made by telephone
or in writing (including telecopy) and, in the case of any
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telephonic notice, shall be immediately followed by a written
confirmation thereof in a form acceptable to the Lender,
provided that the failure to provide written confirmation shall
not invalidate any telephonic notice and, if such written
confirmation differs in any respect from the action taken by
the Lender, the records of the Lender shall control absent
manifest error.
(b) Disbursement of Loans. The Borrower hereby irrevocably
authorizes the Lender to disburse the proceeds of each borrowing
requested, or deemed to be requested, pursuant to this Section 2.2 as
follows: (i) the proceeds of each borrowing requested under Section
2.2(a)(i)(A) or (B) or Section 2.2(ii) shall be disbursed by the Lender
in lawful money of the United States of America in immediately
available funds, (A) in the case of the initial borrowing, in
accordance with the terms of the written instructions from the Borrower
to the Lender, and (B) in the case of each subsequent borrowing, by
credit to the Disbursement Account or to such other account as may be
agreed upon by the Borrower and the Lender from time to time; and (ii)
the proceeds of each borrowing requested under Section 2.2(a)(i)(C),
(D) or (E) shall be disbursed by the Lender by way of direct payment of
the relevant principal, interest or other Secured Obligation, as the
case may be.
Section 2.3 Repayment of Revolving Credit Loans. The Revolving
Credit Loans will be repaid as follows: (a) whether or not any Default
or Event of Default has occurred, the outstanding principal amount of
all the Revolving Credit Loans is due and payable, and shall be repaid
by the Borrower in full together with accrued and unpaid interest on
the amount repaid to the date of repayment, on the Termination Date;
(b) if at any time the aggregate unpaid principal amount of the
Revolving Credit Loans then outstanding exceeds the lesser of the
amounts referred to in clauses (a) and (b) of Section 2.1, the Borrower
shall repay the Revolving Credit Loans in an amount sufficient to
reduce the aggregate unpaid principal amount of such Loans by an amount
equal to such excess, together with accrued and unpaid interest on the
amount repaid to the date of repayment; and (c) the Borrower hereby
instructs the Lender to repay the Revolving Credit Loans outstanding on
any day in an amount equal to the amount received by the Lender on such
day pursuant to Section 7.1(b).
Section 2.4 Revolving Credit Note. The Revolving Credit Loans
and the obligation of the Borrower to repay such Loans shall also be
evidenced by a single Revolving Credit Note payable to the order of the
Lender. Such Note shall be dated the Effective Date and be duly and
validly executed and delivered by the Borrower.
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Section 2.5 Extension of Facility. The Termination Date shall
be automatically extended for successive one-year periods unless either
the Lender or the Borrower provides to the other written notice of
termination not less than 60 days prior to the then effective
Termination Date.
Section 2.6 Effectiveness of Revolving Credit Facility.
(a) Revolving Credit Facility A shall be effective upon the
satisfaction of the conditions precedent set forth in Sections 4.1 and
4.2.
(b) Revolving Credit Facility B shall be effective upon the
satisfaction of the conditions precedent set forth in Sections 4.2 and
4.3. The Borrower acknowledges that the Lender has not extended a
commitment to activate Revolving Credit Facility B and that the Lender
has no obligation to do so, or to make any Loans under Revolving Credit
Facility B, unless and until all of the conditions precedent set forth
in Sections 4.2 and 4.3 are satisfied, including the Lender's written
election at such time to accept the Revolving Credit Facility B Closing
Fee (as defined in Section 3.2(d)) and activate Revolving Credit
Facility B.
(c) Revolving Credit Facility C shall be effective upon the
satisfaction of the conditions precedent set forth in Sections 4.2 and
4.4. The Borrower acknowledges that the Lender has not extended a
commitment to activate Revolving Credit Facility C and that the Lender
has no obligation to do so, or to make any Loans under Revolving Credit
Facility C, unless and until all of the conditions precedent set forth
in Sections 4.2 and 4.4 are satisfied, including the Lender's written
election at such time to accept the Revolving Credit Facility C Closing
Fee (as defined in Section 3.2(d)) and activate Revolving Credit
Facility C.
Section 2.7 Letters of Credit.
(a) Upon the request of the Borrower from time to time, the
Lender shall, in accordance with the provisions of this Section 2.7,
issue one or more Letters of Credit up to an aggregate amount available
to be drawn (plus the aggregate amount of unreimbursed drawings under
all Letters of Credit) at any time not to exceed the Letter of Credit
Facility; provided, that (1) all Letter of Credit Documents in
connection with each Letter of Credit shall be satisfactory to the
Lender in its sole discretion, (2) no
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Letter of Credit shall be issued if, after issuance thereof, the sum of
the aggregate principal amount of Revolving Credit Loans outstanding,
plus the aggregate amount available to be drawn under all Letters of
Credit, plus the aggregate amount of any unreimbursed drawings under
Letters of Credit, would exceed the lesser of (A) the Revolving Credit
Facility and (B) the Borrowing Base plus the Letter of Credit Reserve,
(3) each Letter of Credit shall be a documentary letter of credit
issued to or for the benefit of a supplier of the Borrower in
connection with the purchase of Inventory or a standby letter of credit
issued to a beneficiary and for a purpose acceptable to the Lender in
its sole discretion, and (4) no Letter of Credit shall have an initial
term longer than one year or an expiration date later than the
Termination Date.
(b) The Borrower acknowledges and agrees that if and to the
extent the Borrower shall fail to reimburse the Lender under any Letter
of Credit Documents, the Borrower hereby irrevocably requests and
directs the Lender, subject to and in accordance with the provisions of
Section 2.1, to make payment on its behalf and the amount of any such
payment by the Lender shall constitute a Revolving Credit Loan made at
the time of such payment.
(c) The issuance and negotiation of Letters of Credit shall be
governed by the Uniform Customs and Practices for Documentary Credits
(1993 Revision), as published in the International Chamber of Commerce
Uniform Customs and Practices, Publication No. 500 or such other
policies and practices as may be followed by the Lender with respect to
similar letters of credit at the time.
ARTICLE 3 - GENERAL LOAN PROVISIONS
Section 3.1 Interest.
(a) (i) Prime Rate Loans. The Borrower will pay interest on
the unpaid principal amount of each Prime Rate Loan for each
day from the day such Loan was made until such Loan is paid
(whether at maturity, by reason of acceleration or otherwise),
or is converted to a Loan of a different Type, at a rate per
annum equal to the Prime Rate, payable monthly in arrears on
each Interest Payment Date and on the Termination Date.
(ii) LIBOR Loans. The Borrower will pay interest on the
unpaid principal amount of each LIBOR Loan for the Interest
Period applicable thereto at a rate per annum equal to the sum
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the Applicable Margin plus LIBOR, payable in arrears on each
Interest Payment Date, on the last day of such Interest Period,
and when such LIBOR Loan is paid (whether at maturity, by
reason of acceleration or otherwise). As used herein,
"Applicable Margin" means, on any date of determination, two
percent (2.0%) per annum, as adjusted in accordance with the
pricing matrix set forth below based upon the ratio of Funded
Indebtedness to EBITDA for the Borrower and its Consolidated
Subsidiaries (excluding GHC):
Funded Indebtedness to
EBITDA Ratio Applicable Margin
Greater than 3.5 2.0%
Greater than 3.0 but less than 3.5 1.75%
3.0 or less 1.50%
Adjustments to the Applicable Margin shall be effective as of
the first day of the calendar month after the Lender's receipt
of the Borrower's quarterly financial statements (commencing
with the financial statements for the fiscal quarter ending on
June 30, 1997) in conformance with Section 9.1(b), together
with the officer's certificate described in Section 9.3 setting
forth the calculation of the above-referenced ratio. In the
event the Borrower fails to timely provide the financial
statements and officer's certificate referred to above, and
without prejudice to any additional rights under Section 11.2,
the maximum Applicable Margin shall apply to all LIBOR Loans
until the first day of the calendar month after the Lender's
receipt of such financial statements and certificate.
(b) The Borrower shall pay interest on the unpaid principal
amount of each Secured Obligation (other than a Loan) for each day from
the day the Borrower receives notice that such Secured Obligation is
due and payable until such Secured Obligation is paid at the rate per
annum applicable to Prime Rate Loans, payable on demand.
(c) From and after the occurrence of an Event of Default, the
unpaid principal amount of each Secured Obligation shall bear interest
until paid in full (or, if earlier, until such Event of Default is
cured or waived in writing by the Lender) at a rate per annum equal to
the Default Margin plus the rate otherwise in effect under Section
3.1(a) or
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(b), payable on demand. The interest rate provided for in this Section
3.1(c) shall to the extent permitted by applicable law apply to and
accrue on the amount of any judgment entered with respect to any
Secured Obligation and shall continue to accrue at such rate during any
proceeding described in Section 11.1(g) or (h).
(d) The interest rates provided for in Sections 3.1(a), (b) and
(c) shall be computed on the basis of a year of 360 days and the actual
number of days elapsed.
(e) It is not intended by the Lender, and nothing contained in
this Agreement or the Note shall be deemed, to establish or require the
payment of a rate of interest in excess of the maximum rate permitted
by applicable law (the "Maximum Rate"). If, in any month, the
Effective Interest Rate, absent such limitation, would have exceeded
the Maximum Rate, then the Effective Interest Rate for that month shall
be the Maximum Rate, and if, in future months, the Effective Interest
Rate would otherwise be less than the Maximum Rate, then the Effective
Interest Rate shall remain at the Maximum Rate until such time as the
amount of interest paid hereunder equals the amount of interest which
would have been paid if the same had not been limited by the Maximum
Rate. In this connection, in the event that, upon payment in full of
the Secured Obligations, the total amount of interest paid or accrued
under the terms of this Agreement is less than the total amount of
interest which would have been paid or accrued if the Effective
Interest Rate had at all times been in effect, then the Borrower shall,
to the extent permitted by applicable law, pay to the Lender an amount
equal to the difference between (i) the lesser of (A) the amount of
interest which would have been charged if the Maximum Rate had, at all
times, been in effect and (B) the amount of interest which would have
accrued had the Effective Interest Rate, at all times, been in effect,
and (ii) the amount of interest actually paid or accrued under this
Agreement. In the event the Lender receives, collects or applies as
interest any sum in excess of the Maximum Rate, such excess amount
shall be applied to the reduction of the principal balance of the
applicable Secured Obligation, and, if no such principal is then
outstanding, such excess or part thereof remaining shall be paid to the
Borrower.
Section 3.2 Fees.
(a) Commitment Fee. In connection with and as consideration for
the Lender's commitment hereunder, subject to the terms hereof, to lend
to the Borrower under the Revolving Credit Facility, the Borrower shall
pay a fee to the Lender, from the Effective Date until the Termination
Date, in an amount equal to, (i) in the event Revolving Credit
Facility B
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and Revolving Credit Facility C are not effective in accordance with
Section 2.6, 3/8% per annum of the average daily unused portion of
Revolving Credit Facility A, (ii) in the event Revolving Credit
Facility B (but not Revolving Credit Facility C) is effective in
accordance with Section 2.6, 3/8% per annum of the average daily unused
portion of Revolving Credit Facility A and 1/4% per annum of the average
daily unused portion of Revolving Credit Facility B, and (iii) in the
event Revolving Credit Facility B and Revolving Credit Facility C are
both effective in accordance with Section 2.6, 3/8% per annum of the
average daily unused portion of Revolving Credit Facility A and 1/4% per
annum of the average daily unused portion of Revolving Credit
Facility B and Revolving Credit Facility C. In calculating such fees,
all outstanding Revolving Credit Loans and Letter of Credit obligations
shall be allocated first to Revolving Credit Facility A. All such fees
shall be payable monthly in arrears on the first day of each month.
(b) Closing Fee. On the Effective Date, the Borrower shall pay
to the Lender a closing fee in the amount of $25,000 in connection with
the establishment of the Revolving Credit Facility and in consideration
of the making of Loans under this Agreement and in order to compensate
the Lender for the costs associated with structuring, processing,
approving and closing the Revolving Credit Facility and the Loans, but
excluding expenses for which the Borrower has agreed elsewhere in this
Agreement to reimburse the Lender.
(c) Administration Fee. For services performed by the Lender in
connection with its continuing administration hereof, the Borrower
shall pay to the Lender a fee of $3,125 per quarter, payable quarterly
in advance on the Effective Date and on the first day of each October,
January, April and July thereafter, and continuing so long as any Loan
shall remain outstanding or the Revolving Credit Facility shall not
have been terminated.
(d) Activation Fees.
(i) On the date on which Revolving Credit Facility B becomes
effective in accordance with Section 2.6, the Borrower
shall pay to the Lender a closing fee in the amount of
$25,000 (the "Revolving Credit Facility B Closing Fee")
in connection with the establishment of Revolving
Credit Facility B and in consideration of the making of
Loans thereunder and in order to compensate the
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Lender for the costs associated with structuring, processing,
approving and closing Revolving Credit Facility B and the Loans
thereunder, but excluding expenses for which the Borrower has
agreed elsewhere in this Agreement to reimburse the Lender.
(ii) On the date on which Revolving Credit Facility C
becomes effective in accordance with Section 2.6(c),
the Borrower shall pay to the Lender a closing fee in
the amount of $25,000 (the "Revolving Credit Facility C
Closing Fee") in connection with the establishment of
Revolving Credit Facility C and in consideration of the
making of Loans thereunder and in order to compensate
the Lender for the costs associated with structuring,
processing, approving and closing Revolving Credit
Facility C and the Loans thereunder, but excluding
expenses for which the Borrower has agreed elsewhere in
this Agreement to reimburse the Lender.
(e) Letter of Credit Fees. As consideration for the issuance by
the Lender of a Letter of Credit, the Borrower agrees to pay to the
Lender all applicable Letter of Credit Fees. Such fees shall be
payable to the Lender in advance on the date of issuance of each Letter
of Credit and shall be calculated according to the face amount of such
Letter of Credit based on its stated term.
(f) General. All fees shall be fully earned by the Lender when
due and payable and, except as otherwise set forth herein, shall not be
subject to refund or rebate. All fees are for compensation for
services and are not, and shall not be deemed to be, interest or a
charge for the use of money.
Section 3.3 Notice of Conversion or Continuation of Loans.
Whenever the Borrower desires, subject to the provisions of Section
3.4, to convert an outstanding Loan into a Loan of a different Type
provided for in this Agreement or to continue all or a portion of an
outstanding LIBOR Loan for a subsequent Interest Period, the Borrower
shall notify the Lender (which notice shall be irrevocable) by
telephone or in writing (including telecopy) not later than 12:00 noon
(Eastern time) on the date
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one Business Day before the day on which a proposed conversion of a
LIBOR Loan into a Prime Rate Loan is to be effective (which effective
date shall be the last day of the Interest Period applicable to such
LIBOR Loan) and two Business Days before the day on which a proposed
conversion of a Prime Rate Loan into, or continuation of a LIBOR Loan
as, a LIBOR Loan is to be effective (and such effective date of any
continuation shall be the last day of the Interest Period for such
LIBOR Loan). Each such notice (a "Notice of Conversion or
Continuation") shall (a) identify the Loan to be converted or
continued, including the Type thereof, the aggregate outstanding
principal balance thereof and, in the case of a LIBOR Loan, the last
day of the Interest Period therefor, (b) specify the effective date of
such conversion or continuation, (c) specify the principal amount of
such Loan to be converted or continued and, if converted, the Type or
Types of Loan into which conversion of such principal amount or
specified portions thereof is to be made, and (d) in the case of any
conversion into or continuation as a LIBOR Loan, the Interest Period to
be applicable thereto, and, in the case of any telephonic notice, shall
be immediately followed by a written confirmation thereof by the
Borrower in a form acceptable to the Lender, provided that the failure
to provide a written confirmation shall not invalidate any telephonic
notice and, if such written confirmation differs in any respect from
the action taken by the Lender, the records of the Lender shall control
absent manifest error. In the event the Borrower fails to provide
timely notice of the conversion or continuation of any LIBOR Loan, such
Loan shall automatically convert to a Prime Rate Loan as of the last
day of the Interest Period applicable to such LIBOR Loan.
Section 3.4. Conversion or Continuation. Provided that no Event
of Default exists (but subject to the provisions of Sections 3.5 and
3.6), the Borrower may request that all or any part of any outstanding
Loan of one Type (a) be converted into a Loan or Loans of any other
Type provided for in this Agreement, or (b) be continued as a Loan or
Loans of the same Type, in the same aggregate principal amount, on any
Business Day (which, in the case of a conversion or continuation of a
LIBOR Loan, shall be the last day of the Interest Period applicable to
such LIBOR Loan), upon notice (which notice shall be irrevocable) given
in accordance with Section 3.3. Notwithstanding anything to the
contrary contained in this Agreement, if an Event of Default exists (i)
the Borrower shall not have the right to convert Loans into, or
continue Loans as, LIBOR Loans and (ii) all outstanding LIBOR Loans
shall, at the Lender's election, be converted to Prime Rate Loans as of
the date of the occurrence of such Event of Default.
Section 3.5 Duration of Interest Periods; Maximum Number of
LIBOR Loans; Minimum Increments.
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(a) Subject to the provisions of the definition "Interest
Period", the duration of each Interest Period applicable to a LIBOR
Loan shall be as specified in the applicable Notice of Borrowing or
Notice of Conversion or Continuation. The Borrower may elect a
subsequent Interest Period to be applicable to any LIBOR Loan by giving
a Notice of Conversion or Continuation with respect to such Loan in
accordance with Section 3.3.
(b) If the Lender does not receive a Notice of Conversion or
Continuation in accordance with Section 3.3 with respect to the
continuation of a LIBOR Loan within the applicable time limits
specified in Section 3.3, or if, when such notice must be given, an
Event of Default exists or such Type of Loan is not available, the
Borrower shall be deemed to have elected to convert such LIBOR Loan in
whole into a Prime Rate Loan on the last day of the Interest Period
therefor.
(c) Notwithstanding the foregoing, the Borrower may not select
an Interest Period that would end, but for the provisions of the
definition "Interest Period," after the Termination Date.
(d) In no event shall there be more than five LIBOR Loans
outstanding hereunder at any time. For the purpose of this subsection
(d), each LIBOR Loan having a distinct Interest Period shall be deemed
to be a separate Loan hereunder.
(e) Each LIBOR Loan shall be in a minimum amount of $1,000,000.
Section 3.6 Changed Circumstances.
(a) If the introduction of or any change in or in the
interpretation of (in each case, after the date hereof) any law or
regulation makes it unlawful, or any Governmental Authority asserts,
after the date hereof, that it is unlawful, for the Lender to perform
its obligations hereunder to make or maintain LIBOR Loans, the Lender
shall notify the Borrower of such event, and the right of the Borrower
to select LIBOR Loans for any subsequent Interest Period or in
connection with any subsequent conversion of any Loan shall be
suspended until the Lender shall notify the Borrower that the
circumstances causing such suspension no longer exist, and the Borrower
shall forthwith prepay in full all LIBOR Loans then outstanding, and
shall pay all interest accrued thereon through the date of such
prepayment; provided, that if the date of such repayment is not the
last day of the Interest Period applicable to such LIBOR Loans, the
Borrower shall also pay any amount due pursuant to Section 3.7.
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(b) If the Lender shall, prior to the disbursement of any
requested Revolving Credit Loan or the effective date of any conversion
or continuation of an existing Loan to be made or continued as or
converted into a LIBOR Loan (each such requested Revolving Credit Loan
made and Loan to be converted or continued, a "Pending Loan"), notify
the Borrower that LIBOR will not adequately reflect the cost to the
Lender of making or funding such Pending Loan as a LIBOR Loan or that
the Interbank Offered Rate is not determinable from any interest rate
reporting service of recognized standing, then the right of the
Borrower to select LIBOR Loans for such Pending Loan, any subsequent
Revolving Credit Loan, or in connection with any subsequent conversion
or continuation of any Loan, shall be suspended until the Lender shall
notify the Borrower that the circumstances causing such suspension no
longer exist, and each Loan comprising each Pending Loan and each such
subsequent Loan requested to be made, continued or converted shall be
made or continued as or converted into a Prime Rate Loan.
Section 3.7 Payments Not at End of Interest Period; Failure to
Borrow. If (a) for any reason any payment of principal with respect to
any LIBOR Loan is made on any day prior to the last day of the Interest
Period applicable to such LIBOR Loan, (b) any LIBOR Loan is converted
to a Prime Rate Loan under Section 3.4 as a result of the occurrence of
an Event of Default, or (c) after having given a Notice of Borrowing
with respect to any Loan to be comprised of LIBOR Loans or a Notice of
Conversion or Continuation with respect to any Loan to be continued as
or converted into a LIBOR Loan, such Loan is not made or is not
continued as or converted into a LIBOR Loan due to the Borrower's
failure to borrow or to fulfill the applicable conditions set forth in
Article 4, the Borrower shall pay to the Lender, in addition to any
other amounts that may be due under this Agreement, an amount (if a
positive number) computed pursuant to the following formula:
L = (R - T) x P x D
360
L = amount payable
R =
interest rate applicable to the LIBOR Loan prepaid, converted
or unborrowed
T =
effective interest rate per annum at which any readily
marketable bonds or other obligations of the United States,
selected at the Lender's sole discretion, maturing on or near
the last day of the then applicable or requested Interest
Period for such Loan and in approximately the same amount as
such Loan, can be purchased by the Lender on the day of such
payment of principal or failure to borrow
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P =
the amount of principal paid or converted or the amount of the
requested Loan
D =
the number of days remaining in the Interest Period as of the
date of such payment or conversion or the number of days in the
requested Interest Period
The Borrower shall pay such amount upon presentation by the Lender of a
statement setting forth the amount and the Lender's calculation thereof
pursuant hereto, which statement shall be deemed true and correct
absent manifest error.
Section 3.8 Increased Costs and Reduced Returns. The Borrower
agrees that if any law now or hereafter in effect and whether or not
presently applicable to the Lender or any request, guideline or
directive of any Governmental Authority (whether or not having the
force of law and whether or not failure to comply therewith would be
unlawful) or the interpretation or administration thereof by any
Governmental Authority , shall either (a)(i) impose, affect, modify or
deem applicable any reserve, special deposit, capital maintenance or
similar requirement against any Loan, (ii) impose on the Lender any
other condition regarding any Loan, this Agreement, the Note or the
facilities provided hereunder, or (iii) result in any requirement
regarding capital adequacy (including any risk-based capital
guidelines) affecting the Lender being imposed or modified or deemed
applicable to the Lender, or (b) subject the Lender to any taxes on the
recording, registration, notarization or other formalization of the
Loans or the Note, and the result of any event referred to in clause
(a) or (b) above shall be to increase the cost to the Lender of making,
funding or maintaining any Loan or to reduce the amount of any sum
receivable by the Lender or the Lender's rate of return on capital with
respect to any Loan to a level below that which the Lender could have
achieved but for such imposition, modification or deemed applicability
(taking into consideration the Lender's policies with respect to
capital adequacy) by an amount deemed by Lender (in the exercise of its
discretion) to be material, then, upon demand by the Lender, the
Borrower shall immediately pay to the Lender additional amounts which
shall be sufficient to compensate the Lender for such increased cost,
tax or reduced rate of return. A certificate of the Lender to the
Borrower claiming compensation under this Section 3.8 shall constitute
prima facie evidence of the accuracy of the information contained
therein. Such certificate shall set forth the nature of the occurrence
giving rise to such compensation, the additional amount or amounts to
be paid to it hereunder, and the method by which such amounts were
determined. In determining such amount, the Lender may use any
reasonable averaging and attribution methods.
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Section 3.9 Manner of Payment. (a) Each payment (including
prepayments) by the Borrower on account of the principal of or interest
on the Loans or of any fee or other amounts payable to the Lender under
this Agreement or the Note shall be made not later than 1:30 p.m. on
the date specified for payment under this Agreement (or if such day is
not a Business Day, the next succeeding Business Day) to the Lender at
the Lender's Office, in Dollars, in immediately available funds and
shall be made without any setoff, counterclaim or deduction whatsoever.
(b) The Borrower hereby irrevocably authorizes the Lender and
each Affiliate of the Lender to charge any account of the Borrower
maintained with the Lender or such Affiliate with such amounts as may
be necessary from time to time to pay any Secured Obligations which are
not paid when due.
Section 3.10 Statements of Account. The Lender will account to
the Borrower within 30 days after the end of each calendar month with a
statement of Loans, charges and payments made pursuant to this
Agreement during such calendar month, and such account rendered by the
Lender shall be deemed an account stated as between the Borrower and
the Lender and shall be deemed final, binding and conclusive unless the
Lender is notified by the Borrower in writing to the contrary within 60
days after the date such account is delivered to the Borrower, save for
manifest error. Any such notice shall be deemed an objection only to
those items specifically objected to therein. Failure of the Lender to
render such account shall in no way affect its rights hereunder.
Section 3.11 Termination of Agreement. On the Termination Date,
the Borrower shall pay to the Lender, in same day funds, an amount
equal to the aggregate amount of all Loans outstanding on such date,
together with accrued interest thereon, all fees payable pursuant to
Section 3.2 accrued from the date last paid through the effective date
of termination, any amounts payable to the Lender pursuant to the other
provisions of this Agreement, including, without limitation, Sections
3.7, 3.8, 11.2, 12.12 and 12.13, any and all other Secured Obligations
then outstanding, and an amount equal to the Letter of Credit Reserve
to be held by the Lender as cash collateral security for the payment of
and to be applied to the payment of any amounts which may thereafter
become due with respect to any Letter of Credit, and provide the Lender
with an indemnification agreement in form and substance reasonably
satisfactory to the Lender with respect to returned and dishonored
items and such other matters as the Lender shall reasonably require.
Upon 60 days prior written notice to the Lender, the Borrower may
terminate this Agreement prior to the Termination Date in effect at
such time, upon payment of an early termination fee computed as
follows: (A) $100,000 if such termination occurs on or prior to the
first anniversary of the Effective Date, and (B) $50,000 if such
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termination occurs at any time thereafter other than on a Termination
Date; provided that no early termination fee shall be due if (a) the
Lender, in accordance with the terms thereof, decreases any of the
advance rates set forth in the definition of Borrowing Base or
materially restricts the eligibility standards set forth in the
definition of Eligible Inventory, (b) the Borrower terminates this
Agreement and pays the Lender all amounts due hereunder within 180 days
after any decrease or restriction described in clause (a) above, (c) no
Event of Default existed at the time of such decrease or restriction,
and (d) no Event of Default exists at the time of such termination.
ARTICLE 4 - CONDITIONS PRECEDENT
Section 4.1 Conditions Precedent to Initial Loan. Notwith-
standing any other provision of this Agreement, the Lender's obligation
to make the Initial Loans is subject to the fulfillment of each of the
following conditions prior to or contemporaneously with the making of
such Loan:
(a) Closing Documents. The Lender shall have received each of
the following documents, all of which shall be satisfactory in form and
substance to the Lender and its counsel:
(1) this Agreement, duly executed and delivered by the
Borrower;
(2) the Note, dated the Effective Date and duly executed
and delivered by the Borrower;
(3) certified copies of the articles of incorporation
and by-laws of the Borrower as in effect on the Effective Date;
(4) certified copies of all corporate action, including
stockholder approval, if necessary, taken by the Borrower to
authorize the execution, delivery and performance of this
Agreement and the other Loan Documents and the borrowings under
this Agreement;
(5) certificates of incumbency and specimen signatures
with respect to each of the officers of the Borrower who is
authorized to execute and deliver this Agreement or any other
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Loan Document on behalf of the Borrower or any document,
certificate or instrument to be delivered in connection with
this Agreement or the other Loan Documents and to request
borrowings under this Agreement;
(6) a certificate evidencing the good standing of the
Borrower in the jurisdiction of its incorporation and in each
other jurisdiction in which it does business and where the
failure so to be in good standing could reasonably be expected
to have a Materially Adverse Effect;
(7) the Financing Statements duly executed and delivered
by the Borrower, and evidence satisfactory to the Lender that
the Financing Statements have been filed in each jurisdiction
where such filing may be necessary or appropriate to perfect
the Security Interest;
(8) landlord's waiver and consent agreements duly
executed on behalf of each landlord of real property on which
any Collateral is located;
(9) a Schedule of Inventory prepared as of a recent
date;
(10) certificates or binders of insurance relating to
each of the policies of insurance covering any of the
Collateral together with loss payable clauses which comply with
the terms of Section 7.5(b);
(11) the Assignment of Receivables Securitization
Proceeds, duly executed by the Borrower, GHC and the
Receivables Purchaser, together with the originals of the Buyer
Notes (as defined therein) duly endorsed to the Lender;
(12) the Blocked Account Agreement, duly executed by
each of the parties thereto;
(13) the Intercreditor Agreement re Receivables, duly
executed by the Borrower, ICPPC, GHC, the Receivables
Purchaser, the Receivables Trustee and ABN AMRO;
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(14) a Borrowing Base Certificate prepared as of the
Effective Date duly executed and delivered by the chief
financial officer of the Borrower;
(15) a letter from the Borrower to the Lender requesting
the Initial Loans and specifying the method of disbursement;
(16) copies of all the financial statements referred to
in Section 5.1(m) and meeting the requirements thereof;
(17) a balance sheet of the Borrower and its
Consolidated Subsidiaries (including and excluding GHC) as at
March 31, 1997, prepared by the Borrower on a pro forma basis,
giving effect to the transactions contemplated by this
Agreement and setting forth the assumptions on which such
balance sheet was prepared; forecasted consolidated financial
statements consisting of balance sheets, cash flow statements
and income statements of the Borrower and its Consolidated
Subsidiaries (including and excluding GHC), giving effect to
the transactions contemplated by this Agreement and reflecting
projected borrowings hereunder and setting forth the
assumptions on which such forecasted financial statements were
prepared, covering the one-year period commencing on January 1,
1997, and prepared on a quarterly basis; and such other
evidence as the Lender shall require supporting the
representation and warranty of the Borrower set forth in
Section 5.1(r);
(18) a certificate of the President of the Borrower
stating that, to the best of his knowledge and based on an
examination sufficient to enable him to make an informed
statement, (a) all of the representations and warranties made
or deemed to be made under this Agreement are true and correct
as of the Effective Date, both with and without giving effect
to the Loans to be made at such time and the application of the
proceeds thereof, and (b) no Default or Event of Default
exists;
(19) true and correct copies of the Receivables Purchase
Documents, as certified by the President of the Borrower;
(20) true and correct copies of the Senior Secured Notes
Documents,
as certified by the President of the Borrower;
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(21) certified copies of the articles of incorporation and
by-laws
(or certificate of limited partnership and limited partnership
agreement) of GHC and the Receivables Purchaser as in effect on
the Effective Date;
(22) certified copies of all corporate or partnership action
taken by
GHC and the Receivables Purchaser to authorize the execution,
delivery and performance of the Loan Documents to which each is
a party;
(23) certificates of incumbency and specimen signatures with
respect
to each of the officers of GHC and the Receivables Purchaser
who is authorized to execute and deliver the Loan Documents to
which each is a party;
(24) a certificate evidencing the good standing of GHC and the
Receivables Purchaser in the jurisdiction of its incorporation
or organization;
(25) signed opinions of Tuke Yopp & Sweeney, counsel for
the Borrower, GHC and the Receivables Purchaser, and such local
counsel as the Lender shall deem necessary or desirable,
opining as to such matters in connection with this Agreement as
the Lender or its counsel may reasonably request; and
(26) copies of each of the other Loan Documents duly
executed by the parties thereto with evidence satisfactory to
the Lender and its counsel of the due authorization, binding
effect and enforceability of each such Loan Document on each
such party and such other documents and instruments as the
Lender may reasonably request.
(b) Fees. The Lender shall have received all fees payable on
the Effective Date under this Agreement.
(c) Availability. The Lender shall be provided with evidence
satisfactory to it that, as of the Effective Date, after giving effect
to the Initial Loans, Availability will be not less than $5,000,000.
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(d) No Injunctions, Etc. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or
proposed before any court, governmental agency or legislative body to
enjoin, restrain or prohibit or to obtain substantial damages in
respect of or which is related to or arises out of this Agreement or
the consummation of the transactions contemplated hereby or which, in
the Lender's sole discretion, would make it inadvisable to consummate
the transactions contemplated by this Agreement.
(e) Material Adverse Change. As of the Effective Date, there
shall not have occurred any change which, in the Lender's sole
discretion, has had or may have a Materially Adverse Effect as compared
to the condition of the Borrower presented by the most recent unaudited
financial statements of the Borrower described in Section 5.1(m).
(f) Solvency. The Lender shall have received evidence
satisfactory to it that, after giving effect to the Initial Loans (i)
the Borrower has assets (excluding goodwill and other intangible assets
not capable of valuation) having value, both at fair value and at
present fair saleable value, greater than the amount of its
liabilities, and (ii) the Borrower's assets are sufficient in value to
provide the Borrower with sufficient working capital to enable it
profitably to operate its business and to meet its obligations as they
become due, and (iii) the Borrower has adequate capital to conduct the
business in which it is and proposes to be engaged.
(g) Release of Security Interests. The Lender shall have
received evidence satisfactory to it of the release and termination of
all Liens other than Permitted Liens.
Section 4.2 All Loans. At the time of making of each Loan,
including the Initial Loan:
(a) all of the representations and warranties made or deemed to
be made under this Agreement shall be true and correct at such time
both with and without giving effect to the Loans to be made at such
time and the application of the proceeds thereof, except that
representations and warranties which, by their terms, are applicable
only to the Effective Date shall be required to be true and correct
only as of the Effective Date,
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(b) the corporate actions of the Borrower referred to in Section
4.1(a)(4) shall remain in full force and effect and the incumbency of
officers shall be as stated in the certificates of incumbency delivered
pursuant to Section 4.1(a)(5) or as subsequently modified and reflected
in a certificate of incumbency delivered to the Lender, and
(c) the Lender may, without waiving either condition, consider
the conditions specified in Sections 4.2(a) and (b) fulfilled and a
representation by the Borrower to such effect made if no written notice
to the contrary is received by the Lender from the Borrower prior to
the making of the Loans then to be made.
Section 4.3 Revolving Credit Facility B. In addition to the
conditions set forth in Section 4.2, the effectiveness of Revolving
Credit Facility B and the obligation of the Lender to make Loans
thereunder are subject to the prior fulfillment of each of the
following conditions:
(a) the Borrower shall have paid the $25,000 Revolving Facility
B Closing Fee described in Section 3.2(d)(i);
(b) the Lender shall have elected, in its sole discretion, to
make Revolving Credit Facility B available, as evidenced by the
Lender's written notice to the Borrower accepting the Revolving Credit
Facility B Closing Fee and acknowledging the effectiveness of Revolving
Credit Facility B; and
(c) the Borrower shall execute such documentation as the Lender
may reasonably request in connection therewith, including amendments to
the Financing Statements if necessary or appropriate to reflect the
increased maximum amount of indebtedness covered thereby, and the
Borrower shall pay all recording taxes in connection with the recording
of such amendments.
Section 4.4 Revolving Credit Facility C. In addition to the
conditions set forth in Section 4.2, the effectiveness of Revolving
Credit Facility C and the obligation of the Lender to make Loans
thereunder are subject to the prior fulfillment of each of the
following conditions:
(a) the Borrower shall have given the Lender at least 30 days
prior written notice of its request to activate Revolving Credit
Facility C;
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(b) the Borrower shall have paid the $25,000 Revolving Credit
Facility C Closing Fee described in Section 3.2(d)(ii);
(c) the Lender shall have elected, in its sole discretion, to
make Revolving Credit Facility C available, as evidenced by the
Lender's written notice to the Borrower accepting the Revolving Credit
Facility C Closing Fee and acknowledging the effectiveness of Revolving
Credit Facility C; and
(d) the Borrower shall execute such documentation as the Lender
may reasonably request in connection therewith, including amendments to
the Financing Statements if necessary or appropriate to reflect the
increased maximum amount of indebtedness covered thereby, and the
Borrower shall pay all recording taxes in connection with the recording
of such amendments.
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF THE BORROWER
Section 5.1 Representations and Warranties. The Borrower
represents and warrants to the Lender as follows:
(a) Organization; Power; Qualification. The Borrower and each
of its Subsidiaries is a corporation (or, in the case of the
Receivables Purchaser, a limited partnership), duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation (as the case may be), has the corporate
power and authority to own its properties and to carry on its business
as now being and hereafter proposed to be conducted and is duly
qualified and authorized to do business in each jurisdiction in which
failure to be so qualified and authorized could reasonably be expected
to have a Materially Adverse Effect. The jurisdictions in which the
Borrower and each of its Subsidiaries is qualified as of the Effective
Date to do business as a foreign corporation or limited partnership (as
the case may be) are listed on Schedule 5.1(a).
(b) Subsidiaries and Ownership of the Borrower. Except as set
forth on Schedule 5.1(b), the Borrower has no Subsidiaries as of the
Effective Date. The outstanding stock of the Borrower and each of its
corporate Subsidiaries has been duly and validly issued and is fully
paid and nonassessable and the number and owners of such shares of
capital stock as of the Effective Date are set forth on Schedule
5.1(b).
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(c) Authorization of Agreement, Note, Loan Documents and
Borrowing. The Borrower has the right and power and has taken all
necessary action to authorize it to execute, deliver and perform this
Agreement and each of the other Loan Documents to which it is a party
in accordance with their respective terms and to borrow hereunder.
This Agreement and each of the other Loan Documents to which it is a
party have been duly executed and delivered by the duly authorized
officers of the Borrower and each is, or when executed and delivered in
accordance with this Agreement will be, a legal, valid and binding
obligation of the Borrower, enforceable in accordance with its terms,
except, as to enforcement, only to bankruptcy, insolvency,
reorganization, moratorium, or similar laws at the time in effect
affecting the enforceability of the rights of creditors generally.
(d) Compliance of Agreement, Note, Loan Documents and Borrowing
with Laws, Etc. The execution, delivery and performance of this
Agreement and each of the other Loan Documents to which the Borrower or
any of its Subsidiaries is a party in accordance with their respective
terms do not and will not, by the passage of time, the giving of notice
or otherwise,
(i) require any Governmental Approval or violate any
applicable law relating to the Borrower or any of its
Subsidiaries,
(ii) conflict with, result in a breach of or constitute
a default under (A) the articles or certificate of
incorporation or by-laws of the Borrower or any of its
Subsidiaries, (B) any material indenture, agreement or other
material instrument to which the Borrower or any of its
Subsidiaries is a party or by which any of its property may be
bound or (C) any Governmental Approval relating to the Borrower
or any of its Subsidiaries, or,
(iii) result in or require the creation or imposition of
any Lien upon or with respect to any property now owned or
hereafter acquired by the Borrower or any of its Subsidiaries
other than the Security Interest.
(e) Business. The Borrower is engaged principally in the
business described on Schedule 5.1(e).
(f) Compliance with Law; Governmental Approvals. Except as set
forth in Schedule 5.1(f), the Borrower and each of its Subsidiaries (i)
has all Governmental Approvals, including permits relating to federal,
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state and local Environmental Laws, ordinances and regulations required
by any applicable law for it to conduct its business, each of which is
in full force and effect, is final and not subject to review on appeal
and is not the subject of any pending or, to the knowledge of the
Borrower, threatened attack by direct or collateral proceeding, and
(ii) is in compliance with each Governmental Approval applicable to it
and in compliance with all other applicable laws relating to it,
including, without being limited to, all Environmental Laws and all
occupational health and safety laws applicable to it or its properties,
except for matters described in clause (i) or (ii) which would not,
singly or in the aggregate, cause a Default or Event of Default or have
a Materially Adverse Effect and in respect of which adequate reserves
have been established on its books.
(g) Titles to Properties. Except as set forth in Schedule
5.1(g) or, with respect to property other than the Collateral, for such
matters which would not have a Materially Adverse Effect, the Borrower
and each of its Subsidiaries has good and marketable title to or a
valid leasehold interest in all its real estate and valid and legal
title to or a valid leasehold interest in all personal property and
assets used in or necessary to the conduct of its business, including,
but not limited to, those reflected on the consolidated balance sheet
of the Borrower delivered pursuant to Section 5.1(m)(ii).
(h) Liens. Except as set forth in Schedule 5.1(h) or, with
respect to property other than the Collateral, for such matters which
would not have a Materially Adverse Effect, none of the properties and
assets of the Borrower or any of its Subsidiaries is subject to any
Lien, except Permitted Liens. Other than the Financing Statements, no
financing statement under the Uniform Commercial Code of any state
which names the Borrower as debtor and which has not been terminated
has been filed in any state or other jurisdiction, and the Borrower has
not signed any such financing statement or any security agreement
authorizing any secured party thereunder to file any such financing
statement, except to perfect those Liens listed in Schedule 5.1(h) and
Permitted Liens.
(i) Indebtedness and Guaranties. Set forth on Schedule 5.1(i)
is a complete and correct listing as of the Effective Date of all of
the Borrower's and its Subsidiaries' (i) Indebtedness for Money
Borrowed and (ii) Guaranties. Neither the Borrower nor any of its
Subsidiaries is in default of any material provision of any agreement
evidencing or relating to such any such Indebtedness or Guaranty.
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(j) Litigation. Except as set forth on Schedule 5.1(j), there
are no actions, suits or proceedings pending (nor, to the knowledge of
the Borrower, are there any actions, suits or proceedings threatened,
nor is there any basis therefor) against or in any other way relating
adversely to or affecting the Borrower or any of its Subsidiaries or
any of their property in any court or before any arbitrator of any kind
or before or by any governmental body, which, if determined adversely
to the Borrower or any of its Subsidiaries, could reasonably be
expected to have a Materially Adverse Effect.
(k) Tax Returns and Payments. Except as set forth on Schedule
5.1(k) or for those matters which would not have a Materially Adverse
Effect, all United States federal, state and local and foreign
national, provincial and local and all other tax returns of the
Borrower and each of its Subsidiaries required by applicable law to be
filed have been duly filed, and all United States federal, state and
local and foreign national, provincial and local and all other taxes,
assessments and other governmental charges or levies upon the Borrower
and each of its Subsidiaries and their property, income, profits and
assets which are due and payable have been paid, except any such
nonpayment which is at the time permitted under Section 8.4. The
charges, accruals and reserves on the books of the Borrower and each of
its Subsidiaries in respect of United States federal, state and local
taxes and foreign national, provincial and local taxes for all fiscal
years and portions thereof since the organization of the Borrower and
each of its Subsidiaries are in the judgment of the Borrower adequate,
and the Borrower knows of no reason to anticipate any additional
assessments for any of such years which, singly or in the aggregate,
could reasonably be expected to have a Materially Adverse Effect.
(l) Burdensome Provisions. Neither the Borrower nor any of its
Subsidiaries is a party to any indenture, agreement, lease or other
instrument, or subject to any charter or corporate restriction,
Governmental Approval or applicable law, compliance with the terms of
which could reasonably be expected to have a Materially Adverse Effect.
(m) Financial Statements. The Borrower has furnished to the
Lender a copy of (i) its audited balance sheet as at December 31, 1996,
and the related statements of income, cash flow and retained earnings
for the twelve-month period then ended and (ii) its unaudited balance
sheet as at March 31, 1997, and the related statement of income for the
three-month period then ended. Such financial statements are complete
and correct and present fairly and in all material respects in
accordance with GAAP, the financial position of the Borrower and its
Consolidated Subsidiaries (in the case of such unaudited financial
statements, both including and excluding GHC) as at the dates thereof
and the results of operations of
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the Borrower and its Consolidated Subsidiaries (including and excluding
GHC) for the periods then ended. Except as disclosed or reflected in
such financial statements, neither the Borrower nor any of its
Consolidated Subsidiaries had any material liabilities, contingent or
otherwise, and there were no material unrealized or anticipated losses
of the Borrower or any of its Consolidated Subsidiaries.
(n) Adverse Change. Since the date of the financial statements
described in clause (i) of Section 5.1(m), (i) no change in the
business, assets, liabilities, condition (financial or otherwise),
results of operations or business prospects of the Borrower or any of
its Subsidiaries has occurred that has had, or could reasonably be
expected to have, a Materially Adverse Effect, and (ii) no event has
occurred or failed to occur which has had, or could reasonably be
expected to have, a Materially Adverse Effect.
(o) ERISA. Neither the Borrower nor any Related Company
maintains or contributes to any Benefit Plan other than those listed on
Schedule 5.1(o). Each Benefit Plan maintained by the Borrower or any
Related Company is in substantial compliance with ERISA, and neither
the Borrower nor any Related Company has received any notice asserting
that a Benefit Plan is not in compliance with ERISA. No material
liability to the PBGC or to a Multiemployer Plan has been, or is
expected by the Borrower to be, incurred by the Borrower or any Related
Company.
(p) Absence of Defaults. Neither the Borrower nor any of its
Subsidiaries is in default under its articles or certificate of
incorporation or by-laws, and no event has occurred which has not been
remedied, cured or waived (i) that constitutes a Default or an Event of
Default or (ii) that constitutes or that, with the passage of time or
giving of notice, or both, would constitute a default or event of
default by the Borrower or any of its Subsidiaries under any material
agreement (other than this Agreement) or judgment, decree or order to
which the Borrower or any of its Subsidiaries is a party or by which
the Borrower or any of its Subsidiaries or any of their properties may
be bound or which would require the Borrower or any of its Subsidiaries
to make any payment thereunder prior to the scheduled maturity date
therefor.
(q) Accuracy and Completeness of Information. All written
information, reports and other papers and data produced by or on behalf
of the Borrower and furnished to the Lender were, at the time the same
were so furnished, complete and correct in all material respects to the
extent necessary to give the recipient a true and accurate knowledge of
the subject matter, no fact is known to the Borrower which has had, or
could reasonably be expected to have (so far as the Borrower can
foresee),
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a Materially Adverse Effect which has not been set forth in the
financial statements or disclosure delivered prior to the Effective
Date, in each case referred to in Section 5.1(m), or in such written
information, reports or other papers or data or otherwise disclosed in
writing to the Lender prior to the Effective Date. No document
furnished or written statement made to the Lender by the Borrower in
connection with the negotiation, preparation or execution of this
Agreement or any of the Loan Documents contains any untrue statement of
a fact material to the creditworthiness of the Borrower and its
Subsidiaries or omits to state a material fact necessary in order to
make the statements contained therein not misleading.
(r) Solvency. In each case after giving effect to the
Indebtedness represented by the Loans outstanding and to be incurred
and the transactions contemplated by this Agreement, each of the
Borrower and GHC is solvent, having assets of a fair value which
exceeds the amount required to pay its debts (including contingent,
subordinated, unmatured and unliquidated liabilities) as they become
absolute and matured, and each of the Borrower and GHC is able to and
anticipates that it will be able to meet its debts as they mature and
has adequate capital to conduct the business in which it is or proposes
to be engaged.
(s) Chief Executive Office. The chief executive office of the
Borrower and GHC is located at the address or addresses set forth on
Schedule 5.1(s); except as set forth Schedule 5.1(s), neither the
Borrower nor GHC has maintained its chief executive office at any other
address at any time during the four months immediately preceding the
Agreement Date.
(t) Status of Inventory. All Inventory included in any
Borrowing Base Certificate delivered to the Lender pursuant to Section
7.10(a) meets the criteria enumerated in the definition of Eligible
Inventory, except as disclosed in such Borrowing Base Certificate or in
a subsequent Borrowing Base Certificate or as otherwise specifically
disclosed in writing to the Lender. All Inventory is in good condi-
tion, meets all standards imposed by any governmental agency or
department or division thereof having regulatory authority over such
goods, their use or sale, and is currently either usable or saleable in
the normal course of the Borrower's business, except to the extent
reserved against in the financial statements delivered pursuant to
Article 9 or as disclosed on a Schedule of Inventory delivered to the
Lender pursuant to Section 7.10(a). Set forth on Schedule 5.1(t) is
the (i) address (including street, city, county and state) of each
facility at which Inventory is located, (ii) the approximate quantity
in Dollars of the Inventory customarily located at each such facility,
and (iii) if the facility is leased or is a third party warehouse or
processor location, the name of
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the landlord or such third party warehouseman or processor. All
Inventory is located on the premises set forth on Schedule 5.1(t) or is
in transit to one of such locations, except as otherwise disclosed in
writing to the Lender; the Borrower has not located Inventory at
premises other than those set forth on Schedule 5.1(t) at any time
during the four months immediately preceding the Agreement Date.
(u) Equipment. All Equipment is in good order and repair in all
material respects, normal wear and tear excepted.
(v) Corporate and Fictitious Names; Trade Names. Except as
otherwise disclosed on Schedule 5.1(v), during the one-year period
preceding the Agreement Date, neither the Borrower nor GHC has been
known as or used any corporate or fictitious name other than the
corporate names of the Borrower and GHC on the Effective Date. All
trade names or styles under which the Borrower and GHC sell Inventory
are listed on Schedule 5.1(v).
(w) Federal Regulations. The Borrower is not engaged,
principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any
"margin stock" (as each of the quoted terms is defined or used in
Regulations G and U of the Board of Governors of the Federal Reserve
System).
(x) Investment Company Act. The Borrower is not an "investment
company" or a company "controlled" by an "investment company" (as each
of the quoted terms is defined or used in the Investment Company Act of
1940, as amended).
(y) Employee Relations. As of the Effective Date the Borrower
is not, except as set forth on Schedule 5.1(y), party to any collective
bargaining agreement nor has any labor union been recognized as the
representative of the Borrower's employees; the Borrower knows of no
pending, threatened or contemplated strikes, work stoppage or other
labor disputes involving its employees or those of its Subsidiaries.
(z) Intellectual Property. The Borrower owns or possesses all
Intellectual Property required to conduct its business as now and
presently planned to be conducted without, to its knowledge, conflict
with the rights of others, and Schedule 5.1(z) lists all Intellectual
Property owned as of the Effective Date by the Borrower, the absence of
which would have a Materially Adverse Effect.
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(aa) Receivables. The Borrower has not transferred any of its
accounts receivable to ICPPC, whether by means of a sale, capital
contribution or other transfer, since the transfer of the "Contributed
ICPPC Initial Receivables" pursuant to Section 1.8(a)(i) of the
Receivables Purchase Agreement.
Section 5.2 Survival of Representations and Warranties, Etc. All
representations and warranties set forth in this Article 5 and all
statements contained in any certificate, financial statement or other
instrument delivered by or on behalf of the Borrower pursuant to or in
connection with this Agreement or any of the Loan Documents (including,
but not limited to, any such representation, warranty or statement made
in or in connection with any amendment thereto) shall constitute
representations and warranties made under this Agreement. All
representations and warranties made under this Agreement shall be made
or deemed to be made at and as of the Agreement Date, at and as of the
Effective Date and at and as of the date of each Loan, except that
representations and warranties which, by their terms are applicable
only to one such date shall be deemed to be made only at and as of such
date. All representations and warranties made or deemed to be made
under this Agreement shall survive and not be waived by the execution
and delivery of this Agreement, any investigation made by or on behalf
of the Lender or any borrowing hereunder.
ARTICLE 6 - SECURITY INTEREST
Section 6.1 Security Interest. (a) To secure the payment,
observance and performance of the Secured Obligations, the Borrower
hereby mortgages, pledges and assigns all of the Collateral to the
Lender for itself and as agent for any Affiliate of the Lender and
grants to the Lender for itself and as agent for any Affiliate of the
Lender a continuing security interest in, and a continuing Lien upon,
all of the Collateral.
(b) As additional security for all of the Secured Obligations,
the Borrower grants to the Lender for itself and as agent for any
Affiliate of the Lender a security interest in, and assigns to the
Lender for itself and as agent for any Affiliate of the Lender all of
the Borrower's right, title and interest in and to, any deposits or
other sums at any time credited by or due from the Lender and each
Affiliate of the Lender to the Borrower, with the same rights therein
as if the deposits or other sums were credited by or due from the
Lender.
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Section 6.2 Continued Priority of Security Interest. (a) The
Security Interest granted by the Borrower shall at all times be valid,
perfected and enforceable against the Borrower and all third parties in
accordance with the terms of this Agreement, as security for the
Secured Obligations, and the Collateral shall not at any time be
subject to any Liens that are prior to, on a parity with or junior to
the Security Interest, other than Permitted Liens.
(b) The Borrower shall, at its sole cost and expense, take all
action that may be necessary or desirable, or that the Lender may
reasonably request, so as at all times to maintain the validity,
perfection, enforceability and rank of the Security Interest in the
Collateral in conformity with the requirements of Section 6.2(a) or to
enable the Lender to exercise or enforce its rights hereunder,
including, but not limited to: (i) paying all taxes, assessments and
other claims lawfully levied or assessed on any of the Collateral,
except to the extent that such taxes, assessments and other claims
constitute Permitted Liens, (ii) diligently seeking to obtain, after
the Agreement Date, landlords', mortgagees' or mechanics' releases,
subordinations or waivers, (iii) delivering to the Lender, endorsed or
accompanied by such instruments of assignment as the Lender may
specify, and stamping or marking in such manner as the Lender may
specify, any and all chattel paper, instruments, letters and advices of
guaranty and documents evidencing or forming a part of the Collateral,
and (iv) executing and delivering financing statements, pledges,
designations, hypothecations, notices and assignments, in each case in
form and substance satisfactory to the Lender, relating to the
creation, validity, perfection, maintenance or continuation of the
Security Interest under the UCC or other applicable law.
(c) During the existence of a Default or Event of Default, the
Lender is hereby authorized to file one or more financing or
continuation statements or amendments thereto without the signature of
or in the name of the Borrower for any purpose described in Section
6.2(b). A carbon, photographic or other reproduction of this Agreement
or of any of the Security Documents or of any financing statement filed
in connection with this Agreement is sufficient as a financing
statement, to the extent permitted by applicable law.
(d) The Borrower shall mark its books and records as may be
necessary or appropriate to evidence, protect and perfect the Security
Interest and shall cause its financial statements to reflect the
Security Interest.
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ARTICLE 7 - COLLATERAL COVENANTS
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been indefeasibly paid in full, unless the
Lender shall otherwise consent in the manner provided in Section 12.11:
Section 7.1 Collection of Receivables Securitization Proceeds.
(a) The Borrower will cause all moneys, checks, notes, drafts and
other payments relating to or constituting proceeds of the Receivables
Purchase Agreement to be remitted to the Lender for application against
the Secured Obligations, and in particular the Borrower will advise the
Receivables Purchaser to remit all amounts payable on account of the
Receivables Purchase Agreement to the Lender in accordance with the
terms of the Assignment of Receivables Securitization Proceeds and the
Blocked Account Agreement.
(b) All proceeds of the Receivables Purchase Agreement described
above shall be remitted daily to the Lender at the Lender's Office (i)
for application, on account of the Secured Obligations, as provided in
Section 2.3(c), 11.2 and 11.3, such credits to be entered on the second
Business Day after receipt (except in the case of funds received by the
Lender via wire transfer, which shall be entered on the date of
receipt) and to be conditioned upon final payment in cash or solvent
credits of the items giving rise to them, and (ii) with respect to any
balance remaining after such application, so long as no Event of
Default has occurred and is continuing, for transfer to the
Disbursement Account or such other account of the Borrower as the
Borrower and the Lender may agree.
(c) Any moneys, checks, notes, drafts or other payments referred
to in clause (a) of this Section 7.1 which are received by or on behalf
of the Borrower will be held in trust for the Lender and will be
delivered to the Lender at the Lender's Office as promptly as possible
in the exact form received, together with any necessary endorsements.
Section 7.2 Sales of Inventory. All sales of Inventory will be
made in compliance with all requirements of applicable law, with
respect to which noncompliance would have a Materially Adverse Effect.
Section 7.3 Returned Goods. The Security Interest in the
Inventory shall, without further act, attach to the cash and non-cash
proceeds resulting from the sale or other disposition thereof and to
all Inventory which is returned to the Borrower by customers or is
otherwise recovered.
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Section 7.4 Ownership and Defense of Title. (a) Except for
Permitted Liens, the Borrower shall at all times be the sole owner of
each and every item of Collateral and shall not create any Lien on, or
sell, lease, exchange, assign, transfer, pledge, hypothecate, grant a
security interest or security title in or otherwise dispose of, any of
the Collateral or any interest therein, except for sales of Inventory
in the ordinary course of business (including sales to Affiliates in
accordance with current procedures), for cash or on open account or on
terms of payment ordinarily extended to its customers, sales of
Inventory with a fair market value of up to $1,000,000 in connection
with any sale of the Borrower's St. Louis, Missouri branch permitted
under Section 10.2, and except as otherwise expressly contemplated
herein. The inclusion of "proceeds" of the Collateral under the
Security Interest shall not be deemed a consent by the Lender to any
other sale or other disposition of any part or all of the Collateral.
(b) The Borrower shall defend its title in and to the Collateral
and shall defend the Security Interest in the Collateral against the
claims and demands of all Persons.
(c) In addition to, and not in derogation of, the foregoing and
the requirements of any of the Security Documents, the Borrower shall
(i) protect and preserve all properties material to its business,
including Intellectual Property and maintain all tangible property in
good and workable condition in all material respects, with reasonable
allowance for wear and tear, and (ii) from time to time make or cause
to be made all needed and appropriate repairs, renewals, replacements
and additions to such properties necessary for the conduct of its busi-
ness, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times.
Section 7.5 Insurance. (a) The Borrower shall at all times
maintain insurance on the Inventory against loss or damage by fire,
theft, burglary, pilferage, loss in transit and such other hazards as
the Lender shall reasonably specify, in amounts and under policies
issued by insurers acceptable to the Lender. All premiums on such
insurance shall be paid by the Borrower and copies of the policies
delivered to the Lender. The Borrower will not use or permit the
Inventory to be used in violation of any applicable law or in any
manner which might render inapplicable any insurance coverage.
(b) All insurance policies required under Section 7.5(a) shall
name the Lender as an additional named insured and shall contain "New
York standard" loss payable clauses in the form submitted to the
Borrower by
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the Lender, or otherwise in form and substance satisfactory to the
Lender, naming the Lender as loss payee as its interests may appear,
and providing that (i) all proceeds thereunder shall be payable to the
Lender, (ii) no such insurance shall be affected by any act or neglect
of the insured or owner of the property described in such policy, and
(iii) such policy and loss payable clauses may not be canceled, amended
or terminated unless at least 30 days' prior written notice is given to
the Lender, except that only 15 days' prior written notice shall be
required for cancellation due to nonpayment of premiums.
(c) Any proceeds of insurance referred to in this Section 7.5
which are paid to the Lender shall be, at the option of the Lender in
its sole discretion, either (i) applied to rebuild, restore or replace
the damaged or destroyed property, or (ii) applied to the payment or
prepayment of the Secured Obligations.
(d) The Borrower shall at all times maintain, in addition to the
insurance required by Section 7.5(a) or any of the Security Documents,
insurance with responsible insurance companies against such risks and
in such amounts as is customarily maintained by similar businesses or
as may be required by applicable law, including such public liability,
products liability, third party property damage and business
interruption insurance as is consistent with reasonable business
practices, and from time to time deliver to the Lender upon its request
a detailed list of the insurance then in effect, stating the names of
the insurance companies, the amounts and rates of the insurance, the
dates of the expiration thereof and the properties and risks covered
thereby.
Section 7.6 Location of Offices and Collateral. (a) The
Borrower will not change the location of its chief executive office or
the place where it keeps its books and records relating to the
Collateral or change its name, identity or corporate structure without
giving the Lender 30 days' prior written notice thereof.
(b) All Inventory, other than Inventory in transit to any such
location, will at all times be kept by the Borrower at one of the
locations set forth in Schedules 5.1(t), and shall not, without the
prior written consent of the Lender, be removed therefrom except, so
long as no Event of Default shall have occurred and be continuing, for
sales of Inventory permitted under Section 7.2.
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(c) If any Inventory is in the possession or control of any of
the Borrower's agents or processors, the Borrower shall notify such
agents or processors of the Security Interest and, upon the occurrence
of an Event of Default, shall instruct them (and cause them to
acknowledge such instruction) to hold all such Inventory for the
account of the Lender, subject to the instructions of the Lender.
Section 7.7 Records Relating to Collateral. (a) The Borrower
will at all times (i) keep complete and accurate records of Inventory
on a basis consistent with past practices of the Borrower, itemizing
and describing the kind, type and quantity of Inventory and the
Borrower's cost therefor and a current price list for such Inventory,
and (ii) keep complete and accurate records of all other Collateral.
(b) The Borrower will take a physical listing of all Inventory,
wherever located, at least annually.
Section 7.8 Inspection. The Lender (by any of its officers,
employees or agents) shall have the right, to the extent that the
exercise of such right shall be within the control of the Borrower, at
any time or times to (a) visit the properties of the Borrower, inspect
the Collateral and the other assets of the Borrower and its
Subsidiaries and inspect and make extracts from the books and records
of the Borrower and its Subsidiaries, including, but not limited to,
management letters prepared by independent accountants, all during
customary business hours at such premises, (b) discuss the Borrower's
business, assets, liabilities, financial condition, results of
operations and business prospects, insofar as the same are reasonably
related to the rights of the Lender hereunder or under any of the Loan
Documents, with the Borrower's and its Subsidiaries' (i) principal
officers, (ii) independent accountants and other professionals
providing services to the Borrower, and (iii) any other Person (except
that any such discussion with any third parties shall be conducted only
in accordance with the Lender's standard operating procedures relating
to the maintenance of confidentiality of confidential information of
borrowers), and (c) verify the amount, quantity, value and condition
of, or any other matter relating to, any of the Collateral and in this
connection to review, audit and make extracts from all records and
files related to any of the Collateral. The Borrower will deliver to
the Lender any instrument necessary to authorize an independent
accountant or other professional to have discussions of the type
outlined above with the Lender or for the Lender to obtain records from
any service bureau maintaining records on behalf of the Borrower.
Section 7.9 Maintenance of Equipment. The Borrower shall
maintain all physical property that constitutes Equipment in good and
workable
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condition in all material respects, with reasonable allowance for wear
and tear, and shall exercise proper custody over all such property.
Section 7.10 Information and Reports.
(a) Schedule of Inventory. The Borrower shall deliver to the
Lender on or before the Effective Date, and no later than the 15th day
after the end of each accounting month of the Borrower thereafter, a
Schedule of Inventory as of the last Business Day of the immediately
preceding accounting month of the Borrower, itemizing and describing
the kind, type, quantity and location of Inventory and the cost
thereof.
(b) Borrowing Base Certificate. The Borrower shall deliver to
the Lender not later than the 15th day of each accounting month of the
Borrower a Borrowing Base Certificate prepared as of the close of
business on the last Business Day of the preceding accounting month.
(c) Monthly Securitization Report. Simultaneous with the
delivery thereof to the Receivables Trustee, and in any event within
the time period set forth in the Pooling Agreement (as defined in the
Receivables Purchase Agreement), the Borrower shall deliver to the
Lender a copy of the Monthly Report described in Section 3.5(d) of the
Pooling Agreement.
(d) Notice of Diminution of Value. The Borrower shall give
prompt notice to the Lender of any matter or event which has resulted
in, or may result in, the actual or potential diminution in excess of
$500,000 in the value of any of its Collateral, except for any
diminution in the value of any Inventory in the ordinary course of
business which has been appropriately reserved against, as reflected in
the financial statements previously delivered to the Lender pursuant to
Article 9.
(e) Certification. Each of the schedules delivered to the
Lender pursuant to this Section 7.10 shall be certified by the Chief
Financial Officer of the Borrower to be true, correct and complete as
of the date indicated thereon.
(f) Other Information. The Lender may, in its discretion, from
time to time require the Borrower to deliver the schedules described in
Section 7.10(a) and (b) more or less often and on different schedules
than specified in such Section, and the Borrower will comply with such
requests, it being understood that initially the Lender will require
that the Borrower deliver Borrowing Base certificates by the second
Business
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Day of each week (prepared as of the close of business on the last
Business Day of the preceding week). The Borrower shall also furnish
to the Lender such other information with respect to the Collateral as
the Lender may from time to time reasonably request.
Section 7.11 Power of Attorney. The Borrower hereby appoints
the Lender, during the existence of a Default or Event of Default, as
its attorney, with power (a) to endorse the name of the Borrower on any
checks, notes, acceptances, money orders, drafts or other forms of
payment or security that may come into the Lender's possession, and (b)
to sign the name of the Borrower on any invoice or bill of lading
relating to any Inventory or other Collateral, on any drafts against
customers related to letters of credit, and on notices of assignment,
financing statements and other public records relating to the
perfection or priority of the Security Interest.
ARTICLE 8 - AFFIRMATIVE COVENANTS
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been indefeasibly paid in full, unless the
Lender shall otherwise consent in the manner provided for in Section
12.11, the Borrower will, and will cause each of its Subsidiaries to:
Section 8.1 Preservation of Corporate Existence and Similar
Matters. Preserve and maintain its corporate existence, rights,
franchises, licenses and privileges in the jurisdiction of its
incorporation and qualify and remain qualified as a foreign corporation
and authorized to do business in each jurisdiction in which the
character of its properties or the nature of its business requires such
qualification or authorization and the failure to be so qualified would
have a Materially Adverse Effect.
Section 8.2 Compliance with Applicable Law. Comply with all
applicable laws relating to it where the failure to comply would have a
Materially Adverse Effect.
Section 8.3 Conduct of Business. Engage only in businesses in
substantially the same fields as the businesses conducted on the
Effective Date.
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Section 8.4 Payment of Taxes and Claims. Pay or discharge when
due (a) all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or upon any properties
belonging to it, and (b) all lawful claims of materialmen, mechanics,
carriers, warehousemen and landlords for labor, materials, supplies and
rentals which, if unpaid, might become a Lien on any properties of the
Borrower or such Subsidiary, except that this Section 8.4 shall not
require the payment or discharge of any such tax, assessment, charge,
levy or claim which is being contested in good faith by appropriate
proceedings and for which adequate reserves have been established on
the appropriate books.
Section 8.5 Accounting Methods and Financial Records. Maintain
a system of accounting, and keep such books, records and accounts
(which shall be true and complete), as may be required or as may be
necessary to permit the preparation of financial statements in
accordance with GAAP consistently applied.
Section 8.6 Use of Proceeds. (a) Use the proceeds of (i) the
Initial Loans to pay the amounts indicated in Schedule 8.6 to the
Persons indicated therein, and (ii) all subsequent Revolving Credit
Loans only for working capital and general business purposes, including
but not limited to acquisitions of businesses in similar lines of
business as the Borrower, and
(b) not use any part of such proceeds to purchase or carry, or
to reduce or retire or refinance any credit incurred to purchase or
carry, any margin stock (within the meaning of Regulation G or U of the
Board of Governors of the Federal Reserve System) or for any other
purpose which would involve a violation of such Regulation G or U or
Regulation T or X of such Board of Governors or for any other purpose
prohibited by law or by the terms and conditions of this Agreement.
Section 8.7 Accuracy of Information. Furnish to the Lender
written information, reports, statements and other papers and data,
whether pursuant to Article 9 or any other provision of this Agreement
or any of the other Loan Documents, which shall be, at the time the
same is so furnished, complete and correct in all material respects to
the extent necessary to give the Lender true and accurate knowledge of
the subject matter.
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ARTICLE 9 - INFORMATION
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been indefeasibly paid in full, unless the
Lender shall otherwise consent in the manner set forth in Section
12.11, the Borrower will furnish to the Lender at the Lender's Office:
Section 9.1 Financial Statements.
(a) Audited Year-End Statements. As soon as available, but in
any event within 150 days after the end of each fiscal year of the
Borrower, copies of the consolidated balance sheets of the Borrower and
its Consolidated Subsidiaries (including and excluding GHC) as at the
end of such fiscal year and the related consolidated and consolidating
statements of income, stockholders' equity and cash flow for such
fiscal year, in each case setting forth in comparative form the figures
for the previous year of the Borrower and its Consolidated Subsidiaries
and reported on, without qualification, by Arthur Andersen LLP or other
independent certified public accountants selected by the Borrower and
acceptable to the Lender.
(b) Quarterly Financial Statements. As soon as available, but
in any event within 45 days after the end of each accounting quarter of
the Borrower, copies of the unaudited consolidated balance sheets of
the Borrower and its Consolidated Subsidiaries (including and excluding
GHC) as at the end of such quarter and the related unaudited
consolidated and consolidating income statement for the Borrower and
its Consolidated Subsidiaries (including and excluding GHC) for such
quarter and for the portion of the fiscal year of the Borrower and its
Consolidated Subsidiaries through such quarter, certified by the chief
financial officer of the Borrower to the best of his knowledge as
presenting fairly the financial condition and results of operations of
the Borrower and its Consolidated Subsidiaries (including and excluding
GHC) as at the date thereof and for the periods ended on such date,
subject to normal year end adjustments.
(c) Projected Financial Statements. As soon as available, but
in any event on or before January 31 following the end of each fiscal
year of the Borrower, forecasted financial statements, prepared by the
Borrower, consisting of balance sheets, cash flow statements and income
statements of the Borrower and its Consolidated Subsidiaries (including
and excluding GHC), reflecting projected borrowings hereunder and
setting forth the assumptions on which such forecasted financial
statements were prepared, covering the one-year period until the next
fiscal year end.
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All such financial statements shall be complete and correct in all
material respects and all such financial statements referred to in
clauses (a) and (b) shall be prepared in accordance with GAAP (except,
with respect to interim financial statements, for the omission of
footnotes) applied consistently throughout the periods reflected
therein.
Section 9.2 Discussions With Accountants. The Borrower
authorizes the Lender to discuss the financial condition of the
Borrower with the Borrower's independent certified public accountants
and agrees that such discussion or communication shall be without
liability to either the Lender or the Borrower's independent certified
public accountants. The Borrower shall deliver a letter addressed to
such accountants authorizing them to comply with the provisions of this
Section 9.2.
Section 9.3 Officer's Certificate. Together with each delivery
of financial statements required by Section 9.1(a) and (b), a
certificate of the Borrower's President or chief financial officer, in
the form of Exhibit C attached hereto, (a) stating that, based on an
examination sufficient to enable him to make an informed statement, no
Default or Event of Default exists or, if such is not the case,
specifying such Default or Event of Default and its nature, when it
occurred, whether it is continuing and the steps being taken by the
Borrower with respect to such Default or Event of Default, and (b)
setting forth the calculations necessary to establish whether or not
the Borrower was in compliance with the covenants contained in Sections
10.1, 10.2, and 10.5 as of the date of such statements.
Section 9.4 Copies of Other Reports. (a) Promptly upon receipt
thereof, copies of all material reports, if any, submitted to the
Borrower or its Board of Directors by its independent public
accountants, including, without limitation, all management reports .
(b) From time to time and promptly upon each request, such
forecasts, data, certificates, reports, statements, opinions of
counsel, documents or further information regarding the business,
assets, liabilities, financial condition, results of operations or
business prospects of the Borrower and its Subsidiaries as the Lender
may reasonably request. The rights of the Lender under this Section
9.4(b) are in addition to and not in derogation of its rights under any
other provision of this Agreement or any Loan Document.
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(c) As soon as practicable, copies of all financial statements,
proxy statements and reports that the Borrower or Holdings shall send
to its shareholders generally and of all registration statements and
all regular or periodic reports which the Borrower or Holdings shall
file with the Securities and Exchange Commission or any successor
commission or other securities commission.
(d) If requested by the Lender, statements in conformity with
the requirements of Federal Reserve Form G-1 or U-1 referred to in
Regulations G and U, respectively, of the Board of Governors of the
Federal Reserve System.
(e) As soon as practicable, copies of all amendments,
modifications, supplements and waivers relating to the Senior Secured
Notes Documents or the Receivables Purchase Documents.
Section 9.5 Notice of Litigation and Other Matters. Prompt
notice of:
(a) the commencement, to the extent the Borrower is aware of the
same, of all proceedings and investigations by or before any
governmental or nongovernmental body and all actions and proceedings in
any court or before any arbitrator against or in any other way relating
adversely to, or adversely affecting, the Borrower or any Affiliate of
the Borrower or any of their respective property, assets or businesses
which might, singly or in the aggregate, cause a Default or an Event of
Default or have a Materially Adverse Effect,
(b) any amendment of the articles of incorporation or by-laws of
the Borrower,
(c) any change in the business, assets, liabilities, financial
condition, results of operations or business prospects of the Borrower
or any Affiliate of the Borrower which has had or could reasonably be
expected to have any Materially Adverse Effect and any change in the
executive officers (chief executive officer and chief financial
officer) of the Borrower,
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(d) any (i) Default or Event of Default, (ii) event that
constitutes or that, with the passage of time or giving of notice or
both, would constitute a default or event of default by the Borrower
under any material agreement (other than this Agreement) to which it is
a party or by which it or any of its property is bound if the exercise
of remedies thereunder by the other party to such agreement would have,
either individually or in the aggregate, a Materially Adverse Effect,
(iii) "Default" or "Event of Default" under and as defined in the
Senior Secured Notes Indenture, or (iv) "Early Amortization Event"
under and as defined in the Receivables Purchase Agreement, and
(e) any termination or purported termination of the Blocked
Account Agreement.
Section 9.6 ERISA. As soon as possible and in any event within
30 days after the Borrower knows, or has reason to know, that:
(a) any Termination Event with respect to a Benefit Plan has
occurred or will occur,
(b) the aggregate present value of the Unfunded Vested Accrued
Benefits under all Plans has increased to an amount in excess of
$3,000,000, or
(c) the Borrower is in "default" (as defined in Section
4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan
required by reason of its complete or partial withdrawal (as described
in Section 4203 or 4205 of ERISA) from such Multiemployer Plan, a
certificate of the President or the chief financial officer of the
Borrower setting forth the details of such of the events described in
clauses (a) through (c) as applicable and the action which is proposed
to be taken with respect thereto and, simultaneously with the filing
thereof, copies of any notice or filing which may be required by the
PBGC or other agency of the United States government with respect to
such of the events described in clauses (a) through (c) as applicable.
ARTICLE 10 - NEGATIVE COVENANTS
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Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been indefeasibly paid in full, unless the
Lender shall otherwise consent in the manner set forth in Section
12.11, the Borrower will not (and the Borrower will not permit any of
its Subsidiaries to) directly or indirectly:
Section 10.1 Financial Ratios.
(a) Maximum Liabilities to Tangible Net Worth. Permit the ratio
of total Liabilities to Tangible Net Worth for the Borrower and its
Consolidated Subsidiaries (other than GHC) at the end of any fiscal
quarter:
(i) from the Effective Date to and including December
30, 1997, to be greater than 16 to 1;
(ii) from and including December 31, 1997 to and
including December 30, 1998, to be greater than 14 to 1; and
(iii) at any time thereafter, to be greater than 12
to 1.
(b) Minimum Tangible Net Worth. Permit the Tangible Net Worth
of the Borrower and its Consolidated Subsidiaries (other than GHC) at
the end of any fiscal quarter:
(i) from the Effective Date to and including December
30, 1997, to be less than $15,000,000;
(ii) from and including December 31, 1997 to and
including December 30, 1998, to be less than $20,000,000; and
(iii) at any time thereafter, to be less than
$25,000,000.
(c) Minimum Interest Coverage Ratio. Permit the ratio of (i)
the Borrower's and its Consolidated Subsidiaries' (other than GHC) EBIT
to (ii) the Borrower's and its Consolidated Subsidiaries' (other than
GHC)
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Interest Expense, as of the end of each fiscal quarter of the Borrower,
measured for the immediately preceding four fiscal quarters, to be less
than 1.25 to 1.
(d) Maximum Funded Indebtedness Ratio. Permit the ratio of (i)
Average Funded Indebtedness to (ii) the Borrower's and its Consolidated
Subsidiaries' (other than GHC) EBITDA, as of the end of each fiscal
quarter of the Borrower, measured for the immediately preceding four
fiscal quarters, to be greater than 5.0 to 1. As used herein, "Average
Funded Indebtedness" means (A) the average outstanding amount of Funded
Indebtedness of the Borrower and its Consolidated Subsidiaries (other
than GHC) during the applicable fiscal quarter less (B) the unpaid
amount of the Purchase Price (as defined in the Receivables Purchase
Agreement) due and payable to the Borrower as of the last day of the
applicable fiscal quarter pursuant to Section 3.1(a)(i) of the
Receivables Purchase Agreement (after deducting from such Purchase
Price any applicable setoffs, claims or other deductions).
Section 10.2 Merger, Consolidation and Sale of Assets. Merge or
consolidate with any other Person or sell, lease or transfer or
otherwise dispose of all or a substantial portion of its assets to any
Person, except that (a) the Borrower may merge or consolidate with
another Person (including any Subsidiary) so long as the Borrower is
the surviving corporation and after giving effect thereto no Default or
Event of Default would exist, provided the Borrower has delivered to
the Lender evidence of compliance with the financial covenants set
forth in Article 10 on a pro forma basis after giving effect to such
merger or consolidation, (b) any Subsidiary may merge or consolidate
with another Person so long as such Subsidiary is the surviving
corporation and after giving effect thereto no Default or Event of
Default would exist, and (c) the Borrower may sell or dispose of its
interest in GHC to a non-Affiliated party in an arms length sale,
through a stock or asset sale, merger or consolidation, as long as the
Borrower receives fair consideration for such interest, provided, in
each case, that the Borrower has delivered to the Lender evidence of
compliance with the financial covenants set forth in Article 10 on a
pro forma basis after giving effect to such sale, merger or
consolidation.
Section 10.3 Investments. Except as permitted under Section
4.20 of the Senior Secured Notes Indenture, Acquire, after the
Agreement Date, any Business Unit or Investment or, after such date,
permit any Investment to be outstanding, other than Permitted
Investments; provided, however, that Borrower or any of its
Subsidiaries may Acquire any Business Unit or Person engaged in the
same or substantially similar line of business so long as (a) no
Default or Event of Default exists or will result
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therefrom, and (b) the Borrower has delivered to the Lender evidence of
compliance with the financial covenants set forth in Article 10 on a
pro forma basis after giving effect to the Acquisition.
Section 10.4 Benefit Plans. Permit, or take any action which
would result in, the aggregate present value of the Unfunded Vested
Accrued Benefits under all Benefit Plans of the Borrower to exceed $0.
Section 10.5 Amendments of Other Agreements. Amend, modify or
supplement, or permit or consent to any amendment, modification or
supplement of: (a) Sections 4.9, 4.10, 4.11, 4.12, 4.13, 4.15 or 4.20
of the Senior Secured Notes Indenture; or (b) any other provision of
the Senior Secured Notes Documents or Receivables Purchase Documents in
any way which would be materially adverse to the Lender.
Section 10.6 Minimum Availability. Permit Availability at any
time to be less than $3,000,000.
Section 10.7 Capital Expenditures. Make or incur any Capital
Expenditures, except that the Borrower and its Subsidiaries may make or
incur Capital Expenditures in any fiscal year in an amount not to
exceed, in the aggregate, $15,000,000 annually.
Section 10.8 Receivables Transfers. Transfer any of its
accounts receivable to ICPPC, whether by means of a sale, capital
contribution or other transfer, unless such receivables are sold by
ICPPC to the Receivables Purchaser pursuant to the Receivables Purchase
Agreement and ICPPC becomes a party to the Assignment of Receivables
Securitization Proceeds and subjects its right to receive the proceeds
from such sale to the first priority security interest of the Lender.
ARTICLE 11 - DEFAULT
Section 11.1 Events of Default. Each of the following shall
constitute an Event of Default, whatever the reason for such event and
whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment or order of any court or
any order, rule or regulation of any governmental or nongovernmental
body:
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(a) Default in Payment of Loans. The Borrower shall default in
any payment of principal of, or interest on, any Loan or Note when and
as due (whether at maturity, by reason of acceleration or otherwise).
(b) Other Payment Default. The Borrower shall default in the
payment, as and when due, of principal of or interest on, any other
Secured Obligation, and such default shall continue for five days after
written notice thereof has been given to the Borrower by the Lender.
(c) Misrepresentation. Any representation or warranty made or
deemed to be made by the Borrower under this Agreement or any other
Loan Document or any amendment hereto or thereto shall at any time
prove to have been incorrect or misleading in any material respect when
made.
(d) Default in Performance. The Borrower shall default (i) in
the performance or observance of any material term, covenant, condition
or agreement contained in Articles 6, 7, 8, 9 or 10; or (ii) in the
performance or observance of any material term, covenant, condition or
agreement contained in any other provision of this Agreement (other
than as specifically provided for otherwise in this Section 11.1) and
such default shall continue for a period of 30 days after written
notice thereof has been given to the Borrower by the Lender.
(e) Indebtedness Cross-Default.
(i) The Borrower or any of its Subsidiaries shall fail
to pay when due and payable the principal of or interest on
Indebtedness (other than the Loans or Note) where the principal
amount of such Indebtedness is in excess of $1,500,000, or the
maturity of any such Indebtedness shall have been accelerated
in accordance with the provisions of any indenture, contract or
instrument providing for the creation of or concerning such
Indebtedness or been required to be prepaid prior to the stated
maturity thereof, or any event shall have occurred and be
continuing which, with or without the passage of time or the
giving of notice, or both, would permit any holder or holders
of such Indebtedness, any trustee or agent acting on behalf of
such holder or holders or any other Person so to accelerate
such maturity.
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(ii) A "Default" or "Event of Default" under and as
defined in the Senior Secured Notes Indenture shall have
occurred and be continuing or the Senior Secured Notes
Indenture shall be terminated or for any reason no longer be in
effect.
(iii) An "Early Amortization Event" under and as defined
in the Receivables Purchase Agreement shall have occurred and
be continuing or, at any time prior to the termination of the
Receivables Purchase Agreement, the Blocked Account Agreement
shall be terminated or for any reason no longer be in effect
(or the Lender or the Borrower shall receive a notice
purporting to terminate the Blocked Account Agreement).
(f) Other Cross-Defaults. The Borrower or any of its
Subsidiaries shall default in the payment when due or in the
performance or observance of any material obligation or condition of
any agreement, contract or lease (other than the Security Documents or
any such agreement, contract or lease relating to Indebtedness), if the
exercise of remedies thereunder by the other party to such agreement
could have a Materially Adverse Effect.
(g) Voluntary Bankruptcy Proceeding. The Borrower, any of its
Subsidiaries or any Obligor shall (i) commence a voluntary case under
the federal bankruptcy laws (as now or hereafter in effect), (ii)
commence a proceeding seeking to take advantage of any other laws,
domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition for adjustment of debts,
(iii) consent to or fail to contest in a timely and appropriate manner
any petition filed against it in an involuntary case under such
bankruptcy laws or other laws, (iv) apply for or consent to, or fail to
contest in a timely and appropriate manner, the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator
of itself or of a substantial part of its property, domestic or
foreign, (v) admit in writing its inability to pay its debts as they
become due, (vi) make a general assignment for the benefit of
creditors, or (vii) take any corporate action for the purpose of
authorizing any of the foregoing.
(h) Involuntary Bankruptcy Proceeding. A case or other
proceeding shall be commenced against the Borrower, any of its
Subsidiaries or any Obligor in any court of competent jurisdiction
seeking (i) relief under the federal bankruptcy laws (as now or
hereafter in effect) or under any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or
adjustment of debts, or (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of any such
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Person or of all or any substantial part of the assets, domestic or
foreign, of any such Person, and such case or proceeding shall continue
undismissed or unstayed for a period of 60 consecutive calendar days,
or an order granting the relief requested in such case or proceeding
against any such Person (including, but not limited to, an order for
relief under such federal bankruptcy laws) shall be entered.
(i) Loan Documents. Any Obligor shall default in the per-
formance or observance of any material term, covenant, condition or
agreement contained in, or the payment of any other sum covenanted to
be paid by any Obligor under, any such Loan Document and such default
shall continue for a period of 30 days after written notice thereof has
been given to the Borrower by the Lender; or any provision of this
Agreement, or of any other Loan Document after delivery thereof
hereunder, shall for any reason cease to be valid and binding, other
than a nonmaterial provision rendered unenforceable by operation of
law, or any Obligor or other party thereto (other than the Lender)
shall so state in writing; or this Agreement or any other Loan
Document, after delivery thereof hereunder, shall for any reason (other
than any action taken independently by the Lender and except to the
extent permitted by the terms thereof) cease to create a valid,
perfected and, except as otherwise expressly permitted herein, first
priority Lien on, or security interest in, any of the Collateral
purported to be covered thereby.
(j) Judgment. A judgment or order for the payment of money
which exceeds $1,500,000 in amount shall be entered against the
Borrower, any of its Subsidiaries or any Obligor by any court and such
judgment or order shall continue undischarged or unstayed for 30 days.
(k) Attachment. A warrant or writ of attachment or execution or
similar process which exceeds $1,500,000 in value shall be issued
against any property of the Borrower, any of its Subsidiaries or any
Obligor and such warrant or process shall continue undischarged or
unstayed for 30 days.
(l) ERISA. (i) Any Termination Event with respect to a Benefit
Plan shall occur that, after taking into account the excess, if any, of
(A) the fair market value of the assets of any other Benefit Plan with
respect to which a Termination Event occurs on the same day (but only
to the extent that such excess is the property of the Borrower) over
(B) the present value on such day of all vested nonforfeitable benefits
under such other Benefit Plan, results in an Unfunded Vested Accrued
Benefit in excess of $0, (ii) any Benefit Plan shall incur an
"accumulated funding deficiency" (as defined in Section 412 of the Code
or Section 302 of
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ERISA) for which a waiver has not been obtained in accordance with the
applicable provisions of the Code and ERISA, or (iii) the Borrower is
in "default" (as defined in Section 4219(c)(5) of ERISA) with respect
to payments to a Multiemployer Plan resulting from the Borrower's
complete or partial withdrawal (as described in Section 4203 or 4205 of
ERISA) from such Multiemployer Plan, and with respect to clauses (i),
(ii) and (iii) above, any such event or occurrence could reasonably be
expected to heave a Materially Adverse Effect or result in liability to
the Borrower in excess of $1,500,000.
(m) Qualified Audits. The independent certified public
accountants retained by the Borrower shall refuse to deliver an opinion
in accordance with Section 9.1(a) with respect to the annual financial
statements of the Borrower and its Consolidated Subsidiaries.
(n) Change of Control. A Change of Control shall occur.
(o) Material Adverse Change. There occurs any act, omission,
event, undertaking or circumstance or series of acts, omissions,
events, undertakings or circumstances which have, or in the sole
judgment of the Lender would have, either individually or in the
aggregate, a Materially Adverse Effect.
(p) Change in Management. The person serving as the Borrower's
chief executive officer shall for any reason cease to hold such
position and 90 days shall have elapsed during which time no
replacement satisfactory to the Lender shall have been appointed.
Section 11.2 Remedies.
(a) Automatic Acceleration and Termination of Facilities. Upon
the occurrence of an Event of Default specified in Section 11.1(g) or
(h), (i) the principal of and the interest on the Loans and the Note at
the time outstanding, and all other amounts owed to the Lender under
this Agreement or any of the Loan Documents and all other Secured
Obligations, shall thereupon become due and payable without pre-
sentment, demand, protest or other notice of any kind, all of which are
expressly waived, anything in this Agreement or any of the Loan
Documents to the contrary notwithstanding, and (ii) the Revolving
Credit Facility and the commitment of the Lender to make advances
thereunder or under this Agreement shall immediately terminate.
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(b) Other Remedies. If any Event of Default (other than as
specified in Section 11.1(g) or (h)) shall have occurred and be
continuing, the Lender, in its sole and absolute discretion, may do any
of the following:
(i) declare the principal of and interest on the Loans
and the Notes at the time outstanding, and all other amounts
owed to the Lender under this Agreement or any of the Loan
Documents and all other Secured Obligations, to be forthwith
due and payable, whereupon the same shall immediately become
due and payable without presentment, demand, protest or other
notice of any kind, all of which are expressly waived, anything
in this Agreement or the Loan Documents to the contrary
notwithstanding;
(ii) terminate the Revolving Credit Facility and any
commitment of the Lender to make advances hereunder;
(c) Further Remedies. If any Event of Default shall have
occurred and be continuing, the Lender, in its sole and absolute
discretion, may do any of the following:
(i) enter upon any premises on which Inventory may be
located and, without resistance or interference by the
Borrower, take physical possession of any or all thereof and
maintain such possession on such premises or move the same or
any part thereof to such other place or places as the Lender
shall choose, without being liable to the Borrower on account
of any loss, damage or depreciation that may occur as a result
thereof, so long as the Lender shall act reasonably and in good
faith;
(ii) require the Borrower to and the Borrower shall,
without charge to the Lender, assemble the Inventory and
maintain or deliver it into the possession of the Lender or any
agent or representative of the Lender at such place or places
as the Lender may designate;
(iii) at the expense of the Borrower, cause any of the
Inventory to be placed in a public or field warehouse, and the
Lender shall not be liable to the Borrower on account of any
loss, damage or depreciation that may occur as a result
thereof, so long as the Lender shall act reasonably and in good
faith;
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(iv) without notice, demand or other process, and
without payment of any rent or any other charge, enter any of
the Borrower's premises and, without breach of the peace, until
the Lender completes the enforcement of its rights in the
Collateral, take possession of such premises or place
custodians in exclusive control thereof, remain on such
premises and use the same and any of the Borrower's equipment,
for the purpose of completing any work in process and preparing
any Inventory for disposition and disposing thereof, and the
Lender is hereby granted a license or sublicense and all other
rights as may be necessary, appropriate or desirable to use the
Intellectual Property in connection with the foregoing, and the
rights of the Borrower under all licenses and franchise
agreements shall inure to the Lender's benefit (provided,
however, that any use of any federally registered trademarks as
to any goods shall be subject to the control as to the quality
of such goods of the owner of such trademarks and the goodwill
of the business symbolized thereby);
(v) exercise any and all of its rights under any and all
of the Security Documents;
(vi) apply any cash Collateral to the payment of the
Secured Obligations in any order in which the Lender may elect
or use such cash in connection with the exercise of any of its
other rights hereunder or under any of the Security Documents;
and
(vii) exercise all of the rights and remedies of a
secured party under the UCC (whether or not the UCC is
applicable) and under any other applicable law, including,
without limitation, the right, without notice except as
specified below and with or without taking the possession
thereof, to sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any location chosen
by the Lender, for cash, on credit or for future delivery and
at such price or prices and upon such other terms as the Lender
may deem commercially reasonable. The Borrower agrees that, to
the extent notice of sale shall be required by law, at least 10
days' notice to the Borrower of the time and place of any
public sale or the time after which any private sale is to be
made shall constitute reasonable notice, but notice given in
any other reasonable manner or at any other reasonable time
shall also constitute reasonable notification. The Lender
shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Lender may
adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place
to which it was so adjourned.
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Section 11.3 Application of Proceeds. All proceeds from each
sale of, or other realization upon, all or any part of the Collateral
following an Event of Default shall be applied or paid over as follows:
(a) First: to the payment of all costs and expenses incurred in
connection with such sale or other realization, including reasonable
attorneys' fees,
(b) Second: to the payment of the Secured Obligations (with the
Borrower remaining liable for any deficiency) in any order which the
Lender may elect,
(c) Third: to the creation of a fund in an amount equal to the
Letter of Credit Reserve, which fund shall be held by the Lender as
security for and applied to the payment of any amounts which may
thereafter become due under the Letter of Credit Facility, and
(d) Fourth: the balance (if any) of such proceeds shall be paid
to the Borrower or, subject to any duty imposed by law or otherwise, to
whomsoever is entitled thereto.
The Borrower shall remain liable and will pay, on demand, any
deficiency remaining in respect of the Secured Obligations, together
with interest thereon at a rate per annum equal to the highest rate
then payable hereunder on such Secured Obligations, which interest
shall constitute part of the Secured Obligations.
Section 11.4 Power of Attorney. In addition to the
authorizations granted to the Lender under Section 7.11 or under any
other provision of this Agreement or any of the Loan Documents, upon
and during the continuance of an Event of Default, the Borrower hereby
irrevocably designates, makes, constitutes and appoints the Lender (and
all Persons designated by the Lender from time to time) as the
Borrower's true and lawful attorney and agent in fact, and the Lender
or any agent of the Lender may, without notice to the Borrower, and at
such time or times as the Lender or any such agent in its sole
discretion may determine, in the name of the Borrower or the Lender,
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(a) demand payment of the Collateral, enforce payment thereof by
legal proceedings or otherwise, settle, adjust, compromise, extend or
renew any or all of the Collateral or any legal proceedings brought to
collect the Collateral, discharge and release the Collateral or any
portion thereof and exercise all of the Borrower's rights and remedies
with respect to the collection of the Collateral,
(b) prepare, file and sign the name of the Borrower on any proof
of claim in bankruptcy or any notice of Lien, assignment or
satisfaction of Lien or similar document in connection with any of the
Collateral,
(c) endorse the name of the Borrower upon any chattel paper,
document, instrument, notice, freight bill, bill of lading or similar
document or agreement relating to the Inventory or any other
Collateral,
(d) use the stationery of the Borrower, open the Borrower's
mail, and notify the post office authorities to change the address for
delivery of the Borrower's mail to an address designated by the Lender,
(e) use the information recorded on or contained in any data
processing equipment and computer hardware and software relating to the
Inventory or other Collateral to which the Borrower or any Subsidiary
of the Borrower has access.
Section 11.5 Miscellaneous Provisions Concerning Remedies .
(a) Rights Cumulative. The rights and remedies of the Lender
under this Agreement, the Note and each of the Loan Documents shall be
cumulative and not exclusive of any rights or remedies which it or they
would otherwise have. In exercising such rights and remedies, the
Lender may be selective and no failure or delay by the Lender in
exercising any right shall operate as a waiver of such right nor shall
any single or partial exercise of any power or right preclude its other
or further exercise or the exercise of any other power or right.
(b) Waiver of Marshalling. The Borrower hereby waives any right
to require any marshalling of assets and any similar right.
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(c) Limitation of Liability. Nothing contained in this Article
11 or elsewhere in this Agreement or in any of the Loan Documents shall
be construed as requiring or obligating the Lender or any agent or
designee of the Lender to make any demand or to make any inquiry as to
the nature or sufficiency of any payment received by it or to present
or file any claim or notice or take any action with respect to any
Collateral or the moneys due or to become due thereunder or in
connection therewith or to take any steps necessary to preserve any
rights against prior parties, and neither the Lender nor any of its
agents or designees shall have any liability to the Borrower for
actions taken pursuant to this Article 11, any other provision of this
Agreement or any of the Loan Documents, so long as the Lender or such
agent or designee shall act reasonably and in good faith.
(d) Appointment of Receiver. In any action under this Article
11, the Lender shall be entitled to the appointment of a receiver,
without notice of any kind whatsoever, to take possession of all or any
portion of the Collateral and to exercise such power as the court shall
confer upon such receiver.
Section 11.6 Trademark License. The Borrower hereby grants to
the Lender the nonexclusive right and license to use any trademark then
used by the Borrower, for the purposes set forth in Section 11.2(c)(vi)
and for the purpose of enabling the Lender to realize on the Collateral
and to permit any purchaser of any portion of the Collateral through a
foreclosure sale or any other exercise of the Lender's rights and
remedies under the Loan Documents to use, sell or otherwise dispose of
the Collateral bearing any such trademark. Such right and license is
granted free of charge, without the requirement that any monetary
payment whatsoever be made to the Borrower or any other Person by the
Lender. The Borrower hereby represents, warrants, covenants and agrees
that it presently has, and shall continue to have, the right, without
the approval or consent of others, to grant the license set forth in
this Section 11.6.
ARTICLE 12 - MISCELLANEOUS
Section 12.1 Notices.
(a) Method of Communication. Except as specifically provided in
this Agreement or in any of the Loan Documents, all notices and the
communications hereunder and thereunder shall be in writing or by
telephone subsequently confirmed in writing. Notices in writing shall
be
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delivered personally or sent by overnight courier service, by certified
or registered mail, postage pre-paid, or by facsimile transmission and
shall be deemed received, in the case of personal delivery, when
delivered, in the case of overnight courier service, on the next
Business Day after delivery to such service, in the case of mailing, on
the third day after mailing (or, if such day is a day on which
deliveries of mail are not made, on the next succeeding day on which
deliveries of mail are made) and, in the case of facsimile
transmission, upon transmittal. A telephonic notice to the Lender as
understood by the Lender will be deemed to be the controlling and
proper notice in the event of a discrepancy with or failure to receive
a confirming written notice.
(b) Addresses for Notices. Notices to any party shall be sent
to it at the following addresses, or any other address of which all the
other parties are notified in writing.
If to the Borrower: International Comfort Products
Corporation (USA)
650 Heil-Quaker Avenue
Nashville, Tennessee 37091
Attention: Legal Department
Facsimile No.: (615) 270-4220
with a copy to: International Comfort Products
Corporation (USA)
Suite 1700
201 Fourth Avenue North
Nashville, Tennessee 37219
Attention: General Counsel
Facsimile No.: (615) 270-4220
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If to the Lender: NationsBank, N.A.
c/o NationsBank Business Credit
600 Peachtree Street, 13th Floor
Atlanta, Georgia 30308
Attention: Lynn Webster
Facsimile No.: (404) 607-6437
(c) Lender's Office. The Lender hereby designates its
office located at 600 Peachtree Street, 13th Floor, Atlanta, Georgia
30308, or any subsequent office which shall have been specified for
such purpose by written notice to the Borrower, as the office to which
payments due are to be made and at which Loans will be disbursed.
Section 12.2 Expenses. The Borrower agrees to pay or reimburse
on demand all costs and expenses incurred by the Lender, including,
without limitation, the reasonable fees and disbursements of counsel,
in connection with (a) the negotiation, preparation, execution,
delivery, enforcement and termination of this Agreement and each of the
other Loan Documents, whenever the same shall be executed and
delivered, including, without limitation, (i) the costs and expenses of
appraisals of the collateral, (ii) the costs and expenses of lien
searches, and (iii) taxes, fees and other charges of filing the
Financing Statements and continuations and the costs and expenses of
taking other actions to perfect, protect, and continue the Security
Interest; (b) the preparation, execution and delivery of any waiver,
amendment, supplement or consent by the Lender relating to this
Agreement or any of the Loan Documents; (c) sums paid or obligations
incurred in connection with the payment of any amount or taking any
action required of the Borrower under the Loan Documents that the
Borrower fails to pay or take; (d) if an Event of Default exists, costs
of inspections and verifications of the Collateral, including, without
limitation, standard per diem fees charged by the Lender for travel,
lodging, and meals for inspections of the Collateral and the Borrower's
operations and books and records by the Lender's agents; (e) costs and
expenses of forwarding loan proceeds, collecting checks and other items
of payment, and establishing and maintaining each Disbursement Account;
(f) costs and expenses of preserving and protecting the Collateral; (g)
after the occurrence of a Default, consulting with and obtaining
opinions and appraisals from one or more Persons, including personal
property appraisers, accountants and lawyers, concerning the value of
any Collateral for the Secured Obligations or related to the nature,
scope or value of any right or remedy of the Lender hereunder or under
any of the Loan Documents, including any review of factual matters in
connection therewith, which expenses shall include the reasonable fees
and disbursements of such Persons; and (h) costs and expenses paid or
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incurred to obtain payment of the Secured Obligations, enforce the
Security Interest, sell or otherwise realize upon the Collateral, and
otherwise enforce the provisions of the Loan Documents, or to prosecute
or defend any claim in any way arising out of, related to or connected
with, this Agreement or any of the Loan Documents, which expenses shall
include the reasonable fees and disbursements of counsel and of experts
and other consultants retained by the Lender.
The foregoing shall not be construed to limit any other provisions of
the Loan Documents regarding costs and expenses to be paid by the
Borrower. The Borrower hereby authorizes the Lender to debit the
Borrower's loan accounts (by increasing the principal amount of the
Revolving Credit Loan) in the amount of any such costs and expenses
owed by the Borrower when due.
Section 12.3 Stamp and Other Taxes. The Borrower will pay any
and all stamp, registration, recordation and similar taxes, fees or
charges and shall indemnify the Lender against any and all liabilities
with respect to or resulting from any delay in the payment or omission
to pay any such taxes, fees or charges, which may be payable or
determined to be payable in connection with the execution, delivery,
performance or enforcement of this Agreement and any of the Loan
Documents or the perfection of any rights or security interest
thereunder.
Section 12.4 Setoff. In addition to any rights now or hereafter
granted under applicable law, and not by way of limitation of any such
rights, upon and after the occurrence of any Event of Default, the
Lender and any participant with the Lender in the Loans are hereby
authorized by the Borrower at any time or from time to time, without
notice to the Borrower or to any other Person, any such notice being
hereby expressly waived, to set off and to appropriate and to apply any
and all deposits (general or special, time or demand, including, but
not limited to, indebtedness evidenced by certificates of deposit,
whether matured or unmatured) and any other indebtedness at any time
held or owing by the Lender or any participant to or for the credit or
the account of the Borrower against and on account of the Secured
Obligations irrespective or whether or not (a) the Lender shall have
made any demand under this Agreement or any of the Loan Documents, or
(b) the Lender shall have declared any or all of the Secured
Obligations to be due and payable as permitted by Section 11.2 and
although such Secured Obligations shall be contingent or unmatured.
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Section 12.5 Litigation. EACH OF THE LENDER AND THE BORROWER
HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY WAIVES TRIAL BY JURY IN
ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN
ACTION MAY BE COMMENCED BY OR AGAINST THE BORROWER OR THE LENDER
ARISING OUT OF THIS AGREEMENT, THE COLLATERAL OR ANY ASSIGNMENT THEREOF
OR BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER BETWEEN THE
BORROWER AND THE LENDER OF ANY KIND OR NATURE. THE BORROWER AND THE
LENDER HEREBY AGREE THAT THE FEDERAL COURT OF THE NORTHERN DISTRICT OF
GEORGIA OR, AT THE OPTION OF THE LENDER, ANY COURT IN WHICH THE LENDER
SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT
MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY AND WHICH SITS IN A
JURISDICTION IN WHICH THE BORROWER TRANSACTS BUSINESS SHALL HAVE NON-
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN THE BORROWER AND THE LENDER, PERTAINING DIRECTLY OR INDIRECTLY
TO THIS AGREEMENT OR THE LOAN DOCUMENTS OR TO ANY MATTER ARISING
THEREFROM. THE BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO
SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS,
HEREBY WAIVING PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT OR OTHER
PROCESS OR PAPERS ISSUED THEREIN AND AGREEING THAT SERVICE OF SUCH
SUMMONS AND COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE BORROWER AT THE ADDRESS
SET FORTH IN SECTION 12.1(b), WHICH SERVICE SHALL BE DEEMED MADE UPON
RECEIPT THEREOF. THE NON-EXCLUSIVE CHOICE OF FORUM SET FORTH IN THIS
SECTION SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT
OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT
TO ENFORCE THE SAME IN ANY APPROPRIATE JURISDICTION.
Section 12.6 Waiver of Rights. THE BORROWER HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY WAIVES ALL RIGHTS WHICH THE BORROWER HAS
UNDER CHAPTER 14 OF TITLE 44 OF THE OFFICIAL CODE OF GEORGIA OR UNDER
ANY SIMILAR PROVISION OF APPLICABLE LAW TO NOTICE AND TO A JUDICIAL
HEARING PRIOR TO THE ISSUANCE OF A WRIT OF POSSESSION ENTITLING THE
LENDER, ITS SUCCESSORS AND ASSIGNS TO POSSESSION OF THE COLLATERAL UPON
DEFAULT OR EVENT OF DEFAULT. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING AND WITHOUT LIMITING ANY OTHER RIGHT WHICH THE LENDER MAY
HAVE, THE BORROWER CONSENTS THAT, IF THE LENDER FILES A PETITION FOR AN
IMMEDIATE WRIT OF POSSESSION IN COMPLIANCE WITH SECTIONS 44-14-261 AND
44-14-262 OF THE OFFICIAL CODE OF GEORGIA OR UNDER ANY SIMILAR
PROVISION OF APPLICABLE LAW AND THIS WAIVER OR A COPY HEREOF IS ALLEGED
IN SUCH PETITION AND ATTACHED THERETO, THE COURT BEFORE WHICH SUCH
PETITION IS FILED MAY DISPENSE WITH ALL RIGHTS AND PROCEDURES HEREIN
WAIVED AND MAY ISSUE FORTHWITH AN IMMEDIATE WRIT OF POSSESSION IN
ACCORDANCE WITH CHAPTER 14 OF TITLE 44 OF THE OFFICIAL CODE OF GEORGIA
OR IN ACCORDANCE WITH ANY SIMILAR PROVISION OF APPLICABLE LAW, WITHOUT
THE NECESSITY OF AN ACCOMPANYING BOND AS OTHERWISE REQUIRED BY SECTION
44-14-263 OF THE OFFICIAL CODE OF GEORGIA OR IN ACCORDANCE WITH ANY
SIMILAR PROVISION OF APPLICABLE LAW. THE BORROWER HEREBY ACKNOWLEDGES
THAT IT HAS READ AND FULLY UNDERSTANDS THE TERMS OF THIS WAIVER AND THE
EFFECT HEREOF.
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Section 12.7 Reversal of Payments. To the extent the Borrower
makes a payment or payments to the Lender or the Lender receives any
payment or proceeds of the Collateral for the Borrower's benefit, which
payment(s) or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or equitable
cause, then, the Lender shall have the continuing and exclusive right
to apply, reverse and re-apply any and all payments to any portion of
the Secured Obligations, and, to the extent of such payment or proceeds
received, the Secured Obligations or part thereof intended to be
satisfied shall be revived and continued in full force and effect, as
if such payment or proceeds had not been received by the Lender.
Section 12.8 Injunctive Relief. The Borrower recognizes that,
in the event the Borrower fails to perform, observe or discharge any of
its obligations or liabilities under this Agreement, any remedy of law
may prove to be inadequate relief to the Lender; therefore, the
Borrower agrees that the Lender, at the Lender's option, shall be
entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
Section 12.9 Accounting Matters. All financial and accounting
calculations, measurements and computations made for any purpose
relating to this Agreement, including, without limitation, all
computations utilized by the Borrower to determine whether it is in
compliance with any covenant contained herein, shall, unless there is
an express written direction or consent by the Lender to the contrary,
be performed in accordance with GAAP.
Section 12.10 Assignment; Participation. All the provisions of
this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that
the Borrower may not assign or transfer any of its rights under this
Agreement. The Lender may assign to one or more Persons, or sell
participations to one or more Persons in, all or a portion of its
rights and obligations hereunder and under the Note and, in connection
with any such assignment or sale of a participation, may assign its
rights and obligations under the Security Documents. The Lender may,
in connection with any assignment or proposed assignment or sale or
proposed sale of a participation, disclose to the assignee or proposed
assignee or participant or proposed participant any information
relating to the Borrower furnished to the Lender by or on behalf of the
Borrower.
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Section 12.11 Amendments. Any term, covenant, agreement or
condition of this Agreement or any of the other Loan Documents may be
amended or waived and any departure therefrom may be consented to if,
but only if, such amendment, waiver or consent is in writing signed by
the Lender and, in the case of an amendment, by the Borrower. Unless
otherwise specified in such waiver or consent, a waiver or consent
given hereunder shall be effective only in the specific instance and
for the specific purpose for which given.
Section 12.12 Performance of Borrower's Duties. The Borrower's
obligations under this Agreement and each of the Loan Documents shall
be performed by the Borrower at its sole cost and expense. If the
Borrower shall fail to do any act or thing which it has covenanted to
do under this Agreement or any of the Loan Documents, the Lender may
(but shall not be obligated to) do the same or cause it to be done
either in the name of the Lender or in the name and on behalf of the
Borrower, and the Borrower hereby irrevocably authorizes the Lender so
to act.
Section 12.13 Indemnification. The Borrower agrees to reimburse
the Lender for all reasonable costs and expenses, including reasonable
counsel fees and disbursements, incurred and to indemnify and hold the
Lender harmless from and against all losses suffered by the Lender,
other than losses resulting from the Lender's gross negligence or
willful misconduct, in connection with (a) the exercise by the Lender
of any right or remedy granted to it under this Agreement or any of the
Loan Documents, (b) any claim, and the prosecution or defense thereof,
arising out of or in any way connected with this Agreement or any of
the Loan Documents, except in the case of a dispute between the
Borrower and the Lender in which the Borrower prevails in a final
unappealed or unappealable judgment, and (c) the collection or
enforcement of the Secured Obligations or any of them.
Section 12.14 All Powers Coupled with Interest. All powers of
attorney and other authorizations granted to the Lender and any Persons
designated by the Lender pursuant to any provisions of this Agreement
or any of the Loan Documents shall be deemed coupled with an interest
and shall be irrevocable so long as any of the Secured Obligations
remain unpaid or unsatisfied or the Revolving Credit Facility has not
been terminated.
Section 12.15 Survival. Notwithstanding any termination of this
Agreement, (a) until all Secured Obligations arising under or with
respect to this Agreement have been paid in full and the Revolving
Credit Facility terminated, the Lender shall retain its Security
Interest and shall retain
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all rights under this Agreement and each of the Security Documents with
respect to the Collateral as fully as though this Agreement had not
been terminated, and (b) the indemnities to which the Lender is
entitled under the provisions of this Article 12 and any other
provision of this Agreement and the Loan Documents shall continue in
full force and effect and shall protect the Lender against events
arising after such termination as well as before.
Section 12.16 Severability of Provisions. Any provision of this
Agreement or any other Loan Document which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective only to the extent of such prohibition or unenforceability
without invalidating the remainder of such provision or the remaining
provisions hereof or thereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
Section 12.17 Governing Law. This Agreement and the Note shall
be construed in accordance with and governed by the law of the State of
Georgia.
Section 12.18 Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and shall be binding upon all parties, their successors and
assigns, and all of which taken together shall constitute one and the
same agreement.
Section 12.19 Reproduction of Documents. This Agreement, each
of the Loan Documents and all documents relating thereto, including,
without limitation, (a) consents, waivers and modifications that may
hereafter be executed, (b) documents received by the Lender, and
(c) financial statements, certificates and other information previously
or hereafter furnished to the Lender, may be reproduced by the Lender
by any photographic, photostatic, microcard, microfilm, miniature
photographic or other similar process, and the Lender may destroy any
original document so reproduced. Each party hereto stipulates that, to
the extent permitted by applicable laws any such reproduction shall be
as admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original shall be in
existence and whether or not such reproduction was made by such Lender
in the regular course of business), and any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible
in evidence.
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Section 12.20 Funds Transfer Services.
(a) The Borrower acknowledges that the Lender has made available
to it a description of security procedures regarding funds transfers
executed by the Lender or an affiliate bank at the request of such
Borrower (the "Security Procedures"). The Borrower and the Lender agree
that the Security Procedures are commercially reasonable. The Borrower
further acknowledges that the full scope of the Security Procedures
which the Lender or such affiliate bank offers and strongly recommends
for funds transfers is available only if the Borrower communicates
directly with the Lender or such affiliate bank as applicable in
accordance with said procedures. If the Borrower attempts to
communicate by any other method or otherwise not in accordance with the
Security Procedures, the Lender or such affiliate bank, as applicable,
shall not be required to execute such instructions, but if the Lender
or such affiliate bank, as applicable, does so, the Borrower will be
deemed to have refused the Security Procedures that the Lender or such
affiliate bank, as applicable, offers and strongly recommends, and the
Borrower will be bound by any funds transfer, whether or not
authorized, which is issued in the Borrower's name and accepted by the
Lender or such affiliate bank, as applicable, in good faith. The
Lender or such affiliate bank, as applicable, may modify the Security
Procedures at such time or times and in such manner as the Lender or
such affiliate bank, as applicable, in its sole discretion, deems
appropriate to meet prevailing standards of good banking practice. By
continuing to use the Lender's or such affiliate bank's, as applicable,
wire transfer services after receipt of any modification of the
Security Procedures, the Borrower agrees that the Security Procedures,
as modified, are likewise commercially reasonable. The Borrower
further agrees to establish and maintain procedures to safeguard the
Security Procedures and any information related thereto.
(b) The Lender or such affiliate bank, as applicable, will
generally use the Fedwire funds transfer system for domestic funds
transfers, and the funds transfer system operated by the Society for
Worldwide International Financial Telecommunication (SWIFT) for
international funds transfers. International funds transfers may also
be initiated through the Clearing House InterBank Payment System
(CHIPs) or international cable. However, the Lender or such affiliate
bank, as applicable, may use any means and routes that the Lender or
such affiliate bank, as applicable, in its sole discretion, may
consider suitable for the transmission of funds. Each payment order,
or cancellation thereof, carried out through a funds transfer system or
a clearing house will be governed by all applicable funds transfer
system rules and clearing house rules and clearing arrangements,
whether or not the Lender or such affiliate bank, as applicable, is a
member of the system, clearing house or arrangement and the Borrower
acknowledges that the Lender's or such affiliate bank's, as applicable,
right to reverse, adjust, stop payment
-83-
<PAGE>
or delay posting of an executed payment order is subject to the laws,
regulations, rules, circulars and arrangements described herein.
Section 12.21 Consent to Advertising and Publicity. The
Borrower agrees that the Lender may issue and disseminate to the public
information describing the credit accommodation entered into pursuant
to this Agreement, including the name and address of the Borrower and
the amount and a general description of the credit facilities provided
hereunder.
Section 12.22 Final Agreement. This Agreement and the other
Loan Documents are intended by the parties hereto as the final,
complete and exclusive expression of the agreement among them with
respect to the subject matter hereof and thereof. This Agreement and
the other Loan Documents supersede any and all prior oral or written
agreements between the parties hereto relating to the subject matter
hereof and thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in Atlanta, Georgia by their duly authorized officers in
several counterparts all as of the day and year first written above.
BORROWER:
INTERNATIONAL COMFORT PRODUCTS
CORPORATION (USA)
[CORPORATE SEAL]
Attest: By: /s/ Stephen L. Clanton
--------------------------
Name: Stephen L. Clanton
By: /s/ David P. Cain Title: Senior Vice President, CFO
--------------------------- & Treasurer
Name: David P. Cain
Title: Senior Vice President, General
Counsel & Secretary
LENDER:
NATIONSBANK, N.A.
By:
---------------------------------
Name:
Title:
-84-
<PAGE>
EXHIBIT "A"
REVOLVING CREDIT NOTE
$45,000,000 Date: July __, 1997
FOR VALUE RECEIVED, on July __, 1999 the undersigned promises
to pay to the order of NationsBank, N.A., (hereinafter, together with
any holder hereof, called "Holder") at Atlanta, Georgia (or at such
other place as the Holder may designate in writing to the undersigned)
the principal amount of $45,000,000 or so much thereof as has been
advanced hereunder.
The undersigned shall pay interest as provided in that certain
Loan and Security Agreement between the undersigned and Holder dated
July __, 1997 (the "Loan Agreement").
It is contemplated that the principal sum evidenced by this
Note may be reduced from time to time and that additional advances may
be made from time to time, as provided in the Loan Agreement; provided,
however, that the outstanding principal amount evidenced by this Note
shall not exceed the maximum amount provided in the Loan Agreement.
This Note is subject to the terms and conditions of, and
entitled to the benefit of the Collateral described in, the Loan
Agreement. Capitalized terms not defined herein shall have the
meanings given in the Loan Agreement.
No delay or failure on the part of the Holder in the exercise
of any right or remedy hereunder, under the Loan Agreement, the
Security Documents or at law or in equity, shall operate as a waiver
thereof, and no single or partial exercise by the Holder of any right
or remedy hereunder, under the Loan Agreement, the Security Documents,
or at law or in equity shall preclude or estop another or further
exercise thereof or the exercise of any other right or remedy.
Principal and interest on this Note shall be payable and paid
in lawful money of the United States of America.
<PAGE>
The undersigned and all endorsers waive presentment, notice of
dishonor and protest.
Time is of the essence of this Note and, in case this Note is
collected by law or through an attorney at law, or under advice
therefrom, the undersigned agrees to pay all costs of collection,
including reasonable attorneys' fees if collected by or through an
attorney.
The provisions of this Note shall be construed and interpreted
and all rights and obligations of the parties hereunder determined in
accordance with the laws of the State of Georgia.
IN WITNESS WHEREOF, the undersigned has caused this Note to be
executed, sealed and delivered in Atlanta, Georgia, in its corporate
name, by and through its respective duly authorized officers, as of the
day and year first above written.
INTERNATIONAL COMFORT PRODUCTS
CORPORATION (USA)
By:
(Title)
ATTEST:
By:
(Title)
[CORPORATE SEAL]
<PAGE>
Exhibit B
Reserved
<PAGE>
Exhibit C
BORROWER'S OFFICER'S CERTIFICATE
FOR THE BENEFIT OF
NATIONSBANK, N.A.
I, , of INTERNATIONAL
------------------------ ------------------
COMFORT PRODUCTS CORPORATION (USA), a Delaware corporation (the "Borrower"),
do hereby certify, pursuant to the Loan and Security Agreement between
NationsBank, N.A. and the Borrower, dated as of July , 1997 (the
---
"Agreement"), that, to the best of my knowledge and based on an examination
sufficient to enable me to make an informal statement, that:
1. All of the representations and warranties made or deemed to be
made under the Agreement are true and correct as of the date hereof, both
with and without giving effect to the Loans (as such term and other
capitalized terms used herein but not defined are defined in the Agreement)
to be made on the date hereof and the application of the proceeds thereof;
2. No Default or Event of Default exists as of the date hereof;
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of the
Borrower this day of July, 1997.
------
---------------------
(Title)
[CORPORATE SEAL]
<PAGE>
SCHEDULE 1.1
LETTER OF CREDIT FEES
One percent (1.0%) per annum of the face amount of each Commercial Letter of
Credit, with a minimum fee of $150.
One and one-half percent (1.5%) per annum of the face amount of each Standby
Letter of Credit, with a minimum fee of $150.
In addition, the Borrower shall be responsible for NationsBank's standard
charges for issuing, administering, amending, renewing, paying and canceling
Letters of Credit.
<PAGE>
Schedule 5.1(a)
Jurisdictions in Which Borrower is Qualified as a Foreign Corporation 1:
1. Arizona
2. California
3. Colorado
4. Florida 2
5. Georgia
6. Illinois 2
7. Maryland
8. Missouri
9. North Carolina
10. North Dakota
11. Ohio
12. Tennessee
13. Texas
- -------------------------------
1 Borrower is qualified under the name Inter-City Products
Corporation (USA) in all states other than Tennessee, where it is qualified
under the name International Comfort Products Corporation (USA).
2 Borrower's qualification recently lapsed; Borrower is currently
seeking to requalify.
<PAGE>
Schedule 5.1(b):
Borrower's Capital Stock
Number of Number of
Shares Shares
Name of Corporation Authorized Outstanding
Stockholder (# of Shares
Inter-City Products Corporation (USA)
Common 3,000 1,000
CHL Holdings Inc. (1,000)
Preferred 2,000 130
CHL Holdings Inc. (130)
GHC Holdings 400
Inter-City Products Corporation (USA) (400)
General Heating and Cooling
GHC Holdings
Inter-City Products Partner Corporation
Inter-City Products Corporation (USA)
<PAGE>
Schedule 5.1(e):
Description of Borrower's Business
Inter-City Products corporation (USA), (the "Company"), is one of the largest
designers, manufacturers and marketers (in terms of units shipped as reported
in an industry publication) of central air conditioning and heating products
for residential and light commercial use in the United States.
The Company was formed in 1985 as Heil-Quaker Home Systems, Inc. by Whirlpool
Corp[oration, which originally established this heating and air conditioning
business in 1957. The Company was acquired by Inter-City Products
Corporation, ("ICP"), through its wholly-owned subsidiary CHL Holdings, Inc.,
("CHL"), in 1986. In June 1991, the Company acquired substantially all of
the residential and light commercial air conditioning and heating business of
the Dealer Products Group of SynderGeneral Corporation. This acquisition
expanded the Company's overall distribution capability and provided enhanced
furnace technology. On July 25, 1996, the Company acquired two heating and
cooling products distributors, Coastline Distribution, Inc. of Sanford,
Florida and General Heating & Cooling Company of Kansas City, Missouri. This
acquisition was a strategic move to protect the Company's long-term growth
prospects in the southeast and midwest states. In 1996, the Company's
operations represented approximately 90% of ICP's consolidated revenues.
The Company designs, manufactures, sells and distributes a complete range of
central air conditioners, heat pumps and combination gas/electric units
(collectively, "unitary air conditioners" or "cooling products"), and gas,
electric and oil furnaces ("heating products") for the residential and light
commercial markets. Its principal brand names - Heil, Tempstar,
Arcoaire, and Comfortmaker - are widely recognized in the
industry. Management believes that the Company's products are known for
their quality, reliability, customer service and price competitiveness.
Historically, sales of cooling products were approximately 65% of operating
revenue and sales of heating products were approximately 30% of operating
revenue. Service parts and other income usually accounted for 5% of the
Company's operating revenue.
Products are sole primarily through a network of approximately 350
distributors covering all fifty states. The Company believes that its
national network of independent distributors provides competitive advantages.
The Company's extensive network of independent distributors and its close
ties with such distributors enable it to assess quickly the changing demands
of local markets, control inventory levels and set efficient manufacturing
schedules.
<PAGE>
Schedule 5.1(f):
Exceptions to Governmental Approvals
None
<PAGE>
Schedule 5.1(g):
Non-Lien Title Exceptions and Defects
None
<PAGE>
Schedule 5.1(h):
Liens and Security Interests
1. The Indenture dated as of March 1, 1993 between the Company
and United States Trust Company of New York, as trustee (the "Trustee") on
behalf of the holders of the 9 3/4% Senior Secured Notes due to 2002;
2. The Pledge and Security Agreement by and between the Company
and the Trustee dated as of March 11, 1993;
3. The Intellectual Property Secured Agreement by and between
the Company and the Trustee dated as of March 11, 1993;
4. The Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing by the Company as grantor for the benefit of the Trustee
dated as of March 11, 1993, of record with the Register of Deeds of
Rutherford County, Tennessee and the Register of Deeds of Marshall County,
Tennessee; and
5. The Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing by the Company in favor of the Trustee dated as of
December 27, 1995 of record with the Register of Deeds of Marshall County.
6. Those matters reflected on the lien search performed by
Intercounty Clearance Corporation on behalf of the Lender.
<PAGE>
Schedule 5.1(i):
Indebtedness for Money Borrowed and Guaranties
. $140 MIL Sr. Notes, ICP (USA)
Maturity: March 2000
Rate: 9.75%
Trustee: United States Trust Co. of New York
114 West 47th Street
New York, NY 10036-1532
(212) 852-7557
. $70 MIL Accounts Receivable Securitization
Maturity: July 2001
Trustee: LaSalle National Bank
120 South LaSalle Street
Chicago, Illinois 60603
Agent: Chicago Corporation
208 South LaSalle Street
Chicago, Illinois 60604-1003
(312) 855-7557
. $2.97 MIL Intercompany Note from General Heating & Cooling to ICP (USA)
as of May 31, 1997
. $11.8 MIL Buyer Note Payable from ICPRC to ICP (USA)
as of May 31, 1997
. $1.7 MIL Buyer Note Payable from ICPRC to General Heating & Cooling
as of May 31, 1997
<PAGE>
Schedule 5.1(j):
Material Litigation
JOSEPH A. ENGEL, ET AL V. CHEVRON CORPORATION, INC., INTER-CITY
PRODUCTS, INC., INDIVIDUALLY AND AS CLASS REPRESENTATIVES OF ALL
OTHERS SIMILARLY SITUATED, ET AL, IN THE CIRCUIT COURT FOR RUTHERFORD
COUNTY, TENNESSEE AT MURFREESBORO, CIV.ACT.NO. 37715 (FILED JANUARY
9, 1997) (CLASS ACTION)
The plaintiffs have filed this action against International Comfort
Products Corporation (USA) (formerly known as Inter-City Corporation (USA)),
individually and purportedly as class representative of all others similarly
situated. The complaint states that it is a class action and seeks relief
for compensatory damages, punitive damages and declaratory relief on behalf
of all residents or domiciles of the United States who own or owned
structures in which there is or was a gas or propane furnace, boiler or water
heater that utilizes a high temperature plastic vent system fabricated by
defendants Chevron Chemical and hart & Cooley from "ULTEM," a polyetherimide
resin manufactured, marketed and/or sold by defendant General Electric
Company. The complaint states that the defendants knew or should have known
that high temperature plastic vent piping manufactured from ULTEM resins, is
defective and would deteriorate over time, allowing carbon monoxide gas to
leak into the homes of plaintiffs. Borrower believes that allegation that
this type of venting system has been installed by others on a small
percentage of some models of Borrower's furnaces. The Borrower did not
manufacture the allegedly defective products. The Borrower believes that the
claims made against it in the Complaint are without merit and is vigorously
contesting this matter.
CHANDLER, ERLENE V. INTERNATIONAL COMFORT PRODUCTS CORPORATION (USA)
The CHANDLER case was filed by Erlene Chandler in the U.S. District
Court for the Northern District of Alabama. The plaintiff named only Chevron
Chemical and International Comfort Products Corporation (USA) as defendants.
Chevron filed a cross-claim against the Borrower, and a third-party complaint
against other furnace manufacturers. The complaint states that it is a class
action and seeks relief for compensatory damages, punitive damages and
declaratory relief on behalf of all residents or domiciles of the United
States who own or owned structures in which there is or was a gas or propane
furnace, boiler or water heater that utilizes a high temperature plastic vent
system fabricated by defendants Chevron Chemical and hart & Cooley from
"ULTEM," a polyetherimide resin manufactured, marketed and/or sold by
defendant General Electric Company. The complaint states that the defendants
knew or should have known that high temperature plastic vent piping
manufactured from ULTEM resins, is defective and would deteriorate
<PAGE>
over time, allowing carbon monoxide gas to leak into the homes of plaintiffs.
Borrower believes that it has been named as a defendant in this lawsuit based
on the allegation that this type of venting system has been installed by
others on a small percentage of some models of Borrower's furnaces. The
Borrower did not manufacture the allegedly defective products. The plaintiff
originally sought nationwide class certification. The judge on the case
stated his belief that the case was not appropriate for class certification,
whereupon the plaintiff withdrew the class allegations. The plaintiff
unsuccessfully attempted to transfer her case to Georgia to be heard with the
MINSHALL case. The Borrower's motion to dismiss on jurisdictional and other
grounds is pending. The Borrower believes that the claims made against it in
the Complaint and the cross claim are without merit and is vigorously
contesting this matter.
HIMBER, DONALD ET US. V. RYAN HOMES, INC. T/D/B/A RYAN HOMES, RYCON, A
DIVISION OF RYAN HOMES, INC. AND INTER-CITY PRODUCTS CORPORATION (USA)
The plaintiffs have filed this action against Ryan Homes, its
subsidiaries and the Borrower, individually and purportedly as class
representatives of all similarly situated homeowners. The complaint states
that it is a class action and seeks relief for compensatory damages resulting
from property damages on behalf of all residents of a particular development
who have a furnace manufactured by the Borrower. The complaint asserts that
the Borrower was negligent in designing, manufacturing and selling the
furnaces, as well as negligent in failing to warn the plaintiffs about the
possibility of black residue being distributed through the house and causing
extensive property damage.
The Borrower believes that the claims made against it in the
Complaint are without merit, and is vigorously contesting this matter.
POSSIBLE LITIGATION
The MINSHALL case is very similar to CHANDLER and was filed at
about the same time by the same lawyers. MINSHALL was filed in U.S. District
court in Georgia. Minshall named Chevron but not International Comfort
Products Corporation (USA) as a Defendant. Chevron filed a third party
complaint against other furnace manufacturers, but not the Borrower. We have
been told by Chevron that it meant to include the Borrower, but it has never
done anything to make the Borrower a party to this litigation. The complaint
states that it is a class action and seeks relief for compensatory damages,
punitive damages and declaratory relief on behalf of all residents or
domiciles of the Untied States who own or owned structures in which there is
or was a gas or propane furnace, boiler or water heater that utilizes a high
temperature plastic vent system fabricated by defendants Chevron Chemical and
Hart & Cooley from "ULTEM," a polyetherimide resin manufactured, marketed
<PAGE>
and/or sold by defendant General Electric Company. The complaint states that
the defendants knew or should have known that high temperature plastic vent
piping manufactured from ULTEM resins, is defective and would deteriorate
over time, allowing carbon monoxide gas to leak into the homes of
plaintiffs. Borrower believes that it has been named as a defendant in this
lawsuit based on the allegation that this type of venting system has been
installed by others on a small percentage of some models of Borrower's
furnaces. The Borrower did not manufacture the allegedly defective products.
Before any substantive or class certification issues were resolved, the judge
transferred the case to Alabama to be herd by the same judge that is handling
CHANDLER. The plaintiff subsequently stated its intention to amend its
pleading to seek only a statewide Georgia class certification. The Borrower
believes that any claims which may subsequently be made against it in or
related to the Complaint are without merit and would vigorously contest this
matter.
<PAGE>
July 23, 1997
Michael Leveille
Troutman Sanders LLP
Suite 5200
600 Peachtree Street, N.E.
Atlanta, GA 30308-2216
RE: International Comfort Products Corporation (USA)
Dear Michael:
This is to confirm the prior discussions between you and Jerry Mace
with Tuke Yopp & Sweeney that the environmental matter styled UNITED STATES
OF AMERICA V. CITY OF LEWISBURG, TENNESSEE, ET AL does not present any
exposure to International Comfort Products Corporation (USA). Whirlpool was
obligated for the defense of this action against the company, and Whirlpool
has settled any claims against the company.
I trust that this is responsive to your inquire.
Very truly yours,
INTERNATIONAL COMFORT PRODUCTS
CORPORATION (USA)
David P. Cain
GFM/bb
Enclosures
cc: Rick Simpson
Gerald F. Mace, Esq.
<PAGE>
Schedule 5.1(k):
Tax Returns and Payments
The Borrower and its Subsidiaries are party to a Tax Sharing Agreement as of
January 1, 1988 by and among CHL Holdings Inc. and its subsidiaries. The
Borrower and its Subsidiaries file a consolidated income tax return with its
parent company, CHL Holdings Inc. The U.S. federal and state income tax
returns for the taxation year ended December 31, 1996 are currently under
extension until September [15], 1997.
<PAGE>
Schedule 5.1(o): ERISA
Inter-City Products Corporation (USA) Salaried Employees Share Ownership
Savings Plan
Inter-City Products Corporation (USA) Hourly Employees Share Ownership
Savings Plan
Inter-City Products Corporation (USA) Retirement Plan for Salaried
Employees
Inter-City Products Corporation (USA) Retirement Plan for Hourly
Employees
Inter-City Products Corporation (USA) Health Care Plans for Salaried
Employees
Inter-City Products Corporation (USA) Health Care Plans for Hourly
Employees
Inter-City Products Corporation (USA) Long Term Disability Plan for
Salaried Employees
Inter-City Products Corporation (USA) Life Insurance Plan for Salaried
Employees
Inter-City Products Corporation (USA) Life Insurance Plan for Hourly
Employees
Inter-City Products Corporation (USA) Accidental Death and Dismemberment
for Salaried Employees
Inter-City Products Corporation (USA) Accidental Death and Dismemberment
for Hourly Employees
Inter-City Products Corporation (USA) Vision Plan for Salaried Employees
Inter-City Products Corporation (USA) Education Reimbursement for
Salaried Employees
Inter-City Products Corporation (USA) Education Reimbursement for Hourly
Employees
Inter-City Products Corporation (USA) Travel Accident Insurance for
Salaried Employees
Inter-City Products Corporation (USA) Separation Allowance for Salaried
Employees
Inter-City Products Corporation (USA) Weekly Sickness and Accident Plan
for Hourly Employees
<PAGE>
Schedule 5.1(s): ERISA
Location of Chief Executive Office
Inter-City Products Corporation (USA)
650 Heil-Quaker Avenue
Lewisburg, Tennessee 37091
Tel. (615) 359-3511
Fax. (615) 359-9963
<PAGE>
Schedule 5.1(t): ERISA
Location of Inventory
FACILITY ADDRESS May 31, 1997
LEASED LANDLORD
Lewisburg (Manufacturing) 650 Heil Quaker $ 491,000
Owned
Lewisburg, TN
Lewisburg (Physical Dist.) 651 Heil Quaker $72,058.000
Owned
Lewisburg, TN
LaVergne (Fast Parts) 1621 Heil Quaker Blvd. $19,746,000
Owned
LaVergne, TN
Miami Branch 2851 N.W. 107th Ave. $ 130,000
Leased American Fine Foods
Miami, FL 33172
2841 N.W. 107th Ave.
Miami, FL 33172
St. Louis Branch 730 Fee Fee Road $ 886,000
Leased MGI Properties
Maryland Height, MO 63043
c/o Trammell Crow Mgmt.
800 Maryland Ave. Suite 1850
St. Louis, MO 63105
Murfreesboro Warehouse 606 Butler Drive $ 1,400,000
Leased Ozburn Hessey Logistics
Murfreesboro, TN 37127
Warehouse 404 Butler Drive
Murfreesboro, TN 37127
<PAGE>
Schedule 5.1(v)
Fictitious and Trade Names
The Borrower has used the name HVAC FIRST Corporation as a
fictitious name for an unincorporated division engaged in the financing sales
of Inventory to its distributors. Trade names or styles under which the
Borrower sells Inventory are Arcoaire, Tempstar, Heil, Comfortmaker, and FAST
Parts
<PAGE>
Schedule 5.1(y)
Employee Relations
U.S.A.
Stove, Furnace, Energy and Allied Appliance Workers Division of International
Brotherhood of Boilermakers, Iron Ship Buildings, Blacksmiths, Forgers and
Helpers
AFL-CIO, CFL-Local S14
Exp. September 30, 1998
Stove, Furnace, Energy and Allied Appliance Workers Division of International
Brotherhood of Boilermakers, Iron Ship Buildings, Blacksmiths, Forgers and
Helpers
AFL-CIO, CFL-Local S2
Exp. September 30,1 98
International Association of Machinists and Aerospace Workers-Lodge 1959
Exp. March 31, 1999
<PAGE>
SCHEDULE 5.1 (z) Proprietary Rights
<PAGE>
PATENTS
U.S.
<PAGE>
INTER-CITY PRODUCTS (USA) - PATENTS - U.S.
Issue No.
Issue Date
4,982,785
01/08/91 SERPENTINE HEAT EXCHANGER
4,943,209
07/24/90 HUB FOR A PLASTIC BLOWER IMPELLER
4,942,613
07/17/90 SERVICE THERMOSTAT
5,050,393
09/24/91 REFRIGERATION SYSTEM WITH
SATURATION SENSOR
4,982,721
01/08/91 RESTRICTED INTAKE COMPENSATION
METHOD FOR A TWO STAGE FURNACE
5,027,789
07/02/91 FAN CONTROL ARRANGEMENT FOR A
TWO STAGE FURNACE
4,976,459
12/11/90 WARMUP METHOD FOR A TWO STAGE
FURNACE
<PAGE>
INTER-CITY PRODUCTS (USA) - PATENTS - U.S.
Issue No.
Issue Date
5,186,386
02/16/93 TWO STAGE FURNACE CONTROL
5,005,365
04/09/91 THERMOSTAT SPEED BAR GRAPH FOR
VARIABLE SPEED TEMPERATURE
CONTROL SYSTEM
5,293,860
03/15/94 STANDING PILOT FURNACE WITH
VENTED VESTIBULE
Pending
08/389,268 STANDING PILOT FURNACE WITH
02/17/95 VENTED VESTIBULE
5,094,224
03/10/92 ENHANCED TUBULAR HEAT EXCHANGER
5,244,264
09/14/93 WRAP AROUND BASE RAIL ASSEMBLY
FOR ROOFTOP AIR CONDITIONERS
<PAGE>
INTER-CITY PRODUCTS (USA) - PATENTS - U.S.
Issue No.
Issue Date
5,197,664
03/30/93 METHOD AND APPARATUS FOR
REDUCING THERMAL STRESS ON HEAT
EXCHANGERS
5,404,939
04/11/95 CONDENSING UNIT USING CROSS-FLOW
BLOWER
Pending
08/358,7166 CONDENSING UNIT USING CROSS-FLOW
12/19/94
5,551,508
09/03/96 CONDENSING UNIT USING CROSS-FLOW
BLOWER
5,186,528
02/16/93 REMOVABLE ACCESS PANELS FOR
ROOFTOP UNIT
4,691,768
09/08/87 LANCED FIN CONDENSER FOR CENTRAL
AIR CONDITIONER
<PAGE>
INTER-CITY PRODUCTS (USA) - PATENTS - U.S.
Issue No.
Issue Date
4,682,579
07/28/87 CONDENSATE OVERFLOW CONTROL FOR
FURNACES
5,117,645
06/02/92 REFRIGERATION SYSTEM WITH
SATURATION SENSOR
4,752,210
06/21/88 POWER VENT AND CONTROL FOR
FURNACE
4,739,746
04/26/88 HEAT EXCHANGER FOR FURNACE
4,616,994
10/14/86 GAS BURNER MEANS FOR REDUCING Nox
EMISSIONS
4,858,683
08/22/89 STAMPED DISCHARGE GRILLE
INCLUDING TWO LOUVRED SECTIONS
4,865,517
09/12/89 BLOWER WITH CLAM SHELL HOUSING
<PAGE>
INTER-CITY PRODUCTS (USA) - PATENTS - U.S.
Issue No.
Issue Date
4,542,734 HIGH EFFICIENCY FURNACE WITH
09/24/85 SECONDARY HEAT EXCHANGER
4,543,892 CONDENSATE HANDLING MEANS FOR
10/01/85 CONDENSING FURNACE
3,852,695 ELECTRICAL SWITCHING SYSTEM
12/03/74
3,908,629 HOT AIR FURNACE WITH IMPROVED
09/30/75 HEAT EXCHANGER CONSTRUCTION
3,912,903 ELECTRICAL HEATING DEVICE FOR AIR
10/14/75 DUCT
4,180,895 AIR CONDITIONING SYSTEM WITH
01/01/80 REGENERATABLE DESICCANT BED
<PAGE>
INTER-CITY PRODUCTS (USA) - PATENTS - U.S.
Issue No.
Issue Date
4,217,765 HEAT EXCHANGER-ACCUMULATOR
08/19/80
4,298,061 HEAT EXCHANGER WITH CRIMPED
11/03/81 FLANGE SEAM
4,441,241 HEAT EXCHANGER WITH CRIMPED
04/10/84 FLANGE SEAM
4,510,660 HEAT EXCHANGER WITH CRIMPED
04/16/85 FLANGE SEAM
4,718,484 HEAT EXCHANGER WITH CRIMPED
01/12/88 FLANGE SEAM
4,307,578 HEAT EXCHANGER WITH CRIMPED
12/29/81 OPERABLE ALTERNATIVELY AS
EVAPORATOR OR CONDENSER
<PAGE>
INTER-CITY PRODUCTS (USA) - PATENTS - U.S.
Issue No.
Issue Date
4,308,042 HEAT PUMP WITH FREEZE-UP
12/29/81 PREVENSION
4,308,723 HEAT PUMP EMPLOYING OPTIMAL
01/05/82 REFRIGERANT COMPRESSOR FOR LOW
PRESSURE RATIO APPLICATIONS
4,320,630 HEAT PUMP WATER HEATER
03/23/82
4,336,692 DUAL SOURCE HEAT PUMP
06/29/82
4,366,677 HEAT PUMP WATER HEATER WITH
01/04/83 REMOTE STORAGE TANK AND TIMED
TEMPERATURE SENSING
4,380,156 MULTIPLE SOURCE HEAT PUMP
04/19/93
4,501,193 MOUNTING CURB FOR MULTIPLE UNIT
02/26/85 AIR CONDITIONING SYSTEM
<PAGE>
INTER-CITY PRODUCTS (USA) - PATENTS - U.S.
Issue No.
Issue Date
4,538,338 METHOD FOR MANUFACTURING A
09/03/85 FURNACE HEAT EXCHANGER AND PLATE
ASSEMBLY
4,663,837 METHOD FOR MANUFACTURING A
05/12/87 FURNACE HEAT EXCHANGER AND PLATE
ASSEMBLY
4,547,943 METHOD OF MANUFACTURING A HEAT
10/22/85 EXCHANGER AND PLATE ASSEMBLY
4,649,894 METHOD OF MANUFACTURING A HEAT
03/17/87 EXCHANGER AND PLATE ASSEMBLY
4,893,390 METHOD AND EXPANDER FOR
01/16/90 MANUFACTURING A FURNACE HEAT
EXCHANGER AND PLATE ASSEMBLY
5,024,595 FURNACE PROTECTIVE DEVICE
06/18/91
<PAGE>
INTER-CITY PRODUCTS (USA) - PATENTS - U.S.
Issue No.
Issue Date
5,408,986 ACOUSTICS ENERGY DISSIPATOR FOR
04/25/95 FURNACE
5,375,586 CONDENSATE ISOLATOR AND DRAINAGE
12/27/94 SYSTEM FOR FURNACE
5,444,990 REVERSIBLE FAN ASSEMBLY PANEL FOR
08/29/95 PACKAGE AIR CONDITIONERS
AND HEAT PUMPS
5,509,469 INTERRUPTED FIN FOR HEAT
04/23/96 EXCHANGER
PENDING HEAT EXCHANGER FIN WITH EFFICIENT
MATERIAL UTILIZATION
PENDING DRAINAGE MANAGEMENT SYSTEM FOR
REFRIGERATION COIL
<PAGE>
INTER-CITY PRODUCTS (USA) - PATENTS - U.S.
Issue No.
Issue Date
PENDING BINARY STRIP HEAT CONTROL
4,390,219 TERMINAL BLOCK AND CAPACITOR
06/28/83 MOUNT FOR BLOWER
4,289,730 FURNACE WITH FLUE GAS CONDENSATE
09/15/81 NEUTRALIZER
4,309,947 MOUNTING ARRANGEMENT FOR
01/12/82 CONDENSATE NEUTRALIZER IN A
FURNACE
4,261,255 VENTILATION FAN
04/14/81
4,200,117 DAMPER MECHANISM FOR FRESH AIR
04/29/80 INTAKE
<PAGE>
INTER-CITY PRODUCTS (USA) - PATENTS - U.S.
Issue No.
Issue Date
3,875,755 METHOD OF CHARGING A
04/08/75 REFRIGERATION SYSTEM AND
APPARATUS THEREFOR
3,903,709 REFRIGERANT CHARGING APPARATUS
0/09/75
3,817,451 AIR CONDITIONER CONDENSING SYSTEM
06/18/74 CONTROL
3,831,392 AIR CONDITIONER WITH AIR FLOW
08/27/74 SENSOR
3,691,786 AIR CONDITIONING APPARATUS WITH
09/19/72 REFRIGERANT SUPER COOLER
3,735,602 AIR CONDITIONER CONDENSING SYSTEM
05/29/73 CONTROL
<PAGE>
INTER-CITY PRODUCTS (USA) - PATENTS - U.S.
Issue No.
Issue Date
3,476,411 COUPLING
PENDING COUNTER FLOW HEAT EXCHANGER
<PAGE>
TRADEMARKS
FOREIGN
<PAGE>
INTER-CITY PRODUCTS (USA) - TRADEMARKS - FOREIGN
===========================================================================
Issue No. Mark
Issue Date Next Renewal Goods/Services
- -----------------------------------------------------------------------------
Pending ARCOAIRE
818604840 Electric Air Conditioning
Units for Residential and
06/20/95 Commercial Use
417,106 09/17/08 ARCOAIRE
09/17/08 Air-conditioning and heating
units
510545 06/30/04 ARCOAIRE
11/27/95 Electric air conditioning
units for residential and
commercial use
208,717 08/08/90 CLIMETTE
08/08/75 Dehumidifiers
Pending COMFORTMAKER
ICP0487 Residential air conditioning
and heating units and
01/26/96 and parts therefore
Pending COMFORTMAKER
ICP0403 Residential and light
commercial cooling products
08/22/94
<PAGE>
INTER-CITY PRODUCTS (USA) - TRADEMARKS - FOREIGN
===========================================================================
Issue No. Mark
Issue Date Next Renewal Goods/Services
- -----------------------------------------------------------------------------
TMA368,463 O5/04/05 COMFORTMAKER
05/04/90 Air conditioning and heating
units and part therefor
Pending COMFORTMAKER
ICP0493 Residential air conditioning
and heating units and
04/02/96 parts therefor
2008599 01/26/06 COMFORTMAKER
01/26/96 Residential air conditioning
and heating units and
parts therefor
2053784 01/22/06 COMFORTMAKER
01/22/96 Air conditioning apparatus
and instruments; heating
apparatus and instruments;
parts and fittings for
the aforesaid goods
510544 06/30/04 COMFORTMAKER
11/27/95 Residential and light
commercial cooling products
Pending COMFORTMAKER
ICP0508 Residential air conditioning
and heating units and
04/17/96 parts therefor
<PAGE>
INTER-CITY PRODUCTS (USA) - TRADEMARKS - FOREIGN
===========================================================================
Issue No. Mark
Issue Date Next Renewal Goods/Services
- -----------------------------------------------------------------------------
Pending Residential air conditioning
and heating units and
603-96 parts therefor
02/07/96
166924 02/14/06 COMFORTMAKER
02/14/96 Residential air conditioning
and heating units and
parts therefor
Pending COMFORTMAKER
5194-96 Residential air conditioning
and heating units and
04/18/96 parts therefor
Pending COMFORTMAKER
9600729 Residential air conditioning
and heating units and
01/22/96 parts therefor
399,332 06/19/07 DESIGN - INTERLOCKING
WRENCHES
06/19/92
TMA461,487 08/23/11 ENVIROMAX
08/23/96 Residential furnaces, air
conditioners and heat pumps
<PAGE>
INTER-CITY PRODUCTS (USA) - TRADEMARKS - FOREIGN
===========================================================================
Issue No. Mark
Issue Date Next Renewal Goods/Services
- -----------------------------------------------------------------------------
Pending ENVIROPLUS 90
753,926 Furnaces
05/04/94
Pending FAST AND DESIGN
2.059.243 Parts for heating and air
conditioning products
11/29/96
Pending FAST AND DESIGN
2.059.244 Catalogs of service parts,
service tools and service
11/29/96 literature; service manuals;
service information
bulletins;
all used in connection with
the servicing of heating and
air conditioning products
Pending FAST AND DESIGN
819654493
11/21/96
Pending FAST AND DESIGN
819655511
11/22/96
623,450 11/29/06 FAST AND DESIGN
11/18/89
<PAGE>
INTER-CITY PRODUCTS (USA) - TRADEMARKS - FOREIGN
===========================================================================
Issue No. Mark
Issue Date Next Renewal Goods/Services
- -----------------------------------------------------------------------------
Pending FAST AND DESIGN
96.059116
11/08/96
Pending FAST AND DESIGN
96.059.117
11/08/96
Pending FAST AND DESIGN
11/01/96
Pending FAST AND DESIGN
10/03/96
Pending FAST AND DESIGN
I-96-18788
Pending FAST AND DESIGN
I-96-18789
<PAGE>
INTER-CITY PRODUCTS (USA) - TRADEMARKS - FOREIGN
===========================================================================
Issue No. Mark
Issue Date Next Renewal Goods/Services
- -----------------------------------------------------------------------------
393,131 01/24/07 FLEX-DRIVE
01/24/92 Air conditioners
Pending H.E.L.P.
800,667
12/27/95
412,503 05/21/08 HEIL
05/21/93 Heating and air
conditioning equipment,
namely, fresh air
blower and duct units,
automatic furnace chimney
vent dampers, condenser
units, evaporator coils,
blowers, combination
condenser/blower/compressor
units, combination
blower/evaporator coil
units
426,084 04/15/09 HEIL AND DESIGN
04/15/94 Heating and air
conditioning equipment,
namely, fresh air
blower and duct units,
automatic furnace chimney
vent dampers, condenser
units, evaporator coils,
blowers, combination
condenser/blower/compressor
units, combination
blower/evaporator coil
units
<PAGE>
INTER-CITY PRODUCTS (USA) - TRADEMARKS - FOREIGN
===========================================================================
Issue No. Mark
Issue Date Next Renewal Goods/Services
- -----------------------------------------------------------------------------
HEIL AND DESIGN
Heating and air
conditioning equipment -
namely, fresh
air blower and duct units,
automatic furnace chimney
vent dampers, condenser
units, evaporator coils,
blowers combination
condenser/
blower/compressor units,
combination blower/
evaporator coil units, air
conditioners, electric
heaters, combination
heating/cooling units,
electric furnaces, heat
pumps, gas furnaces, and
oil furnaces
431,493 08/05/09 HIGH EFFICIENCY 5000 &
Design Air Conditioners
08/05/94
433,671 09/23/09 HIGH EFFICIENCY FURNACE
5000 Furnaces
09/23/94
LINCOLN SERIES
Oil Furnaces
368,576 05/11/05 LONGLIFE
05/11/90 Warranty services for gas
furnaces, oil furnaces,
wall furnaces, electric
furnaces, air
conditioners, heat
pumps, electric heating
elements, heat exchangers,
combustion chambers, power
vents, including both
parts and labour
361,838 11/03/94 LONGLIFE
11/03/89
2886 QUAKER BURNOIL
04/07/47
432,346 08/26/09 SUPER HIGH EFFICIENCY 7000
& D Air Conditioners for
08/26/94 commercial and domestic
use
436,218 11/25/09 SUPER HIGH EFFICIENCY
FURNACE Furnaces
11/25/94
TEMPSTAR
Furnaces, air conditioners
and heat pumps
TEMPSTAR
<PAGE>
INTER-CITY PRODUCTS (USA) - TRADEMARKS - FOREIGN
===========================================================================
Issue No. Mark
Issue Date Next Renewal Goods/Services
- -----------------------------------------------------------------------------
343,217 07/29/03 TEMPSTAR
07/39/88 Heating and air
conditioning equipment -
namely, furnaces, air
conditioners and heat
pumps, and parts
for the foregoing
191366 11/28/06 TEMPSTAR
11/28/06 Furnaces, air conditioners
and heat pumps
2008600 01/26/06 TEMPSTAR
01/26/96 Furnaces, air conditioners
and heat pumps
B1367890 12/21/05 TEMPSTAR
12/21/88 Apparatus for heating,
cooling air conditioning,
refrigerating or
ventilating, heat pumps,
central heating boilers,
furnaces apparatus for use
with all the aforesaid
goods; parts and fittings
for all the aforesaid
goods
2053782 01/22/06 TEMPSTAR
01/22/96 Furnaces, air-conditioning
apparatus and instruments
heat pumps; parts and
fittings for all the
aforesaid goods.
514683 12/14/05 TEMPSTAR
12/14/95 Furnaces, air conditioners
and heat pumps
TEMPSTAR
Furnaces, air conditioners
and heat pumps
TEMPSTAR
Furnaces, air conditioners
and heat pumps
167289 02/14/06 TEMPSTAR
02/14/96 Furnaces, air conditioners
and heat pumps
TEMPSTAR
Furnaces, air conditioners
and heat pumps
TEMPSTAR
Furnaces, air conditioners
and heat pumps
<PAGE>
INTER-CITY PRODUCTS (USA) - TRADEMARKS - FOREIGN
===========================================================================
Issue No. Mark
Issue Date Next Renewal Goods/Services
- -----------------------------------------------------------------------------
TEMPSTAR AND DESIGN
Furnaces, air conditioners
and heat pumps
TEMPSTAR AND DESIGN
343,218 07/29/03 TEMPSTAR and Design
Heating and air
conditioning equipment-
namely, furnaces, air
conditioners and heat
pumps, and parts for the
foregoing
191367 11/28/06 TEMPSTAR AND DESIGN
11/28/96 Furnaces, air conditioners
and heat pumps
TEMPSTAR AND DESIGN
Furnaces, air conditioners
and heat pumps
2053786 01/22/06 TEMPSTAR AND DESIGN
01/22/96 Furnaces; air conditioning
apparatus and instruments;
parts and fittings for all
the aforesaid goods
B1367891 12/21/05 TEMPSTAR and Design
12/21/88 Apparatus for heating,
cooling, air conditioning,
refrigerating and
ventilating; heat pumps;
central heating boilers
and furnaces; parts and
fittings for the aforesaid
goods
TEMPSTAR AND DESIGN
Furnaces, air conditioners
and heat pumps
TEMPSTAR AND DESIGN
Furnaces, air conditioners
and heat pumps
TEMPSTAR AND DESIGN
Furnaces, air conditioners
and heat pumps
167288 02/14/06 TEMPSTAR AND DESIGN
02/14/96 Furnaces, air conditioners
and heat pumps
TEMPSTAR AND DESIGN
Furnaces, air conditioners
and heat pumps
<PAGE>
INTER-CITY PRODUCTS (USA) - TRADEMARKS - FOREIGN
===========================================================================
Issue No. Mark
Issue Date Next Renewal Goods/Services
- -----------------------------------------------------------------------------
TEMPSTAR AND DESIGN
Furnaces, air conditioners
and heat pumps
517493 01/30/06 TEMPSTAR DE MEXICO SA DE
C.V.
01/30/96
434,942 10/28/09 ULTRA HIGH EFFICIENCY 900
& D Furnaces
10/28/94
433,967 09/30/09 ULTRA HIGH EFFICIENCY
FURNACE
09/30/94 Furnaces for commercial
and domestic use
434,941 10/28/09 ULTRA HIGH EFFICIENCY
FURNACE
10/28/94 Furnaces
TMA446,267 08/18/10 VILLAGER
08/18/95 Furnaces, air conditioners
and heat pumps
531333 08/10/04 VILLAGER
08/10/94 Furnaces, air conditioners
and heat pumps
384,527 05/17/06 ZONEAIRE
05/17/91 Air conditioners, heat
pumps, heaters and
package terminal air
conditioners
397,261 04/17/07 ZONEAIRE and Design
04/17/92 Air conditioners,
furnaces, heat pumps,
heaters and package
terminal air conditioners
<PAGE>
SCHEDULE 8.6
Use of Proceeds
Funds obtained from the initial draw of the NationsBank revolving credit
facility will be used for general business purposes and working capital
needs.
<PAGE>
TRADEMARKS
U.S.
<PAGE>
INTER-CITY PRODUCTS (USA) - TRADEMARKS-U.S.
Issue No. Mark
Issue Date Goods/Services
1,791,493 5000 HIGH EFFICIENCY & Design
1,797,709 7000 SUPER HIGH EFFICIENCY
1,771,306 9000 TAS ULTRA HIGH EFFICIENCY
1,794,844 9000 ULTRA HIGH EFFICIENCY
1,456,415 AIRQUEST
1,549,046 AIRQUEST and Design
1,521,671 ARCOAIRE
1,173,055 COMFORTMAKER
624,058 COMFORTMAKER
1,680,746 DESIGN-INTERLOCKING WRENCHES
1,671,447 DESIGN-INTERLOCKING WRENCHES
766,381 DURAFUSED
1,844,309 DV90
1,208,099 ENERGY MARSHAL
1,864,627 ENVIROMAX
1,904,324 ENVIROPLUS 90
1,144,065 FAST and Design
1,953,574 FASTDRAW
1,713,429 FLEX-DRIVE
0,924,703 GREENBRIER
Pending H.E.L.P.
74/705,246
678,440 HEIL
1,155,475 HEIL
1,141,252 HEIL and Design
1,771,308 HIGH EFFICIENCY FURNACE 5000
Pending INTERNATIONAL COMFORT PRODUCTS
06/02/97
Pending INTERNATIONAL COMFORT PRODUCTS
06/02/97
Pending LINCOLN SERIES
74/697,649
1,852,336 LONGLIFE
<PAGE>
Issue No. Mark
Issue Date Goods/Services
1,549,047 MARATHERM
1,550,065 MARATHERM and Design
1,159,051 POWER GUARD
1,290,880 RPJ
1,771,309 SUPER HIGH EFFICIENCY 7000
1,465,334 TEMPSTAR
1,483,279 TEMPSTAR and Design
Pending THE NAME SAYS IT ALL
75/230,152
1,159,054 TIGHTFIST
1,771,307 ULTRA HIGH EFFICIENCY 9000
2,061,745 VILLAGER
<PAGE>
PATENTS
FOREIGN
<PAGE>
INTER-CITY PRODUCTS (USA)-PATENTS-FOREIGN
Country Serial No. Issue No.
Status Filing Date Issue Date Title
EP 84304585.7 HUB FOR A PLASTIC BLOWER IMPELLER
Pending
CA 1,334,088 HUB FOR A PLASTIC BLOWER IMPELLER
CA 1,301,290 SERVICE THERMOSTAT
CA 2,030,578 RESTRICTED INTAKE COMPENSATION
METHOD FOR A TWO STAGE FURNACE
CA 1,301,289 THERMOSTAT SPEED BAR GRAPH FOR
VARIABLE SPEED TEMPERATURE CONTROL
SYSTEM
CA 2,099,227 STANDING PILOT FURNACE WITH VENTED
VESTIBULE
CA 2,054,900-9 ENHANCED TUBULAR HEAT EXCHANGER
JP 5-500959 CONDENSING UNIT USING CROSS-FLOW
Pending BLOWER
CA 2,061,650 REMOVABLE ACCESS PANELS FOR
ROOFTOP UNIT
CA 1,295,606 LANCED FIN CONDENSER FOR CENTRAL
AIR CONDITIONER
CA 1,294,521 METHOD AND APPARATUS FOR BENDING
A HEAT EXCHANGER COIL
CA 1,294,839 HEAT EXCHANGER FOR FURNACE
CA 1,280,600 STAMPED DISCHARGE GRILLE INCLUDING
TWO LOUVRED SECTIONS
CA 1,327,959 BLOWER WITH CLAM SHELL HOUSING
CA 1,247,842 METHOD FOR MANUFACTURING A FURNACE
HEAT EXCHANGER AND PLATE ASSEMBLY
CA 1,214,772 METHOD OF MANUFACTURING A HEAT
EXCHANGER AND PLATE ASSEMBLY
CA 2,132,915 ACOUSTICS ENERGY DISSIPATOR FOR
Pending FURNACE
CA 2,140,175 REVERSIBLE FAN ASSEMBLY PANEL FOR
Pending PACKAGE AIR CONDITIONERS AND HEAT
PUMPS
MX REVERSIBLE FAN ASSEMBLY PANEL FOR
Pending PACKAGE AIR CONDITIONERS AND HEAT
PUMPS
CA INTERRUPTED FIN FOR HEAT EXCHANGER
Pending
WO HEAT EXCHANGER FIN WITH EFFICIENT
Pending MATERIAL UTILIZATION
<PAGE>
WO HEAT EXCHANGER FIN WITH EFFICIENT
Pending MATERIAL UTILIZATION
CA HEAT EXCHANGER UNIT AND METHOD OF
Granted MANUFACTURE
<PAGE>
INTER-CITY PRODUCTS (USA)-PATENTS-FOREIGN
Country Serial No. Issue No.
Status Filing Date Issue Date Title
CA 1,126,057 BINARY STRIP HEAT CONTROL
<PAGE>
AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS AMENDMENT TO LOAN AND SECURITY AGREEMENT (the "Amendment") is made
and entered into as of the 24th day of February, 1998, between NATIONSBANK,
N.A. (hereinafter referred to as "Lender"), and INTERNATIONAL COMFORT
PRODUCTS CORPORATION (USA))(hereinafter referred to as "Borrower").
W I T N E S S E T H
WHEREAS, Borrower and Lender entered into that certain Loan and Security
Agreement, dated as of July 18, 1997 (as amended, restated or modified from
time to time, the "Loan Agreement"), pursuant to which Lender agrees to
extend certain Revolving Credit Loans to the Borrower, subject to the terms
and conditions of the Loan Agreement; and
WHEREAS, Borrower has formed a Subsidiary for the purpose of merging
with United Electric Company ("United"), and, as required pursuant to Section
10.2 of the Loan Agreement, Borrower has requested that Lender grant its
consent to the merger of the new Subsidiary with United; and
WHEREAS, Borrower and Lender desire to enter into this Amendment for the
purpose of granting the consents described above and for the purpose of
amending the definition of Tangible Net Worth.
NOW, THEREFORE, in consideration of the foregoing premises, and other
good and valuable consideration, the receipt and legal sufficiency of which
is hereby acknowledge, the parties hereby agree as follows:
1. All capitalized terms used herein and not otherwise expressly
defined herein shall have the respective meanings given to such terms in the
Loan Agreement.
2. Lender acknowledges that Borrower has formed UEC Merger
Corporation, a Delaware corporation, which is a wholly-owned Subsidiary of
Borrower. Lender hereby acknowledges that UEC Merger Corporation will be
merging into United pursuant to the terms and conditions of that certain
Agreement and Plan of Merger, dated January 23, 1998 (the "United Merger").
Lender hereby consents to the United Merger and acknowledges that United will
be the entity surviving the merger, subject, however, to Borrower's delivery
to Lender of evidence of compliance with the financial covenants set forth in
Article 10 of the Loan Agreement (as amended by this Amendment) on a pro
forma basis after giving effect to the United Merger.
-1-<PAGE>
3. Section 1.1 of the Loan Agreement is amended by deleting the
definition of Tangible Net Worth and substituting the following in lieu
thereof:
"Tangible Net Worth" means, as applied to any Person, the Net Worth
of such Person at the time in questions, after deducting therefrom all
accounts receivable and other obligations due from Affiliates (provided
that, to and including December 30, 1998, up to $10,000,000 of
receivables due from International Comfort Products Corporation (Canada)
may be included in "Tangible Net Worth") and the amount of all
intangible items reflected therein, including all unamortized debt
discount and expense, unamortized research and development expense,
unamortized deferred charges, goodwill, Intellectual Property,
unamortized excess cost of investment in Subsidiaries over equity at
dates of acquisition, and all similar items which should properly be
treated as intangibles in accordance with GAAP.
4. The Borrower hereby restates, ratifies and reaffirms each and every
term, condition, representation and warranty heretofore made by it under or
in connection with the execution and delivery of the Loan Agreement as
amended hereby and the other Loan Documents as fully as though such
representations and warranties had been made ont he date hereof and with
specific reference to this Amendment and the Loan Documents.
5. As amended hereby, the Loan Agreement shall be and remain in full
force and effect, and shall constitute the legal, valid, binding and
enforceable obligations of the Borrower to the Lender.
6. The Borrower agrees to pay on demand all costs and expenses of the
Lender in connection with the preparation, execution, delivery and
enforcement of this Amendment and all other Loan Documents and any other
transactions contemplated hereby, including, without limitation, the
reasonable fees and out-of-pocket expenses of legal counsel to the Lender.
7. To induce the Lender to enter into this Amendment, the Borrower
hereby (i) represents and warrants that, as of the date hereof, and after
giving effect to the terms hereof, there exists no Event of Default (or any
event which, with the giving of notice or the passage of time, or both, would
constitute an Event of Default) under the Loan Agreement or any of the Loan
Documents; and (ii) acknowledges and agrees that to Borrower's knowledge no
right of offset, defense, counterclaim, claim, causes of action or objection
in favor of the Borrower against the Lender exists arising out of or with
respect to any of the indebtedness, the Loan Agreement, or any of the other
Loan Documents, or with respect to the administration or funding of the
indebtedness.
-2-<PAGE>
8. The Borrower agrees to take such further action as the Lender shall
reasonably request in connection herewith to evidence the amendments herein
contained to the Loan Agreement.
9. This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which, when so
executed and delivered, shall be deed to be an original and all of which
counterparts, taken together, shall constitute but one and the same
instrument.
10. This Amendment shall be binding upon and inure to the benefit of
the successors and permitted assigns of the parties hereto.
11. This Amendment shall be governed by, and construed in accordance
with, the laws of the State of Georgia, other than its laws respecting choice
of law.
IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Amendment to be duly executed under seal, all as of the date first above
written.
INTERNATIONAL COMFORT PRODUCTS
CORPORATION (USA)
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
Attest:
-----------------------------------
Name:
-------------------------------------
Title:
------------------------------------
NATIONSBANK, N.A.
By:
---------------------------------------
Title:
------------------------------------
-3-
<PAGE>
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (the "Amendment")
is made and entered into as of the 13th day of May, 1998, between
NATIONSBANK, N.A. (hereinafter referred to as the "Lender"), and
INTERNATIONAL COMFORT PRODUCTS CORPORATION (USA) (hereinafter referred to as
the "Borrower").
W I T N E S S E T H
WHEREAS, the Borrower and the Lender entered into that certain Loan and
Security Agreement, dated as of July 18, 1997 (as amended, restated or
modified from time to time, the "Loan Agreement"), pursuant to which the
Lender agrees to extend certain Revolving Credit Loans to the Borrower,
subject to the terms and conditions of the Loan Agreement; and
WHEREAS, the Borrower and the Lender desire to amend certain provisions
of the Loan Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, and other
good and valuable consideration, the receipt and legal sufficiency of which
is hereby acknowledged, the parties hereby agree as follows:
1. All capitalized terms used herein and not otherwise expressly
defined herein shall have the respective meanings given to such terms in the
Loan Agreement.
2. The Loan Agreement is hereby amended as follows:
(a) Delete the definitions of "Indenture Trustee" and "Tangible Net
Worth" in SECTION 1.1 and replace them with the following:
"INDENTURE TRUSTEE" means United States Trust Company of New York, a New
York bank, in its capacity as trustee under the Senior Notes Indenture,
and its successors and assigns.
"TANGIBLE NET WORTH" means, as applied to any Person, the Net Worth of
such Person at the time in question, after deducting therefrom all
accounts receivable and other obligations due from Affiliates and the
amount of all intangible items reflected therein, including all
unamortized debt discount and expense, unamortized research and
development expense, unamortized deferred charges, goodwill,
Intellectual Property, unamortized excess cost of investment in
-1-<PAGE>
Subsidiaries over equity at dates of acquisition, and all similar items
which should property be treated as intangibles in accordance with GAAP.
(b) Add the following new definitions to SECTION 1.1:
"ISSUER" means International Comfort Products Holdings, Inc., a Delaware
corporation, and its successors and assigns.
"RESTRICTED DISTRIBUTION" by any Person means (a) its retirement,
redemption, purchase, or other acquisition for value of any capital
stock or other equity securities or partnership interests issued by such
Person, (b) the declaration or payment of any dividend or distribution
on or with respect to any such securities or partnership interests, (c)
any loan or advance by such Person to, or other investment by such
Person in, the holder of any of such securities or partnership
interests, and (d) any other payment by such Person in respect of such
securities or partnership interests.
"RESTRICTED PAYMENT" means the payment by any Person of the principal
amount of or interest on any Subordinated Indebtedness or any
Indebtedness (other than trade debt) owing to an Affiliate of such
Person.
"SECOND AMENDMENT EFFECTIVE DATE" means the date on which all of the
conditions precedent to the Second Amendment to Loan and Security
Agreement between the Borrower and the Lender are satisfied (or waived
by the Lender).
(c) Delete the definitions of "Senior Secured Notes", "Senior Secured
Notes Documents" and "Senior Senior Secured Indenture" in SECTION 1.1 and
replace them with the following:
"SENIOR NOTES" means the Senior Notes due 2008 issued by the Issuer
pursuant to the Senior Notes Indenture in the original principal amount
of $150,000,000 and in a maximum principal amount of $225,000,000.
"SENIOR NOTES DOCUMENTS" means the Senior Notes Indenture and the other
documents executed in connection therewith.
"SENIOR NOTES INDENTURE" means the Indenture, dated on or about the
Second Amendment Effective Date, between the Issuer and the Indenture
Trustee, pursuant to which the Issuer issues the Senior Notes.
(d) Delete each reference in the Loan Agreement to "Senior Secured
Notes", "Senior Secured Notes Documents" and "Senior Secured Notes
Indenture", respectively, and replace it with "Senior Notes", "Senior Notes
Documents" and "Senior Notes Indenture", respectively.
(e) Delete ARTICLE 10 of the Loan Agreement and replace it with the
following:
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ARTICLE 10 - NEGATIVE COVENANTS
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been indefeasibly paid in full, unless the Lender
shall otherwise consent in the manner set forth in SECTION 12.11, the
Borrower will not (and the Borrower will not permit any of its Subsidiaries
to) directly or indirectly:
Section 10.1 FINANCIAL RATIOS.
(a) MINIMUM TANGIBLE WORTH. Permit the consolidated Tangible Net
Worth (plus Subordinated Indebtedness) of the Borrower and its Consolidated
Subsidiaries at the end of any fiscal quarter:
(i) from the Second Amendment Effective Date to and including
December 30, 1998, to be less than $110,000,000; and
(ii) at any time thereafter, to be less than $120,000,000.
(b) MINIMUM INTEREST COVERAGE RATIO. Permit the ration of (i) the
Borrower's and its Consolidated Subsidiaries' consolidated EBITDA to (ii) the
Borrower's and its Consolidated Subsidiaries' consolidated Interest Expense,
as of the end of any fiscal quarter of the Borrower, measured for the
immediately preceding four fiscal quarters, to be less than 2 to 1.
Section 10.2 MERGER, CONSOLIDATION AND SALE OF ASSETS. Merge or
consolidate with any other Person or sell, lease or transfer or otherwise
dispose of all or substantial portion of its assets to any Person, except
that (a) the Borrower may merge or consolidate with another Person (including
any Subsidiary) so long as the Borrower is the surviving corporation and
after giving effect thereto no Default or Event of Default would exist,
provided the Borrower has delivered to the Lender evidence of compliance with
the financial covenants set forth in ARTICLE 10 on a pro forma basis after
giving effect to such merger or consolidation, and (b) any Subsidiary may
merge or consolidate with another Person so long as such Subsidiary is the
surviving corporation and after giving effect thereto no Default or Event of
Default would exist, provided that, unless such merger or consolidation
involves two Subsidiaries of the Borrower, the Borrower has delivered to the
Lender evidence of compliance with the financial covenants set forth in
ARTICLE 10 on a pro forma basis after giving effect to such merger or
consolidation.
Section 10.3 INVESTMENTS. Except as permitted under the Senior Notes
Indenture, Acquire, after the Agreement Date, any Business Unit or Investment
or, after such date, permit any Investment to be outstanding, other than
Permitted Investments; PROVIDED, HOWEVER, that Borrower or any of its
Subsidiaries may Acquire any Business Unit or Person engaged in the same or
substantially similar line of business so long as (a) no Default or Event of
Default exists or will result therefrom, and (b) the Borrower has delivered
to the Lender evidence of compliance with the financial covenants set forth
in ARTICLE 10 on a pro forma basis after giving effect to the Acquisition.
-3-<PAGE>
Section 10.4 BENEFIT PLANS. Permit, or take any action which would
result in, the aggregate present value of the Unfunded Vested Accrued
Benefits under all Benefit Plans of the Borrower to exceed $0.
Section 10.5 AMENDMENTS OF OTHER AGREEMENTS. Amend, modify or
supplement, or permit or consent to any amendment, modification or supplement
of: (a) Sections 4.03, 4.04, 4.12 or 4.18 of the Senior Notes Indenture; or
(b) any other provision of the Senior Notes Documents or Receivables Purchase
Documents in any way which would be materially adverse to the Lender. The
Borrower agrees that, for the purpose of all references in this Agreement to
the Senior Notes Indenture (including the cross-default set forth in SECTION
11.1(e)(ii)), the Borrower shall at all times be considered a Restricted
Subsidiary under and as defined in the Senior Notes Indenture.
Section 10.6 MINIMUM AVAILABILITY. Permit: (a) Availability at any
time to be less than $5,000,000; or (b) the sum of Availability, plus
borrowing availability under the Receivables Purchase Agreement, plus cash
and Cash Equivalents that are subject to no Liens whatsoever, at any time to
be less than $10,000,000.
Section 10.7 CAPITAL EXPENDITURES. Make or incur any Capital
Expenditures, except that the Borrower and its Subsidiaries may make or incur
Capital Expenditures in any fiscal year in an amount not to exceed, in the
aggregate, $20,000,000 annually.
Section 10.8 RECEIVABLES TRANSFERS. Transfer of any of its accounts
receivable to ICPPC, whether by means of a sale, capital contribution or
other transfer, unless such receivables are sold by ICPPC to the Receivables
Purchaser pursuant to the Receivables Purchase Agreement and ICPPC becomes a
party to the Assignment of Receivables Securitization Proceeds and subjects
its right to receive the proceeds from such sale to the first priority
security interest of the Lender.
Section 10.9 RESTRICTED DISTRIBUTIONS AND PAYMENTS, ETC. Declare or
make any Restricted Distribution or Restricted Payment, except that (a) any
Subsidiary of the Borrower may make Restricted Distributions and Restricted
Payments to the Borrower, and (b) so long as no Default or Event of Default
shall have occurred and be continuing or would result therefrom and the
Borrower has delivered to the Lender evidence of compliance with the
financial covenants set forth in ARTICLE 10 on a pro forma basis after giving
effect thereto, the Borrower may make payments on the Subordinated
Indebtedness to the extent permitted by the subordination provisions
applicable thereto.
Section 10.10 TRANSACTIONS WITH AFFILIATES. Effect any transaction
described under clause (b)(iii) of Section 4.18, LIMITATIONS ON TRANSACTIONS
WITH AFFILIATES, of the Senior Notes of Indenture, other than as permitted
under SECTION 10.9 above and except for (a) sales of inventories to
Subsidiaries of International Comfort Products Corporation, a corporation
organized under the Canada Business Corporation Act ("ICP Parent"), at
margins less than are available to un-Affiliated third parties but not at
less than cost and which in the aggregate shall not have a Materially Adverse
Effect and (b) advances to Subsidiaries of ICP Parent in an aggregate amount
-4-<PAGE>
not to exceed $2,500,000 annually, unless there is no Default or Event of
Default, both before and after giving effect to any such transaction, and the
Borrower has delivered to the Lender evidence of compliance with the
financial covenants set forth in ARTICLE 10 on a pro forma basis after giving
effect thereto.
Section 10.11 LIENS. Create, assume or permit to suffer to exist or
to be created or assumed any Lien on any of the Collateral or any trademark
used with respect to goods constituting part of the Collateral, except for
Permitted Liens.
Section 10.12 TRADEMARKS. Transfer or assign any trademark used with
respect to goods constituting part of the Collateral unless such transfer or
assignment is subject to the Lender's right to use such trademark in
connection with the liquidation of such goods and the Borrower has delivered
to the Lender documentation with respect thereto in form and substance
satisfactory to the Lender.
3. The effectiveness of this Amendment shall be subject to the closing
of the financing contemplated by the Senior Notes Indenture (including the
refinancing of the Indebtedness represented by the Senior Secured Notes
Indenture pursuant to an intercompany loan from the Issuer to the Borrower
which shall be subordinated to the Secured Obligations on terms satisfactory
to the Lender) on substantially the terms set forth in the draft Indenture
delivered to the Lender prior to the date hereof, and the Lender's receipt of
the following documents, each in form and substance satisfactory to the
Lender:
(a) a certificate from an authorized officer of the Borrower as to the
closing of the financing contemplated by the Senior Notes Indenture,
including a certification that no Default or Event of Default exists after
giving effect to such financing and containing certified copies of the Senior
Notes Documents;
(b) evidence of the consummation of the merger of CHL Holdings, Inc.
with and into the Borrower, whereby the Borrower becomes the wholly-owned
direct subsidiary of the Issuer;
(c) a duly executed subordination agreement with respect to the
Indebtedness owing by the Borrower to the Issuer;
(d) a Secretary's Certificate from the Secretary of the Issuer
containing a certified copy of the Issuer's articles of incorporation, a
certificate of good standing from the Issuer's state of incorporation, a copy
of the resolutions of the Issuer's board of directors with respect to the
subordination agreement described above, and certificates of incumbency and
specimen signatures of each of the officers of the Issuer executing such
subordination agreement; and
(e) such other documents as the Lender may reasonably request.
4. The Borrower hereby restates, ratifies, and reaffirms each and
every term, condition, representation and warranty heretofore made by it
under or in connection with the execution and delivery of the Loan Agreement
as amended hereby and the other Loan Documents as fully as though such
-5-<PAGE>
representations and warranties had been made on the date hereof and with
specific reference to this Amendment and the Loan Documents, except to the
extent any such representation or warranty relates only to a prior date.
5. As amended hereby, the Loan Agreement shall be and remain in full
force and effect, and shall constitute the legal, valid, binding and
enforceable obligations of the Borrower to the Lender.
6. The Borrower agrees to pay on demand all costs and expenses of the
Lender in connection with the preparation, execution, delivery and
enforcement of this Amendment and all other Loan Documents and any other
transactions contemplated hereby, including, without limitation, the
reasonable fees and out-of-pocket expenses of legal counsel to the Lender.
7. To induce the Lender to enter into this Amendment, the Borrower
hereby (i) represents and warrants that, as of the date hereof, and after
giving effect to the terms hereof, there exists no Default or Event of
Default; and (ii) acknowledges and agrees that to the Borrower's knowledge no
right of offset, defense, counterclaim, claim, causes of action or objection
in favor of the Borrower against the Lender exists arising out of or with
respect to any of the Secured Obligations, the Loan Agreement, or any of the
other Loan Documents, or with respect to the administration or funding of the
Loans.
8. The Borrower agrees to take such further action as the Lender
shall reasonably request in connection herewith to evidence the amendments
herein contained to the Loan Agreement.
9. This Amendment may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which, when so
executed and delivered, shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same
instrument.
10. This Amendment shall be binding upon and inure to the benefit of
the successors and permitted assigns of the parties hereto.
11. This Amendment shall be governed by, and construed in accordance
with, the laws of the State of Georgia, other than its laws respecting choice
of law.
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IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Amendment to be duly executed under seal, all as of the date first above
written.
INTERNATIONAL COMFORT PRODUCTS
CORPORATION (USA)
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
NATIONSBANK, N.A.
By:
-------------------------------------
Title:
----------------------------------
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<PAGE>
CREDIT AGREEMENT
Cdn$30,000,000
Revolving Term Credit Facility
Dated as of December 19, 1996
Between
INTER-CITY PRODUCTS CORPORATION (CANADA)
as Borrower
G.C. McDONALD SUPPLY LIMITED
as a Loan Party
and
THE LENDER OR LENDERS PARTY THERETO
and
GENERAL ELECTRIC CAPITAL CANADA INC.
as Agent
McMillan Binch
BARRISTERS & SOLICITORS
<PAGE>
TABLE OF CONTENTS
RECITALS............................................................1
SECTION 1 AMOUNT AND TERMS OF CREDIT..............................1
1.1 Revolving Credit Advances...................................1
1.2 Rollover of BA Rate Loans...................................3
1.3 Conversion of Revolving Credit Advances.....................4
1.4 Repayment; Termination of Commitment........................4
1.5 Use of Proceeds.............................................5
1.6 Interest....................................................5
1.7 Eligible Accounts and Eligible Inventory....................8
1.8 Fees........................................................8
1.9 Cash Management System......................................9
1.10 Receipt of Payments.........................................9
1.11 Pro Rata Treatment..........................................9
1.12 Application and Allocation of Payments.....................10
1.13 NonReceipt of Funds by Agent...............................11
1.14 Sharing of Payments, etc...................................11
1.15 Accounting.................................................12
1.16 Indemnity..................................................13
1.17 Access.....................................................13
1.18 Taxes......................................................15
1.19 Additional Costs...........................................16
1.20 Currency Matters...........................................17
1.21 Notices of Revolving Credit Advance, Conversion,
Rollover.................................................17
SECTION 2 CONDITIONS PRECEDENT...................................17
2.1 Conditions to the Initial Advance..........................17
2.2 Further Conditions to Each Advance, Rollover
and Conversion...........................................22
SECTION 3 REPRESENTATIONS AND WARRANTIES.........................23
3.1 Corporate Existence; Compliance with Law...................24
3.2 Chief Executive Offices; Collateral Locations;
Corporate or Other Names.................................24
3.3 Corporate Power; Authorization;
Enforceable Obligations..................................24
3.4 Financial Statements and Projections.......................25
3.5 Material Adverse Change, Restricted Payments...............25
3.6 Ownership of Property; Liens...............................25
3.7 Restrictions; No Default; Material Contracts...............26
3.8 Labour Matters.............................................27
3.9 Ventures, Subsidiaries and Equity Investments;
Outstanding Stock and Indebtedness.......................27
3.10 Taxes......................................................27
3.11 No Foreign Business........................................28
<PAGE>
3.12 Benefit and Pension Plans..................................28
3.13 No Litigation..............................................29
3.14 Brokers....................................................29
3.15 Intellectual Property......................................29
3.16 Full Disclosure............................................30
3.17 Environmental Matters......................................31
3.18 Insurance Policies.........................................33
3.19 Bank Accounts and Lock Boxes...............................33
3.20 Solvency...................................................33
3.21 Inventory..................................................34
3.22 Corporate Structure........................................34
3.23 Government Contracts.......................................34
3.24 Customer and Trade Relations...............................34
3.25 Agreements and Other Documents.............................34
3.26 ICP Indebtedness...........................................35
3.27 Emerson Indebtedness.......................................35
3.28 Collateral.................................................35
SECTION 4 FINANCIAL STATEMENTS AND INFORMATION...................36
4.1 Reports and Notices........................................36
4.2 Communication with Accountants.............................36
SECTION 5 AFFIRMATIVE COVENANTS..................................36
5.1 Maintenance of Existence and Conduct of Business...........36
5.2 Payment of Obligations, Charges and Claims.................37
5.3 Books and Records..........................................38
5.4 Litigation.................................................38
5.5 Insurance, Damage to or Destruction of Collateral..........38
5.6 Compliance with Laws.......................................41
5.7 Agreements.................................................41
5.8 Supplemental Disclosure....................................42
5.9 Environmental Matters......................................42
5.10 Canadian Benefit and Pension Plans.........................44
5.11 Landlord's, Warehouseman/Bailee and Mortgagee
Agreements..............................................46
5.12 Certain Obligations Respecting Subsidiaries................47
5.13 Report to Other Creditors; Letters of Credit
and Foreign Exchange Contracts..........................47
5.14 Intellectual Property......................................47
5.15 Bank Act Security..........................................49
5.16 New Locations..............................................49
5.17 Leased and Other Locations of Collateral
that are Not Owned......................................49
5.18 Security...................................................50
5.19 Inventory Reporting and Tracking...........................50
5.20 MOEE Search Results........................................50
<PAGE>
SECTION 6 NEGATIVE COVENANTS.....................................50
6.1 Mergers, Subsidiaries, Etc.................................50
6.2 Investments................................................51
6.3 Indebtedness...............................................51
6.4 Affiliate and Employee Loans and Transactions..............52
6.5 Capital Structure and Business.............................52
6.6 Guaranteed Indebtedness....................................53
6.7 Liens......................................................53
6.8 Sale of Assets.............................................54
6.9 Material Contracts.........................................54
6.10 ERISA......................................................54
6.11 Canadian Benefit and Pension Plans.........................54
6.12 Financial Covenants........................................55
6.13 Sale-Lease-backs, Etc......................................55
6.14 Cancellation of Indebtedness...............................55
6.15 Restricted Payments........................................56
6.16 Leases.....................................................56
6.17 Lock Boxes and Bank Accounts...............................56
6.18 No Speculative Transactions................................56
6.19 Limitation on Negative Pledge Clauses, Etc.................56
6.20 Sale of Stock..............................................57
6.21 Accounting Changes.........................................57
6.22 Fiscal Year................................................57
6.23 Changes Relating to ICP Indebtedness and
Emerson Indebtedness....................................57
6.24 Cash Management............................................58
6.25 3285 Jean-Beraud Avenue and Collateral Located
outside of Quebec and Ontario...........................58
SECTION 7 TERM...................................................58
7.1 Duration...................................................58
7.2 Survival of Obligations....................................58
SECTION 8 EVENTS OF DEFAULT; RIGHTS AND REMEDIES.................59
8.1 Events of Default..........................................59
8.2 Remedies...................................................62
8.3 Waivers by Loan Parties....................................63
8.4 Application of Proceeds....................................64
SECTION 9 AGENT..................................................65
9.1 Appointment, Powers and Immunities.........................65
9.2 Reliance by Agent..........................................65
9.3 Defaults...................................................66
9.4 Rights as a Lender.........................................66
<PAGE>
9.5 Indemnification............................................66
9.6 Non-Reliance on Agent and Other Lenders....................67
9.7 Failure to Act.............................................67
9.8 Successor Agent............................................68
9.9 Consents under Loan Documents..............................68
9.10 Collateral Matters.........................................69
9.11 Non-Funding Lender; Actions by Lenders.....................69
9.12 Settlement Procedures......................................70
SECTION 10 SUCCESSORS AND ASSIGNS................................72
10.1 Successors and Assigns.....................................72
10.2 Assignments and Participations.............................72
SECTION 11 MISCELLANEOUS.........................................75
11.1 Complete Agreement; Modification of Agreement..............75
11.2 Fees and Expenses..........................................75
11.3 No Waiver..................................................77
11.4 Remedies...................................................77
11.5 Severability...............................................77
11.6 Conflict of Terms..........................................77
11.7 Right of Setoff............................................77
11.8 Judgment Currency..........................................78
11.9 Notices....................................................79
11.10 Section Titles.............................................81
11.11 Counterparts...............................................81
11.12 Time of the Essence........................................81
11.13 Confidentiality............................................81
11.14 Governing Law..............................................82
11.15 Further Assurances.........................................83
<PAGE>
CREDIT AGREEMENT
This Agreement is dated as of December 19, 1996, between INTERCITY
PRODUCTS CORPORATION (CANADA), a Canada corporation, ("Borrower"),
G.C.McDONALD SUPPLY LIMITED, an Ontario corporation, each of the lenders
listed on the signature pages hereof or which pursuant to Section 10.2
becomes a "Lender" hereunder (each individually, a "Lender" and collectively,
"Lenders"), and GENERAL ELECTRIC CAPITAL CANADA INC., a Canada corporation,
as agent hereunder for the Lenders (in such capacity, together with its
successors in such capacity, "Agent").
RECITALS
A. Borrower desires to borrow up to $30,000,000 in Canadian Dollars in
the aggregate from Lenders, and Lenders are willing to make a secured
revolving loan in favour of Borrower of up to such amount upon the terms and
conditions set forth herein.
B. Unless otherwise defined herein, capitalized terms used herein shall
have the respective meanings ascribed to them in Annex A and, for purposes of
this Agreement and the other Loan Documents, the rules of construction set
forth in AnnexA shall govern. Unless otherwise indicated, all references in
this Agreement to articles, sections, subsections, schedules, annexes,
exhibits, and attachments shall refer to the corresponding articles,
sections, subsections, schedules, annexes, exhibits, and attachments of or to
this Agreement. All schedules, annexes, exhibits and attachments hereto, or
expressly identified to this Agreement, are incorporated herein by reference,
and taken together, shall constitute but a single agreement. Unless
otherwise expressly set forth herein, or in a written amendment referring to
such schedules and annexes, all schedules and annexes referred to herein
shall mean the schedules and annexes as in effect as of the Closing Date.
These recitals shall be construed as part of this Agreement.
FOR VALUE RECEIVED, the parties agree as follows:
SECTION 1 AMOUNT AND TERMS OF CREDIT
1.1 Revolving Credit Advances.
(a) Upon and subject to the terms and conditions hereof, each
Lender severally agrees to make available, from time to time until the
Commitment Termination Date, for Borrower's use and upon the request of
Borrower therefor to Agent, advances (each, a "Revolving Credit Advance") in
Canadian Dollars in an aggregate principal amount at any time outstanding up
to but not exceeding the Revolving Credit Commitment of such Lender, provided
that in no event shall the aggregate principal amount of the Revolving Credit
Loan exceed the lesser of:
(1) Maximum Revolving Credit Commitment; and
-1-<PAGE>
(2) the Borrowing Base.
Revolving Credit Advances shall be available by way of Prime Rate Loans and
BA Rate Loans. Each BA Rate Loan shall be in a minimum principal amount of
$1,000,000 and multiples of $500,000 in excess thereof. No Interest Period
shall extend beyond the Commitment Termination Date. Not more than four (4)
Interest Periods shall be in effect at any time with respect to the Revolving
Credit Loan. Borrower may from time to time borrow, repay and reborrow
Revolving Credit Advances under this Section 1.1 so long as it is in
compliance with all terms and conditions described hereunder. BA Rate Loans
will only be available to Borrower if at the time of request the Revolving
Credit Loan then outstanding equals or exceeds $3,000,000 and, for the
duration of the Interest Period selected by Borrower, is reasonably
anticipated to continue to equal or exceed $3,000,000.
(b) Borrower shall give Agent (which shall promptly notify Lenders)
notice of each borrowing requested by Borrower hereunder, as provided in
Section 1.1(c) (a "Notice of Revolving Credit Advance"), and, subject to
Section 1.15, on the date specified for such borrowing each Lender shall make
available the amount of the Revolving Credit Advance to be made by it to
Agent to such account of Agent as Agent may designate, in immediately
available funds, for the account of Borrower. Agent shall, before 2:00 p.m.
(Toronto time) on the date specified for such borrowing, wire transfer in
immediately available funds to the Disbursement Account specified by
Borrower, the aggregate amount of the Revolving Credit Advances so made
available by Lenders to Agent.
(c) Each Notice of Revolving Credit Advance shall be given in
writing (by telecopy or hand delivery) to Agent at its address at 2300
Meadowvale Blvd., Mississauga, Ontario L5N 5P9, to the attention of Gail
Lawrence or such other Person as may be designated in writing by Agent to
Borrower, Telephone No. (905) 8586737, Telecopy No. (905) 8585147, with a
copy to General Electric Capital Corporation, 105 West Madison, Suite 1600,
Chicago, Illinois 60602, to the attention of Account Manager InterCity, or
such other Person as may be designated in writing by Agent to Borrower,
Telephone No. (312) 4190985, Telecopy No. (312) 4195977, in each case given
no later than:
(1) 12:00 p.m. (Toronto time) on the Business Day of the proposed
Revolving Credit Advance by way of Prime Rate Loan; and
(2) 12:00 p.m. (Toronto time) on the Business Day that is two
Business Days prior to the proposed Revolving Credit advance by
way of BA Rate Loan.
Each Notice of Revolving Credit Advance shall be substantially in the form of
Exhibit 1.1(c), specifying therein the requested date, the type, the amount
and the term of the Interest Period (if applicable) of such Revolving Credit
Advance and such other information as may be required by Agent.
-2-
<PAGE>
(d) The Revolving Credit Advances made by each Lender to Borrower
shall be evidenced by a single promissory note of Borrower for such Lender
substantially in the form of Exhibit 1.1(d) (collectively the "Revolving
Credit Notes"), dated the Closing Date, payable to such Lender in a maximum
principal amount equal to the amount of its Revolving Credit Commitment as
originally in effect and otherwise duly completed. The parties hereto
expressly acknowledge, confirm and agree that notwithstanding any provision
to the contrary contained herein or in the Revolving Credit Notes, the
Revolving Credit Notes that shall be executed by Borrower in favour of any
Lender do not constitute titles of indebtedness under the Civil Code of
Quebec. The date, the type and the amount of each Revolving Credit Advance
made by each Lender to Borrower, the dates of the commencement and the
termination of each Interest Period (as applicable) and each payment of
principal and interest with respect thereto and all other amounts becoming
due from the Loan Parties to such Lender and to Agent for the account of such
Lender or Agent shall be recorded on the books and records of Agent, which
books and records shall constitute prima facie evidence of the accuracy of
the information therein recorded and of the indebtedness of the Loan Parties
to such Lender and Agent. All Obligations shall be immediately due and
payable on the Commitment Termination Date.
(e) Borrower shall furnish to Agent a Borrowing Base Certificate
substantially in the form of Exhibit 1.1(e), completed and signed by the
Senior Vice President, Canadian Operations or Director of Finance of
Borrower, which sets forth a calculation of the Borrowing Base at the times
and for the periods set forth in Annex E. In making any Revolving Credit
Advance to Borrower hereunder, Borrower agrees that Agent and each Lender
shall be entitled to rely upon the most recent Borrowing Base Certificate
delivered by Borrower to Agent and on other information available to Agent.
Borrower further agrees that if Borrower shall have failed to deliver a
Borrowing Base Certificate to Agent by the time specified in Annex E, Lenders
shall be under no obligation to make any further Revolving Credit Advances to
Borrower until such time as such Borrowing Base Certificate is delivered to
Agent.
1.2 Rollover of BA Rate Loans. Provided that the provisions of Section
2.2 and the other terms of this Agreement have been satisfied, Borrower may
give to Agent notice substantially in the form of Exhibit 1.2 (a "Notice of
Rollover") at or before 12:00 p.m. (Toronto time) two (2) Business Days
before the last day of the Interest Period applicable thereto that Borrower
does not intend to repay such BA Rate Loan on its then current maturity date
and of the duration of the next Interest Period applicable to such BA Rate
Loan, which new Interest Period shall commence on and include the last day of
the prior Interest Period. Interest for such last day shall be calculated
solely by reference to the interest rate applicable to such new Interest
Period and not the interest rate applicable to the Interest Period ending on
such date. If Borrower fails to give such notice, such maturing BA Rate Loan
shall be deemed to be converted on its maturity date into a Prime Rate Loan
in an amount equal to the principal amount of such maturing BA Rate Loan.
-3-
<PAGE>
1.3 Conversion of Revolving Credit Advances. Provided that the
provisions of Section 2.2 and the other terms of this Agreement have been
satisfied, Borrower may elect to convert, in whole or in part, an outstanding
Prime Rate Loan into a BA Rate Loan by giving notice to Agent substantially
in the form of Exhibit 1.3 (a "Notice of Conversion") no later than 12:00
noon (Toronto time) on the Business Day that is two (2) Business Days prior
to the proposed conversion date, provided that, each conversion to a BA Rate
Loan shall be for a minimum aggregate amount of $1,000,000 and multiples of
$500,000 in excess thereof.
1.4 Repayment; Termination of Commitment.
(a) Borrower hereby promises to pay to Agent, for the account of
each Lender, the entire outstanding principal amount of the Revolving Credit
Loan and unless otherwise payable hereunder, all other Obligations and the
Revolving Credit Loan shall mature, on the Commitment Termination Date.
(b) If the Revolving Credit Loan exceeds the lesser of (1) the
Borrowing Base, and (2) the Maximum Revolving Credit Commitment, Borrower
shall immediately repay to Agent the Revolving Credit Loan in the amount of
such excess; provided that the excess balance shall nevertheless constitute
Obligations that are secured by the Collateral and entitled to all the
benefits thereof and of the Loan Documents and shall be deemed to be
evidenced by the Revolving Credit Notes.
(c) Unless Agent otherwise agrees with the consent of Required
Lenders, Borrower shall make payments to Agent on the outstanding principal
amount of the Revolving Credit Loan in an amount equal to one hundred percent
(100%) of the Net Proceeds of each sale or other disposition of any property
of any Loan Party contemporaneously with each such sale or disposition. Such
payments shall be applied, without premium or penalty (except as provided in
Section 1.6(g)), against outstanding amounts under the Revolving Credit Loan,
and then to the other Obligations in such manner and order as Agent shall
determine (or if all Lenders determine otherwise, as Lenders so determine).
The foregoing shall not constitute a consent by Agent or any Lender to any
sale or other disposition not otherwise expressly permitted hereunder. For
greater certainty, payments made to Agent in accordance with this Section
1.4(c) shall not reduce the Revolving Credit Commitments.
(d) Borrower shall have the right at any time, upon 30 days' prior
written notice to Agent, to terminate voluntarily the Revolving Credit
Commitments of all (but not less than all) Lenders (in whole but, subject to
Section 1.4(e), not in part) without premium or penalty other than payment to
Agent of the Termination Fee. Upon termination of the Revolving Credit
Commitments under this Section 1.4(d), Borrower's right to receive Revolving
Credit Advances shall simultaneously terminate and Borrower's obligation to
pay the NonUse Fee shall terminate, and notwithstanding anything to the
contrary contained herein or in any Revolving Credit Note, the entire balance
of the Obligations shall be immediately due and payable. On the date of such
termination, Borrower shall pay to Agent for value on that date all of the
Obligations, including the Termination Fee and any accrued and unpaid
interest.
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(e) Borrower shall have the right at any time after the first
anniversary of the Closing Date, upon 30 days prior written notice to the
Agent, to reduce the Maximum Revolving Credit Commitment to $10,000,000,
without premium or penalty, in minimum increments of $5,000,000, provided
that no other source of financing is used, directly or indirectly, to make or
permit such reduction. Upon any such reduction, each Lender's Revolving
Credit Commitment would be reduced proportionately.
(f) If the principal amount of any BA Rate Loan is reduced by
payment, prepayment or otherwise prior to the last day of the Interest Period
applicable thereto, then the amounts specified in Section 1.6(g) shall be due
and payable.
1.5 Use of Proceeds. Borrower shall use the proceeds of Revolving Credit
Advances for,
(a) the payment of costs and expenses of the financing
transactions contemplated by this Agreement that are payable
by Borrower;
(b) to repay Indebtedness of the Borrower under the Existing
Credit Agreement as provided in Section 2.1(d); and
(c) for financing ordinary working capital and general corporate
purposes of Borrower not prohibited by the terms of this
Agreement and the other Loan Documents.
1.6 Interest.
(a) Borrower shall pay to Agent interest for the rateable benefit
of Lenders on the aggregate outstanding balance of the Revolving Credit
Advances:
(1) made by way of Prime Rate Loans until paid in full at a
floating rate equal to the sum of the Prime Rate in effect
from time to time plus 1.00% per annum; and
(2) made by way of BA Rate Loans equal to the sum of the BA Rate
(as in effect for the Interest Period for each BA Rate Loan)
plus 2.00% per annum.
(b) Borrower shall pay to Agent for the account of each Lender
interest on the Revolving Credit Advances at the following times:
(1)with respect to Prime Rate Loans, in arrears for the preceding calendar
month or for the period from the last day to which interest has been paid, as
applicable, on the first day of each calendar month, commencing on the first
day of the month following the month in which the first Revolving Credit
Advance is made;
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(2) with respect to BA Rate Loans, in arrears on the last day of
the Interest Period therefor;
(3) if not otherwise paid in full under clause (b)(1) or (2) above
because the Commitment Termination Date occurs on a date other
than on the first day of a calendar month or the last day of
an Interest Period, on the Commitment Termination Date; and
(4) if any interest accrues or remains payable after the
Commitment Termination Date, upon demand.
Whenever any payment to be made hereunder or under any other Loan
Document shall be stated to be due and payable, or whenever the last day of
any Interest Period would otherwise occur, on a day which is not a Business
Day, such payment shall be made, and the last day of such Interest Period
shall occur, on the next succeeding Business Day and such extension of time
shall in such case be included in computing interest on such payment.
(c) Interest shall be calculated by Agent daily on the daily
outstanding principal balance on the basis of a three hundred sixty-five
(365) day year, in each case for the actual number of days occurring in the
period for which such interest is payable. Each determination by Agent of an
interest rate hereunder shall be conclusive absent manifest error.
(d) Upon the occurrence and during the continuation of any Event
of Default:
(1) the interest rate applicable to principal on the Revolving
Credit Advances may, in the sole discretion of Agent or
Required Lenders, be increased to the Default Rate; and
(2) interest on interest and other Obligations (excluding the
principal amount of the Revolving Credit Advances) in default
may, in the sole discretion of Agent or Required Lenders, be
charged at the Default Rate and shall be payable on demand;
provided, that upon the occurrence of an Event of Default specified in
Section 8.1(g), 8.1(h) or 8.1(i), the interest rate applicable to principal
on the Revolving Credit Advances shall be increased automatically to the
Default Rate and interest on interest and other Obligations (excluding
principal on the Revolving Credit Advances) in default shall automatically be
charged and payable at the Default Rate as aforesaid and both before and
after judgment, without the necessity of any action on the part of Agent or
the Required Lenders.
(e) During any time that the Obligations are secured by a mortgage
on real property, then Section 1.6(d) shall not apply in respect of interest
payable on overdue principal and overdue interest and this Section 1.6(e)
shall apply in that regard. Upon a default in the payment of principal due
under this Agreement, Borrower shall pay interest on all principal, both
before and after
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judgment, at a rate per annum equal to the interest rate equal to the
interest rate which would otherwise be applicable to such principal if it
were not in default. Upon a default in the payment of interest due under
this Agreement or any of the other Loan Documents to which Borrower is a
party, Borrower shall pay interest on such overdue interest, both before and
after judgment, at a rate per annum equal to the rate of interest payable
under this Section 1.6(a) on the principal amount to which such overdue
interest relates.
(f) If any provision of this Agreement or any of the other Loan
Documents would oblige Borrower to make any payment of interest or other
amount payable to any Lender in an amount or calculated at a rate which would
be prohibited by law or would result in a receipt by that Lender of interest
at a criminal rate (as such terms are construed under the Criminal Code
(Canada)), then notwithstanding such provision, such amount or rate shall be
deemed to have been adjusted with retroactive effect to the maximum amount or
rate of interest, as the case may be, as would not be so prohibited by law or
so result in a receipt by that Lender of interest at a criminal rate, such
adjustment to be effected, to the extent necessary, as follows:
(1) firstly, by reducing the amount or rate of interest required
to be paid to the affected Lender under this Section 1.6; and
(2) thereafter, by reducing any fees, commissions, premiums and
other amounts required to be paid to the affected Lender which
would constitute interest for purposes of Section 347 of the
Criminal Code (Canada).
Notwithstanding the foregoing and after giving effect to all adjustments
contemplated thereby, if any Lender shall have received an amount in excess
of the maximum permitted by that section of the Criminal Code (Canada), then
Borrower shall be entitled, by notice in writing to the affected Lender, to
obtain reimbursement from that Lender in an amount equal to such excess, and
pending such reimbursement, such amount shall be deemed to be an amount
payable by that Lender to Borrower. Any amount or rate of interest referred
to in this Section 1.6(f) shall be determined in accordance with generally
accepted actuarial practices and principles as an effective annual rate of
interest over the term that any Revolving Credit Advance remains outstanding
on the assumption that any charges, fees or expenses that fall within the
meaning of "interest" (as defined in the Criminal Code (Canada)) shall, if
they relate to a specific period of time, be prorated over that period of
time and otherwise be prorated over the period from the Closing Date to the
Termination Date.
(g) In order to induce Lenders to fund and maintain any BA Rate
Loan at a BA Rate on the terms provided herein, and in consideration of the
entering into by Lenders of funding arrangements from time to time in
contemplation thereof, if any BA Rate Loan is repaid in whole or in part on
any day other than the last day of the Interest Period therefor (whether any
such repayment is made pursuant to any provision of this Agreement or any
other Loan Document or is the result of acceleration, by operation of law or
otherwise), Borrower shall indemnify and hold harmless
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each Lender from and against and in respect of any and all losses, costs and
expenses resulting from, or arising out of or imposed upon or incurred by
such Lender by reason of the liquidation or reemployment of funds acquired or
committed to be acquired by such Lender to fund or maintain such BA Rate Loan
at the BA Rate elected by Borrower, pursuant to such Lender's customary
funding arrangements. Such indemnification shall include any loss (including
loss of margin) or expense arising from the reemployment of funds obtained by
it or from fees payable to terminate deposits from which such funds were
obtained. For the purpose of calculating amounts payable to a Lender under
this subsection, each Lender shall be deemed to have actually funded its
relevant BA Rate Loan through the purchase of a deposit bearing interest at
the BA Rate in an amount equal to the amount of that BA Rate Loan and having
a maturity comparable to the relevant Interest Period; provided, however,
that each Lender may fund each of its BA Rate Loans in any manner it sees
fit, and the foregoing assumption shall be utilized only for the calculation
of amounts payable under this subsection. This covenant shall survive the
termination of this Agreement and the payment of the Notes and all other
amounts payable hereunder. As promptly as practicable under the
circumstances, each Lender shall provide Borrower with its written
calculation of all amounts payable pursuant to this Section 1.6(g) and such
calculation shall be binding on the parties hereto unless Borrower shall
object in writing within ten (10) Business Days of receipt thereof,
specifying the basis for such objection in detail.
(h) For purposes of disclosure pursuant to the Interest Act
(Canada), the annual rates of interest or fees to which the rates of interest
or fees provided in this Agreement and the other Loan Documents (and stated
herein to be computed on the basis of a 365 day year) are equivalent to the
rates so determined multiplied by the actual number of days in the applicable
calendar year and divided by 365.
1.7 Eligible Accounts and Eligible Inventory. Based on the most recent
Borrowing Base Certificate delivered by Borrower to Agent and on other
information available to Agent, Agent shall, in its reasonable credit
judgement, determine which Accounts of the Loan Parties shall be deemed to be
"Eligible Accounts" and which Inventory of the Loan Parties shall be deemed
to be "Eligible Inventory", for purposes of determining the amounts, if any,
to be advanced under the Revolving Credit Loan. Agent reserves the right at
any time and from time to time after the Closing Date, in the exercise of its
reasonable credit judgment:
(a) to adjust any eligibility criteria set forth in the
definitions of Eligible Account and Eligible Inventory or to
establish new eligibility criteria; and
(b) to establish reserves against Revolving Credit Availability.
1.8 Fees. As compensation for Agent's and Lenders' costs, skills, services
and efforts incurred and expended in making the Revolving Credit Loan
available to Borrower, Borrower agrees to pay to Agent or GE Capital Canada,
as applicable, for its own account certain fees charges and expenses pursuant
to the Fee Agreement, and, to Agent for the account of Lenders the fees set
forth in Annex D.
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1.9 Cash Management System. On or prior to the Closing Date, each Loan
Party will establish and maintain until the Termination Date the cash
management system described in Annex B.
1.10 Receipt of Payments. Borrower shall make each payment under this
Agreement not later than 1:30p.m. (Toronto time) on the day when due in
immediately available funds to the Collection Account. For purposes of
computing interest and Fees and determining the Revolving Credit
Availability:
(a) all payments (including cash sweeps) consisting of cash, wire,
or electronic transfers in immediately available funds shall
be deemed received by Agent upon deposit for value in the
Agent's Collection Account; and
(b) all payments consisting of cheques, drafts, or similar noncash
items shall be deemed received upon receipt for value of good
funds following deposit in the Agent's Collection Account.
Subject to Section 1.14, each payment received by Agent under this Agreement
or any Revolving Credit Note for the account of any Lender shall be paid by
Agent promptly to such Lender, in the same funds received, for application to
the applicable Revolving Credit Loan or other Obligation in respect of which
such payment is made. Receipt for value by Agent for the account of each
Lender shall constitute payment by Borrower to each such Lender of the
amounts so received.
1.11 Pro Rata Treatment. Except to the extent otherwise provided herein:
(a) each Revolving Credit Advance shall be incurred and made by
Lenders pro rata according to the amounts that their respective
Revolving Credit Commitments represent of the Maximum Revolving
Credit Commitment;
(b) each payment or prepayment of principal of a Revolving Credit
Loan shall be made to Agent for the account of Lenders, pro
rata in accordance with the respective unpaid principal amounts
of such Revolving Credit Loan held by Lenders;
(c) each payment of interest on each Revolving Credit Loan shall be
made to Agent for the account of Lenders pro rata in accordance
with the amounts of interest on such Revolving Credit Loan then
due and payable to Lenders; and
(d) each payment of NonUse Fees and payments of the Termination Fee
shall be made to Agent for the account of Lenders, pro rata
according to the amounts that their respective Revolving Credit
Commitments represent of the Maximum Revolving Credit
Commitment.
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1.12 Application and Allocation of Payments. Subject to Section 8.4, each
Loan Party irrevocably waives the right to direct the application of any and
all payments at any time or times hereafter received by Agent or any Lender
from or on behalf of any Loan Party, and each Loan Party irrevocably agrees
that Agent and Lenders shall have the continuing exclusive right to apply any
and all such payments against the then due and payable Obligations and in
repayment of the Revolving Credit Advances owing by Borrower as Lenders may
deem advisable provided that, the payments required under Section 1.4(c)
shall be applied in the manner described in such Section. In the absence of
a specific determination by all Lenders as to application of payments or
unless otherwise expressly provided herein, the same shall be applied to the
amounts then due and payable in the following order:
(a) Fees, expenses and other Obligations (including Revolving
Credit Advances made by Agent in its capacity as Agent) owing
by Borrower to Agent;
(b) Fees and expenses of Lenders owing by Borrower to Lenders;
(c) interest payments owing by Borrower to Lenders;
(d) Obligations other than Fees, expenses and interest and
principal payments; and
(e) principal payments on the Revolving Credit Loan;
provided that if any such payments are received from or on behalf of any Loan
Party other than Borrower, or if an Event of Default shall occur and be
continuing, such payments shall be applied to the Obligations in such manner
and order as Agent shall determine (or if all Lenders determine otherwise, as
all Lenders so determine). Agent, on behalf of Lenders, is authorized to,
and at its option may, make or cause to be made Revolving Credit Advances by
Lenders on behalf of Borrower for payment of all Fees, expenses, charges,
costs, principal, interest, or other Obligations then due and payable by
Borrower under this Agreement or any of the Loan Documents, even if the
making of such Revolving Credit Advance causes the Revolving Credit Loan to
exceed (1) the Maximum Revolving Credit Commitment or (2) the Borrowing Base,
in which case the terms of Section 1.4(b) shall apply. If Agent or any
Lender receives any payment in USD (the "USD Amount") on account of the
Obligations, the USD Amount shall constitute a repayment of the Obligations
only to the extent of the amount of Canadian Dollars into which the USD
Amount can be converted at the GE Rate in effect at the time of such receipt.
If Agent or any Lender receives any payment in a currency other than Canadian
Dollars or USD on account of the Obligations, Agent is authorized to convert
the payment into Canadian Dollars using the normal procedures of the Agent
then in effect for buying Canadian Dollars and the amount of Canadian Dollars
so purchased shall constitute a repayment of the Obligations only to the
extent of the amount of Canadian Dollars so purchased.
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1.13 NonReceipt of Funds by Agent. Unless Agent shall have been notified
by a Lender or Borrower (in either case, "Payor") one (1) Business Day prior
to the date on which such Payor is to make payment to Agent of (in the case
of a Lender) the proceeds of a Revolving Credit Advance to be made by such
Lender hereunder or (in the case of Borrower) a payment to Agent for account
of Lenders hereunder (such payment being herein called the "Required
Payment"), which notice shall be effective upon receipt by Agent, that such
Payor does not intend to make the Required Payment to Agent, Agent may assume
that the Required Payment has been made and may, in reliance upon such
assumption (but shall not be required to), make the amount thereof available
to the intended recipient(s) (Borrower or Lenders, as applicable) on such
date. If such Payor has not in fact made the Required Payment to Agent, the
recipient(s) of such payment (Borrower or Lenders, as applicable) shall, on
demand, repay to Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date (the
"Advance Date") such amount was so made available by Agent until the date
Agent recovers such amount, at a rate per annum equal to the Prime Rate in
effect from time to time plus 1.00%, and, if such recipient(s) shall fail
promptly to make such payment, Agent shall be entitled to recover such
amount, on demand, from such Payor, together with interest as aforesaid.
Nothing in this Section 1.13 or elsewhere in this Agreement or the other Loan
Documents shall be deemed to require Agent to advance funds on behalf of any
Lender or to relieve any Lender from its obligation to fulfill its Revolving
Credit Commitment hereunder or to prejudice any rights that Borrower may have
against any Lender (including the Agent in its capacity as a Lender) as a
result of any default by such Lender hereunder.
1.14 Sharing of Payments, etc.
(a) Each Loan Party agrees that, in addition to (and without
limitation of) any right of setoff, banker's lien or counterclaim a Lender
may otherwise have, each Lender shall be entitled, at its option (but
subject, as between Lenders, to the provisions of Section 9.11(b)), to setoff
balances held by it for the account of such Loan Party at any of its offices,
in any currency (at the conversion rate at which it would be prepared to sell
such currency in Toronto, Ontario against the currency in which the
obligation is denominated), against any principal of or interest on any of
such Lender's pro rata portion of the Revolving Credit Loan (including any
Revolving Credit Advances deemed made by such Lender under Section 9.12(b))
or any other amount payable to such Lender hereunder, that is not paid when
due (regardless of whether such balances are then due to Borrower), in which
case it shall promptly notify Borrower and Agent thereof; provided, that such
Lender's failure to give such notice shall not affect the validity thereof.
(b) If any Lender shall obtain from any Loan Party payment of any
principal of or interest on the pro rata portion of the Revolving Credit Loan
owing to it or payment of any other amount under this Agreement, any
Revolving Credit Note held by it, or any other Loan Document through the
exercise of any right of setoff, banker's lien or counterclaim or similar
right (other than from Agent as provided herein), and, as a result of such
payment, such Lender shall have received a greater percentage of the
principal of or interest on such Revolving Credit Loan or such other
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amounts then due hereunder or thereunder by such Loan Party to such Lender
than the percentage received by any other Lender, it shall promptly pay to
Agent, for the benefit of Lenders, the amount of such excess and
simultaneously purchase from such other Lenders a participation in (or, if
and to the extent specified by such Lender, direct interests in) the
Revolving Credit Loan or such other amounts, respectively, owing to such
other Lenders (or in interest due thereon, as the case may be) in such
amounts, and make such other adjustments from time to time as shall be
equitable, to the end that all Lenders shall share the benefit of such excess
payment (net of any expenses that may be incurred by such Lender in obtaining
or preserving such excess payment) pro rata in accordance with the unpaid
principal of and/or interest on the Revolving Credit Loan or such other
amounts, respectively, owing to each of Lenders. Amounts received by Agent
under this Section 1.14(b) shall be treated as a payment by the Loan Party
under Section 1.12. To such end all Lenders shall make appropriate
adjustments among themselves (by the resale of any participation or
assignment sold or otherwise) if such payment is rescinded or must otherwise
be restored.
(c) Each Loan Party agrees that any Lender so purchasing such a
participation (or direct interest) may exercise, in a manner consistent with
Section 1.14(a), all rights of setoff, banker's lien, counterclaim or similar
rights with respect to such participation as fully as if such Lender were a
direct holder of the Revolving Credit Loan or other amounts (as the case may
be) owing to such Lender in the amount of such participation. Any Lender
which so exercises any right of setoff shall notify Borrower and Agent of
such exercise; provided, that the failure to do so shall not affect the
validity of such setoff.
(d) Nothing contained herein shall require any Lender to exercise
any right as against any Loan Party as described in this Section 1.14 or
shall affect the right of any Lender to exercise, and retain the benefits of
exercising, any such right with respect to any other indebtedness or
obligation of any Loan Party. If, under any Insolvency Statute, any Lender
receives a secured claim in lieu of a setoff or right as against any Loan
Party to which this Section 1.14 applies, such Lender shall, to the extent
practicable, assign such rights to Agent for the benefit of Lenders and, in
any event, exercise its rights in respect of such secured claim in a manner
consistent with the rights of Lenders entitled under this Section 1.14 to
share in the benefits of any recovery on such secured claim.
1.15 Accounting. Agent will provide to Borrower a monthly accounting of
transactions under the Revolving Credit Loan. Each and every such accounting
shall (absent manifest error) be deemed final, binding and conclusive upon
each Loan Party in all respects as to all matters reflected therein, unless
Borrower, within thirty (30) days after the date of receipt of any such
accounting, shall notify Agent in writing of any objection which Borrower may
have to any such accounting, describing the basis for such objection with
specificity. In that event, only those items (the "disputed items")
expressly objected to in such notice shall be deemed to be disputed by
Borrower. Agent's determination, based upon the facts available, of any
disputed item shall be presumed correct.
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1.16 Indemnity. Each Loan Party shall jointly and severally indemnify and
hold harmless each of Agent, Lenders and their respective Affiliates, and
each such Person's respective officers, directors, employees, legal counsel
(excluding Agent's and each Lender's legal counsel in respect of any suits or
actions instituted or asserted by Agent or any Lender, Affiliate of Agent or
any Lender or any Loan Party against such counsel where, in the case of any
such suits or actions so instituted by any Loan Party, such Loan Party is
successful in such suit or action after all possible appeals have been
exhausted), agents and representatives (each, an "Indemnified Person"), from
and against any and all suits, actions, proceedings, claims, damages, losses,
liabilities and expenses (including attorneys' fees and disbursements and
other costs of investigation or defense, including those incurred upon any
appeal) which may be instituted or asserted against or incurred by any such
Indemnified Person as the result of credit having been extended, suspended or
terminated under this Agreement and the other Loan Documents and the
administration of such credit, and in connection with or arising out of the
transactions contemplated hereunder and thereunder and any actions or
failures to act in connection therewith, including any and all environmental
liabilities and legal costs and expenses arising out of or incurred in
connection with disputes between or among any parties to any of the Loan
Documents (collectively, "Indemnified Liabilities"); provided, that no such
Loan Party shall be liable for any indemnification to an Indemnified Person
to the extent that any such suit, action, proceeding, claim, damage, loss,
liability or expense results solely from that Indemnified Person's gross
negligence or willful misconduct, as finally determined by a court of
competent jurisdiction. No Indemnified Person shall be responsible or liable
to any other party to any Loan Document, any successor, assignee or third
party beneficiary of such person or any other person asserting claims
derivatively through such party, for indirect, punitive, exemplary or
consequential damages which may be alleged as a result of credit having been
extended, suspended or terminated under any Loan Document or as a result of
any other transaction contemplated hereunder or thereunder.
1.17 Access. Each Loan Party shall at such Person's expense:
(a) provide access during normal business hours to Agent and each
Lender and any of their respective officers, employees,
representatives, consultants and agents, as frequently as Agent
or any Lender determines to be appropriate, upon reasonable
advance notice (unless a Default shall have occurred and be
continuing, in which event no notice shall be required and
Agent and each Lender shall have access at any and all times),
to the properties, facilities, advisors and employees
(including officers) of each Loan Party, such access to be made
through the senior management of the Loan Party (unless a
Default shall have occurred and be continuing, in which event
access need not be through such senior management);
(b) permit Agent and each Lender and any of their officers,
employees, representatives, consultants and agents to inspect,
audit and make extracts from all of each Loan Party's records,
files and books of account; and
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(c) permit Agent on behalf of Lenders or any representatives,
consultants or agents of Agent to conduct audits to inspect,
review and evaluate the Collateral, provided, however, so long
as no Default or Event of Default shall have occurred and be
continuing, Agent shall not conduct more than two (2)
Collateral audits in any calendar year at the expense of the
Loan Parties. Each Loan Party shall render to Agent and each
Lender and their representatives, consultants and agents such
clerical and other assistance as may be reasonably requested
with regard thereto. For greater certainty, Agent shall have
the right to perform (or retain an independent auditor to
perform) the collateral audits contemplated hereunder;
alternatively, Agent may request that Borrower retain a
collateral auditor, and upon such request, Borrower shall
deliver to Agent the audit report of such auditor indicating
that, based upon a review by such auditor of the Inventory of
the Loan Parties (including verification as to the value,
location and respective types) and the Accounts of the Loan
Parties (including verification as to amount, aging, indemnity
and credit of the respective account debtors and the billing
practices of the Loan Parties), the information set forth in
the Borrowing Base Certificates relating to the periods
covered by the audit is accurate and complete in all respects.
Representatives of Lenders may attend collateral audits at no
charge to the Loan Parties.
Each Loan Party shall make available to Agent (including its counsel),
as quickly as practicable under the circumstances, originals or copies
(provided that with respect to original documents where possession of the
original is not necessary to protect the interests of the Agent and Lenders
the only obligation of a Loan Party shall be to provide access to the
original document at the premises of the Loan Party or, at the option of the
Agent, Lender or their respective counsel, to deliver a copy of the original
document to the Agent, Lender or counsel) of all books, records, board
minutes, contracts, insurance policies, environmental audits, business plans,
files, financial statements (actual and pro forma), Tax Returns and other
filings with any Governmental Body, and other instruments and documents which
Agent or any Lender may request. Borrower represents and warrants to Agent
and Lenders that as of the Closing Date a duplicate copy of all
electronically recorded data relating to Collateral (by way of computer tapes
or discs) is located at the locations set out in Schedule 1.17.
Borrower shall ensure that a duplicate copy (by way of computer tapes or
discs) of all data electronically recorded after the Closing Date (as updated
weekly) and relating to Collateral is delivered weekly to and maintained at
such location. Each Loan Party shall deliver any document or instrument
reasonably necessary for Agent or any Lender, as it may from time to time
request, to obtain records from any service bureau or other Person which
maintains records for such Loan Party, and shall maintain duplicate records
or supporting documentation on any media, including computer tapes and discs
owned by such Loan Party. Each Loan Party shall instruct the Accountants and
its banking and other financial institutions to make available to Agent and
each Lender such information and records as Agent and each Lender may
reasonably request.
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1.18 Taxes.
(a) Subject to Section 1.18(c), any and all payments by any Loan
Party under this Agreement, the Revolving Credit Notes or any of the other
Loan Documents shall be made, in accordance with this Section 1.18, free and
clear of and without deduction for any and all present or future Taxes,
excluding Taxes imposed on or measured by the net income or capital of Agent
or Lender by the jurisdictions under the laws of which they are organized or
carry on business. If any Loan Party shall be required by law to deduct any
such Taxes from or in respect of any sum payable hereunder, under the
Revolving Credit Notes or under any other Loan Documents,
(1) the sum payable shall be increased as much as shall be necessary
so that after making all required deductions (including
deductions applicable to additional sums payable under this
Section 1.18) Agent or Lenders, as applicable, receive an amount
equal to the sum they would have received had no such deductions
been made,
(2) the applicable Loan Party shall make such deductions, and
(3) the applicable Loan Party shall pay the full amount deducted to
the relevant taxing or other authority in accordance with
applicable law.
Within 30 days after the date of any payment of such Taxes, Borrower shall
furnish to Agent the original or a certified copy of a receipt evidencing
payment thereof.
(b) Borrower shall indemnify and, within ten (10) days of demand
therefor, pay Agent and each Lender for the full amount of such Taxes
(including any Taxes imposed by any jurisdiction on amounts payable under
this Section 1.18) paid by Agent or such Lender, as appropriate, and any
liability (including penalties, interest and expenses) arising therefrom or
with respect thereto, whether or not such Taxes were correctly or legally
asserted.
(c) The Agent and each Lender party hereto on the date hereof
represents and warrants that it is not a nonresident of Canada under the ITA.
If the Agent or a Lender hereunder loses its status as a resident of Canada
for tax purposes, other than due solely to a change in Applicable Laws or the
interpretation or application thereof, so that withholding Taxes become
payable in respect of payments to the Agent or such Lender, Borrower shall
not be required to comply with Section 1.18(a) and shall be entitled to
withhold such Taxes from payments due to the Agent or such Lender in
accordance with Applicable Laws and remit only the balance of such payments
remaining after such withholding to the Agent or such Lender.
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1.19 Additional Costs.
(a) If at any time, any Lender determines, acting reasonably and
with appropriate diligence, that (1) any Regulatory Change, or (2) compliance
by such Lender with any direction, requirement or request from any central
bank or other regulatory authority given after the date of execution hereof,
whether or not having the force of law, has or would have, as a consequence
of such Lender's obligation under this Agreement, and taking into
consideration such Lender's policies with respect to capital adequacy, the
effect of reducing the rate of return on such Lender's capital to a level
below that which such Lender could have achieved under this Agreement but for
such change or compliance, such Lender shall determine the amount of such
additional amounts as will compensate such Lender for such reduction.
(b) If after the date of execution hereof, any introduction of any
Applicable Law or any Regulatory Change or any change in the compliance of
any Lender therewith now or hereafter:
(1) subjects any Lender to, or causes the withdrawal or termination
of a previously granted exemption with respect to, any Tax or
changes the basis of taxation, or increases any existing Tax, on
payments of principal, interest, fees or other amounts payable
by Borrower to such Lender under this Agreement (except for
Taxes imposed on or measured by the net income or capital of
such Lender);
(2) imposes, modifies or deems applicable any reserve, special
deposit, deposit insurance or similar requirement against assets
held by, or deposits in or for the account of or loans by or any
other acquisition of funds by, an office of such Lender, in
connection with Revolving Credit Advances or such Lender's
Revolving Credit Commitment;
(3) imposes or holds applicable on such Lender, or expects there to
be maintained by such Lender any capital adequacy or additional
capital requirement in respect of Revolving Credit Advances or
its Revolving Credit Commitment or any other condition with
respect to this Agreement; or
(4) imposes any Tax on reserves or deemed reserves with respect to
the undrawn portion of its Revolving Credit Commitment;
and the result of any of the foregoing, in the determination of
Lender acting reasonably and with appropriate diligence, shall
be to increase the cost to, or reduce the amount of principal,
interest or other amount received or receivable by such Lender
hereunder or its effective return hereunder in respect of
making, maintaining or funding Revolving Credit Advances
hereunder, such Lender shall, acting reasonably, determine that
amount of money which shall compensate such Lender for such
increase in cost or reduction in income (herein referred to as
"Additional Compensation").
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(c) Upon a Lender having determined that it is entitled to
additional amounts in accordance with the provisions of Section 1.19(a) or to
Additional Compensation in accordance with the provisions of Section 1.19(b),
such Lender shall promptly so notify Agent and shall provide to Agent a
photocopy of the relevant Regulatory Change or Applicable Law (if any, in
either case) and a certificate of a duly authorized officer of such Lender
setting forth the additional amounts or Additional Compensation, as
applicable, and the basis of calculation thereof, which shall be prima facie
evidence of such additional amounts or Additional Compensation, as
applicable. Agent shall promptly notify Borrower and Borrower shall pay to
Agent for the account of such Lender within 10 Business Days of the giving of
such notice such Lender's compensation (that is, additional amounts or
Additional Compensation, as applicable) for such costs as are incurred or
reductions as are suffered as to which such notification relates. Each
Lender shall be entitled to be paid such additional amounts or Additional
Compensation, as applicable, from time to time to the extent that the
provisions of this Section 1.19 are then applicable notwithstanding that such
Lender has previously been paid any additional amounts or Additional
Compensation.
1.20 Currency Matters. Principal, interest, reimbursement obligations,
fees and all other amounts payable under this Agreement and the other Loan
Documents to the Agent and the Lenders shall be payable in Canadian Dollars
except as expressly stated otherwise in the Loan Documents. All
calculations, comparisons, measurements or determinations under this
Agreement shall be made in Canadian Dollars.
1.21 Notices of Revolving Credit Advance, Conversion, Rollover. Agent and
Lenders shall be entitled to rely upon and shall be fully protected under
this Agreement in relying upon any Notice of Revolving Credit Advance, Notice
of Rollover or Notice of Conversion believed by Agent to be genuine and to
assume that the persons executing and delivering the same were duly
authorized unless the responsible individual acting thereon for Agent shall
have actual knowledge to the contrary.
SECTION 2 CONDITIONS PRECEDENT
2.1 Conditions to the Initial Advance. Notwithstanding any other
provision of this Agreement and without affecting in any manner the rights of
Agent or any Lender hereunder, none of the Loan Parties shall have any rights
under this Agreement (but each of the Loan Parties shall have all applicable
obligations hereunder), and Agent and Lenders shall not be obligated to make
any Revolving Credit Advance or to take, fulfil, or perform any other action
hereunder, until the following conditions have been fulfilled to the
satisfaction of Agent (and to the extent specified below, of Lenders):
(a) this Agreement or counterparts thereof shall have been duly
executed by, and delivered to, each Loan Party, Agent and each
Lender; and
(b) Agent shall have received such documents, instruments,
certificates, opinions and agreements as Agent shall request
in connection with the transactions contemplated by this
Agreement and
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the other Loan Documents, including all documents,
instruments, agreements and other materials listed in the
Schedule of Closing Documents attached as Annex C, each in
form and substance satisfactory to Agent, together with
evidence of the completion of all necessary or appropriate
recordings and filings of the foregoing in order to give Agent
first ranking Liens (subject to the other Liens permitted by
Section 6.7) created thereby in the Collateral together with
collateral releases and discharges in form and substance
satisfactory to Agent from all of the existing creditors of
each Loan Party except to the extent such creditors are
permitted to have Liens under Section 6.7;
(c) Agent shall have received evidence satisfactory to Agent that
all Liens upon any of the property of each Loan Party have
been terminated and released except to the extent such Liens
are permitted under Section 6.7;
(d) Agent shall have received evidence satisfactory to Agent that
all Indebtedness and other obligations of the Loan Parties
under the Existing Credit Agreements (as in effect immediately
prior to the Closing Date) will be performed and paid in full
from the proceeds of the initial Revolving Credit Advance and
all Liens upon any of the property (including any cash
collateral) of each Loan Party in favour of the lender
thereunder shall be terminated and released immediately upon
such payment and Agent and to that end, on or prior to the
Closing Date such lender shall have provided discharges in
form and substance satisfactory to Agent providing for the
discharge, release and termination of all such Liens,
termination of the Existing Credit Agreements and
acknowledgment of payment in full of all outstanding
Indebtedness and other obligations under or relating to the
Existing Credit Agreements;
(e) Agent shall have received:
(1) evidence satisfactory to Agent that the Loan Parties have
obtained all required consents, licences, permits, waivers,
approvals and acknowledgments of all Persons, including all
requisite Governmental Approvals, to the execution and delivery
of this Agreement and the other Loan Documents, the consummation
of the transactions contemplated hereby and thereby and the
continued operation by each Loan Party, or
(2) an officer's certificate in form and substance satisfactory to
Agent affirming that no such consents, licences, permits,
waivers, approvals or acknowledgements are required;
(f) Agent shall be satisfied that, as of the Closing Date, each
Loan Party and the transactions contemplated by this Agreement
shall be in compliance in all material respects with all
material
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agreements and all Applicable Laws, and there shall be no
legal impediment to any of Lenders making loans or other
extensions of credit contemplated by this Agreement in any
applicable jurisdiction;
(g) Agent shall have received evidence satisfactory to Agent that
the insurance policies provided for in Section 3.18 and Annex
F are in full force and effect, together with appropriate
evidence showing loss payable and/or additional insured
clauses and/or mortgage clauses or endorsements, as
appropriate, in favour of Agent for Agent and Lenders and in
form and substance satisfactory to Agent. All policies of
insurance shall have been issued by insurers acceptable to
Agent and contain provisions to the effect that 30 days' prior
notice will be provided to Agent if any cancellation,
nonrenewal or amendment thereof;
(h) Borrower shall have paid in immediately available funds to
Agent for its account and the account of Lenders, as the case
may be, all Fees required to be paid on the Closing Date and
all fees, costs, and expenses of closing (including reasonable
fees and expenses of consultants and counsel to Agent and any
Lender presented as of the Closing Date);
(i) as of the Closing Date, the Agent shall be satisfied that:
(1) no Restricted Payments shall have been made by Borrower since
September 30, 1996, other than as contemplated by Schedule 3.5;
and
(2) no material adverse change shall have occurred in the results of
operations of any of the Loan Parties on a consolidated basis,
for the period commencing September 30, 1996 and ending on the
Closing Date from the projected results of the Loan Parties'
operations for such period contained in the Projections;
(3) since September 30, 1996 no litigation, action, proceeding,
investigation, audit, regulation or legislation shall have been
instituted, threatened or proposed before any Governmental Body:
(A) which, if successful, would have a Material Adverse
Effect, or
(B) to enjoin, restrain or prohibit, or to obtain damages in
respect of, or which is related to or arises out of, this
Agreement, or any of the other Loan Documents or the
consummation of the transactions contemplated hereby or
thereby and which, in Agent's sole judgment, would make
it inadvisable to consummate the transactions
contemplated by this Agreement, or any of the other Loan
Documents;
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(j) Agent shall be reasonably satisfied with the corporate,
capital, tax, management compensation, legal and management
structure and cash management systems of each Loan Party, and
shall be satisfied, in its sole judgment, with the nature and
status of all material contractual obligations, senior
management confidentiality, stock repurchase and
noncompetition rights and obligations, securities, labour,
tax, employee benefit, environmental, health and safety
matters, the funding of pension obligations, in each case,
involving or affecting each Loan Party. In connection
therewith, Agent shall have completed, with results reasonably
satisfactory to Agent and Lenders, such business and legal
due diligence of each Loan Party and ICP, CHL, and ICP (USA)
as Agent may require including, without limitation,
satisfactory review by Agent's field examiners or counsel, as
applicable, of each Loan Party's Accounts, assets, Inventory,
financial controls and records, contracts (including, without
limitation, shareholder agreements, licenses and debt and
equity agreements), leases, pension funds, management
compensation and equity incentive programs, management
noncompetition provisions, organizational or governing
documents, environmental compliance, indebtedness, legal and
capital structure, liabilities, tax position and a liquidation
analysis. Agent shall have had reasonable and continuing
access to any material it deems necessary to monitor the loans
to be made hereunder, including access to each Loan Party's
Accountants. Agent shall be satisfied with the structure and
the tax effects of the transactions contemplated by this
Agreement and other Loan Documents and the terms of the Loan
Documents;
(k) as of the Closing Date, Borrower shall have provided to
Lenders copies of any existing environmental reviews and
audits, including any environmental audit requested by Agent
which shall be in form and substance, and by an environmental
engineering firm, satisfactory to Agent, as well as other
information pertaining to actual or potential environmental
claims with respect to each Loan Party;
(l) the Eligible Accounts and the Eligible Inventory supporting
the initial Revolving Credit Advance and the amount of the
reserves to be established on the Closing Date shall, after
giving effect to the initial Revolving Credit Advance and the
consummation of the Related Transactions (on a pro forma basis
after payment of all costs and fees and without deterioration
in trade payables or working capital), be sufficient in value,
as determined by Agent, to provide Revolving Credit
Availability of at least $3,000,000;
(m) Agent shall have received Financials and Projections updated
to 1997;
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(n) on the Closing Date, the total Indebtedness of the Loan
Parties (excluding any Indebtedness owing by Borrower to any
of its Affiliates) less any cash on hand shall not exceed
$40,000,000; Agent shall have received evidence that Borrower
has received from ICP (USA) a minimum of USD998,575.36
(converted to approximately $1,361,572) in cash for certain
export inventory sold to ICP (USA);
(p) Agent shall have received evidence of the receipt by Borrower
of not less than $1,355,000 in payment of an account
receivable owing by ICP;
(q) Borrower's Accountants shall have agreed to provide annually
to Agent a letter in which the Accountants agree to respond to
questions given to them in writing by Agent regarding the
business and financial condition of the Loan Parties based
solely on their audit of the Loan Parties;
(r) Agent shall have received a letter from CH2M Gore& Storrie
Limited confirming that Agent and Lenders shall be entitled to
review and rely upon the certain environmental reports
prepared for Borrower by CH2M Gore & Storrie Limited;
(s) Agent and Lenders shall have the unqualified right to use all
Intellectual Property owned by any Loan Party or by ICP (USA)
(in the case of ICP (USA) such use shall be as provided in the
ICP (USA) Acknowledgement and Consent) in any way associated
with or relating to the Collateral for the purpose of
exercising their rights and remedies under the Collateral
Documents in respect of the Collateral, which rights and
remedies may not be adversely affected by any event,
including, without limitation, the bankruptcy, insolvency or
reorganization of any Loan Party or any Affiliate of any Loan
Party or any other Person;
(t) Emerson and each Affiliate of any Loan Party to whom any Loan
Party owes any indebtedness (other than for trade credit)
shall have entered into an intercreditor agreement in form and
substance satisfactory to the Agent, which shall include,
without limitation, that the Loan Party's obligations to
Emerson or to any of the Loan Party's Affiliates (including,
without limitation, the Indebtedness owing by Borrower to
ICP), and Emerson's security for the Loan Party's obligations
to Emerson, are subordinate to the Obligations and the Agent's
and the Lenders' security on the Collateral and that neither
Emerson nor any such Affiliate shall request, demand, sue for,
take or receive all or any part of any Indebtedness owing to
Emerson or any such Affiliate by any Loan Party, Emerson shall
not exercise any rights of setoff or any of its rights or
remedies in respect of any security for such Indebtedness, and
Emerson and each such Affiliate of any Loan Party shall waive
all of their rights and remedies at law in respect of such
Indebtedness and
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security until all the Obligations have been irrevocably paid
and discharged in full and the Revolving Credit Facility has
been terminated. Upon the exercise by Agent of any of its
rights and remedies under the Collateral Documents to realize
on Collateral located in the Province of Quebec Emerson shall
agree to discharge its security on such Collateral so that the
Agent's and the Lenders' realization on the Collateral located
in the Province of Quebec shall not be subject to Emerson's
security. The Agent and the Lenders shall agree that the
proceeds of the Collateral remaining after all the Obligations
have been irrevocably paid and discharged in full and the
Revolving Credit Facility has been terminated may be available
to Emerson. Emerson and each Affiliate of each Loan Party
shall agree to vote or to abstain from voting, as directed by
the Agent, in any reorganization proceeding involving any Loan
Party. If Emerson has registered any security on any real
property of any Loan Party, Emerson shall execute and deliver
to Agent a registrable postponement that incorporates the
foregoing terms of this Section 2.1(t). Emerson shall agree
that Borrower's Indebtedness to Emerson and all security
therefor shall be automatically extinguished upon CHL,
Borrower and ICP (USA) ceasing to be under the common control
of ICP;
(u) Agent shall have been provided with details of management
compensation and equity incentive programs of the Loan Parties
and Agent shall be satisfied with the form and substance of
the provisions regarding noncompetition for members of senior
management of the Loan Parties;
(v) the Closing Date shall have occurred on or before December 31,
1996; and
(w) Agent shall have received an operating plan for the Loan
Parties, certified by Borrower's Senior Vice President,
Canadian Operations, in form acceptable to Agent, which shall
include a capital expenditures budget and operating profit and
cash flow projections for each year until the Commitment
Termination Date and for each month in the immediately
following year.
The making of the initial Revolving Credit Advance to Borrower shall
constitute confirmation that the conditions set out in Section 2.1 have been
fulfilled to satisfaction of Agent (and, to the extent specified above, to
satisfaction of Lenders).
2.2 Further Conditions to Each Advance, Rollover and Conversion. It shall
be a further condition to the funding of the initial and each subsequent
Revolving Credit Advance and to each rollover of or conversion to a BA Rate
Loan in accordance with Section 1.2 or Section 1.3, respectively, that the
following statements shall be true on the date of each such funding, advance,
rollover or conversion, as the case may be:
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(a) each Loan Party's representations and warranties contained
herein or in any of the Loan Documents shall be true and
correct on and as of the Closing Date and, subject to Section
5.8, the date on which each such Revolving Credit Advance,
rollover or conversion is made, as though made on or incurred
on and as of such date, except to the extent that any such
representation or warranty expressly relates solely to an
earlier date, in which case such representation and warranty
shall have been true and correct on such date, and except for
changes permitted or contemplated by this Agreement;
(b) no event shall have occurred and be continuing, or would
result from the making of any Revolving Credit Advance,
rollover or conversion, which constitutes a Default or an
Event of Default;
(c) after giving effect to any such Revolving Credit Advance,
rollover or conversion, the Revolving Credit Loan shall not
exceed the Borrowing Base and there shall be no requirement
under Section 1.4(b) to prepay any Revolving Credit Advance;
(d) there shall not have occurred a Material Adverse Effect which
shall not have been cured or waived in writing by Required
Lenders;
(e) Agent shall have received a Notice of Revolving Credit
Advance, Notice of Rollover or Notice of Conversion in
accordance with Section 1.1(c), Section 1.2 or Section 1.3,
respectively.
The request and acceptance or retention on a rollover or conversion by
Borrower of the proceeds of any Revolving Credit Advance shall be deemed to
constitute, as of the date of such request:
(1) a representation and warranty by each Loan Party that the
conditions in this Section 2.2 have been satisfied; and
(2) a reaffirmation by McDonald of the McDonald Guarantee and a
confirmation by each Loan Party of the granting and continuance of
Agent's and Lenders' Liens pursuant to the Collateral Documents.
SECTION 3 REPRESENTATIONS AND WARRANTIES
To induce Agent and Lenders to enter into this Agreement, Borrower makes the
following representations and warranties to Agent and Lenders with respect to
itself and each other Loan Party, and each other Loan Party makes the
following representations and warranties to Agent and Lenders with respect to
itself and each other Loan Party (which representations and warranties shall
be renewed as provided in Section 2.2 until the Termination Date unless
stated therein to be made as of a specific time):
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3.1 Corporate Existence; Compliance with Law. Each Loan Party:
(a) is a corporation duly organized and validly existing under the
laws of the jurisdiction of its incorporation and is duly
qualified to do business under the laws of each jurisdiction
where its ownership or lease of property or the conduct of its
business requires such qualification;
(b) has the requisite corporate power and authority and the legal
right to own, pledge, mortgage or otherwise encumber and
operate its properties, to lease the property it operates
under lease, and to conduct its business as now, heretofore
and proposed to be conducted;
(c) has all Governmental Approvals and has made all filings with,
and has given all notices to, all Governmental Bodies having
jurisdiction, to the extent required for such ownership,
operation and conduct;
(d) is in compliance with its articles or certificate of
incorporation, bylaws and other organizational documents; and
(e) is in compliance in all material respects with all Applicable
Laws, provided, however, each Loan Party is in compliance in
all respects with all Applicable Laws regarding the
withholding, collection, payment and/or deposit, as
applicable, of employees' income, unemployment and health
insurance and other benefits and social security.
3.2 Chief Executive Offices; Collateral Locations; Corporate or Other
Names. The current location of each Loan Party's chief executive office,
principal place of business, other corporate offices, leased premises,
warehouses and other premises within or on which any Collateral is stored or
located, and the locations of all of each Loan Party's records concerning the
Collateral are set forth in Schedule 3.2. Each Loan Party's corporate name
is set forth in Schedule 3.2. Except as set forth in Schedule 3.2, none of
the Loan Parties has been known as or used any corporate, fictitious or trade
name.
3.3 Corporate Power; Authorization; Enforceable Obligations. The
execution, delivery and performance by each Loan Party of this Agreement and
the other Loan Documents to which it is a party and the creation by each Loan
Party of all Liens provided for herein and therein:
(a) are within the applicable Loan Party's corporate power;
(b) have been duly authorized by all necessary corporate and
shareholder action;
(c) are not in contravention of any provision of any Loan Party's
articles or certificate of incorporation or bylaws or other
organizational documents;
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(d) will not violate any Applicable Laws;
(e) will not conflict with or result in the breach or termination
of, constitute a default under or accelerate any performance
required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which any Loan Party is a
party or by which any Loan Party or any of its respective
property is bound;
(f) will not result in the creation or imposition of any Lien upon
any of the property of any Loan Party other than those in
favour of Agent or Lenders, all pursuant to the Loan Documents;
and
(g) do not require the consent or approval of any Governmental Body
or any other Person, except those referred to in Section
2.1(e), all of which will have been duly obtained, made or
complied with prior to the Closing Date and which are in full
force and effect.
Each of the Loan Documents has been duly executed and delivered by each
Loan Party that is a party thereto, and each constitutes a legal, valid and
binding obligation of each such Loan Party, enforceable against each such
Loan Party in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally.
3.4 Financial Statements and Projections. Borrower has delivered the
Financials and Projections identified in Schedule 3.4 (which Projections are
attached hereto as Exhibit 3.4), and each of such Financials and Projections
complies with the description thereof contained in Schedule 3.4.
3.5 Material Adverse Change, Restricted Payments. Except as set forth in
Schedule 3.5, from September 30, 1996 through to the Closing Date, none of
the Loan Parties has any material obligations, contingent liabilities, or
liabilities for Charges, longterm leases or unusual forward or longterm
commitments which are not reflected in the audited consolidated December 31,
1995 balance sheet of Borrower. As of the Closing Date, there has been no
material deviation from the Projections delivered under Section 3.4. Except
as set forth in Schedule 3.5, no Restricted Payment has been made by a Loan
Party since September 30, 1996, and no shares of Stock of any Loan Party have
been, or are now required to be, redeemed, retired, purchased or otherwise
acquired for value by any Loan Party. Since September 30, 1996 no event has
occurred which, alone or together with other events, could reasonably be
expected to have or result in a Material Adverse Effect.
3.6 Ownership of Property; Liens. As of the Closing Date, the real estate
listed in Parts 1(a) and 1(b) of Schedule 3.6 constitutes all of the real
property owned or leased by any Loan Party, or used in any Loan Party's
business (the "Real Property"). Except as set out in Parts 1(a) and 1(b) of
Schedule 3.6, each Loan Party owns (a) good and marketable title to all of
the real property
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described in Part 1(a) of Schedule 3.6, (b) legal, valid and binding
leasehold interests in all Leases (either as lessee, sublessee or assignee)
as described in Part 1(b) of Schedule 3.6, and (c) good title to, or valid
leasehold interests in, all of its other properties and assets. None of the
properties and assets of any Loan Party is subject to any Liens, except Liens
permitted by Section 6.7. As of the Closing Date, except as set out in Part
2 of Schedule 3.6, each Loan Party has received all deeds, assignments,
waivers, consents (including landlord waivers and consents and bailee
agreements), nondisturbance and recognition or similar agreements (including
mortgagee agreements), bills of sale and other documents, and duly effected
all recordings, filings and other actions necessary to establish, protect and
perfect its right, title and interest in and to all Real Property and its
other assets or property. Except as set out in Part 3 of Schedule 3.6, none
of the Loan Parties, nor to any Loan Party's knowledge, any other party to
any Lease is in default of its monetary obligations or any other of its
material obligations thereunder or has delivered or received any notice of
default under any such Lease, and no event has occurred which, with the
giving of notice, the passage of time, or both, would constitute any such
default under any such Lease. Except as set out in Part 3 of Schedule 3.6,
none of the Loan Parties owns or holds, or is obligated under or a party to,
any option, right of first refusal or any other contractual right to
purchase, acquire, sell, assign or dispose of any real property. Except as
set out in Part 3 of Schedule 3.6, no portion of the Real Property has
suffered any material damage by fire or other casualty loss which has not
heretofore been completely repaired and restored to its original condition.
All Governmental Approvals required to have been issued or appropriate to
enable the Real Property to be lawfully occupied and used for all of the
purposes for which it is currently occupied and used, have been lawfully
issued and are, as of the Closing Date, in full force and the absence of any
Governmental Approval so required could not have a Material Adverse Effect.
3.7 Restrictions; No Default; Material Contracts. No contract, lease,
agreement or other instrument to which any Loan Party is a party or by which
it or any of its properties or assets are bound or affected and no provision
of any charter, corporate restriction or Applicable Laws has resulted in or
will result in a Material Adverse Effect. None of the Loan Parties is in
default and, to each Loan Party's knowledge, no third party is in default,
under or with respect to any Material Contract. No Default or Event of
Default has occurred and is continuing. Schedule 3.7, as supplemented from
time to time by written disclosures to Agent, sets forth a complete and
accurate list of all Material Contracts. Each Loan Party is in compliance
with:
(a) all licence agreements to which it is a party or bound by;
(b) its obligations to make royalty payments to other Persons;
(c) all Material Contracts; and
(d) the terms and conditions of its insurance coverage and
policies therefor.
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3.8 Labour Matters. Except as set forth in Schedule 3.8, there are no
strikes or other labour disputes against any Loan Party that are pending or,
to any Loan Party's knowledge, threatened. Hours worked by and payment made
to employees of each Loan Party have not been in violation of any Applicable
Laws which would have a Material Adverse Effect. All payments due from any
Loan Party on account of worker's compensation, Canada Pension Plan, Quebec
Pension Plan, employee health plans, social security and employee insurance
of every kind and employee income tax source deductions and vacation pay have
been paid or accrued as a liability on the books of the applicable Loan
Party. Except as set forth in Schedule 3.8, none of the Loan Parties has any
obligation under any collective bargaining agreement, consulting or
management agreement, or any employment agreement requiring payment in excess
of $250,000 in any Fiscal Year, and a correct and complete copy of each
agreement listed on Schedule 3.8 has been provided to Agent. Each Loan Party
is in compliance in all material respects with the terms and conditions of
all such collective bargaining agreements, consulting agreements, management
agreements, employment agreements and other labour agreements. There is no
organizing activity involving any Loan Party pending or, to any Loan Party's
knowledge, threatened by any labour union or group of employees. Except as
set forth in Schedule 3.13, no labour organization or group of employees has
made a pending demand for recognition, and, there are no complaints or
charges against any Loan Party pending or threatened to be filed with any
Governmental Body or arbitrator based on, arising out of, in connection with,
or otherwise relating to the employment or termination of employment by any
Loan Party of any individual.
3.9 Ventures, Subsidiaries and Equity Investments; Outstanding Stock and
Indebtedness. No Loan Party has any Subsidiaries other than those
Subsidiaries set forth on Schedule 3.9 and, except as set forth in Schedule
3.9, none of the Loan Parties is engaged in any joint venture or partnership
with any other Person or has any equity interest in any other Person. None
of the Loan Parties is a party to or is bound by any shareholder agreement.
The Stock of each Loan Party owned by each of the stockholders thereof named
in Schedule 3.9 constitutes all of the issued and outstanding Stock of such
Persons and all such Stock is duly and validly issued, fully paid and
nonassessable. Except as set forth in Schedule 3.9, there are no outstanding
rights to purchase options, warrants or similar rights, agreements or plans
pursuant to which any Loan Party may be required to issue, sell or purchase
any Stock. Schedule 3.9 lists all Indebtedness of each Loan Party as of the
Closing Date (including, in the case of reimbursement obligations incurred by
any of the Loan Parties in respect of letters of credit issued for the
account of any of the Loan Parties, the applicant, the issuer's name, the
amount, the currency, the expiry date and beneficiary (e.g. Inventory
supplier)).
3.10 Taxes. All Tax Returns required to be filed by or on behalf of each
Loan Party have been accurately prepared, duly executed and filed within the
prescribed period. All information provided in such Tax Returns pertaining
to each Loan Party is true, complete and accurate. All Taxes attributable to
each Loan Party that were due and payable have been paid (except Taxes being
contested pursuant to Section 5.2) and adequate provision has been made on
the books of
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each Loan Party in accordance with GAAP for all Taxes payable for the current
or a prior year which are not yet due to the extent that such Loan Party is
aware of the amount of such Taxes. Except as set out in Schedule 3.10, none
of the Loan Parties has received any notice of assessment of additional taxes
or any other claim or notice of any nature whatsoever that any Tax or
additional Tax is due which has not been paid or otherwise finally settled or
satisfied. Except as set out in Schedule 3.10, there are no actions, suits,
proceedings, investigations, audits or claims, threatened or pending in
respect of any Taxes of any Loan Party, nor are there any matters under
discussion with any Governmental Body relating to any Taxes asserted by any
such body. Each Loan Party has withheld from its employees, customers and
any other applicable payees (and timely paid to the appropriate Governmental
Body) the proper and accurate amount of all Taxes and other amounts required
to be withheld or collected and remitted in compliance with all Applicable
Laws. There are no Liens for Taxes on the assets of any Loan Party except
for Liens for Taxes not yet due. None of the Loan Parties have executed or
filed with Revenue Canada or any other Governmental Body any agreement,
waiver or other document extending or having the effect of extending the
period for assessment, reassessment or collection of any Taxes or the filing
of any Tax Returns.
3.11 No Foreign Business. None of the Loan Parties carries on any
business, employs any employees or owns any material assets outside Canada.
3.12 Benefit and Pension Plans. Schedule 3.12 sets forth all Canadian
Benefit Plans and Canadian Pension Plans adopted by each Loan Party. The
Canadian Pension Plans are duly registered under the ITA and all other
Applicable Laws which require registration and no event has occurred which is
reasonably likely to cause the loss of such registered status. All material
obligations of each Loan Party (including fiduciary, funding, investment and
administration obligations) required to be performed in connection with the
Canadian Pension Plans and the funding agreements therefor have been
performed in a timely fashion. There have been no improper withdrawals or
applications of the assets of the Canadian Pension Plans or the Canadian
Benefit Plans. There are no outstanding disputes concerning the assets held
under the funding agreements for the Canadian Pension Plans or the Canadian
Benefit Plans. Each of the Canadian Pension Plans is fully funded both on an
ongoing basis and on a solvency basis (using actuarial methods and
assumptions which are consistent with the valuations last filed with the
applicable Governmental Bodies and which are consistent with generally
accepted actuarial principles). No promises of benefit improvements under
the Canadian Pension Plans or the Canadian Benefit Plans have been made
except where such improvement could not have a Material Adverse Effect and in
any event no such improvements will result in a solvency deficiency or going
concern unfunded liability in the affected Canadian Pension Plans. All
contributions or premiums required to be made or paid by each Loan Party to
the Canadian Pension Plans or the Canadian Benefit Plans have been made or
paid in a timely fashion in accordance with the terms of such plans and all
Applicable Laws. All employee contributions to the Canadian Pension Plans or
the Canadian Benefit Plans by way of authorized payroll deduction or
otherwise have been properly withheld or collected by each Loan Party and
fully paid into such plans in a timely manner. The pension fund under each
Canadian Pension Plan is exempt from the payment of any income tax and there
are no
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taxes, penalties or interest owing in respect of any such pension fund. All
material reports and disclosures relating to the Canadian Pension Plans
required by such plans and any Applicable Laws to be filed or distributed
have been filed or distributed in a timely manner. None of the Loan Parties
is a party to, employs any employees who are participants in, or has taken
any action which may have the effect of acknowledging, accepting or creating
any liability whatsoever under or in respect of, any employee benefit plan
which is governed by ERISA. None of the Loan Parties is subject to any Lien
in favour of the PBGC or any other Person in connection with any liability
under or in connection with ERISA. All payments and contributions of any
nature or kind required to be made by any Loan Party in connection with the
Canadian Pension Plans are fully reflected in the Projections.
3.13 No Litigation. Except as set forth in Schedule 3.13, no litigation,
action, claim or proceeding is now pending or, to the knowledge of any Loan
Party, threatened against any Loan Party, at law, in equity or otherwise,
before any Governmental Body:
(a) which challenges any such Person's right, power, or competence
to enter into or perform any of its obligations under the Loan
Documents, or the validity or enforceability of any Loan
Document or any action taken thereunder; or
(b) which if determined adversely, could have or result in a
Material Adverse Effect.
To the knowledge of each Loan Party, there does not exist a state of facts
which is reasonably likely to give rise to such proceedings.
3.14 Brokers. No broker or finder acting on behalf of any Loan Party brought
about the obtaining, making or closing of the credit extended pursuant to
this Agreement or the transactions contemplated by the Loan Documents or the
transactions contemplated thereby and no Loan Party has any obligation to any
Person in respect of any finder's or brokerage fees in connection therewith.
3.15 Intellectual Property.
(a) Except as set out in Schedule 3.15, each Loan Party owns or is
licensed to use all Intellectual Property necessary to continue to conduct
its business as heretofore conducted by it, now conducted by it and proposed
to be conducted by it. Each of such Intellectual Properties that each Loan
Party actually uses to conduct its business, now conducted by it or proposed
to be conducted by it, is listed (by type of property; for example,
trademark, tradename, industrial design, computer software or right to use
the same, and if none of the Loan Parties owns the trademark, tradename,
industrial design, computer software or other type of property and owns the
right to use the same (for example, by way of licence), the owner of the
applicable Intellectual Property is listed), together with applicable
Canadian and United States application or registration numbers, as
applicable, in Schedule 3.15, which Schedule may be amended without
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the consent of Agent to include any changes permitted by Section 5.14. All
Intellectual Property owned by each Loan Party, and each applicable
registration thereof, is valid, subsisting and enforceable. Except as set
out in Schedule 3.15, each Loan Party conducts business without infringement
or claim of infringement of any Intellectual Property of others. To each
Loan Party's knowledge, except as set out in Schedule 3.15, there is no
infringement or claim of infringement by others of any Intellectual Property
used by any Loan Party. Each Loan Party's use of Intellectual Property does
not contravene any Applicable Law. Set out on Schedule 3.15 is a complete
list of all Licence Agreements to which each Loan Party is a party. Except
as set forth on Schedule 3.15, all Licence Agreements are in full force and
effect unamended. There have not been any material defaults under or any
breaches of any of the Licence Agreements; provided that, there has not been
any default under or any breach of any of the Licence Agreements where such
default or breach could have a Material Adverse Effect. Except as set forth
on Schedule 3.15, none of the Licence Agreements under which any Loan Party
obtains rights or an option to acquire rights to use any Intellectual
Property contains any restriction on that Loan Party's ability to assign or
to encumber its rights or option to acquire rights to use such Intellectual
Property or is terminable upon the occurrence of any of the events described
under Sections 8.1(g), 8.1(h) or 8.1(i). Agent and Lenders have the
unqualified right to use all Intellectual Property owned by any Loan Party or
by ICP (USA) (in the case of ICP (USA) such use shall be as provided in the
ICP (USA) Acknowledgement and Consent) in any way associated with or relating
to the Collateral for the purpose of exercising their rights and remedies
under the Collateral Documents in respect of the Collateral which rights and
remedies may not be adversely affected by any event, including, without
limitation, the bankruptcy, insolvency or reorganization of any Loan Party or
any Affiliate of any Loan Party or any other Person.
(b) Borrower is the sole legal and beneficial owner of and has
good title or the licence to use all of the computer software (other than
operating systems software) running on Borrower's IBM AS/400, Model E35
computer systems (the "AS/400 Software"), free and clear of all Liens
whatsoever. No royalty or other fee is required to be paid by Borrower to
any other Person in respect of the use of any of the AS/400 Software.
Borrower has the right to use all of the AS/400 Software and has not granted
any licence or other rights to any other Person in respect of the AS/400
Software. There are no restrictions on the ability of Borrower or any
successor to or assignee from Borrower to use and exploit all rights of
Borrower in the AS/400 Software. The use of the AS/400 Software does not
infringe, and Borrower has not received any notice, complaint, threat or
claim (1) that any AS/400 Software may infringe on any rights owned, held or
claimed by any other Person; or (2) that there is pending or threatened any
claim or litigation against Borrower contesting the right of Borrower to use
any such AS/400 Software. No other Person has any right to disclosure or use
of any proprietary technology or rights of Borrower relating to the AS/400
Software, present or future.
3.16 Full Disclosure. No information contained in this Agreement, the
other Loan Documents, the Financials or any written statement furnished by or
on behalf of any Loan Party or any
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Affiliate thereof pursuant to the terms of this Agreement or any other Loan
Document, which has previously been delivered to Agent or any Lender,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made. With
respect to all business plans and other forecasts and projections (including
the Projections) furnished by or on behalf of any Loan Party and made
available to Agent or any Lender relating to the financial condition,
operations, business, properties or prospects of such Loan Party:
(a) all material facts stated as such therein are true and
complete in all respects;
(b) all material facts upon which the forecasts or projections
therein contained are based are true and complete in all
respects and no material fact was omitted therefrom;
(c) all material assumptions made on that basis are reasonable
under the circumstances and are disclosed therein; and
(d) the forecasts or projections are reasonably based on those
facts and assumptions.
With respect to any such business plans, forecasts or projections made
available to Agent or any Lender after the Closing Date, the foregoing
clauses (a) through (d) shall be true and correct in all respects as of the
date of such business plans, projections or forecasts.
3.17 Environmental Matters. Except as disclosed in Schedule 3.17:
(a) all Facilities and the Undertaking have been, and continue to
be, owned, leased, managed, controlled or operated, and have
been and are now in compliance with all Environmental Laws;
(b) each Loan Party has obtained all Governmental Approvals which
are required under Environmental Laws in respect of the
Facilities and the Undertaking. The Undertaking has been
conducted in compliance with all such Governmental Approvals
and all such Governmental Approvals are valid and in full
force and effect;
(c) none of the Loan Parties has received any notice, or is aware
of any proposal, to amend, revoke or replace any Governmental
Approval under Environmental Laws, or requiring the issue of
any such additional Governmental Approval in respect of the
Facilities or the Undertaking;
(d) each Loan Party and, to each Loan Party's actual knowledge
(without conducting any due diligence or other investigation)
their respective predecessors in title, have carried on or are
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carrying on, as the case may be, the Undertaking in a manner
which would permit the issue, maintenance, renewal or reissue
of all Governmental Approvals required under the Environmental
Laws in respect of the Facilities and the Undertaking;
(e) no notice, citation, summons or order has been issued, no
complaint has been filed, no administrative or legal
proceedings have been instituted and no penalty has been
assessed and no environmental investigation or review is
pending or threatened by any Governmental Body with respect to
any alleged:
(1) violation by any Loan Party of any Environmental Law with respect
to the Facilities or the Undertaking, or
(2) failure by any Loan Party to have any Governmental Approval which
any of them is required to have under Environmental Laws in
respect of the Facilities or the Undertaking, or
(3) violation of or failure by any Loan Party to comply with any
Governmental Approval which any of them is required to have under
Environmental Laws in respect of the Facilities or the
Undertaking;
(f) none of the Loan Parties nor, to each Loan Party's actual
knowledge (without conducting any due diligence or other
investigation), none of their respective predecessor's in
title, is or has been on notice of, or subject to, a claim,
administrative order or other demand either to take
decontamination or restoration or other action under any
Environmental Laws, or to reimburse any Person who has taken
such action, in connection with a Facility or other property
or is or has been the object of any stop order, control order,
directive, order, programme approval, certificate or
depollution programme relating to an Environmental Activity or
any other environmental matter which mandates any work,
repairs, construction, modifications, capital expenditures or
any preparation of contingency plans binding upon any Loan
Party;
(g) none of the Loan Parties nor, to each Loan Party's actual
knowledge (without conducting any due diligence or other
investigation), any of their respective predecessors in title,
has, contrary to any Environmental Laws, used, generated,
treated, stored, recycled, reused or Discharged any
Contaminant in, on, under, or from any property now or
previously owned, operated, leased or occupied by any Loan
Party or any of their respective predecessors in title or on
any adjoining premises;
(h) each Loan Party and, to each Loan Party's actual knowledge
(without conducting any due diligence or other investigation),
their respective predecessors in title, has reported promptly
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to appropriate Governmental Bodies the occurrence of any
Environmental Activity or any other event where required to do
so by Environmental Laws in respect of any of the Facilities
and the Undertaking;
(i) there are no environmental Liens or registrations under any
Environmental Laws on any Facility and no actions have been
taken which could subject any Facility to such environmental
Liens or registrations;
(j) there is no fact, condition or circumstance relating to the
Facilities or the Undertaking that could result in any
liability under any Environmental Laws;
(k) none of the Loan Parties has any liability or contingent
liability under any Environmental Laws in connection with the
Facilities or the Undertaking (whether or not such contingent
liability is required under GAAP to be reflected in the
financial statements of any Loan Party or any Subsidiary);
(l) there are no unauthorized locations in Canada and the United
States to which Contaminants have been shipped or disposed of
by any Loan Party;
(m) all facilities and all transporters and handlers engaged by
any Loan Party to transport or dispose of any Contaminants
had, at the time of shipment or disposal, all required
Governmental Approvals; and
(n) Borrower has provided to Agent copies of all environmental
reports, reviews and audits prepared within the past five
years and all reasonably available and current information
pertaining to actual or potential environmental liabilities,
in each case, relating to each Loan Party.
3.18 Insurance Policies. Schedule 3.18 lists all insurance of any nature
maintained for current occurrences by each Loan Party, as well as a summary
of the terms of such insurance. Such insurance complies with the standards
set forth in Annex F.
3.19 Bank Accounts and Lock Boxes. Schedule 3.19 lists all banks and other
financial institutions at which each Loan Party maintains deposits and/or
other accounts and lock boxes, including the Disbursement Accounts, the
Blocked Accounts and the Lock Boxes, and such Schedule correctly identifies
the name, address and telephone number of each such financial institution,
the name in which the account is held, a description of the purpose of the
account, and the complete account number. None of the Loan Parties maintains
any post office or other type of lock box.
3.20 Solvency. Each Loan Party is solvent and will not become insolvent
after giving effect to the transactions contemplated by this Agreement and
the other Loan Documents. Each Loan Party, after giving effect to the
transactions contemplated by this Agreement and the other Loan
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Documents, will have an adequate amount of capital to conduct its business
until the Commitment Termination Date.
3.21 Inventory. All Inventory purchased by each Loan Party is purchased
free and clear of any and all adverse claims other than unpaid suppliers'
rights to repossess goods under Section 81.1 of the Bankruptcy and Insolvency
Act (Canada) and such suppliers' substantially similar rights under the Civil
Code of Quebec.
3.22 Corporate Structure. Borrower is a wholly owned Subsidiary of ICP and
McDonald is a wholly owned Subsidiary of Borrower. Borrower has no
Subsidiaries other than McDonald. McDonald has no Subsidiaries.
3.23 Government Contracts. The aggregate amount of the Accounts of all
Loan Parties that are subject to the Financial Administration Act (Canada) or
any other similar Applicable Law does not exceed $150,000 in any Fiscal Year.
3.24 Customer and Trade Relations. As of the Closing Date, there exists no
actual or threatened termination or cancellation of, or any material adverse
modification or change in:
(a) the business relationship of any Loan Party with any customer
or group of customers whose purchases during the preceding
twelve (12) months caused them to be ranked among the ten
largest customers of any Loan Party; or
(b) the business relationship of any Loan Party with any supplier
material to its operations.
Except as set out in Schedule 3.24, none of the Loan Parties purchases
Inventory from any Affiliate of any Loan Party other than from another Loan
Party.
3.25 Agreements and Other Documents. As of the Closing Date, each Loan
Party has provided to Agent or its counsel accurate and complete copies of
all of the following agreements or documents to which it or any of its
properties is subject and each of which is listed on Schedule 3.25:
(a) supply agreements and purchase agreements not terminable by any
Loan Party within sixty (60) days following written notice
issued by such Loan Party and involving transactions in excess
of $50,000 per annum;
(b) any lease of Equipment requiring aggregate rental and other
payments in excess of $50,000 per annum;
(c) all material licenses and permits held by any Loan Party
necessary for the conduct of each Loan Party's business;
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(d) instruments (including guarantees) or documents evidencing
Indebtedness of any Loan Party or Affiliate Corporation and any
security interest granted by any Loan Party with respect
thereto;
(e) all licence agreements and collective agreements and other
material agreements to which any Affiliate Corporation is a
party or any of their property is bound;
(f) any lease of Real Property; and
(g) instruments and agreements relating to equity securities,
rights, options, or warrants of any Loan Party.
3.26 ICP Indebtedness. As of the Closing Date, Borrower has delivered to
Agent a complete and correct copy of all documents evidencing or delivered in
connection with the ICP Indebtedness and there is no other Indebtedness of
any Loan Party to any Affiliate of any Loan Party other than trade credit
permitted under Section 6.4. Borrower has the corporate power and authority
to incur the ICP Indebtedness. All Obligations, including the Obligations to
pay principal of and interest on the Revolving Credit Loan, rank in all
respects in priority to the ICP Indebtedness as provided in the ICP
Postponement and Subordination Agreement. Each Loan Party acknowledges that
Agent and each Lender are entering into this Agreement and are extending the
Revolving Credit Commitments in reliance upon the provisions of the ICP
Postponement and Subordination Agreement.
3.27 Emerson Indebtedness. As of the Closing Date, Borrower has delivered
to Agent a complete and correct copy of all documents evidencing or delivered
in connection with the Emerson Indebtedness. Borrower has the corporate
power and authority to incur the Emerson Indebtedness. All Obligations,
including the Obligations to pay principal of and interest on the Revolving
Credit Loan, rank in all respects in priority to the Emerson Indebtedness as
provided in the Emerson Postponement, Subordination and Assignment Agreement.
Each Loan Party acknowledges that Agent and each Lender are entering into
this Agreement and are extending the Revolving Credit Commitments in reliance
upon the provisions of the Emerson Postponement, Subordination and Assignment
Agreement.
3.28 Collateral.
(a) The Liens granted to Agent, on behalf of Agent and Lenders,
pursuant to the Collateral Documents will be, at the Closing Date, fully
perfected first priority Liens in and to the Collateral described therein,
subject only to any Liens permitted by Section 6.7.
(b) As of the Closing Date, each Loan Party has used reasonable
commercial efforts to deliver or cause to be delivered to Agent a landlord
waiver and consent or bailee agreement, as applicable, each in form and
substance acceptable to Agent, duly executed by each lessor of each leased
property of each Loan Party on which Collateral is located on the Closing
Date or each processor, customer, agent, warehouseman or consignee on whose
property Collateral is located on the
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Closing Date, as applicable. Each Loan Party has delivered to Agent on or
before the Closing Date all landlord waivers and consents and landlord
consents and acknowledgements (in any form) received by any Loan Party from
any landlord of such Loan Party.
SECTION 4 FINANCIAL STATEMENTS AND INFORMATION
4.1 Reports and Notices. Each Loan Party covenants and agrees that from
and after the Closing Date and until the Termination Date, it shall deliver
to Agent, in sufficient numbers for Agent and each Lender, the applicable
financial statements, projections and notices at the times and in the manner
set forth in Annex E.
4.2 Communication with Accountants. Each Loan Party authorizes Agent to
communicate directly with its Accountants and authorizes or will arrange for
authorization for those Accountants to make available to Agent any and all
financial statements and other supporting financial documents and schedules,
including copies of any management letter with respect to its business,
financial condition and other affairs. At or before the Closing Date and
annually thereafter, the Loan Parties shall deliver to Agent a letter from
the Accountants (the "Accountant's Letter"), addressed to Agent and Lenders,
in which the Accountants agree to respond to questions given to them in
writing by Agent regarding the business and financial condition of the Loan
Parties based solely on their audit of the Loan Parties. After the Closing
Date, if any Loan Party engages the services of accountants other than the
Accountants, such Loan Party shall deliver to Agent from such accountants and
a letter addressed to Agent and Lenders containing the same terms and
provisions as the Accountant's Letter.
SECTION 5 AFFIRMATIVE COVENANTS
Each Loan Party jointly and severally covenants and agrees that, unless Agent
shall otherwise consent in writing with the agreement of the Required
Lenders, from and after the date hereof and until the Termination Date:
5.1 Maintenance of Existence and Conduct of Business. Each Loan Party
shall:
(a) do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence and its
rights and franchises;
(b) continue to conduct its business substantially as now
conducted or as otherwise permitted hereunder;
(c) at all times maintain, preserve and protect all of its
Intellectual Property, and keep, maintain and preserve its
Equipment, fixtures and all the remainder of its property, in
use or useful in the conduct of its business and keep the same
in good repair, working order and condition (taking into
consideration ordinary wear and tear) and from time to time
make, or cause to be made, all
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necessary or appropriate repairs, replacements and
improvements thereto consistent with industry practices, so
that the business carried on in connection therewith may be
properly and advantageously conducted at all times; and
(d) not change its legal name or transact business under
additional business style names in addition to those set forth
in Schedule 3.2 unless Agent is given notice at least 30 days
prior to any change in its legal name or the transaction of
business under any such business style name.
5.2 Payment of Obligations, Charges and Claims. Each Loan Party shall pay
and discharge in accordance with the terms thereof,
(a) all of its Indebtedness, Obligations and obligations
represented by rental or lease payments payable in respect of
any location at which Collateral is located at any time or in
respect of any computer software of hardware rented or leased
by any Loan Party at any time, in each case, as and when due
and payable;
(b) all Charges imposed upon it or its income and profits, or
any of its property (real, personal or mixed); and
(c) all lawful claims for labour, materials, supplies and
services or otherwise, which if unpaid might by law become a
Lien on its property;
provided, that none of the Loan Parties shall be required to pay any such
Charge or claim which is being contested in good faith by proper legal
actions or proceedings, so long as at the time of commencement of any such
action or proceeding and during the pendency thereof:
(1) no Default or Event of Default shall have occurred and be
continuing,
(2) adequate reserves with respect thereto are established and are
maintained in accordance with GAAP,
(3) such contest operates to suspend collection of the contested
Charges or claims and is maintained and prosecuted continuously
with diligence,
(4) none of the Collateral would be subject to forfeiture or loss or
any Lien by reason of the institution or prosecution of such
contest,
(5) no Lien, except for Permitted Encumbrances, shall exist, be
imposed or be attempted to be imposed for such Charges or claims
during such action or proceeding unless the full amount of such
Charge or claim is covered by insurance satisfactory in all
respects to Agent, and
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(6) Agent has not advised Borrower in writing that Agent reasonably
believes that nonpayment or nondischarge thereof could have or
result in a Material Adverse Effect.
The applicable Loan Party shall promptly pay or discharge such
contested Charges and all additional charges, interest, penalties and
expenses, if any, and shall deliver to Agent evidence acceptable to Agent of
such compliance, payment or discharge, if such contest is terminated or
discontinued adversely to that Loan Party or the conditions set forth in this
Section 5.2 are no longer satisfied.
5.3 Books and Records. Each Loan Party shall keep adequate records and
books of account with respect to its business activities, in which proper
entries, reflecting all financial transactions, are made in accordance with
GAAP and on a basis consistent with the Financials.
5.4 Litigation. Each Loan Party shall notify Agent in writing, promptly
upon learning thereof, of any litigation, action, claim or proceeding being
commenced or threatened against any Loan Party at law, in equity or otherwise
and of the institution against any such Person of any litigation, action,
claim or proceeding which:
(a) may involve an amount in excess of $100,000, or the Equivalent
Amount thereof, individually or in the aggregate;
(b) if determined adversely, could have or result in a Material
Adverse Effect;
(c) seeks injunctive relief;
(d) alleges any criminal misconduct on the part of any Loan Party;
or
(e) challenges any Loan Party's right, power or competence to
enter into or perform any of its obligations under the Loan
Documents, or the validity or enforceability of any Loan
Document or any action taken thereunder.
5.5 Insurance, Damage to or Destruction of Collateral.
(a) Each Loan Parties shall, at its sole cost and expense, maintain
the policies of insurance in such amounts and as otherwise described in Annex
F in form and with insurers recognized as adequate by Agent. If any Loan
Party at any time or times hereafter shall fail to obtain or maintain any of
the policies of insurance required above or to pay all premiums relating
thereto, Agent may at any time or times thereafter obtain and maintain such
policies of insurance and pay such premiums and take any other action with
respect thereto which Agent deems advisable. Agent shall have no obligation
to obtain insurance for any Loan Party or pay any premiums therefor. By
doing so, Agent shall not be deemed to have waived any Default or Event of
Default arising from any Loan Party's failure to maintain such insurance or
pay any premiums therefor. All
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sums so disbursed, including attorneys' fees, court costs and other charges
related thereto, shall be payable on demand by Borrower to Agent and shall be
additional Obligations hereunder secured by the Collateral.
(b) Agent reserves the right at any time, upon review of any Loan
Party's risk profile (including any change in the product mix maintained by
any Loan Party or any laws affecting the potential liability of such Loan
Party), to require additional forms and limits of insurance to, in Agent's
opinion, adequately protect both Agent's and Lender's interests in all or any
portion of the Collateral and to ensure that each Loan Party is protected by
insurance in amounts and with coverage customary for its industry. If
requested by Agent, each Loan Party shall deliver to Agent from time to time
a report of a reputable insurance broker, satisfactory to Agent, with respect
to its insurance policies.
(c) Each Loan Party shall deliver to Agent, in form and substance
satisfactory to Agent, endorsements to all of its (1) "All Risk" and business
interruption insurance naming Agent, on behalf of itself and Lenders, as loss
payee, and (2) general liability and other liability policies naming Agent,
on behalf of itself and Lenders, as additional insured. Each Loan Party
irrevocably makes, constitutes and appoints Agent (and all officers,
employees or agents designated by Agent), so long as any Default or Event of
Default shall have occurred and be continuing or the anticipated insurance
proceeds exceed $250,000, as such Loan Party's true and lawful agent and
attorney-in-fact for the purpose of making, settling and adjusting claims
under such "All Risk" policies of insurance, endorsing the name of such Loan
Party on any cheque or other item of payment for the proceeds of such "All
Risk" policies of insurance and for making all determinations and decisions
with respect to such "All Risk" policies of insurance. Agent shall have no
duty to exercise any rights or powers granted to it pursuant to the foregoing
power of attorney. Borrower shall promptly notify Agent of any loss, damage,
or destruction to the Collateral in the amount of $100,000 or more, whether
or not covered by insurance. Each Loan Party agrees that it will not settle
or adjust any claim under such "All Risk" policies of insurance where the
anticipated insurance proceeds exceed $500,000 without the prior written
consent of Agent. Agent is hereby authorized to directly collect all
insurance proceeds relating to the Collateral, so long as any Default or
Event of Default shall have occurred and be continuing or the anticipated
insurance proceeds exceed $500,000. After deducting from such proceeds the
reasonable expenses, if any, incurred by Agent in the collection or handling
thereof, Agent may, at its option, apply such proceeds to the reduction of
the Obligations in accordance
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with Section 1.12, or permit the relevant Loan Party to use such money, or
any part thereof, to replace, repair, restore or rebuild the Collateral in a
diligent and expeditious manner with materials and workmanship of
substantially the same quality as existed before the loss, damage or
destruction. So long as no Default or Event of Default shall have occurred
and be continuing, if the casualty giving rise to such insurance proceeds
would not reasonably be expected to have a Material Adverse Effect or such
insurance proceeds do not exceed $500,000 in the aggregate, Agent shall
permit each Loan Party to replace, restore, repair or rebuild the property;
provided that if the relevant Loan Party has not completed or entered into
binding agreements to complete such replacement, restoration, repair or
rebuilding within 180 days of such casualty, Agent may apply such insurance
proceeds to the Obligations in accordance with Section 1.12. All insurance
proceeds which are to be made available to a Loan Party to replace, repair,
restore or rebuild the Collateral shall be applied by Agent to reduce the
outstanding principal balance of the Revolving Credit Loan (which application
shall not result in a permanent reduction of the Revolving Loan Commitment)
and upon such application, Agent shall establish a reserve against the
Borrowing Base in an amount equal to the amount of such proceeds so applied.
Thereafter, such funds shall be made available to Borrower to provide funds
to replace, repair, restore or rebuild the Collateral as follows: (A)
Borrower shall request a Revolving Loan Advance in the amount requested to be
released; (B) so long as the conditions set forth in Section 2.2 have been
met, Lenders shall make such Revolving Loan Advance; and (C) the reserve
established with respect to such insurance proceeds shall be reduced by the
amount of such Revolving Loan Advance. To the extent not used to replace,
repair, restore or rebuild the Collateral, such insurance proceeds shall be
applied in accordance with Section 1.12.
(d) Each Loan Party shall, promptly upon such Loan Party learning
of the institution of any proceeding for the expropriation or other taking of
any Collateral, notify Agent of the pendency of such proceeding, and agrees
that Agent may participate in any such proceeding and such Loan Party from
time to time will deliver to Agent all instruments reasonably requested by
Agent to permit such participation. Agent shall (and is hereby authorized
to) collect any and all awards, payments or other proceeds of any such
expropriation or taking. If all amounts collected are less than $250,000 and
no Default or Event of Default has occurred and is continuing, the applicable
Loan Party shall be entitled to use such amounts, within 180 days of receipt
by the Agent, to replace, such expropriated or taken Collateral as provided
in Section 5.5(g). Otherwise, Agent may apply such amounts to the reduction
of the Obligations in the manner set forth in Section 1.12 or, at Agent's
option in its sole discretion, permit the applicable Loan Party to use such
amounts, or any part thereof, to replace, such Collateral as provided in
Section 5.5(g).
(e) If, notwithstanding the provisions hereof which require that
Agent be the sole loss payee with respect to the Collateral, a cheque or
other instrument from an insurer is made payable to any Loan Party solely or
jointly with Agent, Agent may endorse such Person's name thereon and take
such other action as Agent may elect to obtain the proceeds thereof. After
deducting from such proceeds the reasonable expenses, if any, incurred by
Agent in the collection or handling thereof, Agent may apply such proceeds to
the reduction of the Obligations in the manner set forth in Section 1.12.
If, notwithstanding that all proceeds of insurance in respect of any
Collateral shall be payable to Agent, any Loan Party receives any proceeds of
insurance in respect of any
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Collateral in respect of the policies required to be maintained under this
Agreement, such proceeds shall be held in trust by that Loan Party for Agent
and, unless Agent otherwise permits,
such proceeds shall be forthwith deposited in accordance with the cash
management system described in Annex B.
(f) Subject to the terms and conditions hereof (including Section
2.2), after application of the proceeds of any loss or taking of any
Collateral to the reduction of the Obligations pursuant to Section 5.5(e)
Borrower may borrow Revolving Credit Advances for the purpose of replacing,
repairing or restoring any Collateral subject to such loss or taking in
accordance with Section 5.5(g).
(g) Any Collateral which is to be replaced, repaired or restored
pursuant to this Section 5.5 shall be replaced, repaired or restored pursuant
to such terms and conditions as Agent may require and with materials and
workmanship of substantially as good a quality as existed before such loss or
taking, and each Loan Party shall commence such replacement, repair or
restoration as soon as practicable and proceed diligently with it until
completion to Agent's satisfaction. Borrower shall provide to Agent written
progress reports, other information and evidence of compliance with the
foregoing.
(h) Before or contemporaneously with the amendment,
supplementation or other modification of any Loan Party's insurance coverage
under which Agent is to be named as a loss payee under the terms of this
Agreement, Borrower agrees to deliver to Agent:
(1) an Assignment of Monies Payable Under Insurance Policies duly
executed by the applicable Loan Party;
(2) a duly executed confirmation of the applicable insurer
confirming the receipt of the transfer and assignment and
authorization provided for in such Assignment of Monies Payable
Under Insurance Policies and the duly executed agreement of the
applicable insurer to pay all proceeds of insurance in
accordance with the same; and
(3) a legal opinion of counsel acceptable to Agent in form and
substance acceptable to Agent as to the Assignment of Monies
Payable Under Insurance Policies being enforceable against the
applicable Loan Party.
5.6 Compliance with Laws. Each Loan Party shall comply in all material
respects with all Applicable Laws; provided that, each Loan Party shall
comply in all respects with all Applicable Laws regarding the withholding,
collection, payment and deposit of employee's income, unemployment and health
insurance or other benefits and social security.
5.7 Agreements. Each Loan Party shall perform and comply with, within all
required time periods in all material respects, all of its obligations and
enforce all of its rights under each agreement, contract, instrument or other
document to which it is a party, including any Material Contracts, leases,
licences and customer contracts to which it is a party provided that, each
Loan Party shall perform and comply with, within all required time periods,
all of its obligations and enforce all of its rights thereunder where the
failure to so perform and enforce could have or result in a Material Adverse
Effect. Each Loan Party shall take such actions or omit to take such actions
so as not to cause a breach of the representations and warranties hereunder
and under the other Loan Documents.
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5.8 Supplemental Disclosure. On the request of Agent or upon becoming
aware of an event that causes a Material Adverse Effect or a Default or an
Event of Default, and in any event not less frequently than once each Fiscal
Quarter, Borrower will supplement (or cause to be supplemented) each Schedule
hereto, or representation herein or in any other Loan Document with respect
to any matter hereafter arising which, if existing or occurring at the date
of this Agreement or at the time the representations and warranties are
renewed as provided in Section 2.2, would have been required to be set forth
or described in such Schedule or as an exception to such representation or
which is necessary to correct any information in such Schedule or
representation which has been rendered inaccurate by such matter; provided,
that with respect to the requirement to provide supplements once each Fiscal
Quarter, such Schedule, representation or warranty shall not be deemed to be
inaccurate pending delivery of such supplements and provided further (a) no
such supplement to any such Schedule or representation shall be or be deemed
a waiver by Agent or Lenders of any Default or Event of Default resulting
from the matters disclosed in such supplement except as consented to in
writing by Agent (with the consent of the Required Lenders) and (b) no
supplement shall be required as to representations and warranties that relate
solely to the Closing Date. Each Loan Party shall, if so requested by Agent,
furnish to Agent and Lenders as often as they reasonably request, statements
and schedules further identifying and describing the Collateral and such
other reports in connection with the Collateral as Agent may reasonably
request, all in reasonable detail, and each Loan Party shall advise Agent and
Lenders promptly, in reasonable detail, of:
(1) any Lien, other than as permitted pursuant to Section 6.7,
attaching to or asserted against any of the Collateral;
(2) any material change in the composition of the Collateral; and
(3) the occurrence of any other event which would have a Material
Adverse Effect upon the Collateral and/or Agent's and/or
Lenders' Lien thereon.
Any supplement or other information provided hereunder which combines
existing information with new information or deleted information shall be
presented in such a manner that the new information or deleted information is
identifiable.
5.9 Environmental Matters.
(a) Each Loan Party:
(1) shall be at all times in compliance with all Environmental
Laws; and
(2) shall similarly ensure that the Facilities and the Undertaking
are in compliance with all Environmental Laws and that no
Contaminants are, contrary to any Environmental Laws,
Discharged, generated, used, stored, transported or otherwise
dealt with.
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(b) Borrower shall deliver to Agent promptly following the
completion thereof a copy of any environmental assessments or audits that it
or any other Loan Party conducts or has conducted by a third party. If Agent
requests, in its reasonable discretion, in connection with Agent's monitoring
and the protection of the Collateral, an Environmental Assessment, Borrower
shall, upon the request of Agent, provide to Agent an Environmental
Assessment concerning any Facility or element of the Undertaking, which
Environmental Assessment must prove satisfactory to Agent, acting reasonably.
If Borrower does not initiate such Environmental Assessment within 30 days of
Agent's request and diligently proceed with such Environmental Assessment
thereafter, Agent may, but is not required to, retain an independent,
qualified engineer or environmental consultant to conduct the Environmental
Assessment. Each Loan Party shall grant full and complete access to the
Facilities, including, but not limited to, the right to enter upon,
investigate, and collect air, surface water, groundwater, and soil samples,
provided, that such entry, investigation and sampling shall not unduly
interfere with the normal business and operations of such Loan Party. All
costs of such an Environmental Assessment will be paid by Borrower upon
demand.
(c) Borrower shall promptly, and in any event within five Business
Days of the receipt by Borrower, notify Agent of any written notice or
communication received by any Loan Party of the following:
(1) any report to a Governmental Body pursuant to any applicable
Environmental Laws or Governmental Approvals of any
Environmental Activity relating to the Facilities or the
Undertaking, made by or known to any Loan Party;
(2) any notification to any Loan Party by a Governmental Body to
the effect that:
(A) it intends to cancel, suspend or refuse to renew a
Governmental Approval relating to Environmental Laws or
has so cancelled, suspended or refused to renew the same,
(B) it intends to impose or has imposed terms, provisions,
conditions or limitations in a Governmental Approval
relating to Environmental Laws,
(C) it has imposed or intends to impose any order,
requirement, directive, program approval or certificate
relating to Environmental Laws which mandates any work,
repairs, construction, standby equipment, modifications
or capital expenditure,
(D) it has imposed or intends to impose any stop order or
control order under an Environmental Law relating to any
Loan Party, or
(E) a Loan Party may be liable, in whole or in part, for any
remedial action, including decontamination or restoration
work;
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(3) any investigation, inquiry, search (whether effected pursuant
to a search order, search warrant or powers conferred by
statute), characterization work, sampling, excavation or
drilling by a Governmental Body relating to any Environmental
Activity or other environmental matter concerning any Loan
Party, but not including routine and periodic inspections or
site visits by members of a Governmental Body dealing with
pollution abatement;
(4) any administrative or judicial complaint or order filed against
any Loan Party alleging violation of any Environmental Laws or
Governmental Approval;
(5) any injunction, prosecution, action, charge or proceeding,
whether before a court or a regulatory body, dealing with
Environmental Laws;
(6) any request or order by a Governmental Body that any Loan Party
perform any evaluation, assessment, characterization work,
study or test relating to any Environmental Activity;
(7) any change in Governmental Approvals issued to any Loan Party
applicable to the generation, transportation, storage or
disposal by such Loan Party of Contaminants; and
(8) any process, investigation or order which could result in
liability to any Loan Party for any cleanup or remedial action,
including decontamination or restoration work, associated with
any Environmental Activity relating to any Facility or the
Undertaking or for any damages resulting from such
Environmental Activity.
(d) Borrower shall, upon receiving a written request therefor from
Agent, within 20 days of delivering to Agent a notice mentioned in Section
5.9(c), deliver to Agent a written estimate, prepared by an independent
environmental consulting firm and in form and substance satisfactory to
Agent, of the cost of the action, works or measures required pursuant to an
Environmental Law and mentioned in such notice.
(e)Borrower shall promptly, and in any event within 10 days, forward to Agent
a copy of any Government Approval or application obtained or filed by any
Loan Party under any Environmental Laws to the extent that failure to hold or
apply for the same could have a Material Adverse Effect.
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5.10 Canadian Benefit and Pension Plans.
(a) For each existing Canadian Pension Plan set forth in Schedule
3.12, each Loan Party shall:
(1) use its best efforts to ensure that such plan retains its
registered status under and is administered in a timely manner
in all respects in accordance with the applicable pension plan
text, funding agreement, the ITA and all other Applicable
Laws; and
(2) cause all reports and disclosures relating to such plan that
are required by such plan or any Applicable Laws to be filed
or distributed are filed or distributed in a timely manner.
(b) For each Canadian Pension Plan hereafter adopted by any Loan
Party which is required to be registered under the ITA or any other
Applicable Laws, that Loan Party shall:
(1) use its best efforts to seek and receive confirmation in
writing from the applicable Governmental Bodies to the effect
that such plan is unconditionally registered under the ITA or
such other Applicable Laws;
(2) from and after the adoption of any Canadian Pension Plan, use
its best efforts to ensure such plan retains its registered
status under and is administered in all respects in accordance
with the applicable pension plan text, funding agreement, the
ITA and all other Applicable Laws; and
(3) cause all reports and disclosures relating to such plan that
are required by such plan or any Applicable Laws to be filed
or distributed are filed or distributed in a timely manner.
(c) For each existing Canadian Pension Plan and Canadian Benefit
Plan set forth in Schedule 3.12 or hereafter adopted, each Loan Party shall
in a timely fashion:
(1) perform all obligations (including fiduciary, funding,
investment and administration obligations) required to be
performed in connection with such plan and the funding media
therefor;
(2) make all contributions and pay all premiums required to be
made or paid by that Loan Party to such plan in accordance
with the terms of such plan and all Applicable Laws;
(3) withhold by way of authorized payroll deductions or otherwise
collect and pay into such plan all employee contributions
required to be withheld or collected by that Loan Party in
accordance with the terms of such plan and all Applicable
Laws; and
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(4) ensure that such plan is fully funded both on an ongoing basis
and on a solvency basis using actuarial methods and
assumptions which are consistent with the valuations last
filed with the applicable Governmental Bodies and which are
consistent with generally accepted actuarial principles.
(d) Borrower shall deliver to Agent:
(1) promptly after the filing thereof by any Loan Party with any
applicable Governmental Body, copies of each annual and other
return, report or valuation with respect to each Canadian
Pension Plan;
(2) promptly after receipt thereof, a copy of any direction,
order, notice, ruling or opinion that any Loan Party may
receive from any applicable Governmental Body with respect to
any Canadian Pension Plan; and
(3) notification within 30 days of any increases in the benefits
of any existing Canadian Pension Plan or Canadian Benefit
Plan, or the establishment of any new Canadian Pension Plan or
Canadian Benefit Plan, or the commencement of contributions to
any such plan to which any Loan Party was not previously
contributing.
(e) Without limiting Section 5.10(d) above, Borrower shall cause
any actuarial valuation required by Applicable Law with respect to any of the
Canadian Pension Plans as of any specified date to be completed, filed with
the applicable Government Body and delivered to the Agent all within 100 days
of such specified date.
5.11 Landlord's, Warehouseman/Bailee and Mortgagee Agreements. Each Loan
Party shall, unless otherwise agreed to by Agent in writing, use reasonable
commercial efforts to obtain or cause to be obtained a landlord agreement or
warehouseman/bailee agreement, each in form and substance acceptable to Agent
with the lessor of each present or future leased premises of that Loan Party
or the warehouseman or bailee of each present or future warehouse or other
location at which any Collateral is located at any time, as applicable.
After the Closing Date, if within 10 Business Days following notification
from Borrower to Agent that a Loan Party proposes to keep, maintain or store
Collateral at any new location (that is, a location at which Collateral is
not kept, maintained or stored as of the Closing Date), Agent requests a
landlord waiver and consent or a bailee agreement, as applicable, Borrower
shall use reasonable commercial efforts to deliver
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to Agent such landlord waiver and consent or bailee agreement requested in
form and substance satisfactory to Agent before any Collateral is kept,
maintained or stored at any such location. For greater certainty, with
respect to each location at which Inventory of any Loan Party is located, if
Borrower is unable to deliver to Agent a landlord waiver and consent or a
bailee agreement, as applicable, under which Agent is granted access to the
Collateral located at such location and containing a waiver of all rights of
distraint against such Collateral and otherwise in form and substance
satisfactory to Agent, acting reasonably, Eligible Inventory at that location
may be subject to a reserve determined by Agent in the exercise of its
reasonable credit judgment for purposes of calculating Revolving Credit
Availability. The reserve provided for in the immediately preceding sentence
shall not exceed (a) the aggregate amount of arrears of rent payable (if any)
in respect of all locations at which Collateral is located plus (b) Agent's
reasonable estimate of the aggregate amount of rent that would be payable
during the period that Agent reasonably estimates could be necessary to
permit Agent and Lenders to exercise their rights and remedies in respect of
Collateral located at any and/or all locations, including sales of Collateral
at such locations or removal of Collateral from such locations to other
locations and storage and eventual sales of Collateral at such other
locations; plus (c) in all cases, all costs and expenses ancillary thereto.
5.12 Certain Obligations Respecting Subsidiaries. Borrower shall take such
action from time to time as shall be necessary to ensure that McDonald is a
direct wholly-owned Subsidiary of Borrower and is owned directly only by
Borrower.
5.13 Report to Other Creditors; Letters of Credit and Foreign Exchange
Contracts. Borrower shall provide to Agent copies of any statement or report
provided to any other party by any Loan Party pursuant to the terms of each
contract or agreement relating to Indebtedness of any Loan Party and not
otherwise required to be provided to Agent pursuant to this Agreement
promptly following the provision to such other party. Borrower shall deliver
to Agent concurrently with the application by any Loan Party for a letter of
credit a copy of such application and concurrently with the entry by any Loan
Party into a foreign exchange contract a copy of such foreign exchange
contract.
5.14 Intellectual Property. If before the Termination Date, any Loan Party
shall:
(a) obtain rights to any new Intellectual Property; or
(b) become entitled to the benefit of any Intellectual Property,
Borrower shall give to Agent prompt written notice thereof.
In addition, each Loan Party shall:
(1) prosecute diligently each Intellectual Property registration
application pending as of the Closing Date or thereafter until
the Termination Date, as is appropriate in its best interests;
(2) make applications to register its Intellectual Property, as is
appropriate in its best interests;
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(3) use its best efforts to preserve and maintain all rights in
its Intellectual Property, as is appropriate in its best
interests, and to ensure that Agent and Lenders have the
unqualified right to use all Intellectual Property in any way
associated with or relating to the Collateral for the purpose
of exercising their rights and remedies in respect of the
Collateral which rights and remedies may not be adversely
affected by any event, including without limitation the
bankruptcy, insolvency or reorganization of any Loan Party or
any Affiliate of any Loan Party or any other Person;
(4) Borrower shall duly comply with all requirements of any
Governmental Body applicable to any Intellectual Property
owned or used by Borrower and with all covenants, terms or
conditions upon which any such Intellectual Property is owned
or used; and
(5) Borrower shall notify Agent in writing:
(A) forthwith of the failure of any licensee or other
Person to pay or perform any obligations due to
Borrower in respect of any Intellectual Property owned
or licensed by Borrower;
(B) forthwith of any proceedings before any court,
administrative board or other tribunal which could
materially adversely affect Borrower or any
Intellectual Property and of any action or proceeding
that may affect Borrower's rights in the Intellectual
Property and of each allegation that the Intellectual
Property infringes upon or violates the rights of any
Person; and
(C) at least thirty (30) days prior to any change of name
of Borrower, any transfer or license of the
Intellectual Property or any part thereof or any
change in the location of the Intellectual Property or
any part thereof.
Each Loan Party shall, and Borrower shall instruct the solicitor or agent
prosecuting or filing any Intellectual Property applications of a Loan Party
to, take all necessary steps to perfect Agent's security in the Intellectual
Property that is the subject of such applications and to deliver to Agent as
soon as practically possible a legal opinion from counsel, in form and
substance satisfactory to Agent, stating that Agent's security is enforceable
and duly perfected. With respect to each Loan Party's options to acquire
rights or rights to use any Intellectual Property acquired after the Closing
Date, Borrower shall deliver to Agent a copy of each Licence Agreement
evidencing such options or rights, as applicable, (other than any Licence
Agreement relating solely to non-customized commercial software that is
available for sale to the general public and such Licence Agreement is the
owner's standard pre-printed agreement used for selling such software to the
general public) and an agreement duly executed by each owner and (in the case
of rights sublicensed to each Loan Party) each licensor of such Intellectual
Property, in form and substance satisfactory to Agent, together with a legal
opinion relating to such security from counsel, and
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in form and substance, satisfactory to Agent. None of the Loan Parties shall
abandon any right to file or register any Intellectual Property material to
its business without the consent of Agent. At any time after the occurrence
and during the continuance of an Event of Default, Agent shall have the
right, but shall in no way be obligated, to bring suit in its own name, on
its behalf and on behalf of Lenders, to enforce all Intellectual Property of
each Loan Party and, if Agent shall determine that it shall commence any such
suit, each Loan Party shall do any and all lawful acts and execute any and
all proper documents required by Agent in aid of such enforcement and
Borrower hereby indemnifies Agent and Lenders and shall, promptly, upon
demand from Agent, reimburse Agent for all costs and expenses incurred by
Agent in the exercise of its rights under this Section 5.14.
5.15 Bank Act Security. If at any time, any Lender is a bank to which the
Bank Act (Canada) applies, each Loan Party shall, upon any request from Agent
on behalf of such Lender, execute and deliver to Agent on behalf of such
Lender security under Section 427 of the said Act including, without
limitation, a notice of intention to give security, a promise to give
security and an assignment, containing terms substantially similar to the
existing Collateral Documents charging or creating a security interest in
Inventory of such Loan Party and, otherwise in form and substance
satisfactory to Agent, together with a legal opinion and report, from a
Person or Persons acceptable to Agent, with respect to the execution,
delivery and enforceability of such documentation and its proper
registration, all in form and substance satisfactory to Agent.
5.16 New Locations. Borrower shall advise Agent in writing not less than
30 days before any Loan Party:
(a) changes the location of its chief executive office or
principal places of business or the location of its records or
acquiring any new such locations from those listed in Schedule
3.2; or
(b) keeps, maintains or stores Inventory at any location other
than the locations listed in Schedule 3.2;
provided, in each case, that any such new location must be within Canada.
Before changing any such location or acquiring another such location (whether
by purchase, lease or otherwise), the applicable Loan Party shall provide
Agent and Lenders with such financing statements, charges, assignments,
hypothecs, security interests, other Loan Documents, landlord agreements,
warehouseman/bailee agreements and agreements (as contemplated under Section
5.11) and legal opinions as Agent may reasonably require in order to assure
and maintain a first priority, perfected Lien on the Collateral, subject only
to Liens permitted by Section 6.7, and to assure access thereto.
5.17 Leased and Other Locations of Collateral that are Not Owned. Each
Loan Party shall timely and fully pay their respective monetary obligations
and otherwise perform their respective
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material obligations under all leases and other agreements with respect to
each leased location or public warehouse or other location that is not owned
by such Loan Party where any Collateral may be located. Borrower shall
promptly deliver to Agent copies of:
(a) each default notice received under or with respect to any such
leased location or public warehouse or other location; and
(b) such other notices or documents as Agent may request in its
reasonable discretion.
5.18 Security. Each Loan Party shall defend the Lien granted pursuant to
the Loan Documents against claims and demands of all Persons whomsoever.
Each Loan Party shall maintain the Collateral so as not to be commingled with
the assets of any other Person thereby becoming indistinguishable from that
of another Person (other than another Loan Party). Each Loan Party will
advise Agent in writing of any material change to Collateral or acquisition
of Collateral out of the ordinary course within one (1) Business Day of such
change or acquisition. Upon the request of Agent, Borrower will furnish to
Agent statements and schedules further identifying and describing Collateral.
Prior to any Loan Party purchasing any Inventory from any Affiliate (other
than another Loan Party), Borrower shall use reasonable commercial efforts to
deliver to Agent a Supplier Waiver and Assignment duly executed by that
Affiliate, together with a legal opinion of counsel, and in form and
substance, acceptable to Agent as to such Supplier Waiver and Assignment
being duly authorized, executed and delivered by that Affiliate.
5.19 Inventory Reporting and Tracking. Each Loan Party shall at all times
maintain a perpetual inventory system which is updated on a daily basis,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory and of Eligible Inventory, its cost
therefor and daily withdrawals therefrom and additions thereto, all of which
records shall be available during the Loan Party's usual business hours at
the request of any of the Agent's officers, employees or agents.
5.20 MOEE Search Results. Within 90 days after the Closing Date, Borrower
shall provide to Agent in writing the results of a review of the records of
the Ministry of Energy and Environment pertaining to the Facilities and the
Undertaking.
SECTION 6 NEGATIVE COVENANTS
Each Loan Party jointly and severally covenants and agrees that,
without the prior written consent of Agent and the Required Lenders, from and
after the date hereof and until the Termination Date:
6.1 Mergers, Subsidiaries, Etc. No Loan Party shall, directly or
indirectly, by operation of law or otherwise, amalgamate or merge with,
consolidate with, acquire all or substantially all of the
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assets or shares of, or otherwise combine with, any Person or form or acquire
any Subsidiary.
6.2 Investments. No Loan Party shall, directly or indirectly, make,
maintain any Investment except:
(a) as otherwise permitted by Sections 6.3, 6.4 or 6.6;
(b) Investments outstanding on the date hereof and listed in
Schedule 6.2, but not any additional Investment therein;
(c) Cash Equivalents acquired, made or renewed only when there
are no Obligations in respect of Revolving Credit Loans
against which amounts deposited to the Collection Accounts
can be applied; and
(d) demand deposit accounts maintained in the ordinary course of
business and in accordance with Annex B and in which the
aggregate amount on deposit in all such accounts does not at
any time exceed the amount referred to in Section 6.24.
6.3 Indebtedness. No Loan Party shall create, incur, assume or permit to
exist any Indebtedness, except:
(a) the Obligations;
(b) deferred Taxes as shown on the Financials;
(c) Capital Lease Obligations and Purchase-Money Indebtedness
permitted under clause (d) of Section 6.7;
(d) the ICP Indebtedness and any accrued but unpaid interest
thereon;
(e) the Emerson Indebtedness and any accrued but unpaid interest
thereon;
(f) other Indebtedness set forth in Schedule 3.9, but not any
increase in the amount of any thereof, and any amendment,
refinancing or refunding of any thereof shall be on terms no
less favourable than the terms in existence on the Closing
Date (as determined by Agent) to any Loan Party, the Agent or
any Lender; and
(g) trade credit incurred by Borrower in favour of ICP (USA) in
accordance with Section 6.4.
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6.4 Affiliate and Employee Loans and Transactions. None of the Loan
Parties shall, directly or indirectly, enter into, assume or permit to exist
any lending, borrowing or other commercial transaction with any of its
Affiliates (other than another Loan Party) or employees, including payment of
any management, consulting, servicing, advisory or similar fee, unless such
transaction or series of related transactions is in accordance with
Applicable Law (including financial assistance restrictions thereunder) and
provided that:
(a) if such transaction or series of related transactions is with
any Affiliate of a Loan Party,
(1) such transaction or series of related transactions is
permitted by Section 6.15; or
(2) such transaction or series of related transactions is
on terms set out in writing that are no less
favourable to the applicable Loan Party than those
that could be obtained in a comparable arm's length
transaction with an entity that is not an Affiliate of
such Loan Party and, if such transaction or series of
related transactions, other than transactions
involving trade accounts incurred in the normal course
of business, involves aggregate payments in excess of
$250,000, or the Equivalent Amount, Borrower has
provided to Agent the documentation evidencing such
transaction or series of related transactions; and
(b) if such transaction or series of related transactions is with
any employee of any Loan Party,
(1) such transaction or series of related transactions is
permitted by Section 6.15; or
(2) such transaction or series of related transactions
consists of loans to such employee that are evidenced
in writing and are made on an arm's length basis in
the ordinary course of business for travel expenses
and relocation expenses up to $50,000, or the
Equivalent Amount, for any single employee and
$500,000, or the Equivalent Amount, in the aggregate
for all such employees of all Loan Parties at any one
time outstanding.
6.5 Capital Structure and Business. Except as permitted under Section
5.1, no Loan Party shall:
(a) make any changes in its business objectives, purposes, or
operations which could in any way adversely affect the
repayment of the Obligations or have or result in a Material
Adverse Effect;
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(b) make any change in its capital structure as described in
Schedule 3.9 (including the issuance or recapitalization of
any shares of Stock or other securities convertible into Stock
or any revision of the terms of its outstanding Stock) other
than the issuance of additional stock by McDonald to Borrower
which shall be subject to the Borrower Pledge Agreement;
(c) amend its articles of incorporation, or other constating
documents; or
(d) engage in any business other than the business currently
engaged in by such Person.
6.6 Guaranteed Indebtedness. No Loan Party shall create, incur, assume or
permit to exist any Guaranteed Indebtedness except:
(a) by endorsement of instruments or items of payment for deposit
to the general account of such Person;
(b) the Obligations; and
(c) the Emerson Indebtedness.
6.7 Liens. No Loan Party shall create or permit to exist any Lien on any
of its properties or assets except for:
(a) presently existing or hereafter created Liens in favour of
Agent or Lenders to secure the Obligations;
(b) Liens set forth in Schedule 6.7 existing on the Closing Date,
but not any increase in the amount secured by any such Liens;
(c) Permitted Encumbrances;
(d) Liens created after the Closing Date by conditional sale or
other title retention agreements (including Capital Leases) in
connection with Purchase-Money Indebtedness with respect to
Equipment acquired by any Loan Party in the ordinary course of
business to secure (and not to exceed) the purchase price of
such Equipment or to secure Indebtedness or Capital Lease
Obligations incurred solely for the purpose of financing the
acquisition of such Equipment, in a maximum aggregate amount
outstanding not to exceed:
(1) $500,000 outstanding at any time,
(2) $250,000 incurred in any Fiscal Year, and
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(3) $250,000 per obligation without the prior written
approval of the Agent;
and so long as such Equipment is not a component, part or
accessory installed on, or an accession, addition or
attachment to, any other Equipment or other property (other
than computer hardware components) of any Loan Party on which
a Lien exists in favour of Agent or Lenders; and
(e) the Emerson Lien.
6.8 Sale of Assets. No Loan Party shall sell, transfer, convey, assign or
otherwise dispose of any of its assets or properties, including any
Collateral; provided, that the foregoing shall not prohibit:
(a) the sale of Inventory in the ordinary course of business;
(b) the sale or disposition of any assets which have become
obsolete or surplus to the business of any Loan Party where
the Net Proceeds thereof are less than or equal to $250,000 in
the aggregate for any Fiscal Year; and
(c) the sale of all of the issued and outstanding shares of
McDonald or all or substantially all of its assets, provided
in each case the Net Proceeds thereof are, upon receipt by the
relevant Loan Party paid to Agent in repayment of the then
outstanding Obligations.
6.9 Material Contracts. No Loan Party shall cancel or terminate any
Material Contract or amend or otherwise modify any Material Contract, or
waive any default or breach under any Material Contract, or take any other
action in connection with any Material Contract that would have a Material
Adverse Effect.
6.10 ERISA. No Loan Party shall carry on any business, employ any
employees or own any assets outside Canada. No Loan Party shall become a
party to, employ any employees who are or who may become participants in, or
take any action which may have the effect of acknowledging, accepting or
creating any liability whatsoever under or in respect of, any employee
benefit plan which is governed by ERISA. No Loan Party shall create, assume
or incur, or suffer to be created, assumed or incurred or to exist, any Lien
in favour of the PBGC or any other Person in connection with any liability
under or in connection with ERISA.
6.11 Canadian Benefit and Pension Plans. No Loan Party shall, directly or
indirectly:
(a) terminate or cause to terminate, in whole or in part, or
initiate the termination of, in whole or in part, any Canadian
Pension Plan so as to result in any liability to any Loan
Party which could have a Material Adverse Effect;
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(b) permit to exist any event or condition in respect of any
Canadian Pension Plan which presents the risk of liability to
any Loan Party which could have a Material Adverse Effect;
(c) enter into any new Canadian Pension Plan or Canadian Benefit
Plan or modify any such existing plans so as to increase its
obligations thereunder which could result in any liability to
any Loan Party and which could have a Material Adverse Effect;
(d) permit the greater of the going concern unfunded liability and
the solvency deficiency under each Canadian Pension Plan, but
only to the extent they are permitted to remain unfunded under
Applicable Laws, to exceed, in the aggregate, taking into
account all Canadian Pension Plans of all Loan Parties,
$300,000;
(e) fail to make minimum required contributions to amortize any
funding deficiencies under a Canadian Pension Plan within the
time period set out in Applicable Laws;
(f) fail to make a required contribution under any Canadian
Pension Plan or Canadian Benefit Plan which could result in
the imposition of a Lien upon the assets of any Loan Party
within 30 days after the date such payment becomes due, unless
such payment is being contested pursuant to Section 5.2;
(g) make any improper withdrawals or applications of assets of a
Canadian Pension Plan or Canadian Benefit Plan;
(h) accept payment of any amount from any Canadian Pension Plan;
or
(i) merge any Canadian Pension Plan with any other pension plan.
6.12 Financial Covenants. Borrower shall not breach or fail to comply with
any of the financial covenants set forth in Annex G, each of which shall be
calculated in accordance with GAAP consistently applied (and based upon the
financial statements delivered hereunder).
6.13 Sale-Leasebacks, Etc. No Loan Party shall engage in any sale-
leaseback, synthetic lease or similar transaction involving any of its
property or assets.
6.14 Cancellation of Indebtedness. No Loan Party shall cancel any claim or
Indebtedness owing to it, except for reasonable consideration negotiated on
an arm's length basis and in the ordinary course of its business, or directly
or indirectly, voluntarily prepay, redeem, defease or repurchase any
principal of, interest on or other amount payable in respect of Indebtedness
(other than the Obligations).
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6.15 Restricted Payments. No Loan Party shall make any Restricted Payment
to any Person, other than (a) Restricted Payments to Affiliates who are
individuals and serve as directors, officers or employees of any Loan Party
consisting of reasonable compensation or indemnification of such Affiliates
in the ordinary course and consistent with past practice and Applicable Laws;
(b) so long as no Default or Event of Default has occurred and is continuing
and after receipt by Agent of the audited consolidated financial statements
of Borrower referred to in Annex E for a Fiscal Year of Borrower, Restricted
Payments by Borrower to ICP not exceeding 50% of the Net Income of Borrower
for such Fiscal Year based on such audited financial statements, excluding
from the calculation of Net Income extraordinary noncash income,
extraordinary noncash losses and current tax expense to the extent of any
retained earnings adjustment; (c) payments by Borrower to Emerson on account
of the Emerson Indebtedness to the extent permitted by the Emerson
Postponement, Subordination and Assignment Agreement; and (d) payments by any
Loan Party on account of any other Indebtedness (not mentioned above) of that
Loan Party to the extent permitted under Section 6.3.
6.16 Leases.
(a) No Loan Party shall enter into any Lease after the date of
this Agreement if after entering into such Lease the aggregate
of all payments by all Loan Parties in any Fiscal Year would
exceed $100,000 under all such Leases to which one or more
Loan Parties is a party or has an obligation.
(b) No Loan Party shall enter into any operating lease after the
date of this Agreement for equipment or personal property if
after entering into any such lease the aggregate of all
payments by all Loan Parties in any Fiscal Year would exceed
$100,000 under all such leases to which one or more Loan
Parties is a party or has an obligation.
6.17 Lock Boxes and Bank Accounts. None of the Loan Parties shall maintain
any lock boxes, deposit, operating or other bank accounts except for those
accounts identified in Schedule 3.19.
6.18 No Speculative Transactions. No Loan Party shall engage in any
speculative transaction, including, without limitation any speculative
transaction involving commodity options, futures contracts or interest rate
or currency hedging.
6.19 Limitation on Negative Pledge Clauses, Etc. No Loan Party shall,
directly or indirectly, enter into any agreement with any Person which
prohibits or limits the ability of any Loan Party to create, incur, assume or
suffer to exist any Lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired, other than the agreements with Agent
or Lenders pursuant to a Loan Document and other than Lien restrictions in a
Capital Lease or other purchase-money financing arrangement permitted
hereunder relating to the asset financed thereunder. No Loan Party shall
enter into, after the date of this Agreement, any indenture, agreement,
instrument or other arrangement that, directly or indirectly, prohibits or
restrains, or
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has the effect of prohibiting or restraining, or imposes adverse conditions
upon, the incurrence or payment of Indebtedness, the granting of Liens, the
declaration or payment of dividends or other Restricted Payments, the making
of loans, advances or Investments or the sale, assignment, transfer or other
disposition of any property or assets.
6.20 Sale of Stock. No Loan Party shall sell (whether in a public or
private offering or otherwise) any of its Stock other than the sale by
McDonald of its stock to Borrower which Stock shall be subject to the
Borrower Pledge Agreement.
6.21 Accounting Changes. No Loan Party shall make any significant change
in accounting treatment and reporting practices except for changes concurred
in by their Accountants.
6.22 Fiscal Year. No Loan Party shall change its Fiscal Year from December
31 in each year.
6.23 Changes Relating to ICP Indebtedness and Emerson Indebtedness. No
Loan Party shall change or amend the terms of the ICP Indebtedness or the
Emerson Indebtedness (or any indenture or agreement in connection therewith)
if the effect of such amendment is to:
(a) increase the interest rate on any of the ICP Indebtedness or
the Emerson Indebtedness;
(b) change the dates upon which payments of principal or interest
are due on any of the ICP Indebtedness or the Emerson
Indebtedness, other than to extend such dates;
(c) change any default or event of default, other than to delete
or make less restrictive any default provision therein, or add
any covenant with respect to any of the ICP Indebtedness or
the Emerson Indebtedness;
(d) change the redemption or prepayment provisions of any of
the ICP Indebtedness or Emerson Indebtedness, other than to
extend the term therefor or to reduce the premiums payable in
connection therewith;
(e) grant any security or collateral to secure payment of any of
the ICP Indebtedness or the Emerson Indebtedness (other than
the subordinate security held by Emerson from Borrower as of
the date hereof and assigned by Emerson to the Agent and the
Lenders pursuant to the Emerson Postponement, Subordination
and Assignment Agreement); or
(f) change or amend any other term if such change or amendment
would materially increase the obligations of the Loan Party or
confer additional material rights on any Affiliate or Emerson
in a manner adverse to Agent or any Lender.
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6.24 Cash Management. No Loan Party shall accumulate or maintain cash in
the Disbursement Accounts as of any date of determination in an aggregate
amount more than $250,000 in the aggregate in excess of cheques outstanding
against such accounts as of that date and amounts necessary to meet minimum
balance requirements.
6.25 3285 Jean-Beraud Avenue and Collateral Located outside of Quebec and
Ontario. No Loan Party shall keep, maintain or store Inventory, equipment or
other tangible personal property at 3285 Jean-Beraud Avenue, Laval, Quebec.
No Loan Party shall keep, maintain or store Inventory, equipment or other
tangible personal property at any location outside the Provinces of Quebec
and Ontario if the aggregate book value of such property at all such
locations exceeds $1,000,000 unless the Loan Party has notified the Agent in
writing and Agent has confirmed to Loan Party in writing that either it has
obtained a first ranking Lien on such property subject only to Prior Claims
that have not been filed, recorded or registered and in respect of which no
other action has been taken to make the Prior Claim enforceable by the holder
thereof, or it has decided for the time being not to obtain such a first
ranking Lien.
SECTION 7 TERM
7.1 Duration. The financing arrangements contemplated hereby shall be in
effect until the Commitment Termination Date. On the Commitment Termination
Date, the Revolving Credit Commitments shall terminate and the Revolving
Credit Loan and all other Obligations shall immediately become due and
payable in full, in immediately available funds.
7.2 Survival of Obligations. Except as otherwise expressly provided for
in the Loan Documents, no termination or cancellation (regardless of cause or
procedure) of any financing arrangement under this Agreement shall in any way
affect or impair the Obligations, duties, indemnities, and liabilities of any
Loan Party, or the rights of Agent or any Lender relating to any Obligations,
due or not due, liquidated, contingent or unliquidated or any transaction or
event occurring prior to such termination, or any transaction or event, the
performance of which is not required until after the Commitment Termination
Date. Except as otherwise expressly provided herein or in any other Loan
Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon any Loan Party, and all rights of Agent
and each Lender, all as contained in the Loan Documents, shall not terminate
or expire, but rather shall survive such termination or cancellation and
shall continue in full force and effect until the Termination Date, provided
that any indemnity obligations of any Loan Party contained in the Loan
Documents and the provisions contained in Section 11 hereof shall survive the
Termination Date.
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SECTION 8 EVENTS OF DEFAULT; RIGHTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or more of the following
events (regardless of the reason therefor) shall constitute an "Event of
Default" hereunder:
(a) any Loan Party shall fail to make any payment in respect of
any Obligations hereunder or under any of the other Loan
Documents when due and payable or declared due and payable,
including any payment of principal of, or interest on, or Fees
in respect of, the Revolving Credit Loan;
(b) any Loan Party shall fail or neglect to perform, keep or
observe any of the provisions of Section 1.5, Section 1.9,
Section 4.1, Section 5.1(d), Section 5.5, Section 5.16,
Section 5.18 or Section 6, including any of the provisions set
forth in Annex B, Annex E, Annex F or Annex G;
(c) any Loan Party shall fail or neglect to perform, keep or
observe any term or provision of this Agreement or of any of
the other Loan Documents (other than any such term or
provision referred to in paragraph (a) or (b) above), and the
same shall remain unremedied for a period ending on the first
to occur of ten (10) days after any Loan Party shall receive
written notice of any such failure from Agent or any Lender or
ten (10) days after any Loan Party shall become aware thereof;
(d) a default shall occur under the documents governing the terms
and conditions of the ICP Indebtedness or the Emerson
Indebtedness, other than the failure to pay interest provided
that neither ICP, in the case of the ICP Indebtedness, nor
Emerson, in the case of the Emerson Indebtedness, has taken
any step, action or proceeding whatsoever to collect such
interest;
(e) a default shall occur under any other agreement, document or
instrument in respect of borrowed money or Guaranteed
Indebtedness to which any Loan Party or Affiliate Corporation
is a party or by which any such Person or its property is
bound, and such default:
(1) involves the failure to make any payment (whether of
principal, interest or otherwise) due and owed
(whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) in respect of any
Indebtedness of such Person in an aggregate amount
exceeding $250,000 or the Equivalent Amount thereof,
or
(2) causes (or permits any holder of such Indebtedness or
a trustee to cause) such Indebtedness, or a portion
thereof in an aggregate amount exceeding $250,000, or
the Equivalent Amount thereof, to become due prior to
its stated maturity or before its regularly scheduled
date of payment, regardless of whether such default is
waived or such right is exercised by such holder or
trustee;
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(f) any Borrowing Base Certificate shall be untrue or incorrect in
any respect, or any representation or warranty herein or in
any other Loan Document or in any written statement pursuant
thereto or hereto, or in any report, financial statement or
certificate made or delivered to Agent or any Lender by any
Loan Party shall be untrue or incorrect in any material
respect as of the date when made or deemed made (including
those made or deemed made pursuant to Section 2.2);
(g) assets of any Loan Party, with a value of more than $100,000
shall be attached, seized, levied upon or subjected to a writ,
execution, distress warrant, or similar process, or come
within the possession of any administrator, receiver, trustee,
custodian, assignee or bailiff for the benefit of creditors of
such Person and shall remain unstayed or undismissed for 30
consecutive days; or any Person, other than a Loan Party,
shall apply for the appointment of an administrator, receiver,
trustee, custodian, assignee, bailiff or similar official for
any assets of any Loan Party and shall remain unstayed or
undismissed for 30 consecutive days; or any Loan Party shall
have concealed, removed or permitted to be concealed or
removed, any part of its property, with intent to hinder,
delay or defraud its creditors or any of them or made or
suffered a transfer of any of its property or the incurring of
an obligation which may be fraudulent under any Insolvency
Statute, fraudulent conveyance or other similar law by
whatever name called and in whatever jurisdiction;
(h) the commencement of a case or proceeding, or the presentation
of a petition, against any Loan Party or Affiliate Corporation
in or to a court having competent jurisdiction seeking a
decree or order:
(1) under any Insolvency Statute,
(2) appointing a custodian, administrator, receiver,
liquidator, assignee, trustee or sequestrator (or
similar official) for any Loan Party or Affiliate
Corporation or for all or any substantial part of its
properties or assets, or
(3) ordering the winding up or liquidation of the affairs
of any Loan Party or Affiliate Corporation,
and such case or proceeding shall remain undismissed or
unstayed for 30 consecutive days or such court shall enter a
decree or order granting the relief sought in such case or
proceeding;
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(i) any Loan Party or Affiliate Corporation shall:
(1) suspend or threaten to suspend or cease to carry on
its business,
(2) commence a proceeding, (including, without limitation,
the filing of a petition or an assignment or a
proposal or a notice of intention to make a proposal)
under any Insolvency Statute,
(3) consents to the institution of proceedings under any
Insolvency Statute or to the filing of any such
petition or to the appointment of or taking possession
by a custodian, administrator, receiver, liquidator,
assignee, trustee, bailiff or sequestrator (or similar
official) of any Loan Party or Affiliate Corporation
or of any substantial part of the property of any Loan
Party or Affiliate Corporation,
(4) be unable to meet its liabilities generally as they
become due, or is, or is adjudged or declared to be,
or admits to being, bankrupt or insolvent under any
Insolvency Statute or otherwise;
(5) shall take any corporate action in furtherance of any
of the foregoing action;
(j) final judgment or judgments (after the expiration of all times
to appeal therefrom) for the payment of money in excess of
$100,000, or the Equivalent Amount thereof, in the aggregate
shall be rendered against any Loan Party, unless the same
shall be vacated, stayed, bonded, paid or discharged within a
period of 30 days from the date of such judgment;
(k) there shall occur any event which causes a Material Adverse
Effect which shall not have been cured (or waived by Required
Lenders) within ten (10) days of notice thereof from Agent or
the Required Lenders to Borrower;
(l) any provision of any Loan Document shall for any reason cease
to be valid, binding and enforceable in accordance with its
terms, or any Loan Party, Emerson or ICP shall challenge the
enforceability of any Loan Document or shall assert in
writing, or engage in any action or inaction based on any such
assertion, that any provision of any of the Loan Documents has
ceased to be or otherwise is not valid, binding and
enforceable in accordance with its terms; or any Lien created
under any Collateral Document shall cease to be a valid and
perfected Lien having the first priority in any of the
Collateral purported to be covered thereby (except to the
extent otherwise permitted herein or by any Collateral
Documents);
(m) there shall occur a Change in Control;
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(n) the amount of trade credit made available by ICP (USA) to
Borrower as of the date of this Agreement shall be directly or
indirectly cancelled, reduced or otherwise restricted in any
manner whatsoever or the term of such trade credit, being net
60 days, shall be shortened;
(o) at any time 80% of the sum of the book values of the Accounts
and Inventory of Borrower, based on Borrower's financial
statements provided to Agent for the most recent Fiscal Month,
less the amount of the Obligations outstanding at such time,
is less than Cdn$20,550,000 which amount shall be permanently
reduced from time to time to the extent the principal amount
of the CHL Obligations falls below Cdn$20,550,000 when
converted from USD to Cdn$ at an exchange rate of Cdn$1.37 for
each USD1.00; or
(p) at any time the sum of the book values of the Cash, Accounts
and Inventory of Borrower, based on Borrower's financial
statements provided to Agent for the most recent Fiscal Month,
divided by the sum of the amounts of the Obligations
outstanding at such time and the current liabilities of
Borrower (excluding non-trade indebtedness owing to Affiliates
of Borrower), all based on such financial statements, is less
than the ratio of 1:1.
With respect to Sections 8.1(o) and 8.1(p), if Borrower does not provide to
Agent and Emerson the financial statements referred to therein within 60 days
after the close of a Fiscal Month, an Event of Default under such Sections
shall be deemed to have occurred on the expiry of such 60 day period.
8.2 Remedies.
(a) If any Default or Event of Default shall have occurred and be
continuing, Agent may, or if requested by Required Lenders, shall without
notice:
(1) suspend or terminate this facility with respect to any
obligations of the Lenders to make further Revolving Credit
Advances, whereupon, subject to Section 1.1(a), any further
Revolving Credit Advances shall be made in Agent's sole
discretion or Required Lenders' sole discretion (if
termination occurred at the request of Required Lenders);
and/or
(2) increase the rate of interest applicable to the Revolving
Credit Loan and other Obligations to the Default Rate as
provided in Section 1.6(d) or 1.6(e), as applicable, effective
as of the date of occurrence of the Default;
provided that, if such Default is remedied before becoming an Event of
Default, Agent and Required Lenders' rights under this Section 8.2(a) shall
cease in respect of such Default upon such remediation.
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(b) If any Event of Default shall have occurred and be continuing,
Agent may, or if requested by the Required Lenders, shall, without notice,
take any one or more of the following actions:
(1) terminate the Revolving Credit Commitments whereupon Lenders'
obligations to make further Revolving Credit Advances shall
terminate;
(2) declare all or any portion of the Obligations to be forthwith
due and payable, including the Revolving Credit Loan,
whereupon such Obligations shall become and be immediately due
and payable without presentment, demand or protest of any kind
by or to any Person, all of which are expressly waived by the
Loan Parties;
(3) exercise any rights and remedies provided to Agent or Lenders
under the Loan Documents and/or at law or equity,
provided, that upon the occurrence of an Event of Default specified in
Sections 8.1(g), 8.1(h) or 8.1(i) the rate of interest applicable to all
Obligations shall automatically be increased to or charged at, as
appropriate, the Default Rate as provided in Section 1.6(d) or 1.6(e), as
applicable, and the Revolving Credit Commitments of each Lender shall
immediately terminate and the Obligations shall become immediately due and
payable, in each case, without declaration, presentment, demand or protest of
any kind by or to any Person, all of which are expressly waived by each Loan
Party.
8.3 Waivers by Loan Parties. Except as otherwise provided for in this
Agreement and under Applicable Laws, to the full extent permitted by
Applicable Laws, each Loan Party waives:
(a) presentment, demand and protest and notice of presentment,
dishonour, notice of intent to accelerate, notice of
acceleration, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any or all
Loan Documents, notes, commercial paper, accounts, contract
rights, documents, instruments, chattel paper and guarantees
at any time held by Agent or any Lender on which any Loan
Party may in any way be liable, and each Loan Party hereby
ratifies and confirms whatever Agent or any Lender may do in
this regard;
(b) all rights to notice and a hearing before Agent's or Lenders'
taking possession or control of, or to Agent's or Lenders'
replevy, attachment or levy upon, the Collateral or any bond
or security which might be required by any court before
allowing Agent or Lenders to exercise any of their remedies;
and
(c) the benefit of any right of redemption and all valuation,
appraisal, marshalling and exemption laws.
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Each Loan Party acknowledges that it has been advised by counsel of its
choice with respect to this Agreement, the other Loan Documents and the
transactions contemplated by this Agreement and the other Loan Documents.
8.4 Application of Proceeds. After the occurrence of an Event of Default
and acceleration of the Obligations, the proceeds of the Collateral shall be
applied by Agent to payment of the Obligations in the following order, unless
Lenders otherwise agree in writing or a court of competent jurisdiction shall
otherwise direct:
(a) FIRST, to payment of all costs and expenses of Agent and
Lenders incurred in connection with the preservation,
collection and enforcement of the Obligations, or of any of
the Liens granted to Agent pursuant to the Collateral
Documents or otherwise, including, without limitation, any
amounts advanced by Agent or Lenders to protect or preserve
the Collateral;
(b) SECOND, to payment of that portion of the Obligations
constituting accrued and unpaid interest and fees and
indemnities payable under Section 1 and Annex D in accordance
with the proportion which the accrued interest and fees and
indemnities payable under Section 1 and Annex D constituting
the Obligations owing to Agent and each such Lender at such
time bears to the aggregate amount of accrued interest and
fees and indemnities payable under such Section 1 and Annex D
constituting the Obligations owing to the Agent and all
Lenders at such time until such interest, fees and indemnities
shall be paid in full;
(c) THIRD, to payment of the principal of the Obligations, ratably
amongst Lenders in accordance with the proportion which the
principal amount of the Obligations owing to each such Lender
bears to the aggregate principal amount of the Obligations
owing to all Lenders until such principal of the Obligations
shall be paid in full;
(d) FOURTH, to the payment of all other Obligations, ratably
amongst Lenders in accordance with the proportion which the
amount of such other Obligations owing to each such Lender
bears to the aggregate principal amount of such other
Obligations owing to all Lenders until such other Obligations
shall be paid in full; and
(e) FIFTH, the balance, if any, after all of the Obligations have
been satisfied, shall, except as otherwise provided in any
Loan Document, be paid over to such other secured or
unsecured Person or Persons as may be required by law.
Each Loan Party acknowledges and agrees that it shall remain liable to
the extent of any deficiency between the amount of the proceeds of the
Collateral and the aggregate amount of the sums referred to in the first
through fourth clauses above.
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SECTION 9 AGENT
9.1 Appointment, Powers and Immunities. Each Lender hereby irrevocably
appoints and authorizes GE Capital Canada to act as its agent hereunder and
under the other Loan Documents with such powers as are specifically delegated
to Agent by the terms of this Agreement and of the other Loan Documents,
together with such other powers as are reasonably incidental thereto. As
between the Agent and the Lenders, Agent (which term as used in this sentence
and in Section 9.5 and the first sentence of Section 9.6 shall include
reference to its affiliates and its own and its affiliates' officers,
directors, employees and agents):
(a) shall have no duties or responsibilities except those
expressly set forth in this Agreement and in the other Loan
Documents, and shall not by reason of this Agreement or any
other Loan Document be a trustee or fiduciary for any Lender;
(b) shall not be responsible to Lenders for any recitals,
statements, representations or warranties contained in this
Agreement or in any other Loan Document, or in any certificate
or other document referred to or provided for in, or received
by any of them under, this Agreement or any other Loan
Document, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement
or any other Loan Document or any other document referred to
or provided for herein or therein or for any failure by any
Loan Party or any other Person to perform any of its
obligations hereunder or thereunder;
(c) shall not be required to initiate or conduct any litigation or
collection proceedings hereunder or under any other Loan
Document;
(d) shall not be responsible to Lenders for any action taken or
omitted to be taken by it hereunder or under any other Loan
Document or under any other document or instrument referred to
or provided for herein or therein or in connection herewith or
therewith, except for its own gross negligence or willful
misconduct as determined by a final judgment of a court of
competent jurisdiction (after all possible appeals have been
exhausted). Agent may employ agents and attorneys-in-fact and
shall not be responsible for the negligence or misconduct of
any such agents or attorneys-in-fact selected by it in good
faith.
9.2 Reliance by Agent. Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telecopy, telex, telegram or cable) believed by it to be genuine
and correct and to have been signed or sent by or on behalf of the proper
Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by Agent. As to any
matters not expressly provided for by this Agreement or any other Loan
Document, Agent shall in all cases be fully protected in acting, or in
refraining
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from acting, hereunder or thereunder in accordance with instructions given by
Required Lenders or all Lenders (or in the absence of such instructions so
requested by Agent), as is required in such circumstance, and such
instructions of such Lenders and any action taken or failure to act pursuant
thereto shall be binding on all Lenders.
9.3 Defaults. Agent shall not be deemed to have knowledge or notice of
the occurrence of a Default or an Event of Default (other than the nonpayment
of principal of or interest on the Revolving Credit Loan or of Fees) unless
Agent has received notice from a Lender or Borrower specifying such Default
or Event of Default and stating that such notice is a "Notice of Default" or
"Notice of Event of Default". If Agent receives such a notice of the
occurrence of a Default or Event of Default, Agent shall give prompt notice
thereof to Lenders (and shall give each Lender prompt notice of each such
nonpayment). Agent shall (subject to Section 9.7) take such action with
respect to such Default or Event of Default as shall be directed by Required
Lenders; provided, that unless and until Agent shall have received such
directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interest of Lenders except to
the extent that this Agreement expressly requires that such action be taken,
or not be taken, only with the consent or upon the authorization of Required
Lenders or all Lenders, as is required in such circumstance.
9.4 Rights as a Lender. With respect to the Revolving Credit Commitment
of GE Capital Canada and all Revolving Credit Advances made by GE Capital
Canada (and any successor acting as Agent), GE Capital Canada (and any
successor acting as Agent) shall have the same rights and powers hereunder as
any other Lender and may exercise the same as though it were not acting as
Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise
indicates, include Agent in its individual capacity. GE Capital Canada (and
any successor acting as Agent) and its affiliates may (without having to
account therefor to any Lender) lend money to, make investments in and
generally engage in any kind of business with any Loan Party (and any of its
Subsidiaries or Affiliates) as if it were not acting as Agent, and GE Capital
Canada and its affiliates may accept fees and other consideration from any
Loan Party or any Affiliate thereof for services in connection with this
Agreement or otherwise without having to account for the same to Lenders.
9.5 Indemnification. Lenders agree to indemnify Agent (to the extent not
reimbursed by Borrower hereunder and without limiting the obligations of
Borrower hereunder) promptly following demand therefore ratably in accordance
with the aggregate principal amount of the Revolving Credit Advances held by
Lenders (or, if no Revolving Credit Advances are at the time outstanding,
ratably in accordance with their respective Revolving Credit Commitments),
for any and all Claims of any kind and nature whatsoever that may be imposed
on, incurred by or asserted against Agent (including by any Lender) arising
out of or by reason of any investigation in or in any way relating to or
arising out of this Agreement or any other Loan Document or any other
documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby (including the costs and expenses
that any Loan Party is obligated to pay
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hereunder) or the enforcement of any of the terms hereof or thereof or of any
such other documents; provided, that no Lender shall be liable for any of the
foregoing to the extent they arise solely from the gross negligence or
willful misconduct of the party to be indemnified as determined by a final
judgment of a court of competent jurisdiction (after all possible appeals
have been exhausted). Without limiting the foregoing, each Lender agrees to
reimburse Agent promptly after demand for its rateable share of out-of-pocket
expenses (including counsel fees) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment and
enforcement (whether through negotiations, legal proceedings or otherwise)
of, or legal advice in respect of rights or responsibilities under, this
Agreement and each other Loan Document (to the extent that Agent is not
reimbursed by Borrower hereunder and without limiting the obligations of any
Loan Party hereunder).
9.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees that it
has, independently and without reliance on Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made
its own credit analysis of each Loan Party and decision to enter into this
Agreement and that it will, independently and without reliance upon Agent or
any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own analysis and decisions
in taking or not taking action under this Agreement or any of the other Loan
Documents. Agent shall not be required to keep itself informed as to the
performance or observance by any Loan Party of this Agreement or any of the
other Loan Documents or any other document referred to or provided for herein
or therein or to inspect the properties or books of any Loan Party. Agent
will use reasonable efforts to provide Lenders with any information received
by Agent from Borrower which is required to be provided to Lenders hereunder,
with any notice of a Default or Event of Default received by Agent from
Borrower and with any notice of a Default or Event of Default delivered by
Agent to Borrower; provided, that Agent shall not be liable to any Lender for
any failure to do so, except to the extent that such failure is attributable
to Agent's gross negligence or willful misconduct, as determined by a final
judgment of a court of competent jurisdiction (after all possible appeals
have been exhausted). Agent shall not have any duty or responsibility to
provide any Lender with any other credit or other information concerning the
affairs, financial condition or business of any Loan Party (or any of their
Affiliates) that may come into the possession of Agent or any of its
affiliates nor to update or correct any information previously given which
becomes incorrect or which Agent learns is incorrect.
9.7 Failure to Act. Except for action expressly required of Agent
hereunder and under the other Loan Documents, Agent shall in all cases be
fully justified in failing or refusing to act hereunder and thereunder:
(a) if such action would, in the opinion of Agent, be contrary to
law or the terms of this Agreement or any other Loan Document,
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(b) if such action would, in the opinion of Agent, expose Agent to
environmental liabilities, or
(c) if Agent shall not first be indemnified to its satisfaction
against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take such
action.
9.8 Successor Agent. Agent may resign at any time by giving written
notice thereof to Lenders and Borrower. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required Lenders and
shall have accepted such appointment within 30 days after the retiring
Agent's giving of notice of resignation or receipt of notice of removal, then
the retiring Agent may, on behalf of Lenders, appoint a successor Agent, that
shall be a Lender (and satisfy the criteria set out in Section 10.2(a)).
Upon the acceptance of any appointment as Agent hereunder by a successor
Agent, such successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent (retiring by reason of its resignation or removal) shall be
discharged from its duties and obligations hereunder. After any retiring
Agent's resignation or removal hereunder as Agent, the provisions of this
Section 9 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Agent.
9.9 Consents under Loan Documents. Except as otherwise provided in
Section 11.1 with respect to this Agreement, Agent may, with the prior
consent of Required Lenders (but not otherwise), consent to any modification,
supplement or waiver under any of the Loan Documents; provided, that without
the prior consent of each Lender, Agent shall not (except as provided herein
or in the Collateral Documents) release any material portion of the
Collateral or otherwise terminate any Lien under any Collateral Document with
respect to any material portion of the Collateral, or agree to additional
obligations being secured by such Collateral, except that no such consent
shall be required, and Agent is hereby authorized and instructed, to release
any Lien covering Collateral:
(a) which is the subject of a disposition permitted hereunder;
(b) which secures Indebtedness to the extent permitted under
Section 6.3;
(c) to which Required Lenders have consented (except as otherwise
provided in Section 11.1); or
(d) the value of which does not exceed $100,000, or the Equivalent
Amount thereof, in any Fiscal Year.
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9.10 Collateral Matters.
(a) Except as otherwise expressly provided for in this Agreement,
Agent shall have no obligation whatsoever to any Lender or any other Person
to investigate, confirm or assure that the Collateral exists or is owned by
any Loan Party or is cared for, protected or insured or has not been
encumbered, or that any particular items of Collateral meet the eligibility
criteria applicable in respect of the relevant borrowing base, or whether any
particular reserves are appropriate, or that the Liens granted to Agent
herein or pursuant hereto have been properly or sufficiently or lawfully
created, perfected, protected or enforced or are entitled to any particular
priority, or to exercise at all or in any particular manner or under any duty
or care, disclosure or fidelity, or to continue exercising, any of the
rights, authorities and powers granted or available to Agent in this
Agreement or in any of the other Loan Documents, it being understood and
agreed that:
(1) in respect of the Collateral, or any act, omission or event
related thereto, Agent may act in any manner it may deem
appropriate, in its sole discretion, given Agent's own
interest in the Collateral as a Lender; and
(2) that Agent shall have no duty or liability whatsoever to any
other Lender, other than liability solely resulting from its
own gross negligence or willful misconduct as determined by a
final judgment of a court of competent jurisdiction (after all
possible appeals have been exhausted).
(b) Each Lender hereby appoints each other Lender as agent for the
purpose of perfecting Lenders' security interests in assets which can be
perfected by possession and which are so perfected. Should any Lender (other
than Agent) obtain possession of any such Collateral, such Lender shall
notify Agent thereof and, promptly upon Agent's request therefor, shall
deliver such Collateral to Agent or in accordance with Agent's instructions.
9.11 Non-Funding Lender; Actions by Lenders.
(a) The failure of any Lender (such Lender, a "Non-Funding
Lender") to make any Revolving Credit Advance to be made by it on the date
specified therefor shall not relieve any other Lender (each such other
Lender, an "Other Lender") of its obligation to make its Revolving Credit
Advance, on such date, but neither any Other Lender nor Agent shall be
responsible for the failure of any Non-Funding Lender to make a Revolving
Credit Advance to be made by such Non-Funding Lender, and no Non-Funding
Lender shall have any obligation to Agent or any Other Lender for the failure
by such Non-Funding Lender. Notwithstanding anything set forth herein to the
contrary, a Non-Funding Lender shall not have any voting or consent rights
under or with respect to any Loan Document or constitute a "Lender" (or be
included in the calculation of "Required Lenders" hereunder) for any voting
or consent rights under or with respect to any Loan Document.
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(b) Anything in this Agreement to the contrary notwithstanding,
each Lender hereby agrees with each other Lender that no Lender shall take
any action to protect or enforce its rights arising out of this Agreement,
the Revolving Credit Notes or the other Loan Documents (including exercising
any rights of offset) without first obtaining the prior written consent of
Agent and Required Lenders, it being the intent of Lenders that any such
action to protect or enforce rights under this Agreement, the Notes or the
other Loan Documents shall be taken in concert and at the direction or with
the consent of Agent and Required Lenders and not individually by a single
Lender.
9.12 Settlement Procedures.
(a) The Revolving Credit Loan balance may fluctuate from day to
day due to Agent's disbursement of funds to, and receipt of funds from,
Borrower. In order to minimize the frequency of transfers of funds between
Agent and Lenders, Revolving Credit Advances may be made by Agent and
payments in respect thereof will be settled according to the procedures set
forth in this Section 9.12. Notwithstanding these procedures, each Lender's
obligation to fund its portion of any Revolving Credit Advance will commence
on the date such Revolving Credit Advance is made. Such payments will be
made by each Lender without setoff, counterclaim or reduction of any kind.
(b) Notwithstanding anything to the contrary contained in this
Agreement, Agent may elect, at its sole option, to fund the entire amount of
any Revolving Credit Advance requested by Borrower. If Agent makes such
election, such Revolving Credit Advance made by Agent shall be deemed, and
shall constitute, as of the date of making thereof, a Revolving Credit
Advance made by each Lender to Borrower in an amount equal to such Lender's
pro rata share thereof, and each Lender shall be obligated to deliver to
Agent such share of such Revolving Credit Advance on the Weekly Settlement
Date in accordance with the procedure for weekly settlement set forth in
Section 9.12(c) or as otherwise provided in Section 9.12(a). Notwithstanding
anything to the contrary contained in this Agreement, for purposes of
calculating interest payable to any Lender:
(1) Agent shall be deemed a "Lender" with respect to any
outstanding Revolving Credit Advances funded by Agent; and
(2) the amount of Revolving Credit Advances of any Lender that are
outstanding on any day shall be equal to the amount of such
Lender's Revolving Credit Advances outstanding on such day:
(A) excluding any Revolving Credit Advances that have been
funded entirely by Agent with respect to which such
Lender has not funded its pro rata share, and
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(B) including Revolving Credit Advances of such Lender
which have been repaid by Borrower to Agent but not
yet received by such Lender from Agent.
(c) Each Lender shall settle with Agent, upon Agent's request, on
the second Business Day of each week (or on such other day of the week as may
be designated from time to time by Agent) in each successive week (the
"Weekly Settlement Date"), on the net Revolving Credit Advances and payments
since the date of the last settlement. On each Weekly Settlement Date,
before 12:00 noon, Agent shall notify each Lender by telephone or telecopy or
other form of electronic transmission, of such Lender's pro rata share of the
outstanding Revolving Credit Advances and the amount of the payment necessary
to adjust such Lender's outstanding Revolving Credit Advances to such
Lender's pro rata share of such Revolving Credit Advances as of such Weekly
Settlement Date (on a net basis taking into account any funds in the
Collection Account which Agent determines are available). Any such payment
shall be made by the party from which such payment is due to the other party,
in same day funds, not later than 1:00 p.m. on such Weekly Settlement Date.
If any Lender shall, for any reason, not settle with Agent within one (1)
Business Day after the Weekly Settlement Date, such Lender agrees to pay and
Borrower agrees to repay (assuming Borrower has received such funds from the
Agent), severally, to Agent forthwith on demand the amount due Agent on such
Weekly Settlement Date together with interest thereon for each day from such
Weekly Settlement Date until the day such amount is paid to Agent, at:
(1) in the case of such Lender, the Prime Rate in effect for the
first three (3) days for which such amount remains unpaid and
thereafter at the rate then in effect with respect to the
applicable type of Revolving Credit Advances pursuant to
Section 1.6, and
(2) in the case of Borrower, the rate then in effect with respect
to Revolving Credit Advances pursuant to Section 1.6.
If such Lender shall pay to Agent such corresponding amount, such amount so
paid shall constitute such Lender's Revolving Credit Advance and, if both
such Lender and Borrower shall have paid and repaid, respectively, such
corresponding amount, Agent shall promptly pay over to Borrower such
corresponding amount in same day funds, but Borrower shall remain obligated
for all interest thereon at the rate then in effect with respect to Revolving
Credit Advances pursuant to Section 1.6.
(d) As an alternative to the weekly settlement provided for in
Section 9.12(c), Agent may elect at its sole option, to use the following
same day settlement procedure for borrowings of Revolving Credit Advances.
Before 12:00 noon on any date specified for a borrowing of a Revolving Credit
Advance in a Notice of Revolving Credit Advance, Agent may notify each Lender
by telephone, telecopy or other form of electronic transmission, of the
requested Revolving Credit Advance. Not later than 1:00 p.m. on the date of
such proposed Revolving Credit Advance, each Lender shall make available to
Agent, in same day funds, to such account as Agent may designate, such
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Lender's pro rata share of such Revolving Credit Advance. Notwithstanding
the foregoing, to the extent that there are available funds in the Collection
Account, Agent may, at Agent's discretion, notify each Lender that such
Lender's obligation to make available to Agent same day funds as provided in
the preceding sentence shall be satisfied to the extent of its pro rata share
out of such funds in the Collection Account, or such portion of such funds as
Agent shall indicate are to be applied to fund such Revolving Credit Advance.
SECTION 10 SUCCESSORS AND ASSIGNS
10.1 Successors and Assigns. This Agreement and the other Loan Documents
shall be binding on and shall inure to the benefit of each Loan Party, Agent,
Lenders, and their respective successors and assigns, except as otherwise
provided herein or therein. No Loan Party may assign, delegate, transfer,
hypothecate or otherwise convey its rights, benefits, obligations or duties
hereunder or under any of the Loan Documents without the prior express
written consent of Agent and all Lenders. Any such purported assignment,
transfer, hypothecation or other conveyance by any Loan Party without such
prior express written consent shall be void. The terms and provisions of
this Agreement and the other Loan Documents are for the purpose of defining
the relative rights and obligations of each Loan Party, Agent and Lenders
with respect to the transactions contemplated hereby and there shall be no
third party beneficiaries of any of the terms and provisions of this
Agreement or any of the other Loan Documents.
10.2 Assignments and Participations.
(a) Each Lender may, with the prior written consent of Agent,
resell (through syndication, assignment or participation) all or a portion of
its rights and obligations under this Agreement (including all or a part of
its Revolving Credit Advances, Revolving Credit Commitments and Revolving
Credit Note), in minimum increments of $5,000,000, to any other Person;
provided that, after giving effect to such resale, the selling Lender, if it
retains any Revolving Credit Commitments, shall have retained Revolving
Credit Commitments in an amount at least equal to $5,000,000 and; provided
further that, if any Lender sells, transfers or assigns all or any portion of
its rights and obligations under this Agreement to a nonresident of Canada
for purposes of the ITA, the purchaser shall not be entitled to the benefit
of Section 1.18 if such section would not be applicable had the sale,
transfer or assignment been made to a resident of Canada for purposes of the
ITA.
(b) In the case of an assignment by any Lender under this Section
10.2, the purchaser shall have, to the extent of such assignment, the same
rights, benefits and obligations as it would if it were a Lender hereunder;
provided, that each such assignment shall be of a constant, and not a
varying, percentage of the selling Lender's rights and obligations under this
Agreement. Upon execution by the assignor and the assignee of an instrument
pursuant to which the assignee assumes such rights and obligations, payment
by such assignee to such assignor of an amount equal to the purchase price
agreed between such assignor and assignee and delivered to Agent and Borrower
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of an executed copy of such instrument, together with payment to Agent of a
processing fee of $5,000, such assignee shall have, to the extent of such
assignment (unless otherwise provided therein), the same rights and benefits
as it would have if it were a Lender hereunder and the assignor shall be, to
the extent of such assignment (unless otherwise provided therein) released
from its obligations under this Agreement. Each Loan Party hereby
acknowledges and agrees that any assignment will give rise to a direct
obligation of each of the Loan Parties to the assignee and that the assignee
shall be considered to be a "Lender" hereunder and under the other Loan
Documents. In all instances, each Lender's liability to make Revolving
Credit Advances shall be several and not joint and shall be limited to such
Lender's pro rata share thereof. Upon any such assignment, Borrower, at its
own expense, shall execute and deliver to Agent in exchange for the
surrendered Revolving Credit Note of the assignor Lender a new Revolving
Credit Note to the order of the assignor Lender in an amount equal to the
Revolving Credit Commitment assumed by such assignee Lender, and if the
assignor Lender has retained a Revolving Credit Commitment hereunder, a new
Revolving Credit Note to the order of the assignor Lender in an amount equal
to such retained Revolving Credit Commitment. Such new Revolving Credit Note
shall be dated the Closing Date and shall otherwise be in the form of the
Revolving Credit Note replaced thereby. The Revolving Credit Note
surrendered to Agent shall be returned by Agent to Borrower marked
"cancelled".
(c) In the case of a participation by any Lender under this
Section 10.2,
(1) all amounts payable by Borrower hereunder shall be determined
as if that Lender had not sold such participation and the
participating Lender shall remain a "Lender" for all purposes
under this Agreement;
(2) any such grant of a participation will be made in compliance
with all Applicable Laws; and
(3) such Lender shall not grant any participation under which the
participant shall have rights to approve any amendment to or
waiver of this Agreement or the Loan Documents, except to the
extent such amendment or waiver would:
(A) extend the final maturity date for payment of the
Revolving Credit Loan,
(B) reduce the interest rate or the amount of principal or
Fees applicable to the Revolving Credit Loan, or
(C) release all or substantially all of the Collateral,
except as expressly provided herein or in the Loan
Documents.
In those cases in which a Lender grants rights to its participants to approve
any amendment to or waiver of this Agreement or the other Loan Documents
respecting the matters described in the
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foregoing clauses (A) through (C), the relevant participation agreements
shall provide for a voting mechanism whereby a majority of the amount of the
participating Lender's portion of the Revolving Credit Loan (irrespective of
whether held by such Lender or participated), shall control the vote for all
of such Lender's portion of the Revolving Credit Loan. In the case of any
participation, the participant shall not have any rights under this Agreement
or any of the other Loan Documents entered into in connection herewith (the
participant's right against such Lender in respect of such participation to
be those set forth in the participation or other agreement executed by such
Lender and the participant relating thereto) and all amounts payable to any
Lender hereunder shall be determined as if such Lender had not sold such
participation, provided, that with respect to Sections 1.16, 1.18, 1.19 and
11.7, participants shall be deemed to have the rights of a Lender.
(d) Except as otherwise provided in this Section 10.2, no Lender
shall, as between Borrower and that Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the
Revolving Credit Loan or other Obligations owed to such Lender. Subject to
Section 11.13 any Lender permitted to sell assignments and participations
under this Section 10.2 may furnish any information concerning any Loan Party
in the possession of that Lender from time to time to assignee and
participants (including prospective assignees and participants).
(e) Each Loan Party shall assist each Lender permitted to sell
assignments or participations under this Section 10.2 in whatever manner
necessary in order to enable or effect any such assignment or participation,
including the execution and delivery of any and all agreements, notes,
confirmations of Obligations, and other documents and instruments as shall be
reasonably requested and the preparation and delivery of informational
materials, appraisals or other documents for, and the participation of
relevant management in meetings with, potential assignees or participants.
Each Loan Party shall certify the correctness, completeness and accuracy as
at the date thereof of all descriptions of the Loan Parties and their
respective affairs contained in any selling materials and all information to
the extent such descriptions and information are provided by it and included
in such materials and approved by it. No Loan Party shall have any
obligation in respect of any selling material or information included therein
unless such materials shall have been submitted to it for approval and such
approval obtained before any use or distribution thereof by Agent or any
Lender. The Loan Parties shall not be entitled to receive any reimbursement
for any out-of-pocket costs or expenses that any Loan Party incurs as a
result of providing such assistance in connection with any sale of
participations or assignments and shall not have any obligations in respect
of Agent's or any Lender's costs or expenses incurred in connection with any
sale of participations or assignments.
(f) Each Lender that resells (through syndication, assignment or
participation) all or a portion of its rights and obligations under this
Agreement shall advise Agent and Borrower of the identity of the purchaser.
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SECTION 11 MISCELLANEOUS
11.1 Complete Agreement; Modification of Agreement. This Agreement and the
other Loan Documents constitute the complete agreement between the parties
with respect to the subject matter hereof and thereof and supersede all prior
agreements, commitments, understandings or inducements (oral or written,
expressed or implied), including the Commitment Letter. Neither this
Agreement nor any other Loan Document nor any terms hereof or thereof may be
changed, waived, discharged or terminated unless such change, waiver,
discharge or termination is in writing signed by the Required Lenders;
provided, that no such change, waiver, discharge or termination shall,
without the consent of each affected Lender and Agent:
(a) extend the scheduled final maturity of the Revolving Credit
Loan, or any portion thereof, or reduce the rate or extend the
time of payment of interest (other than as a result of waiving
the applicability of any post-Default or Event of Default
increase in interest rates) thereon or Fees, or reduce the
principal amount thereof, or increase the Revolving Credit
Commitment of such Lender over the amount thereof then in
effect (it being understood that a waiver of any Default or
Event of Default shall not constitute a change in the terms of
any Revolving Credit Commitment of any Lender);
(b) release Collateral with a fair market value of more than
$250,000, or the Equivalent Amount in any year;
(c) amend, modify or waive any provision of this Section, or
Section 1.11, 1.16, 9.5, 11.2 or 11.7;
(d) reduce any percentage specified in, or otherwise modify, the
definition of Required Lenders; or
(e) consent to the assignment or transfer by any Loan Party of any
of its rights and obligations under this Agreement.
No provision of Section 9 may be amended without the prior written consent of
Agent.
11.2 Fees and Expenses.
Borrower shall reimburse Agent on demand for all out-of-pocket
expenses incurred in connection with the preparation, negotiation, execution,
delivery and registration of the Commitment Letter and of the Loan Documents
(including the reasonable fees and expenses of its counsel, advisors,
consultants and auditors retained in connection with the Loan Documents and
advice in connection therewith). Borrower shall reimburse Agent (and, with
respect to clauses (d) and (e) below, all Lenders) for all reasonable fees,
costs and expenses, including the fees, costs and expenses of counsel or
other advisors (including environmental and management consultants and
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appraisers) for advice, assistance, or other representation in connection
with:
(a) the forwarding to Borrower or any other Person on behalf of
Borrower by Agent of the proceeds of the Revolving Credit Advances;
(b) currency conversion transaction costs (if any);
(c) any amendment, modification or waiver of, consent with respect
to, or interpretation of, any of the Loan Documents or advice in connection
with its rights hereunder or thereunder;
(d) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Agent, any Lender, any Loan Party or any other Person)
in any way relating to the Collateral, any of the Loan Documents or any other
agreement to be executed or delivered in connection therewith or herewith,
whether as party, witness, or otherwise, including any litigation, contest,
dispute, suit, case, proceeding or action, and any appeal or review thereof,
in connection with a case commenced by or against any Loan Party or any other
Person that may be obligated to Agent by virtue of the Loan Documents;
including any such litigation, contest, dispute, suit, proceeding or action
arising in connection with any workout or restructuring of the Revolving
Credit Loan during the pendency of one or more Events of Default; provided
that in the case of reimbursement of counsel for Lenders other than Agent,
such reimbursement shall be limited to one counsel for all such Lenders;
(e) any enforcement of any remedies of Agent or any Lender under
any of the Loan Documents against any or all of the Loan Parties or any other
Person that may be obligated to Agent or any Lender by virtue of any of the
Loan Documents; including any enforcement of any such remedies in the course
of any workout or restructuring of the Revolving Credit Loan during the
pendency of one or more Events of Default; provided that in the case of
reimbursement of counsel for Lenders other than Agent, such reimbursement
shall be limited to one counsel for all such Lenders;
(f) any workout or restructuring of the Revolving Credit Loans
during the pendency of one or more Events of Default;
(g) efforts to (1) monitor the Revolving Credit Loan or any of the
other Obligations, (2) evaluate, observe or assess any of the Loan Parties or
their respective affairs, and (3) verify, protect, evaluate, assess,
appraise, collect, sell, liquidate or otherwise dispose of any of the
Collateral;
including all legal counsel's and other professional and service providers'
fees arising from such services, including those in connection with any
appellate proceedings; and all expenses, costs, charges and other fees
incurred by such counsel and others in any way or respect arising in
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connection with or relating to any of the events or actions described in this
Section 11.2 shall be payable, on demand, by Borrower to Agent. Without
limiting the generality of the foregoing, such expenses, costs, charges and
fees may include: reasonable fees, costs and expenses of accountants,
environmental advisors, appraisers, investment bankers, management and other
consultants and paralegals; court costs and expenses; photocopying and
duplication expenses; court reporter fees, costs and expenses; long distance
telephone charges; air express charges; telegram or telecopy charges;
secretarial overtime charges; and reasonable expenses for travel, lodging and
food paid or incurred in connection with the performance of such legal or
other advisory services.
11.3 No Waiver. No failure on the part of Agent or Lenders, at any time or
times, to require strict performance by any Loan Party, of any provision of
this Agreement or any of the other Loan Documents shall waive, affect or
diminish any right of Agent or Lenders thereafter to demand strict compliance
and performance therewith. Any suspension or waiver of a Default or Event of
Default shall not suspend, waive or affect any other Default or Event of
Default, whether the same is prior or subsequent thereto, and whether of the
same or of a different type. None of the undertakings, agreements,
warranties, covenants and representations of any Loan Party contained in this
Agreement or any of the other Loan Documents and no Default or Event of
Default by any Loan Party shall be deemed to have been suspended or waived by
Lenders, unless such waiver or suspension is by an instrument in writing
signed by an officer of or other authorized employee of Agent and Required
Lenders or all Lenders if required hereunder and directed to Borrower or
other Loan Party specifying such suspension or waiver.
11.4 Remedies. The rights and remedies of Agent and Lenders under this
Agreement shall be cumulative and nonexclusive of any other rights and
remedies which Agent or any Lender may have under any other agreement,
including the Loan Documents, by operation of law or otherwise. Recourse to
the Collateral shall not be required.
11.5 Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
Applicable Laws, but if any provision of this Agreement shall be prohibited
by or invalid under Applicable Laws, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
11.6 Conflict of Terms. Except as otherwise provided in this Agreement or
any of the other Loan Documents by specific reference to the applicable
provisions of this Agreement, if any provision contained in this Agreement is
in conflict with, or inconsistent with, any provision in any of the other
Loan Documents, the provisions contained in this Agreement shall govern and
control; provided, however, that any provision contained in this Agreement
shall not be in conflict with, or be inconsistent with, any provision in any
of the other Loan Documents unless the relevant Loan Party cannot comply with
both provisions.
11.7 Right of Setoff. Subject to Sections 1.14 and 9.11, upon the
occurrence and during the continuance of any Event of Default, each Lender is
hereby authorized at any time and from time
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to time, to the fullest extent permitted by law, to setoff and apply any and
all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Lender to or
for the credit or the account of any Loan Party against any and all of the
Obligations now or hereafter existing irrespective of whether or not such
Lender shall have made any demand under this Agreement or any other Loan
Document and although such Obligations may be unmatured. Each Lender agrees
promptly to notify Agent and the applicable Loan Party after any such setoff
and application made by such Lender; provided, that the failure to give such
notice shall not affect the validity of such setoff and application. The
rights of each Lender under this Section are in addition to the other rights
and remedies (including other rights of setoff) which such Lender may have.
11.8 Judgment Currency.
(a) If, for the purpose of obtaining or enforcing judgment against
any Loan Party in any court in any jurisdiction, it becomes necessary to
convert into any other currency (such other currency being hereinafter in
this Section 11.8 referred to as the "Judgment Currency") an amount due under
any Loan Document in any currency (the "Obligation Currency") other than the
Judgment Currency, the conversion shall be made at the rate of exchange
prevailing on the Business Day immediately preceding:
(1) the date of actual payment of the amount due, in the case of
any proceeding in the courts of the Province of Ontario or in
the courts of any other jurisdiction that will give effect to
such conversion being made on such date; or
(2) the date on which the judgment is given, in the case of any
proceeding in the courts of any other jurisdiction (the
applicable date as of which such conversion is made pursuant
to this Section 11.8(a) being hereinafter in this Section 11.8
referred to as the "Judgment Conversion Date").
(b) If, in the case of any proceeding in the court of any
jurisdiction referred to in Section 11.8(a), there is a change in the rate of
exchange prevailing between the Judgment Conversion Date and the date of
actual receipt of the amount due in immediately available funds, the
applicable Loan Party shall pay such additional amount (if any, but in any
event not a lesser amount) as may be necessary to ensure that the amount
actually received in the Judgment Currency, when converted at the rate of
exchange prevailing on the date of payment, will produce the amount of the
Obligation Currency, as the case may be, which could have been purchased with
the amount of the Judgment Currency stipulated in the judgment or judicial
order at the rate of exchange prevailing on the Judgment Conversion Date.
(c) Any amount due from a Loan Party under Section 11.8(b) shall
be due as a separate debt and shall not be affected by judgment being
obtained for any other amounts due under or in respect of any of the Loan
Documents.
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(d) The term "rate of exchange" in this Section 11.8 means the
12:00 noon rate of exchange quoted on any Business Day on Telerate News
Service (Page 3194 or such other Page as may replace such Page on such Screen
for the purpose of displaying currency exchange rates) for the sale of
Canadian Dollars against the Judgment Currency.
11.9 Notices. Except as otherwise provided herein, whenever it is provided
herein that any notice, demand, request, consent, approval, declaration or
other communication shall or may be given to or served upon one party by the
other party, or whenever one party desires to give or serve upon the other
party any communication with respect to this Agreement, each such notice,
demand, request, consent, approval, declaration or other communication shall
be in writing and shall be deemed to have been validly served, given or
delivered:
(a) upon transmission, when transmission occurs at or before 5:00
p.m. on any Business Day, or, if a transmission occurs after
such time on the Business Day immediately following such
Business Day, when sent by telecopy or other similar facsimile
transmission (with such telecopy or facsimile promptly
confirmed by delivery of a copy by personal delivery as
otherwise provided in this Section 11.9);
(b) when delivered, if hand-delivered by messenger or courier
service, all of which shall be addressed to the party to be
notified and sent to the address or facsimile number
indicated below or to such other address (or facsimile number)
as may be substituted by notice given as herein provided.
The giving of any notice required hereunder may be waived in writing by the
party entitled to receive such notice. Failure or delay in delivering copies
of any notice, demand, request, consent, approval, declaration or other
communication to any Person (other than any Loan Party, Agent or any Lender)
designated below to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration
or other communication:
(1) Communications with Agent (and with GE Capital Canada
in its capacity as Lender hereunder) under this
Section 11.9 shall be addressed as follows:
General Electric Capital Canada Inc.
150 York Street
Suite 300
Toronto, Ontario
M5H 3A9
Attention: Vice President, InterCity Account
Telecopier No.: (416) 365-0202
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with a copy to:
General Electric Capital Corporation
105 West Madison
Suite 1600
Chicago, Illinois
USA 60602
Attention: Account Manager, InterCity Account
Telecopier No.: (312) 419-5977
and
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927-5100
Attention: Regional Counsel, InterCity Account
Telecopier No.: (203) 316-7822
(2) communications with each Lender (other than GE Capital
Canada) shall be addressed to the address of such
Lender set forth under its name on the signing pages
of this Agreement, with a copy, in each case, to Agent
and each Person to whom copies of communications with
Agent are to be given or served under Section 11.9;
(3) communications with Borrower under this Section 11.9
shall be addressed as follows:
InterCity Products Corporation (Canada)
141 Cidermill Avenue
Vaughan, Ontario
L4K 4G5
Attention: Director of Finance
Telecopier No.: (905) 738-7555
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(4) communications with McDonald under this Section 11.9
shall be addressed as follows:
G.C. McDonald Supply Limited
c/o InterCity Products Corporation (Canada)
141 Cidermill Avenue
Vaughan, Ontario
L4K 4G5
Attention: Director of Finance
Telecopier No.: (905) 738-7555
11.10 Section Titles. The Section titles and Table of Contents contained
in this Agreement are and shall be without substantive meaning or content of
any kind whatsoever and are not a part of this Agreement.
11.11 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
11.12 Time of the Essence. Time is of the essence of this Agreement and
each of the other Loan Documents.
11.13 Confidentiality.
(a) Each Loan Party agrees that it shall not (and shall not permit
any of its Subsidiaries to) issue any news release or make any public
announcement pertaining to the transactions contemplated by the Loan
Documents without the prior written consent of Agent.
(b) Agent and each Lender agree to use commercially reasonable
efforts (equivalent to the efforts Agent or such Lender applies to maintain
the confidentiality of its own confidential information) to maintain as
confidential all confidential information provided to them by the Loan
Parties and designated as confidential for a period of three (3) years
following receipt thereof, except that Agent and each Lender may disclose
such information (1) to Persons employed or engaged by Agent or such Lender
in evaluating, approving, structuring or administering the Revolving Credit
Loan and the Revolving Credit Commitment; (2) to any actual or potential
assignee or participant that has agreed to comply with the covenant contained
in this Section 11.13 (and any such bona fide assignee or participant may
disclose such information to Persons employed or engaged by them as described
in clause (1) above); (3) as required or requested by any Governmental Body
or reasonably believed by Agent or such Lender to be compelled by any court
decree, subpoena or legal or administrative order or process; (4) as, in the
opinion of Agent's or such Lender's counsel, required by law; (5) in
connection with the exercise of any right or remedy under the Loan Documents
or in connection with any action, claim, lawsuit, demand, investigation or
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proceeding before any Governmental Body to which Agent or such Lender is a
party; or (6) which ceases to be confidential through no fault of Agent or
such Lender.
(c) The Loan Parties have furnished and will furnish to Agent
certain information concerning the Loan Parties which is non-public,
proprietary or confidential in nature ("Confidential Information"). Agent
and each Lender confirm to the Loan Parties that it is Agent's and such
Lender's policy and practice to maintain in confidence all Confidential
Information which is provided to it under agreements providing for the
extension of credit, and that it will protect the confidentiality of
Confidential Information submitted to it with respect to any Loan Party under
this Agreement, commensurate with its efforts to maintain the confidentiality
of its own Confidential Information, provided, however, that (1) nothing
contained herein shall prevent Agent or any Lender from disclosing
Confidential Information (A) to Persons employed or engaged by Agent or such
Lender in evaluating, approving, structuring or administering the Revolving
Credit Loan and the Revolving Credit Commitment on the condition that such
information not be further disclosed except in compliance with this Section
11.13(c); (B) as required or requested by any Governmental Body or reasonably
believed by Agent or such Lender to be compelled by any court decree,
subpoena or legal or administrative order or process; (C) as, in the opinion
of Agent's or such Lender's counsel, required by law; (D) to any actual or
potential assignee of or participant in any Lender's rights and obligations
under this Agreement pursuant to Section 10.2 to the extent such actual or
potential assignee or participant has agreed to maintain such information in
confidence on the basis set forth in this Section 11.13(c) (and any such bona
fide assignee or participant may disclose such information to Persons
employed or engaged by them as described in clause (1) above) and (E) in
connection with the exercise of any of its rights and remedies under this
Agreement or any of the other Loan Documents or in connection with any
action, claim, lawsuit, demand, investigation or proceeding before any
Governmental Body to which Agent or such Lender is a party; (2) the terms of
this Section 11.13(c) shall be inapplicable to any information provided to
Agent or such Lender which is in its possession prior to the delivery to it
of such information by any Loan Party or otherwise has been obtained by it on
a nonconfidential basis, or which was or becomes available to the public or
otherwise part of the public domain (other than as a result of Agent's or
such Lender's failure or any prospective participant's or assignee's failure
to abide hereby), or which was not non-public, proprietary or confidential
when a Loan Party delivered it to Agent; and (3) the determination by Agent
or any Lender as to the application of any of the circumstances described in
the foregoing clauses (1) and (2) will be presumed correct if made in good
faith.
(d) Notwithstanding paragraphs (a) and (b) above, each Loan Party
consents to Agent publishing a tombstone or similar advertising material
relating to the financing transaction contemplated by this Agreement.
11.14 Governing Law. Except as otherwise expressly provided in any of the
Loan Documents, in all respects, including all matters of construction,
validity and performance, this Agreement and the Obligations arising
hereunder shall be governed by, and construed and enforced in
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accordance with, the laws of the Province of Ontario applicable to contracts
made and performed in such province, and any laws of Canada applicable
therein without reference to principles of conflicts of law, except that,
with respect to registration, perfection and enforcement of hypothecs,
charges, assignments and security interests on, of or in Collateral located
in jurisdictions other than the Province of Ontario, to the extent required
by the law of such jurisdictions, such law shall govern. Borrower hereby
covenants and agrees that the courts located in the Province of Ontario shall
have nonexclusive jurisdiction to hear and determine any claims or disputes
pertaining to the Loan Documents or to any matter arising out of or related
to any of the Loan Documents; provided, however, that nothing in the Loan
Documents shall be deemed or operate to preclude the Agent from bringing suit
or taking other legal action in any other jurisdiction to collect amounts
owing under any of the Loan Documents, to realize on the Collateral or any
other security for the Obligations, or to enforce a judgement or other court
order in favour of the Agent.
11.15 Further Assurances. Each Loan Party shall, from time to time, upon
each request from Agent, at Borrower's cost and expense, make, do, execute
and cause to be made, done and executed, all such further and other lawful
acts, documents and assurances whatsoever which Agent determines in its
reasonable opinion may be necessary in order to give effect to the
provisions, purposes and intent of this Agreement and the other Loan
Documents and to complete the transactions contemplated by this Agreement and
the other Loan Documents.
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IN WITNESS WHEREOF, the parties have executed this Agreement.
INTERCITY PRODUCTS CORPORATION (CANADA)
By:
-------------------------------------
Name:
Title:
G.C. McDONALD SUPPLY LIMITED
By:
-------------------------------------
Name:
Title:
GENERAL ELECTRIC CAPITAL
CANADA INC, as Agent
By:
--------------------------------------
Name:
Title:
Lenders:
Revolving Credit Commitment:
Cdn$30,000,000
GENERAL ELECTRIC CAPITAL
CANADA INC.
By:
---------------------------------------
Name:
Title:
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<PAGE>
ANNEXES, SCHEDULES AND EXHIBITS
TO
CREDIT AGREEMENT
Dated as of December 19, 1996
between
INTERCITY PRODUCTS CORPORATION (CANADA)
as Borrower
and
G.C. McDONALD SUPPLY LIMITED
as a Loan Party
THE LENDER OR LENDERS PARTY THERETO
and
GENERAL ELECTRIC CAPITAL CANADA INC.
as Agent
<PAGE>
INDEX OF ANNEXES, SCHEDULES AND EXHIBITS
Annex A - Definitions; Rules of Construction
Annex B - Cash Management System
Annex C - Schedule of Closing Documents
Annex D - Schedule of Certain Fees
Annex E - Financials, Projections and Notices
Annex F - Insurance Requirements
Annex G - Financial Covenants
Schedule 1.17 - Location of Electronically Recorded Data
Schedule 3.2 - Chief Executive Office; Collateral Locations;
Corporate Names
Schedule 3.4 - Financials and Projections
Schedule 3.5 - Material Adverse Changes and Restricted Payments
Schedule 3.6 - Real Property and Leases
Schedule 3.7 - Material Contracts
Schedule 3.8 - Labour Matters
Schedule 3.9 - Ventures, Subsidiaries and Affiliates; Outstanding
Stock and Indebtedness
Schedule 3.10 - Taxes
Schedule 3.12 - Canadian Benefit and Pension Plans
Schedule 3.13 - Litigation
Schedule 3.15 - Intellectual Property
Schedule 3.17 - Environmental Matters
Schedule 3.18 - Insurance Policies
Schedule 3.19 - Bank Accounts and Lock Boxes
Schedule 3.24 - Customer and Trade Relations
Schedule 3.25 - Agreements and Other Documents
Schedule 6.2 - Investments
Schedule 6.7 - Liens
Exhibit 1.1(c) - Form of Notice of Revolving Credit Advance
Exhibit 1.1(d) - Form of Revolving Credit Note
Exhibit 1.1(e) - Form of Borrowing Base Certificate
Exhibit 1.2 - Form of Notice of Rollover
Exhibit 1.3 - Form of Notice of Conversion
Exhibit 3.4 - Projections
Exhibit A - Form of Compliance Certificate
Exhibit B - Form of Supplier Waiver and Assignment
<PAGE>
Annex A to Credit Agreement
DEFINITIONS: RULES OF CONSTRUCTION
1. Definitions. Capitalized terms used in this Agreement and the other
Loan Documents have (unless otherwise provided elsewhere in this Agreement
and the other Loan Documents) the following respective meanings:
ACCOUNT DEBTOR means, as to any Person, any other Person who is or who
may become obligated to such Person under, with respect to, or on account of,
an Account.
ACCOUNTANTS means, with respect to each Loan Party, Price Waterhouse,
or such other chartered public accountants who shall be a nationally
recognized accounting firm.
ACCOUNTANT'S LETTER has the meaning given to it in Section 4.2.
ACCOUNTS means all "accounts", as such term is defined in the PPSA
(Ontario), now owned or hereafter acquired by any Loan Party, including,
without limitation:
(a) all accounts receivable, other receivables, book debts and
other forms of obligations (other than forms of obligations
evidenced by Chattel Paper or Instruments or a security) now
owned or hereafter received or acquired by or belonging or
owing to any Loan Party, whether arising out of goods sold or
services rendered by it or from any other transaction;
(b) all of each Loan Party's rights in, to and under all purchase
orders or receipts now owned or hereafter acquired by it for
goods or services;
(c) all of Borrower's or any other Loan Party's rights to any
goods represented by any of the foregoing (including unpaid
sellers' rights of rescission, replevin, reclamation and
stoppage in transit and rights to returned, reclaimed or
repossessed goods);
(d) all monies due or to become due to any Loan Party under all
purchase orders and contracts for the sale or lease of goods
or the performance of services or both by any Loan Party or in
connection with any other transaction (whether or not yet
earned by performance on the part of any Loan Party) now or
hereafter in existence, including, without limitation, the
right to receive the proceeds of said purchase orders and
contracts; and
(e) all collateral security and guarantees of any kind, now or
hereafter in existence, given by any Person with respect to
any of the foregoing.
<PAGE>
ADDITIONAL COMPENSATION means has the meaning given to it in Section
1.19.
ADVANCE DATE has the meaning given to it in Section 1.13.
Affiliate means, with respect to any Person,
(a) each Person that, directly or indirectly, owns or controls,
whether beneficially, or as a trustee, guardian or other
fiduciary, five percent (5%) or more of the Stock having
ordinary voting power in the election of directors of such
Person;
(b) each Person that controls, is controlled by or is under common
control with such Person; or
(c) each of such Person's officers, directors, joint ventures and
partners.
For the purpose of this definition, "control" of a Person shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of
voting securities, by contract or otherwise; provided that when used in
reference to any Loan Party, the term Affiliate shall specifically exclude
Agent and each Lender.
AFFILIATE CORPORATION means any of ICP, CHL or ICP (USA).
AGENT has the meaning given to it in the first paragraph of this
Agreement or any successor thereto pursuant to Section 9.8.
AGENT'S COLLECTION ACCOUNTS means Agent's Canadian Dollar account
number 1011519 in the name of GE Capital Canada at Royal Bank of Canada, 200
Bay Street, 14th Floor, Royal Bank Plaza, Toronto, Ontario, transit number
00002, or such other account as may be designated by Agent.
AGREEMENT means the Credit Agreement to which this Annex A is attached
and of which it forms a part, including all Annexes, Schedules, and Exhibits
attached or otherwise identified thereto, all restatements, modifications and
supplements hereof or hereto, and any appendices, attachments, exhibits or
schedules to any of the foregoing, and shall refer to this Agreement as the
same may be in effect at the time such reference becomes operative; provided,
that any reference to the Schedules to this Agreement shall be deemed a
reference to the Schedules as in effect as of the Closing Date, unless
otherwise provided in a written amendment thereto.
APPLICABLE LAWS means, with respect to any Person, property,
transaction or event, all applicable laws, statutes, regulations, treaties,
judgments and decrees and (whether or not having the force of law) and all
applicable official directives, rules, consents, approvals, authorizations,
guidelines,
<PAGE>
orders and policies of any Governmental Body having authority over such
Person, except that wherever the term "Applicable Laws" is used in Sections
3, 5 and 6, the term shall be read as requiring all elements thereof to have
the force of law.
ASSIGNMENT OF RENTS AND BENEFITS means each assignment of rents and
benefits between any Loan Party and Agent, for the benefit of Agent and
Lenders, in form and substance satisfactory to Agent, including all
amendments, restatements, modifications and supplements thereto, in form and
substance satisfactory to Agent, and shall refer to each Assignment of Rents
and Benefits as the same may be in effect at the time such reference becomes
operative.
ASSIGNMENTS OF MONIES PAYABLE UNDER INSURANCE POLICIES means each
assignment of monies which may become payable under insurance policies to be
executed by each Loan Party in favour of Agent, for the benefit of Agent and
Lenders, including all restatements, amendments, modifications and
supplements thereto, and shall refer to the Assignments of Monies Payable
Under Insurance Policies as the same may be in effect at the time such
reference becomes operative.
BA RATE means, in respect of any Interest Period applicable to a BA
Rate Loan, the rate of interest per annum determined by Agent by reference to
the average rate (rounded upwards to the nearest basis point) quoted on
Telerate News Service (Page 3197, or such other Page as may replace such Page
on such Screen for the purpose of displaying Canadian interbank bid rates for
Canadian Dollar bankers' acceptances) applicable to Canadian Dollar bankers'
acceptances with a term comparable to such Interest Period as of 10:00 a.m.
(Toronto time) two Business Day before the first day of such Interest Period.
If for any reason the Telerate News Service rates are unavailable, BA Rate
means the rate of interest determined by Agent which is equal to the
arithmetic mean of the rates quoted by The Bank of Nova Scotia, Royal Bank of
Canada, and Canadian Imperial Bank of Commerce, in respect of Canadian Dollar
bankers' acceptances with a term comparable to such Interest Period as of
10:00 a.m. two Business Day before the first day of such Interest Period.
BA RATE LOAN means a loan that bears interest at a rate based on the
BA Rate.
BANK ACT SECURITY has the meaning given to it in Section 5.15.
BLOCKED ACCOUNT has the meaning given to it in Annex B.
BLOCKED ACCOUNTS AGREEMENT means each blocked accounts agreement to be
executed by each Loan Party in favour of Agent, for the benefit of Agent and
Lenders, in form and substance satisfactory to Agent, including all
restatements, amendments, modifications and supplements thereto, in form and
substance satisfactory to Agent, and shall refer to each Blocked Accounts
Agreement as the same may be in effect at the time such reference becomes
operative.
<PAGE>
BLOCKED CONCENTRATION ACCOUNT has the meaning given to it in Annex B.
BLOCKED CONCENTRATION ACCOUNT BANK has the meaning given to it in
Annex B.
BORROWER has the meaning given to it in the first paragraph of this
Agreement.
BORROWER PLEDGE AGREEMENT means the pledge agreement dated as of
December 19, 1996 between Borrower and Agent, for the benefit of Agent and
Lenders, pledging all of the issued shares of McDonald to Agent, including
all restatements, amendments, modifications and supplements thereto, and
shall refer to the Borrower Pledge Agreement, as the same may be in effect at
the time such reference becomes operative.
BORROWING BASE means, at any time, an amount determined by Agent to be
equal to the sum at such time of:
(a) eighty five percent (85%) of Eligible Accounts (based on the
lower of the accounts receivable aging or the general ledger
value),
plus
(b) fifty percent (50%) of Eligible Inventory, valued on a
firstin, firstout basis (at the lower of (x) market or (y) the
lower of cost from the general ledger of the Borrower or from
the perpetual ledger of the Borrower), and
minus
(c) the amount of any reserves, including, without limitation, in
respect of Prior Claims and, in the case of Eligible
Inventory, a revaluation reserve and excess/obsolete reserve,
(if any), as Agent may, from time to time, determine
appropriate, in its reasonable credit judgement.
BORROWING BASE CERTIFICATE means a certificate in substantially the
form attached hereto as Exhibit 1.1(e).
BUSINESS DAY means any day that is not
(a) a Saturday, a Sunday or a day on which banks are required or
permitted to be closed in the State of Illinois or the
Province of Ontario; or
(b) a day on which Agent is not open for business.
CANADIAN BENEFIT PLANS means all material employee benefit plans
maintained or contributed to by any Loan Party that are not Canadian Pension
Plans including, without limitation, all profit
<PAGE>
sharing, savings, supplemental retirement, retiring allowance, severance,
pension, deferred compensation, welfare, bonus, incentive compensation,
phantom stock, legal services, supplementary unemployment benefit plans or
arrangements and all life, health, dental and disability plans and
arrangements in which the employees or former employees of Borrower or any of
its Subsidiaries employed in Canada participate or are eligible to
participate but excluding all stock option or stock purchase plans.
CANADIAN DOLLARS AND CDN$ means lawful money of Canada.
CANADIAN PENSION PLANS means each plan which is considered to be a
pension plan for the purposes of any applicable pension benefits standards
statute and/or regulation in Canada established, maintained or contributed to
by Borrower or any of its Subsidiaries for its or any of its Subsidiaries'
employees or former employees.
CAPITAL EXPENDITURES shall mean, with respect to any period, all
payments of Borrower and its Subsidiaries during such period for any fixed
assets or improvements, or for replacements, substitutions or additions
thereto, that have a useful life of more than one year and that are required
to be capitalized under GAAP, and, in any event, shall include Capital Lease
Obligations and all asset purchases giving rise to a Lien securing Purchase-
Money Indebtedness.
CAPITAL LEASE means any lease of any property (whether real, personal
or mixed) by any Person as lessee that, in accordance with GAAP, either would
be required to be classified and accounted for as a capital lease on a
balance sheet of such Person or otherwise be disclosed as such in a note to
such balance sheet.
CAPITAL LEASE OBLIGATION means, as of any date, the amount of the
obligation of the lessee under a Capital Lease.
CASH EQUIVALENTS means:
(a) securities with maturities of 30 days or less from the date of
acquisition, issued or fully guaranteed or insured by the
governments of Canada or the United States of America or any
agency thereof;
(b) certificates of deposit, overnight bank deposits and bankers'
acceptances issued by commercial banks incorporated under the
laws of Canada or the United States of America, each having
capital and surplus in excess of Cdn$500,000,000, or the
Equivalent Amount thereof, having maturities of 30 days or
less from the date of acquisition; and
(c) commercial paper of an issuer rated at least A1 by Standard &
Poor's Corp. or at least P1 by Moody's Investors Services,
Inc., or carrying an equivalent rating by a nationally
recognized rating agency if both of the two named rating
agencies cease publishing ratings of investments, with
maturities of not more than 30 days from the date acquired.
<PAGE>
CHANGE IN CONTROL means the time when:
(a) any Loan Party has sold, transferred, conveyed, assigned or
otherwise disposed of all or substantially all of its assets;
(b) ICP ceases to be the beneficial owner and registered holder of
all of the issued and outstanding shares of Borrower;
(c) Borrower ceases to be the beneficial owner and registered
holder of all of the issued and outstanding shares of McDonald
unless the Net Proceeds of any sale of such shares are, upon
receipt by Borrower, paid to Agent in repayment of the then
outstanding Obligations; or
(d) with respect to ICP,
(1) any Person or group of Persons acting jointly or in
concert shall have acquired beneficial ownership of,
or the power to exercise control or direction over,
20% or more of the issued and outstanding shares of
any class of shares in the capital Stock of ICP having
the right to vote for the election of directors of ICP
under ordinary circumstances, excluding the
acquisition by any Person or group of Persons of all
or any part of the shares of ICP owned at the date of
this Agreement by The Mortgage Insurance Company of
Canada ("MICC") (it being represented by Borrower that
at the date of this Agreement MICC is the registered
owner of approximately 32% of such issued and
outstanding shares of ICP); or
(2) during any period of twelve consecutive calendar
months, individuals who at the beginning of such
period constituted the board of directors of ICP
(together with any new directors whose election by the
board of directors of ICP or whose nomination for
election by the stockholders of ICP was approved by a
vote of at least two-thirds of the directors then
still in office who either were directors at the
beginning of such period or whose elections or
nomination for election was previously so approved)
cease for any reason other than death or disability to
constitute a majority of the directors then in office,
excluding, for purposes of calculating such majority,
any directors who are nominees or representatives of
MICC.
CHARGES means all Taxes or Liens in respect of Taxes upon or relating
to:
(a) the Collateral;
(b) the Obligations;
<PAGE>
(c) the employees, payroll, income or gross receipts of any Loan
Party;
(d) the ownership or use by any Loan Party of any of its assets;
or
(e) any other aspect of any Loan Party's business.
CHATTEL PAPER means all "chattel paper", as such term is defined in
the PPSA (Ontario), now owned or hereafter acquired by Borrower, wherever
located.
CHL means CHL Holdings, Inc.
CHL OBLIGATIONS means all indebtedness, liabilities and obligations of
CHL under a credit agreement between CHL and Suntrust Bank, Nashville, N.A.
dated as of December 19, 1996.
CLAIM has the meaning given to it in Section 1.16.
CLOSING DATE means the Business Day on which the conditions precedent
set forth in Section 2 have been satisfied, in Agent's sole discretion, or
waived in writing by Agent, and on which the initial Revolving Credit Advance
shall be made (which date shall in any event be on or before December 31,
1996).
CLOSING FEE has the meaning ascribed to it in Annex D.
COLLATERAL means the property covered by the Collateral Documents and
any other property, real or personal, tangible or intangible, now existing or
hereafter acquired, that may at any time be or become subject to a Lien in
favour of Agent or Lenders to secure any or all of the Obligations.
COLLATERAL DOCUMENTS means the Security Agreements, the Hypothecs, the
Debentures, the Debenture Delivery Agreement, the General Assignments of Book
Debts, the Intellectual Property Security Agreements, Supplier Waivers and
Assignments, the Assignments of Rents and Benefits, the Blocked Accounts
Agreements, the Assignments of Monies Payable Under Insurance Policies, the
McDonald Guarantee, the Borrower Pledge Agreement, the ICP Postponement and
Subordination Agreement, and the Emerson Postponement, Subordination and
Assignment Agreement and all other instruments and agreements now or
hereafter securing the whole or any part of the Obligations or the
obligations of McDonald under the McDonald Guarantee.
COLLATERAL EXAMINATION CHARGE has the meaning given to it in Annex D.
COLLATERAL MANAGEMENT FEE has the meaning given to it in Annex D.
<PAGE>
COMMITMENT LETTER means the Commitment Letter, dated October 10, 1996
made by GE Capital Canada and agreed to and accepted on behalf of the
Borrower on October 15, 1996, together with the appendix attached thereto.
COMMITMENT TERMINATION DATE means the earliest of:
(a) the third anniversary of the Closing Date;
(b) the date of termination of the Revolving Credit Commitments
pursuant to Section 8.2; and
(c) the date of termination of the Revolving Credit Commitments in
accordance with the provisions of Section 1.4.
COMPLIANCE CERTIFICATE means a certificate in the form attached hereto
as Exhibit A.
CONTAMINANT means any substance, solid, liquid or gaseous matter, fuel
(including, without limitation, petroleum or petroleum products, crude oil,
natural gas, natural gas liquid, liquified natural gas, synthetic fuel or any
combination of the above), microorganism, sound, vibration, ray, heat, odour,
radiation, energy vector, plasma, organic or inorganic matter, whether or not
animate or inanimate, container, transient reaction intermediate, nuclear
material or any combination of the above deemed hazardous, toxic, a
pollutant, a deleterious substance, a hazardous material, a waste, a
hazardous waste, a contaminant or a source of pollution or contamination
under any Environmental Laws or the presence of which in the Environment is
likely to affect adversely the quality of the Environment in any way,
including, without limitation, affecting adversely the life, health, safety,
welfare or comfort of human beings, or causing damage to or otherwise
impairing the quality of the soil, vegetation, wildlife or property.
DEBENTURE means each agreement between each Loan Party and Agent, for
the benefit of Agent and Lenders, in form and substance satisfactory to
Agent, including all amendments, restatements, modifications and supplements
thereto, in form and substance satisfactory to Agent, and shall refer to each
Debenture as the same may be in effect at the time such reference becomes
operative.
DEFAULT means any event which, with the passage of time or notice or
both, would, unless cured or waived, become an Event of Default.
DEFAULT RATE means:
(a) with respect to principal owing on Revolving Credit Advances,
a rate per annum equal to:
(1) two percent (2%),
<PAGE>
plus
(2) the rate or rates of interest otherwise in effect
hereunder from time to time therefor; and
(b) with respect to interest on other Obligations (excluding
principal on the Revolving Credit Advances), a rate per annum
equal to:
(1) the Prime Rate in effect from time to time,
plus
(2) two and one quarter (2.25%).
DEPRECIATION AND AMORTIZATION EXPENSE shall mean, with respect to any
fiscal period of Borrower, all depreciation or amortization expenses of
Borrower on a consolidated basis for such period.
DISBURSEMENT ACCOUNTS has the meaning given to it in Annex B.
DISCHARGE means the emission, deposit, issue, discharge, release,
escape, leaching, dispersal, migration, spraying, spill, leakage or seepage
of a Contaminant into the Environment.
EBITDA shall mean, with respect to any fiscal period of Borrower:
(a) Net Income,
plus
(b) Interest Expense to the extent deducted or added in
determining Net Income;
plus
(c) Tax Expense to the extent deducted or added in determining Net
Income;
plus
(d) Depreciation and Amortization Expense to the extent deducted
or added in determining Net Income;
<PAGE>
minus
(e) to the extent added in determining Net Income, extraordinary,
nonrecurring or nonoperating gains of Borrower and its
Subsidiaries on a consolidated basis;
plus
(f) to the extent deducted in determining Net Income,
extraordinary, nonrecurring or nonoperating losses of Borrower
and its Subsidiaries on a consolidated basis.
ELIGIBLE ACCOUNT means the gross outstanding balance of Accounts of
each Loan Party denominated in Canadian Dollars or USD, which Agent, in
accordance with Section 1.7, shall from time to time deem eligible, less, all
finance charges, late fees, other fees that are unearned, and all allowances,
rebates and discounts for volume, advertising, defective returns, markdown
allowances, cash payment and booking discounts, credit card payments, for the
account of an Account Debtor, warehouse delivery and booking discounts and
such other amounts as Agent, in its sole discretion, shall from time to time
deem appropriate. Without in any way limiting the discretion given to Agent
hereunder to deem an Account of any Loan Party ineligible or to change the
following eligibility criteria, an Account of any Loan Party shall not be an
Eligible Account if:
(a) (1) such Account is owing by an Account Debtor which is
unable to pay its debts as such debts become due, or
is, or is adjudged or declared to be, or admits to
being, bankrupt or insolvent, or makes, or files a
notice of intention to make, a proposal under any
Insolvency Statute; or
(2) any notice of intention is filed or any voluntary case
or involuntary case or proceeding is commenced under
any Insolvency Statute, or incorporation or other law,
now or hereinafter in effect, for the
(i) bankruptcy, liquidation, windingup,
dissolution or suspension of general
operations of such Account Debtor,
(ii) composition, reorganization, arrangement or
readjustment of, or other relief from, or stay
of proceedings to enforce, some or all of the
debts of such Account Debtor,
(iii) appointment of a trustee, receiver, receiver
and manager, liquidator, custodian or other
similar official for, or for all or a
substantial part of the assets of, such
Account Debtor, or
<PAGE>
(iv) possession, foreclosure or retention, or sale
or other disposition of, or other proceedings
to enforce security over, all or a substantial
part of the assets of such Account Debtor;
(b) the Accounts originated outside of Canada;
(c) the Account originated in provinces in which each Loan Party
has not made such filings necessary to enable each Loan Party
to sustain an action for collection;
(d) in the case of an Account subject to a volume rebate, such
Account shall be deemed ineligible to the extent of the amount
of the volume rebate;
(e) the Account is owing by an Affiliate of any Loan Party or by
any other person related to or operating at non-arm's length
to any Loan Party;
(f) the Account is represented by invoices for goods or services
which have not been provided in the ordinary course of
business of any Loan Party;
(g) the Account is due from an obligor whose indebtedness to any
Loan Party exceeds the credit limit specified by such Loan
Party for such obligor;
(h) any warranty, representation or covenant contained in this
Agreement or any of the other Loan Documents applicable either
to Accounts of any Loan Party in general or to any such
specific Account has been breached with respect to such
Account in any material respect;
(i) such Account has remained unpaid after the earlier to occur
of:
(1) 60 days after the date on which payment is specified
to be due in the original applicable invoice, and
(2) 120 days after the date of such original applicable
invoice provided that such period may be up to 150
days after the date of the original applicable invoice
under Borrower's booking program for room air
conditioners, provided in each case that such terms
are consistent with the terms in effect on the date of
this Agreement;
(j) such Account is payable by an Account Debtor which is a
supplier or creditor of any Loan Party to the extent that any
Loan Party is indebted to such Account Debtor;
(k) Accounts represented by invoices for goods or services which
have not been delivered and accepted or fully performed, as
the case may be;
<PAGE>
(l) the sale represented by such Account is on a bill-and-hold,
undelivered sale, guaranteed sale, sale or return,
consignment, or sale on approval basis;
(m) Agent believes, in its reasonable discretion, that the
collection of such Account is insecure or that such Account
may not be paid;
(n) such Account is subject to any claim by or dispute with the
Account Debtor, to the extent of such claim or dispute;
(o) such Account is subject to any right of setoff by the Account
Debtor, to the extent of such right;
(p) Agent does not have a perfected first ranking Lien in and to
such Account, subject to no Lien other than (1) Prior Claims
(that have not been filed, recorded or registered and in
respect of which no other action has been taken to make the
Prior Claim enforceable by the holder thereof) that secure
amounts that are not yet due and payable and (2) the Emerson
Lien which is subordinated under the Emerson Postponement,
Subordination and Assignment Agreement;
(q) such Account is not evidenced by an invoice or other writing
in form acceptable to Agent in its reasonable discretion;
(r) such Account is an Account owing by a Governmental Body;
(s) in order to be entitled to collect it, any Loan Party is
required to perform any additional service for, or perform or
incur any additional obligation to, Account Debtor;
(t) such Account is owing by an Account Debtor whose Indebtedness
to any Loan Party on Accounts which are otherwise ineligible
exceeds 50% of such Account Debtor's total Indebtedness to any
Loan Party;
(u) such Account is an Account in respect of which Account Debtor
takes a deduction or credit not authorized or otherwise agreed
to by any Loan Party to the extent of such unauthorized
deduction or credit;
(v) Accounts due from an Account Debtor to the extent that the
Account Debtor's total Indebtedness to the Loan Parties
exceeds 15% of the aggregate amount of all Accounts of the
Loan Parties; or
(w) Accounts due on account of loans or other financial assistance
made or provided by any Loan Party.
<PAGE>
ELIGIBLE INVENTORY means such Inventory of any Loan Party that
consists of finished goods and which Agent, in its discretion, shall from
time to time deem eligible. Without in any way limiting the discretion given
to Agent hereunder to deem Inventory of any Loan Party ineligible or to
change the following eligibility criteria, Inventory of any Loan Party shall
not be Eligible Inventory if:
(a) it is placed by any Loan Party on consignment or held by any
Loan Party on consignment from another Person;
(b) it is Inventory not located in the Provinces of Quebec or
Ontario;
(c) it is Inventory in transit;
(d) it is Inventory held on or at any leased premises unless:
(1) the Inventory at any one location has a value of more
than $50,000,
(2) the Inventory is identifiable as a Loan Party's
Inventory, and
(3) the landlord of such premises has executed a landlord
agreement, in form and substance satisfactory to Agent
and that remains effective at all times;
(e) it is Inventory in the possession or control of a bailee,
warehouseman, processor, converter, finisher or other Person
other than any Loan Party, unless:
(1) the Inventory at any one location has a value of more
than $50,000,
(2) the Inventory is identifiable as a Loan Party's
Inventory, and
(3) Agent is in possession of such agreements, instruments
and documents as Agent may require (each in form and
content acceptable to Agent and duly executed, as
appropriate by the bailee, warehouseman, processor,
converter or other Person in possession or control of
such Inventory, as applicable) including warehouse
receipts in Agent's name covering such Inventory;
(f) it is not insured in accordance with insurance requirements of
Annex F;
(g) Agent does not have a perfected first ranking Lien in and to
such Inventory, subject to no prior ranking Lien other than
(1) Prior Claims (that have not been filed, recorded or
registered and in respect of which no other action has been
taken to make the Prior Claim enforceable by the holder
thereof) that secure amounts that are not yet due and payable
and (2) the Emerson Lien which is subordinated under the
Emerson Postponement, Subordination and Assignment Agreement;
<PAGE>
(h) it does not meet all standards imposed by any Applicable Law
or promulgated by any Governmental Body including, without
limitation, all Applicable Laws governing product labelling,
care labelling and country of origin labelling;
(i) it is not owned by any Loan Party free and clear of all Liens
and rights of others, except (1) first priority Liens in
favour of Agent, (2) Prior Claims (that have not been filed,
recorded or registered and in respect of which no other action
has been taken to make the Prior Claim enforceable by the
holder thereof) that secure amounts that are not yet due and
payable and (3) and the Emerson Lien which is subordinated
under the Emerson Postponement, Subordination and Assignment
Agreement;
(j) it in any material respect fails to meet or violates any
warranty, representation or covenant contained in this
Agreement or any other Loan Document;
(k) it is Inventory in respect of which any Loan Party does not
maintain adequate records satisfactory to Agent;
(l) it is not sold in the ordinary course of a Loan Party's
business;
(m) it consists of display items, samples, packaging and shipping
materials, defective goods or goods which have been returned
by buyers;
(n) it is covered by a negotiable document of title which has not
been delivered to Agent on terms satisfactory to Agent;
(o) such Inventory is subject to a distribution agreement, licence
or similar agreement with a third party which could restrict
Agent, Lenders and/or their agents from exercising their
rights and remedies in respect of such Inventory and Agent
does not hold an agreement duly executed by such third party
and in form and substance satisfactory to Agent under which
that third party consents to Agent, Lenders and/or their
agents exercising Agent's and Lenders' rights and remedies
under the Collateral Documents in respect of such Inventory;
or
(p) it is not otherwise acceptable to Agent in its reasonable
credit judgment.
EMERSON means Emerson Electric Co., a corporation formed and existing
under the laws of the State of Missouri.
EMERSON GUARANTEE means the guarantee agreement dated as of December
19, 1996 executed by Borrower in favour of Emerson in respect of the
indebtedness, liabilities and obligations of ICP
<PAGE>
under a reimbursement agreement dated as of December 19, 1996 executed by ICP
in favour of Emerson and shall refer to the Emerson Guarantee, as the same
may be in effect at the time such reference becomes operative.
EMERSON INDEBTEDNESS means all debts, liabilities and obligations of
Borrower to Emerson under the Emerson Guarantee.
EMERSON LIEN means the second ranking Lien, subordinated to the Lien
of the Agent and the Lenders constituted by the Loan Documents as provided in
the Emerson Postponement, Subordination and Assignment Agreement, in all
Collateral of Borrower to secure the Emerson Indebtedness.
EMERSON POSTPONEMENT, SUBORDINATION AND ASSIGNMENT AGREEMENT means the
agreement dated as of December 19, 1996 between Emerson, Agent, Borrower and
ICP, including all restatements, amendments, modifications and supplements
thereto, postponing the Emerson Indebtedness to the Obligations,
subordinating the security for the Emerson Indebtedness to the security for
the Obligations and assigning the Emerson Indebtedness and the security
therefor to the Agent, for the benefit of Agent and Lenders, as security for
the Obligations, and shall refer to the Emerson Postponement, Subordination
and Assignment Agreement as the same may be in effect at the time such
reference becomes operative.
ENVIRONMENT means all components of the Earth, including, all layers
of the atmosphere, air, land (including, all underground spaces and cavities
and all land submerged under water), soil, water (including surface and
underground water), all organic and inorganic matter and living organisms,
animal life, vegetation, and the interacting natural systems that include
components referred to above in this definition.
ENVIRONMENTAL ACTIVITY means any past, present or future activity,
event or circumstance in respect of a Contaminant (including, without
limitation, its storage, holding, collection, purchase, accumulation,
assessment, generation, manufacture, construction, processing, treatment,
stabilization, disposition, handling, transportation, deposit, recycling,
elimination, sale, distribution, import or export or its Discharge into the
Environment) or which is otherwise regulated by Environmental Laws.
ENVIRONMENTAL ASSESSMENT means an environmental audit conducted by a
Person approved in writing by Agent in respect of any or all of the
Facilities.
ENVIRONMENTAL LAWS means all applicable federal, state, provincial,
national, and local laws, including treaties, statutes, regulations,
directives, ordinances, codes, orders, rules, subordinate legislation,
Governmental Approvals and other governmental actions, restrictions and
requirements, and all judgments, orders, instructions and awards of any court
of competent
<PAGE>
authority and all codes of practice and guidance, from time to time, having
the force of law, relating to environmental matters (including Environmental
Activities or occupational health and safety), including, the Environmental
Protection Act (Ontario), the Occupational Health and Safety Act (Ontario),
the Canadian Environmental Protection Act (Canada), the Fisheries Act
(Canada), the Transportation of Dangerous Goods Act (Canada) and the
Hazardous Materials Information Review Act (Canada), all as amended, and
includes all regulations made under such statutes.
EQUIPMENT means all equipment as such term is defined in the PPSA
(Ontario), and, in any event, shall include all machinery, equipment,
furnishings, fixtures and vehicles and any and all additions, accessions,
substitutions and replacements of any of the foregoing, wherever located,
together with all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto.
EQUIVALENT AMOUNT means, on any date, with respect to obligations or
valuations denominated in one currency (the "First Currency") the amount of
the First Currency which is required to purchase a fixed amount in another
currency (the "Other Currency") on any Business Day at the 12:00 noon rate
quoted on Telerate News Service (Page 3194 or such other Page as may replace
such Page on such Screen for the purpose of displaying currency exchange
rates) on the Business Day immediately preceding such date of determination,
or at such other rate as may have been agreed in writing between Borrower and
Agent.
ERISA means the United States Employee Retirement Income Security Act
of 1974 (or any successor legislation thereto), as amended from time to time,
and any regulations promulgated thereunder.
EVENT OF DEFAULT has the meaning given to it in Section 8.1.
EXISTING CREDIT AGREEMENTS means the loan agreement between Borrower
and The Toronto-Dominion Bank dated as of March 19, 1990 as amended by
amending agreements dated as of December 23, 1992, March 11, 1993, March 22,
1994, March 31, 1995 and letter agreements dated February 21, 1996 and
February 22, 1996 as further amended by an amending agreement made as of July
19, 1996 and the letter loan agreement between G.C.McDonald Supply Limited
and The Toronto-Dominion Bank dated February 25, 1995.
FACILITIES means the moveable, personal, immoveable and real
properties (including buildings, equipment, machinery and lands) from time to
time, owned, leased, managed, controlled or operated by Borrower or any of
its Subsidiaries.
FEES means the fees due to Agent and Lenders as set forth in Annex D,
and any other fees due to Agent or Lenders pursuant to the Loan Documents.
<PAGE>
FINANCIALS means the financial statements referred to in Section 3.4.
FISCAL MONTH means each of the monthly accounting periods adopted by
Borrower before the Closing Date.
FISCAL QUARTER means each of four consecutive accounting periods in
each Fiscal Year consisting of three Fiscal Months.
FISCAL YEAR shall mean the annual accounting period ending on December
31 in each year.
GAAP means, subject to Section 2.(a) of this Annex A, with respect to
each Loan Party, generally accepted accounting principles in Canada in effect
from time to time, applied on a consistent basis.
GE CAPITAL means General Electric Capital Corporation, a corporation
organized under the banking laws of the State of New York.
GE CAPITAL CANADA means General Electric Capital Canada Inc., a Canada
corporation, having an office at 2300 Meadowvale Blvd., Mississauga, Ontario,
L5N5P9.
GE RATE with respect to any calendar month means the rate of exchange
announced by GE Capital Canada to its customers before the beginning of such
calendar month as the rate of exchange GE Capital Canada will use throughout
such calendar month to convert USD to Cdn$.
GENERAL ASSIGNMENT OF BOOK DEBTS means each general assignment of
debts to be executed by each Loan Party in favour of Agent, for the benefit
of Agent and Lenders, in form and substance satisfactory to Agent, including
all restatements, amendments, modifications and supplements thereto, in form
and substance satisfactory to Agent, and shall refer to each General
Assignment of Book Debts as the same may be in effect at the time such
reference becomes operative.
GOVERNMENTAL APPROVAL means any authorization, certificate,
attestation, permit, approval, grant, licence, consent, right, privilege,
registration, filing, commitment, order, judgment, direction, ordinance or
decree issued or granted by or under law or by any Governmental Body as well
as any acquired or vested right required or recognized pursuant to
Environmental Laws.
GOVERNMENTAL BODY means any government, parliament, legislature,
regulatory authority, agency, tribunal, department, commission, board,
arbitrator or panel of arbitrators or court or other law, regulation or rule
making entity (including a Minister of the Crown), having or purporting to
have jurisdiction on behalf of any nation, state, province, municipality or
district, or any subdivision thereof.
<PAGE>
GUARANTEED INDEBTEDNESS means, as to any Person, any obligation of
such Person guaranteeing any indebtedness, lease, dividend, or other
obligation ("primary obligation") of any other Person (the "primary obligor")
in any manner, including any obligation or arrangement of such Person:
(a) to purchase or repurchase any such primary obligation;
(b) to advance or supply funds:
(1) for the purchase or payment of any such primary
obligation, or
(2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth
or solvency or any balance sheet condition of the
primary obligor;
(c) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such
primary obligation; or
(d) to indemnify the owner of such primary obligation against loss
in respect thereof.
The amount of any Guaranteed Indebtedness at any time shall be deemed to be
an amount equal to the lesser at such time of (x) the stated or determinable
amount of the primary obligation in respect of which such Guaranteed
Indebtedness is made or (y) the maximum amount for which such Person may be
liable pursuant to the terms of the instrument embodying such Guaranteed
Indebtedness; or, if not stated or determinable, the maximum reasonably
anticipated liability (assuming full performance) in respect thereof.
HYPOTHEC means the hypothec to be executed by each Loan Party, Agent
and Lenders in favour of Lenders, including all restatements, amendments,
modifications and supplements thereto, and shall refer to each Hypothec, as
the same may be in effect at the time such reference becomes operative.
ICP means InterCity Products Corporation, a corporation incorporated
and subsisting under the laws of Canada.
ICP (USA) means InterCity Products Corporation (USA), a corporation
formed under the laws of the State of Delaware.
ICP (USA) ACKNOWLEDGEMENT AND CONSENT means the acknowledgement and
consent dated as of December 19, 1996 between ICP (USA) and Agent, for the
benefit of Agent and Lenders, with respect to the Intellectual Property owned
by ICP (USA) including all restatements, amendments, modifications and
supplements thereto, and shall refer to the ICP (USA) Acknowledgement and
Consent, as the same may be in effect at the time such reference becomes
operative.
<PAGE>
ICP INDEBTEDNESS means the Indebtedness advanced to Borrower by ICP in
an amount not less than $37,900,000 and subordinated on terms set out in the
ICP Postponement and Subordination Agreement.
ICP POSTPONEMENT AND SUBORDINATION AGREEMENT means the postponement
and subordination agreement dated as of December 19, 1996 between ICP and
Agent postponing and subordinating the ICP Indebtedness to the Obligations,
including all restatements, amendments, modifications and supplements
thereto, and shall refer to the ICP Postponement and Subordination Agreement,
as the same may be in effect at the time such reference becomes operative.
INDEBTEDNESS of any Person means:
(a) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services payment for
which is deferred six (6) months or more, but excluding
obligations to trade creditors incurred in the ordinary course
of business that are not overdue by more than six (6) months
unless being contested in good faith, (including reimbursement
and all other obligations with respect to surety bonds,
letters of credit and bankers' acceptances, whether or not
matured, but not including obligations to trade creditors
incurred in the ordinary course of business);
(b) all obligations evidenced by notes, bonds, debentures or
similar instruments;
(c) all indebtedness created or arising under any conditional sale
or other title retention agreements with respect to property
acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property);
(d) all Capital Lease Obligations;
(e) all Guaranteed Indebtedness;
(f) all Indebtedness referred to in clause (a), (b), (c), (d) or
(e) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien upon or in property (including
accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the
payment of such Indebtedness; and
(g) in respect of the Borrower, the Obligations.
INDEMNIFIED PERSON has the meaning given to it in Section 1.16.
<PAGE>
INSOLVENCY STATUTE means either of the Bankruptcy and Insolvency Act
(Canada) or the Companies' Creditors Arrangement Act (Canada), each as now
and hereafter in effect, any successors to such statutes and any other
applicable insolvency or other similar law of any jurisdiction.
INSTRUMENTS means all "instruments", as such term is defined in the
PPSA (Ontario), now owned or hereafter acquired by Borrower, wherever
located.
INTELLECTUAL PROPERTY means, all intellectual and industrial property,
including, without limitation, all patents, industrial designs, copyrights,
trademarks, trade names, trade secrets, and options and rights to use any of
the foregoing and, when the context permits, all registrations and
applications that have been made or shall be made or filed in any office in
any jurisdiction in respect of the foregoing, and all reissues, extensions
and renewals thereof.
INTELLECTUAL PROPERTY SECURITY AGREEMENT means each agreement between
each Loan Party and Agent, for the benefit of Agent and Lenders, in form and
substance satisfactory to Agent, including all amendments, restatements,
modifications and supplements thereto, in form and substance satisfactory to
Agent, and shall refer to each Intellectual Property Security Agreement as
the same may be in effect at the time such reference becomes operative.
INTEREST EXPENSE shall mean with respect to any fiscal period of
Borrower, interest expense of Borrower on a consolidated basis for such
period, including amortization of original issue discount on any Indebtedness
and of all fees payable in connection with the incurrence of such
Indebtedness other than the Obligations, including, without limitation, the
interest portion of any deferred payment obligation and the interest
component of any Capital Lease Obligation.
INTEREST PERIOD means with respect to any BA Rate Loan bearing
interest at a fixed rate, a period of 30, 60 or 90 days commencing on the day
of the month specified by Borrower in its Notice of Revolving Credit Advance,
Notice of Rollover or Notice of Conversion with respect to such BA Rate Loan
delivered to Agent in accordance with Section 2.2.
INVENTORY means, as to any Person, all goods, wares and merchandise
manufactured, produced or purchased for resale or lease by such Person, and
all goods, wares and merchandise used in or procured for the packing or
packaging of goods, wares and merchandise so manufactured, produced or
purchased for resale or lease.
INVESTMENT means, for any Person:
(a) the acquisition (whether for cash, property, services or
securities or otherwise) of shares, bonds, notes, debentures,
partnership or other debt instruments or ownership interests
or other securities of any other Person or any agreement to
make any such acquisition;
<PAGE>
(b) the making of any deposit with, or advance, loan or other
extension of credit to, any other Person (including the
purchase of property from another Person subject to an
understanding or agreement, contingent or otherwise, to resell
such property to such Person); and
(c) the entering into of any Guaranteed Indebtedness of, or other
contingent obligation with respect to, Indebtedness or other
liability of any other Person and (without duplication) any
amount committed to be advanced, lent or extended to such
Person.
ITA means the Income Tax Act (Canada), as amended, and any successor
thereto, and any regulations promulgated thereunder.
JUDGMENT CONVERSION DATE has the meaning given to it in Section 11.8.
JUDGMENT CURRENCY has the meaning given to it in Section 11.8.
LEASES means all of those leasehold estates in real property now owned
or hereafter acquired by any Loan Party, as lessee or sublessee.
LENDER and LENDERS have the meanings provided in the first paragraph
of this Agreement.
LICENCE AGREEMENTS means all agreements pursuant to which a Loan Party
has obtained rights or an option to acquire rights or has granted to a Person
rights or an option to acquire rights to use any Intellectual Property owned
by a Person or a Loan Party, respectively.
LIEN means any mortgage, deed to secure debt or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement, deemed trust, garnishment rights or preferential arrangement of
any kind or nature whatsoever (including any lease or title retention
agreement, any financing lease having substantially the same economic effect
as any of the foregoing, and the filing of, or agreement to give, any
financing statement perfecting a security interest under the Applicable Laws
of any jurisdiction) whether or not filed, recorded or otherwise perfected
under such Applicable Laws.
LOAN DOCUMENTS mean this Agreement, the Revolving Credit Notes, the
Collateral Documents and all agreements, instruments, documents and
certificates in favour of Agent and/or Lenders executed in connection with
the transactions contemplated by this Agreement, including, without
limitation, those that are identified in the Schedule of Closing Documents
attached as Annex C, and including all other pledges, powers of attorney,
consents, assignments, contracts, notices, and
<PAGE>
other written matter whether heretofore, now or hereafter executed by or on
behalf of any Loan Party and delivered to Agent and/or Lenders in connection
with this Agreement or the financing transactions contemplated hereby.
LOAN PARTY means Borrower or McDonald.
LOCK BOX has the meaning given to it in Annex B.
MATERIAL ADVERSE EFFECT means:
(a) a material adverse effect on:
(1) the business, assets, operations, prospects, or
financial or other condition of any Loan Party or the
industry within which any Loan Party operates other
than a material adverse effect generally affecting
such industry,
(2) Borrower's ability to pay or perform the Obligations
in accordance with the terms thereof or any other Loan
Party's ability to perform its obligations under any
Loan Document to which it is a party,
(3) the Collateral or Agent's or Lenders' Liens on the
Collateral or the priority of any such Liens, or
(4) the rights and remedies of Agent and Lenders under
this Agreement and the other Loan Documents; or
(b) the incurrence by any Loan Party of any liability, contingent
or liquidated, that has an actual or estimated incurrence of
liability, or exposure or loss, greater than $1,500,000 as of
any date of determination or the Equivalent Amount thereof
(net of any tax effect) to any Loan Party.
MATERIAL CONTRACT means each contract to which any Loan Party is now
or hereafter a party which:
(a) involves aggregate consideration payable to or by any Loan
Party, contingent or otherwise, in excess of $250,000 payable
in any five year period, or the Equivalent Amount thereof,
except contracts as to which the remaining consideration
payable to or by any Loan Party is less than $250,000 payable
in any five year period, or the Equivalent Amount thereof; or
(b) is otherwise material to the business or operations of any
Loan Party.
MAXIMUM REVOLVING CREDIT COMMITMENT means, on any date, an amount
equal to $30,000,000, as reduced or terminated in accordance with the terms
of this Agreement.
<PAGE>
MCDONALD means G.C.McDonald Supply Limited, a corporation formed and
subsisting under the laws of the Province of Ontario.
MCDONALD GUARANTEE means the guarantee agreement to be executed by
McDonald in favour of Agent, for the benefit of Agent and Lenders, including
all restatements, amendments, modifications and supplements thereto, and
shall refer to the McDonald Guarantee, as the same may be in effect at the
time such reference becomes operative.
NET INCOME shall mean, with respect to any fiscal period of Borrower,
the aggregate net income (or loss) of Borrower on a consolidated basis from
continuing operations for such period.
NET PROCEEDS means (a) with respect to any asset disposition (other
than sales of Inventory of any Loan Party in the ordinary course of business
which shall be subject to the cash management system required under Section
1.9) permitted by Section 6.8 ("Asset Disposition"), the sum of cash or
readily marketable cash equivalents received (including by way of a cash
generating sale or discounting of a note or receivable, but excluding any
other consideration received in the form of assumption by the acquiring
Person of debt or other obligations relating to the assets so disposed of or
received in any other noncash form) therefrom, whether at the time of such
disposition or subsequent thereto, or (b) with respect to any sale or
issuance of any Stock of any Loan Party after the Closing Date, cash or
readily marketable cash equivalents received (but excluding any other noncash
form) therefrom, whether at the time of such disposition or subsequent
thereto, net, in either (a) or (b) above, of all legal, title and recording
tax expenses, underwriting discounts, commissions and other reasonable fees,
costs and expenses incurred and all Taxes required to be accrued as a
liability as a consequence of such transactions and, in the case of an Asset
Disposition, net of all payments made on any Indebtedness which is secured by
such assets pursuant to a permitted Lien upon or with respect to such assets
or which must by the terms of such Lien, or in order to obtain a necessary
consent to such Asset Disposition, or by Applicable Law, be repaid out of the
proceeds from such Asset Disposition.
NON-FUNDING LENDER has the meaning given to it in Section 9.11.
NON-USE FEE has the meaning given to it in Annex D.
NOTICE OF CONVERSION has the meaning given to it in Section 1.3.
NOTICE OF REVOLVING CREDIT ADVANCE has the meaning given to it in
Section 1.1(b).
NOTICE OF ROLLOVER has the meaning given to it in Section 1.2.
OBLIGATIONS means all loans, advances, debts, liabilities and
obligations for the performance of covenants, tasks or duties or for payment
of monetary amounts (whether or not such performance
<PAGE>
is then required or contingent, or amounts are liquidated or determinable)
owing by one or more Loan Parties to Agent or any Lender, and all covenants
and duties regarding such amounts, of any kind or nature, present or future,
whether or not evidenced by any note, agreement or other instrument, arising
under any of the Loan Documents. This term includes all principal, interest
(including interest which accrues after the commencement of any case or
proceeding referred to in Section 8.1(h) or 8.1(i)), all Fees, Charges,
Claims, expenses, counsel fees and any other sum chargeable to Borrower or
any other Loan Party under any of the Loan Documents.
OTHER LENDER has the meaning given to it in Section 9.11.
PAYOR has the meaning given to it in Section 1.13.
PBGC means the Pension Benefit Guaranty Corporation or any successor
thereto.
PERMITTED ENCUMBRANCES means the following encumbrances:
(a) Liens for Taxes (that have not been filed, recorded or
registered and in respect of which no other action has been
taken to make the Lien enforceable by the holder thereof)
either not yet due and payable or to the extent that
nonpayment thereof is permitted by the terms of Section 5.2 of
this Agreement;
(b) Liens (that have not been filed, recorded or registered and in
respect of which no other action has been taken to make the
Lien enforceable by the holder thereof) securing obligations
not yet due and payable under unemployment insurance, workers'
compensation or similar legislation;
(c) pledges or deposits securing bids, tenders, contracts (other
than contracts for the payment of money) or leases to which
any Loan Party is a party as lessee made in the ordinary
course of business;
(d) deposits or other security securing public or statutory
obligations of any Loan Party, or given to a public utility or
any governmental or public authority when required in
connection with the operations of any Loan Party;
(e) inchoate or statutory workers', mechanics', suppliers',
construction or similar liens arising in the ordinary course
of business; provided, that such liens are not registered
against the title to any real or personal property or are
being contested in good faith by appropriate proceedings and
in respect of which there shall have been set aside a reserve
(segregated to the extent required by GAAP) in an amount which
is reasonably adequate with respect thereto;
(f) carriers', warehousemen's or other similar possessory liens
arising in the ordinary course of business and securing
Indebtedness not yet due and payable in an outstanding
aggregate amount not in excess of $50,000, at any time;
<PAGE>
(g) easements, servitudes, rights of way, licences, encroachments,
restrictions, agreements, notices, orders, deposits, covenants
and other rights in real property, statutory exceptions to
title, reservations, limitations, provisions and conditions,
if any, expressed in any original grant from the Crown or
zoning or other restrictions on the use of real property or
other minor defects or irregularities in title (including
leasehold title) thereto, so long as the same do not
materially impair the use, value or marketability of such real
property, leases or leasehold estates;
(h) any applicable municipal bylaws, regulations or ordinances and
any registered restrictions in each case applicable to the
zoning or use of any real property;
(i) deposits securing, or in lieu of, surety, appeal or customs
bonds in proceedings to which any Loan Party is a party;
(j) any attachment or judgment lien which does not cause a Default
or Event of Default under Section 8.1(j);
(k) the Emerson Lien;
(l) Liens arising under the Loan Documents or any other security
in favour of Agent or the Lenders;
(m) the Liens listed in Schedule 6.7 hereto; and
(n) any right of expropriation, access or use or similar rights
conferred or reserved by or in any statute, laws or
regulations or other governmental enactments;
PERSON means any individual, sole proprietorship, partnership, joint
venture, trust, trustee, executor, administrator or other legal
representative, unincorporated organization, association, corporation,
institution, public benefit corporation, entity or Governmental Body.
PPSA (ONTARIO) means the Personal Property Security Act (Ontario) as
the same may, from time to time, be in effect in the Province of Ontario.
PRIME RATE means, at any date, the greater of:
(a) the annual rate of interest determined by Agent which is equal
to the then current highest annual prime rate of interest
announced from time to time by any of The Bank of Nova Scotia,
Royal Bank of Canada and Canadian Imperial Bank of Commerce,
as being its reference rate in effect on such date (or if such
date is not a Business Day, on the Business Day immediately
preceding such date) for determining interest rates on
Canadian Dollar denominated commercial
<PAGE>
loans made by it in Canada (commonly referred to by each bank
as its "prime rate"), in each case regardless of whether any
of such banks actually charges such rate of interest in
connection with extensions of credit in Canadian dollars to
debtors; and
(b) the BA Rate in respect of an Interest Period of thirty (30)
days starting on such date plus one (1%) percent.
PRIME RATE LOAN means a loan that bears interest at a rate based on
the Prime Rate.
PRIOR CLAIMS means, at any time, all Liens created by Applicable Laws
which rank, or are capable of ranking, prior to or pari passu with Agent's
security against all or part of the Collateral including, without limitation,
for amounts owing for wages, employee deductions, goods and services taxes,
sales taxes, income taxes, employer health taxes, municipal taxes, workers'
compensation, government royalties, pension fund obligations and overdue
rents.
PROJECTIONS means the projections referred to in paragraph 2 of
Schedule 3.4 and any other projections required to be delivered by Borrower
to Agent or any Lender under this Agreement.
PURCHASE-MONEY INDEBTEDNESS means, with respect to any Person, all
obligations of such Person:
(a) consisting of the deferred purchase price of any property,
conditional sale obligations, obligations under any title
retention agreement (but excluding trade accounts payable
arising in the ordinary course of business) and other purchase
money obligations, in each case, where the maturity of such
obligation does not exceed the anticipated useful life of the
property being financed; and
(b) incurred to finance the acquisition or construction of such
property, including additions and improvements;
provided, however, any Lien arising in connection with any such Indebtedness
shall be limited to the specified asset being financed, including additions
or improvements to such asset.
REAL PROPERTY has the meaning given to it in Section 3.6.
RELATED TRANSACTIONS means the initial Revolving Credit Advance, the
repayment of all obligations under the Existing Credit Agreements, the
payment of all Fees, costs and expenses associated with the foregoing and the
execution and delivery of all agreements and documents necessary to
consummate all such transactions.
REGULATORY CHANGE means, with respect to any Lender, any change after
the date of this Agreement in Applicable Law or the adoption or making after
such date of any interpretation,
<PAGE>
directive or request applying to a class of lenders including such Lender of
or under any Applicable Law (whether or not failure to comply therewith would
be unlawful) by any court or Governmental Body or monetary authority charged
with the interpretation or administration thereof.
RELATIONSHIP BANKS has the meaning given to it in Annex B.
REQUIRED LENDERS means, at any time, Lenders holding more than 50% of
the aggregate of the Revolving Credit Commitments of all Lenders at such time
(or, if the Commitment Termination Date has occurred, in lieu of the
Revolving Credit Commitments, the Revolving Credit Loan then outstanding).
REQUIRED PAYMENT has the meaning given to it in Section 1.13.
RESTRICTED PAYMENT means, with respect to any Person:
(a) the declaration or payment of any dividend or the occurrence
of any liability to make any other payment or distribution of
cash or other property or assets in respect of such Person's
Stock;
(b) any payment on account of the purchase, redemption, defeasance
or other retirement of such Person's Stock or any other
payment or distribution made in respect thereof, either
directly or indirectly;
(c) any payment, loan, contribution, or other transfer of funds or
other property to any holder of Stock of such Person;
(d) any payment, purchase, redemption, retirement or other
acquisition for value or setting apart of any money for a
sinking or other analogous fund for the purchase, redemption,
retirement or other acquisition of, or to obtain the surrender
of, or any payment (scheduled, voluntary or other) of
principal of or interest on, or any other amount owing in
respect of Indebtedness; or
(e) any payment of a claim for the rescission of the purchase or
sale of, or for material damages arising from the purchase or
sale of any Stock of such Person, or of a claim for
indemnification or contribution arising out of or relating to
any such claim for damages or rescission.
REVOLVING CREDIT ADVANCE has the meaning given to it in Section
1.1(a).
REVOLVING CREDIT AVAILABILITY means, at any time, the amount equal to:
(a) the lesser of:
<PAGE>
(1) the Borrowing Base at such time, and
(2) the Maximum Revolving Credit Commitment at such time;
minus
(b) the Revolving Credit Loan at such time.
REVOLVING CREDIT COMMITMENT means, as to each Lender, the commitment
of such Lender to make Revolving Credit Advances to Borrower pursuant to
Section 1.1 in the aggregate principal amount outstanding not to exceed the
amount set forth opposite such Lender's name on the signature pages of this
Agreement or specified in any amendment hereto or any assignment hereof
pursuant to Section 10.2 hereof, as such amount may be reduced or terminated
in accordance with the terms of this Agreement.
REVOLVING CREDIT LOAN means, at any time, an amount equal to the
aggregate of the principal amount of Revolving Credit Advances outstanding at
such time.
REVOLVING CREDIT NOTES means the promissory notes provided for by
Section 1.1(d) and all promissory notes delivered in substitution or exchange
therefor, in each case as the same may be restated, amended, modified and
supplemented and in effect from time to time.
ROLLING PERIOD shall mean, as of the end of any Fiscal Quarter of
Borrower, the immediately preceding four Fiscal Quarters, including the
Fiscal Quarter then ending.
SECURITY AGREEMENT means each general security agreement to be
executed by each Loan Party in favour of Agent, for the benefit of Agent and
Lenders, including all restatements, amendments, modifications and
supplements thereto, and shall refer to such Security Agreement, as the same
may be in effect at the time such reference becomes operative.
SHAREHOLDERS EQUITY means, at any time, the shareholders equity of
Borrower and its Subsidiaries on a consolidated basis, determined in
accordance with GAAP.
STOCK means all shares, options, warrants, general or limited
partnership interests, participation or other equivalents (regardless of how
designated) of or in a corporation, partnership or equivalent entity, whether
voting or non voting.
SUBSIDIARY means, with respect to any Person:
(a) any corporation of which an aggregate of more than 50% of the
outstanding Stock having ordinary voting power to elect a
majority of the board of directors of such corporation
(irrespective of whether, at the time, Stock of any other
class or classes of such corporation shall
<PAGE>
have or might have voting power by reason of the happening of
any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person and/or one or more
Subsidiaries of such Person, or with respect to which any such
Person has the right to vote or designate the vote of more
than 50% of such Stock whether by proxy, agreement, operation
of law or otherwise; and
(b) any partnership in which such Person and/or one or more
Subsidiaries of such Person shall have an interest (whether in
the form of voting or participation in profits or capital
contribution) of more than 50% or of which any such Person is
a general partner or may exercise the powers of a general
partner.
SUPPLIER WAIVER AND ASSIGNMENT means each agreement to be executed by
each Affiliate supplier of a Loan Party (other than another Loan Party) in
favour of Agent in respect of the Affiliates rights under Section 81.1 of the
Bankruptcy and Insolvency Act (Canada) or similar Applicable Laws, for the
benefit of Agent and Lenders, substantially in the form of Exhibit D,
including all amendments, restatements, modifications and supplements
thereto, in form and substance satisfactory to Agent, and shall refer to each
Supplier Waiver and Assignment as the same may be in effect at the time such
reference becomes operative.
TANGIBLE NET WORTH means the aggregate of Shareholders Equity,
retained earnings and the principal amount of the ICP Indebtedness, minus
intangible assets.
TAX EXPENSE shall mean, with respect to any fiscal period of Borrower,
provision for Taxes (excluding sales, use or like taxes) of Borrower on a
consolidated basis for such period.
TAX and TAXES includes all present and future taxes, surtaxes, duties,
levies, imposts, rates, fees, assessments, withholdings and other charges of
any nature (including income, corporate, capital (including large
corporations), net worth, sales, consumption, use, transfer, goods and
services, value-added, stamp, registration, franchise, withholding, payroll,
employment, health, education, excise, business, school, property,
occupation, customs, anti-dumping and countervail taxes, surtaxes, duties,
levies, imports, rates, fees, assessments, withholdings and other charges)
imposed by any Governmental Body, together with any fines, interest,
penalties or other additions on, to, in lieu of, for non-collection of or in
respect of those taxes, surtaxes, duties, levies, imposts, rates, fees,
assessments, withholdings and other charges.
TAX RETURNS means all reports, estimates, information statements and
returns relating to, or required to be filed in connection with, any Taxes
pursuant to the statutes, laws, rules and regulations of any federal,
provincial, state, municipal or foreign governmental taxing authority and
"Tax Return" shall mean any one thereof.
TERMINATION DATE means the date on which:
<PAGE>
(a) the Revolving Credit Commitments have been terminated in full,
and Lenders shall have no further obligation to make any
credit extensions or financial accommodations hereunder; and
(b) all Obligations have been indefeasibly paid in full in
immediately available funds.
TERMINATION FEE has the meaning given to it in Annex D.
UNDERTAKING means the business, undertaking and operations of Borrower
and its Subsidiaries and of their predecessors in title.
USD means lawful money of the United States of America.
WEEKLY SETTLEMENT DATE has the meaning given to it in Section 9.12(c).
2. Certain Matters of Construction.
(a) Any accounting term used in the Agreement or the other Loan
Documents shall have, unless otherwise specifically provided therein, the
meaning customarily given such term in accordance with GAAP, and all
financial computations shall be computed on a consolidated basis in
accordance with GAAP consistently applied. That certain items or
computations are explicitly modified by the phrase "in accordance with GAAP"
shall in no way be construed to limit the foregoing. If any "Accounting
Changes" (as defined below) occur and such changes result in a change in the
standards or terms used in this Agreement, then Borrower, Lenders and Agent
agree to enter into negotiations in order to amend such provisions of this
Agreement so as equitably to reflect such Accounting Changes with the desired
result that the criteria for evaluating Borrower's financial condition shall
be the same after giving effect to such Accounting Changes as if such
Accounting Changes had not been made. "Accounting Changes" means:
(1) changes in accounting principles required by the promulgation
of any rule, regulation, pronouncement or opinion by the
Canadian Institute of Chartered Accountants (or successor
thereto or any agency with similar functions), and
(2) changes in accounting principles concurred in by Borrower's
Accountants.
If the parties to this Agreement shall have agreed upon any such required
amendment, then, after such amendment has been evidenced in writing and the
underlying Accounting Change with respect thereto has been implemented, any
reference to GAAP contained in this Agreement shall, only to the extent of
such Accounting Change, refer to GAAP, consistently applied after giving
effect to the implementation of such Accounting Change. If the parties to
this Agreement cannot agree upon any required amendment within thirty (30)
days following the date of implementation of any Accounting Change, then all
financial statements delivered in accordance with Annex E
<PAGE>
to this Agreement and all standards, terms and covenants used in this
Agreement shall be prepared, used and calculated without regard to the
underlying Accounting Change, except that the annual audited financial
statements of the Borrower and its Subsidiaries may be prepared giving effect
to the Accounting Change provided that it is accompanied by a report of the
Auditors, in form and substance acceptable to the Agent, indicating
appropriate adjustments to be made to the annual financial statements if such
statements were to disregard the Accounting Change.
(b) Unless otherwise specified, all references to dollar amounts
in this Agreement or the other Loan Documents shall mean Canadian Dollars.
(c) Unless otherwise specified, any reference to a time of day
means local time in the City of Toronto, Province of Ontario, Canada.
(d) The words "herein", "hereof" and "hereunder" or other words of
similar import refer to this Agreement as a whole, including the annexes,
exhibits and schedules hereto, as the same may from time to time be restated,
amended, modified or supplemented, and not to any particular section,
subsection or clause contained in this Agreement.
(e) For purposes of this Agreement and the other Loan Documents,
the following additional rules of construction shall apply:
(1) wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the
singular and the plural, and pronouns stated in the masculine,
feminine or neuter gender shall include the masculine, the
feminine and the neuter;
(2) the term "including" shall not be limiting or exclusive,
unless specifically indicated to the contrary;
(3) all references to statutes and related regulations shall
include any amendments of same and any successor statutes and
regulations; and
(4) all references to any instruments or agreements, including
references to any of the Loan Documents, shall include any and
all modifications thereto and any and all extensions or
renewals thereof.
<PAGE>
Annex B to Credit Agreement
CASH MANAGEMENT SYSTEM
Each Loan Party shall, and shall cause its Subsidiaries to, establish
and maintain the Cash Management Systems described below:
(a) On or before the Closing Date and until the Termination Date,
each Loan Party shall (i) establish lock boxes ("Lock Boxes") at one or more
of the banks set forth on Attachment I and shall request in writing and
otherwise take such reasonable steps to ensure that all Account Debtors
forward payment directly to such Lock Boxes, and (ii) deposit and cause its
Subsidiaries to deposit or cause to be deposited promptly, and in any event
no later than the second Business Day after the date of receipt thereof, all
cash, cheques, notes, drafts, electronic funds remittances or other similar
items of payment relating to or constituting payments made in respect of any
and all Collateral (whether or not otherwise delivered to a Lock Box) into
bank accounts in such Loan Party's name or any such Subsidiary's name
(collectively, the "Blocked Accounts") at banks set forth on Attachment I
(each, a "Relationship Bank"). On or before the Closing Date, each Loan
Party shall have established a concentration account in its name (the
"Blocked Concentration Account") at the bank which shall be designated as the
Blocked Concentration Account bank for such Loan Party on Attachment I (the
"Blocked Concentration Account Bank") which bank shall be satisfactory to
Agent.
(b) On or before the Closing Date (or such later date as Agent
shall consent to in writing), the Blocked Concentration Account Bank, each
bank where a Disbursement Account is located and all other Relationship
Banks, shall have entered into tri-party blocked account agreements with
Agent, for the benefit of itself and Lenders, and each Loan Party and
Subsidiaries thereof, as applicable, in form and substance acceptable to
Agent (the "Blocked Account Agreements"), which shall become operative on or
prior to the Closing Date. Each such Blocked Account Agreement shall
provide, among other things, that (i) all items of payment deposited in the
Blocked Account subject to such Blocked Account Agreement and proceeds
thereof deposited in the Blocked Concentration Account are held by such bank
as agent or bailee-in-possession for Agent, on behalf of Lenders, (ii) the
bank executing such agreement has no rights of setoff or recoupment or any
other claim against such Blocked Account, as the case may be, other than for
payment of its service fees and other charges directly related to the
administration of such account and for returned cheques or other items of
payment, and (iii) from and after the Closing Date (A) with respect to banks
at which a Blocked Account is located, such bank agrees to forward
immediately all amounts in each Blocked Account to the Blocked Concentration
Account Bank and to commence the process of daily sweeps from such Blocked
Account into the Blocked Concentration Account and (B) with respect to the
Blocked Concentration Account Bank, such bank agrees to immediately forward
all amounts received in the Blocked Concentration Account to the Agent's
Collection Account through daily sweeps from such Blocked Concentration
<PAGE>
Account into the Agent's Collection Account. No Loan Party shall, nor shall
it cause or permit any Subsidiary thereof to, accumulate or maintain cash in
disbursement or payroll accounts as of any date of determination in an
aggregate amount more than $250,000 in excess of cheques outstanding against
such accounts as of that date and amounts necessary to meet minimum balance
requirements.
(c) So long as no Default or Event of Default has occurred and is
continuing, each Loan Party may amend Attachment I to add or replace a
Relationship Bank, Lock Box or Blocked Account or to replace any Blocked
Concentration Account or any Disbursement Account; provided, however, that
(i) Agent shall have consented in writing in advance to the opening of such
account or Lock Box with the relevant bank and (ii) prior to the time of the
opening of such account or Lock Box, such Loan Party and/or the Subsidiaries
thereof, as applicable, and such bank shall have executed and delivered to
Agent a tri-party Blocked Account Agreement, in form and substance
satisfactory to Agent. Each Loan Party shall close any of its accounts (and
establish replacement accounts in accordance with the foregoing sentence)
promptly and in any event within thirty (30) days of notice from Agent that
the creditworthiness of any bank holding an account is no longer acceptable
in Agent's reasonable judgment, or as promptly as practicable and in any
event within thirty (30) days of notice from Agent that the operating
performance, funds transfer and/or availability procedures or performance
with respect to accounts or lockboxes of the bank holding such accounts or
Agent's liability under any triparty Blocked Account Agreement with such bank
is no longer acceptable in Agent's reasonable judgment.
(d) The Lock Boxes, Blocked Accounts, Disbursement Accounts and
the Blocked Concentration Account shall be cash collateral accounts, with all
cash, cheques and other similar items of payment in such accounts securing
payment of the Loans and all other Obligations, and in which each Loan Party
and each Subsidiary thereof shall have granted a Lien to Agent, on behalf of
itself and Lenders, pursuant to the Collateral Documents.
(e) All amounts deposited in the Agent's Collection Account shall
be deemed received by Agent in accordance with Section 1.10 of the Agreement
and shall be applied (and allocated) by Agent in accordance with Section 1.12
of the Agreement. In no event shall any amount be so applied unless and
until such amount shall have been credited in immediately available funds to
the Agent's Collection Account.
(f) Each Loan Party may maintain, in its name, an account (each a
"Disbursement Account" and collectively, the "Disbursement Accounts") at a
Relationship Bank acceptable to Agent into which Agent shall, from time to
time, deposit proceeds of Revolving Credit Advances made to Borrower pursuant
to Section 1.1 for use by Borrower solely in accordance with the provisions
of Section 1.5. All the Disbursement Accounts as of the Closing Date are
listed under the heading "Disbursement Accounts" in Attachment I hereto.
<PAGE>
(g) Each Loan Party shall and shall cause its Affiliates,
officers, employees, agents, directors or other Persons acting for or in
concert with any Loan Party (each a "Related Person") to (i) hold in trust
for Agent, for the benefit of itself and Lenders, all checks, cash and other
items of payment received by any Loan Party or any such Related Person, and
(ii) within one (1) Business Day after receipt by each Loan Party or any such
Related Person of any checks, cash or other items or payment, deposit the
same into a Blocked Account. Each Loan Party and each Related Person thereof
acknowledges and agrees that all cash, checks or items of payment
constituting proceeds of Collateral are the property of Agent and Lenders.
All proceeds of the sale or other disposition of any Collateral, shall be
deposited directly into Blocked Accounts.
(h) Each Loan Party hereby constitutes and irrevocably appoints
Agent its true and lawful attorney, with full power of substitution, to
demand, collect, receive and, following an Event of Default that is
continuing, sue for all amounts which may become due or payable under any
account (including any Blocked Account or Disbursement Account), to receive
all payments and other documents or instruments delivered to the Lock Box,
and to execute all withdrawal receipts or other orders for such Loan Party,
in its own name or in such Loan Party's name or otherwise, which Agent deems
necessary or appropriate to protect and preserve its right, title and
interest in such accounts.
(i) Upon the request of Agent, each Loan Party shall forward to
Agent, on a daily basis, evidence of the deposit of all items of payment
received by any Loan Party into its Blocked Accounts and copies of all such
cheques and other items, together with a statement showing the application of
those items relating to payments on Collateral and a collection report with
regard thereto in form and substance satisfactory to Agent and such other
documentation and information that Agent may reasonably request in connection
with any Lock Box, Blocked Account, the Blocked Concentration Account or any
Disbursement Account.
<PAGE>
ATTACHMENT I TO ANNEX B
LIST OF BLOCKED ACCOUNT, BLOCKED CONCENTRATION ACCOUNT, DISBURSEMENT ACCOUNTS
AND LOCK BOX
1. Blocked Accounts.
(a) *
Account No.: *
Branch, bank and transit number: *
(b) *
Account No.: *
2. Blocked Concentration Account
(a) *
Account No.: *
Branch, bank and transit number: *
3. Disbursement Account.
(a) *
Account No.: *
Branch, bank and transit number: *
4. Lock Box
*
No.: *
<PAGE>
Annex C to Credit Agreement
SCHEDULE OF CLOSING DOCUMENTS
In addition to this Agreement, duly executed by Borrower, as required
by Section 2.1(a), Agent and Lenders shall have received the following, each,
unless otherwise specified below or agreed to by Agent, dated the Closing
Date, in form and substance satisfactory to Agent, Lenders and their counsel,
unless otherwise specified below:
1. PRINCIPAL LOAN DOCUMENTS.
(a) Revolving Credit Note. A duly executed Revolving Credit Note
denominated in Canadian Dollars payable to the order of each Lender.
(b) Borrowing Base Certificate. An original Borrowing Base
Certificate, duly executed by the Senior Vice President, Canadian Operations
of Borrower.
(c) Notice of Revolving Credit Advance. An original Notice of
Revolving Credit Advance, duly executed by an authorized officer of Borrower
requesting the initial Revolving Credit Advance.
(d) Compliance Certificate. An original Compliance Certificate,
prepared as of the Closing Date, duly executed by the Senior Vice President,
Canadian Operations of Borrower.
2. COLLATERAL DOCUMENTS.
(a) Security Agreement. The Security Agreement, duly executed by
each Loan Party.
(b) Hypothec. The Hypothec, duly executed by each Loan Party and
Lenders.
(c) Assignments of Monies payable Under Insurance Policies. The
Assignments of Monies Payable Under Insurance Policies, duly executed by each
Loan Party.
(d) McDonald Guarantee. The McDonald Guarantee, duly executed by
McDonald.
(e) Borrower Pledge Agreement. The Borrower Pledge Agreement,
duly executed by Borrower.
(f) Intellectual Property Security Agreements. The Intellectual
Property Security Agreements, duly executed by Borrower.
(g) Debenture. The Debentures, duly executed by each Loan Party,
as applicable.
<PAGE>
(h) ICP (USA) Acknowledgement and Consent. The ICP (USA)
Acknowledgement and Consent, duly executed by ICP (USA).
(i) Assignment of Rents and Benefits. Assignment of Rents and
Benefits, duly executed by Borrower.
(j) General Assignment of Book Debts. The General Assignment of
Book Debts, duly executed by Borrower.
(k) Supplier Waiver and Assignment. The Supplier Waiver and
Assignment, duly executed by ICP (USA) of each Loan Party selling Inventory
to any Loan Party.
(l) ICP Postponement and Subordination Agreement. The ICP
Postponement and Subordination Agreement, duly executed by ICP.
(m) Financing Statements. Copies of proper financing statements
or other applicable notices or registration documents (the "Financing
Statements") duly filed under the PPSA (Ontario) and in proper form for
filing under other applicable statutes or laws, of all jurisdictions as may
be necessary or, in the reasonable opinion of Agent, desirable, to perfect
the Liens created by the Collateral Documents referred to in paragraphs (a)
through (g) inclusive above.
(n) Lien Searches. Certified copies of searches or other evidence
satisfactory to Agent, listing the Financing Statements referred to in
paragraph (l) above and all other effective financing statements or other
applicable registration documents which name any Loan Party (under its
present name, any previous name or any trade name or name under which it does
business) as debtor and which are filed in the jurisdictions referred to in
paragraph (h) above, together with copies of such other financing statements
or other applicable registration documents (none of which shall cover the
Collateral purported to be covered by any Collateral Documents except for
those financing statements or other applicable registration documents with
respect to Liens permitted by this Agreement to exist after the Closing Date
but only to the extent the Collateral covered thereby is so permitted to be
covered thereby under this Agreement).
(o) Recordings. Evidence of the completion of all other
recordings and filings as may be necessary or, in the opinion of and at the
request of Agent acting reasonably, desirable to perfect the Liens created by
each Collateral Document.
(p) Other Collateral Documents. Such other Collateral Documents
duly executed by the Loan Parties as Agent may reasonably require in order
that Agent shall have received a Lien in all property of each Loan Party
contemplated by this Agreement to secure the payment of all of the
Obligations or any guarantee thereof, together with such documents,
instruments, certificates and opinions related thereto as Agent may
reasonably require.
<PAGE>
3. THIRD PARTY AGREEMENTS.
(a) Emerson Postponement, Subordination and Assignment Agreement.
The Emerson Postponement, Subordination and Assignment Agreement, duly
executed by Emerson.
(b) Insurance. Evidence that the insurance required by the terms
of this Agreement and the Collateral Documents is in full force and effect.
(c) Cash Management System. Duly executed Blocked Accounts
Agreements as contemplated by Annex B.
(d) Warehouseman/Bailee Agreements, Landlord's Agreements and
Mortgagees' Consents and Agreements. Bailee letters from each bailee,
warehouseman, processor, converter, finisher or other Person (other than any
Loan Party) in possession or control of Inventory owned by any Loan Party,
and a landlord agreement from each landlord with respect to each leased
location at which Collateral owned by any Loan Party is located.
4. DOCUMENTS DELIVERED BY LOAN PARTIES.
(a) Board Resolutions and Incumbency Certificates. A certificate
of the Secretary or an Assistant Secretary of each Loan Party and of each of
the Affiliate Corporations which is a party to a Loan Document certifying:
(i) the resolutions adopted by the Board of Directors of
such Loan Party or Affiliate Corporation, as the case
may be, approving each Loan Document to which it is a
party and the transactions contemplated thereby;
(ii) all documents evidencing other necessary corporate
action by such Loan Party or Affiliate Corporation, as
the case may be, and required governmental and third
party approvals with respect to each such Loan
Document; and
(iii) the names and true signatures of the authorized
officers of such Loan Party or Affiliate Corporation.
(b) Articles or Certificate of Incorporation; ByLaws and Good
Standing Certificates. Each of the following documents:
(i) the articles or certificate of incorporation of each
Loan Party as in effect on the Closing Date, and the
bylaws of such Loan Party as in effect on the Closing
Date, each certified by the Secretary, Assistant
Secretary or other appropriate officer or director of
such Loan Party; and
<PAGE>
(ii) certificates of status or compliance for each Loan
Party from the jurisdiction where such Loan Party is
incorporated and from the jurisdictions in which such
Loan Party is required to qualify as a foreign
corporation authorized to transact business, in each
instance, as of a date no more than five days before
the Closing Date.
(c) Financials. Copies of the Financials described in Section 3.4
in form and substance satisfactory to Agent.
(d) Projections. Copies of the Projections described in Schedule
3.4 in form and substance satisfactory to Agent.
(e) Officer's Certificates. A certificate of the Senior Vice
President, Canadian Operations of Borrower affirming that the conditions set
forth in Section 2.2 have been satisfied as of the Closing Date.
(f) Payment Instructions. Payment instructions from Borrower
providing for the payment in full of:
(i) all Fees payable to Agent and Lenders on the Closing
Date,
(ii) the reasonable fees and expenses of McMillan Binch,
special counsel to Agent, and of each local counsel to
Agent in connection with the transactions contemplated
by this Agreement.
5. LEGAL OPINIONS.
(a) An opinion of Osler, Hoskin & Harcourt, counsel to each of the
Loan Parties and the Affiliate Corporations, in form and substance
satisfactory to Agent.
(b) Such opinions of local counsel to the Loan Parties which are
acceptable to Agent as Agent may reasonably request.
6. Such other reports, statements and reconciliations with respect to the
Borrowing Base or Collateral of any or each Loan Party as Agent shall from
time to time request in its reasonable discretion.
<PAGE>
Annex D to Credit Agreement
SCHEDULE OF CERTAIN FEES
1. Closing Fee. Borrower shall pay to Agent a closing fee in the
amount of $225,000 (the "Closing Fee") on the earlier of (a) the Closing
Date, (b) the acceptance by Borrower of financing from another lender and (c)
Borrower's termination of Agent's efforts to complete the financing provided
for in the Commitment Letter (and for greater certainty, if the conditions
precedent to closing of the Revolving Credit Facility set out in the Credit
Agreement are not satisfied by December 31, 1996, such event shall constitute
Borrower's termination under this clause), which fee is fully earned and non-
refundable at the time it becomes due and payable as aforesaid, against which
shall be credited any portion of the commitment fee paid concurrently with
the acceptance of the Commitment Letter and the remaining balance of the
underwriting deposit set forth in the Commitment Letter after deducting all
expenses payable by Borrower under the Credit Agreement..
2. Non-Use Fee. Borrower shall pay to Agent, for the account of
Lenders, an unused facility fee (the "Non-Use Fee"), equal to 0.375% per
annum on the unused daily balance of the Maximum Revolving Credit Commitment,
payable monthly in arrears (a) for the preceding calendar month, on the first
Business Day of the succeeding calendar month, commencing December 1, 1996,
and (b) on the Commitment Termination Date. All computations of the Non-Use
Fee shall be made by Agent on the basis of a three hundred sixty five (365)
day year, and for the actual number of days occurring in the period for which
such fee is payable.
3. Termination Fee. Borrower shall pay to Agent, for the account
of Lenders, a prepayment fee (the "Termination Fee") if, before the
Commitment Termination Date, Borrower terminates the Revolving Credit
Commitments, whether voluntarily or by reason of a default, in an amount
equal to (a) 2% of the Revolving Credit Commitment if the termination occurs
on or before the first anniversary of the Closing Date and (b) 1% of the
Revolving Credit Commitment if the termination occurs after the first
anniversary of the Closing Date and before the date which is 180 days before
the Commitment Termination Date.
4. Collateral Examination Charge. Borrower shall pay to Agent,
for Agent's own account, a collateral examination charge of $875 per day per
individual, plus all travel and living expenses and other reasonable actual
out-of-pocket expenses incurred, in connection with any field examination
conducted by Agent (the "Collateral Examination Charge") payable on the
Closing Date or as incurred after the Closing Date.
5. Collateral Management Fee. Borrower shall pay to Agent, for
Agent's own account, a collateral management fee of $40,000 per annum payable
in arrears in quarterly installments at the end of each Fiscal Quarter
commencing December 31, 1996 for so long as any Obligations are
<PAGE>
outstanding or the Revolving Credit Commitment has not been terminated (the
"Collateral Management Fee"). If the Revolving Credit Commitment is
cancelled under the terms of the Credit Agreement, Borrower shall pay to
Agent the Collateral Management Fee for the entire Fiscal Quarter in which
such cancellation occurs.
<PAGE>
Annex E to Credit Agreement
FINANCIAL STATEMENTS, PROJECTIONS AND NOTICES
The following (each to be in form and substance acceptable to
Agent) shall be delivered to the Agent:
1. Within two (2) Business Days after the close of each week or
more frequently if requested by the Agent, a Borrowing Base Certificate as of
the last day of such week or relevant period if shorter.
2. Within nine (9) Business Days after the close of each Fiscal
Month:
(a) a Borrowing Base Certificate as of the last day of such Fiscal
Month;
(b) an accounts receivable report of the Loan Parties setting out
the aging of the total outstanding balances of Accounts of each Loan Party,
and a schedule detailing ineligible Accounts of the Loan Parties, as of the
last day of such Fiscal Month;
(c) a report on Inventory of the Loan Parties by product line and
a schedule detailing ineligible Inventory of the Loan Parties as of the last
day of such Fiscal Month;
(d) an accounts payable report of the Loan Parties setting out the
aging of the total outstanding balances of the accounts payable of the Loan
Parties, as of the last day of such Fiscal Month; and
(e) such other information as the Agent determines appropriate for
monitoring the Revolving Credit Loan and the Collateral; and
in each case above accompanied by such supporting detail and documentation as
Agent may reasonably request.
3. Within 30 days after the close of each Fiscal Month and Fiscal
Quarter:
(a) an internally prepared consolidated and consolidating income
statement and statement of retained earnings and cash flows for Borrower and
its Subsidiaries for such Fiscal Month and that portion of the current Fiscal
Year ending as of the close of such Fiscal Month, and a consolidated and a
consolidating balance sheet of Borrower and its Subsidiaries as at the end of
such Fiscal Month, which financial and other information shall provide
comparisons to the Projections and the prior year, both on a monthly and
year-to-date basis;
<PAGE>
(b) reports of Borrower executed on its behalf by its Senior Vice
President, Canadian Operations setting forth management's discussion and
analysis of all current income statement, balance sheet and cash flow
financial trends;
(c) certificate of the Senior Vice President, Canadian Operations
or Director of Finance of Borrower that all such financial statements are
complete and do not contain any error, misstatement or omission and present
fairly in accordance with GAAP (subject to normal yearend adjustments) the
financial position and the results of operations and the cash flows of
Borrower as at the end of such Fiscal Month or Fiscal Quarter, as the case
may be, and for the period then ended, and that to his or her knowledge there
was no Default or Event of Default in existence as of such time or specifying
those Defaults or Events of Default of which he or she was aware and
accompanied by a Compliance Certificate.
4. Within 30 days after the close of each Fiscal Quarter, a
statement in reasonable detail showing the calculations used in determining
Borrower's compliance with the financial covenants set forth in Annex G,
accompanied by a Compliance Certificate.
5. Within 90 days after the close of each Fiscal Year:
(a) copies of the annual audited consolidated and consolidating
financial statements of Borrower and its Subsidiaries, in each case
consisting of a balance sheet, income statement and statement of retained
earnings and cash flow, setting forth in comparative form the figures for the
previous Fiscal Year, which financial statements shall be prepared in
accordance with GAAP, certified without qualification by the Accountants, and
accompanied by a statement in reasonable detail from such accountants showing
the calculations used in determining Borrower's compliance with the financial
covenants set forth in Annex G;
(b) reports of Borrower executed on its behalf by its Senior Vice
President, Canadian Operations setting forth management's discussion and
analysis of all current income statement, balance sheet and cash flow
financial trends; and
(c) certificates of Borrower executed on its behalf by its Senior
Vice President, Canadian Operations that all such financial statements are
complete and correct and present fairly in accordance with GAAP the financial
position, the results of operations and the changes in financial position of
Borrower as at the end of such Fiscal Year and for the period then ended, and
that there was no Default or Event of Default in existence as of such time or
specifying those Defaults or Events of Default of which he or she was aware
and accompanied by a Compliance Certificate.
6. Not later than 30 days after the last day of each Fiscal Year,
a consolidated and consolidating operating plan approved by the Senior Vice
President, Canadian Operations of Borrower for the
<PAGE>
next succeeding Fiscal Year which shall include monthly financial projections
(including a Capital Expenditures budget) for Borrower and its Subsidiaries
acceptable to Agent for the following Fiscal Year (similar in form and
content to the Projections) approved by Borrower's Board of Directors and, in
each case, which includes projected balance sheets, cash flow statements and
income statements of Borrower for the following Fiscal Year, on a monthly
basis and for each year thereafter until the Commitment Termination Date, on
an annual basis, together with a description of major assumptions used in
generating such balance sheets, cash flows and income statements, and other
appropriate supporting details as requested by Agent.
7. Within 45 days after completion of Borrower's annual physical
count of Inventory, a report in a form and with such specificity as may be
satisfactory to Agent concerning such physical count of the Inventory.
8. As soon as practicable, but in any event within two (2)
Business Days after a Loan Party becomes aware of the existence of any
Default or Event of Default, or any development or other information that
would have a Material Adverse Effect, written notice specifying the nature of
such Default or Event of Default or development or information, including the
anticipated effect thereof.
9. Upon Agent's request, copies of all Tax Returns, reports and
statements, (excluding sales, use or like taxes) filed by each Loan Party.
10. As soon as practicable, but in any event within two (2)
Business Days after Borrower decides to make a filing or after the filing
thereof with any securities regulatory authority, whichever is sooner, a copy
of each material report, notice or other filing, if any, made by any Loan
Party with such regulatory authority and promptly after receipt or delivery,
a copy of each material written communication received by any Loan Party from
or delivered by any Loan Party to any securities regulatory authority.
11. Promptly following provision to any other party, copies of any
statement or report provided to any other party by any Loan Party pursuant to
the terms of each contract or agreement relating to Indebtedness of any Loan
Party and not otherwise required to be provided to Agent pursuant to this
Agreement.
12. Upon the occurrence of a Default or an Event of Default, at
the request of Agent and at Borrower's expense, a report of an independent
collateral auditor (which may be, or be affiliated with, Agent and/or a
Lender) with respect to the Eligible Inventory and the Eligible Accounts
included in the Borrowing Base, which report shall indicate that, based upon
a review by such auditors of the Inventory of each Loan Party (including
verification as to the value, location and respective types), Accounts of
each Loan Party (including verification as to amount, aging, indemnity and
credit of the respective account debtors and the billing practices of each
Loan
<PAGE>
Party), the information set forth in the Borrowing Base Certificates relating
to the periods covered by the audit is accurate and complete in all respects.
Agent shall have the right to perform (or obtain an independent auditor to
perform) the foregoing collateral audit; alternatively, Agent may request
Borrower obtain such a collateral auditor and, upon such request, Borrower
shall deliver to Agent the report of such auditor contemplated hereby within
30 days of Agent's request therefor.
13. Upon the occurrence of a Default or an Event of Default, at
the request of Agent and at Borrower's expense, a report of an appraiser
(which may be, or be affiliated with, Agent and/or a Lender) with respect to
all or any part of the Collateral. Agent shall have the right to perform (or
obtain an independent appraiser to perform) the foregoing appraisals;
alternatively, Agent may request Borrower obtain such appraisals and, upon
such request, Borrower shall deliver to Agent the report of such appraisers
contemplated hereby within 30 days of Agent's request therefor.
14. Such other reports and information respecting any Loan Party's
business, financial condition or prospects as Agent may, from time to time,
reasonably request.
<PAGE>
Annex F to Credit Agreement
INSURANCE REQUIREMENTS
1. Coverage Requirements. The insurance policies maintained by the Loan
Parties shall provide for, without limitation, the following insurance
coverage:
(a) "all risk" physical damage insurance on all of the Loan
Parties' tangible real and personal property and assets,
wherever located, including Inventory located at premises not
owned or leased by any Loan Party and covers, without
limitation, fire and extended coverage, boiler and machinery
coverage, flood, earthquake, environmental, liquids, theft,
burglary, explosion, collapse, business interruption and all
other hazards and risks ordinarily insured against by owners
or users of such properties in similar businesses. All
policies of insurance on such real and personal property
contain an endorsement, in form and substance acceptable to
Agent, showing loss payable to Agent, as its interests may
appear, and extra expense and business interruption
endorsements. Such endorsement, or an independent instrument
furnished to Agent, provides that the insurance companies will
give Agent at least 30 days prior written notice before any
such policy or policies of insurance shall be altered or
cancelled and that no act or default of any Loan Party or any
other Person shall affect the right of Agent to recover under
such policy or policies of insurance in case of loss or damage
(that is, the standard mortgage clause);
(b) comprehensive general liability insurance on an "occurrence
basis" against claims for personal injury, bodily injury and
property damage with a minimum limit of $1,000,000 per
occurrence and $2,000,000 in the aggregate. Such coverage
includes premises/operations, broad form contractual
liability, underground, explosion and collapse hazard,
independent contractors, broad form property coverage,
products and completed operations liability;
(c) statutory limits of workers' compensation insurance;
(d) automobile liability insurance for all owned, non-owned or
hired automobiles against claims for personal injury, bodily
injury and property damage with a minimum combined single
limit of $1,000,000 per occurrence;
(e) umbrella insurance of $10,000,000 per occurrence and
$10,000,000 in the aggregate; and
(f) crime insurance with respect to employee dishonesty in an
amount not less than $5,000,000.
<PAGE>
Each such policy (1) shall have deductibles acceptable to Agent; (2)
shall provide that Agent will be notified by written notice at least 30 days
prior to such policy's cancellation or modification; (3) is in full force and
effect; (4) is in form and with insurers recognized as adequate by Agent
(insurers with an A.M. Best rating lower than "A" will not be considered
adequate); (5) covering property and physical damage shall contain the
standard mortgage clause approved by the Insurance Bureau of Canada for use
in Canada; and (6) provide coverage of such risks and for such amounts as is
customarily maintained for businesses of the scope and size of the Loan
Parties and as otherwise acceptable to Agent. Borrower has delivered to Agent
a certificate of insurance that Borrower represents and warrants evidences
the existence of each policy of insurance, payment of all premiums therefor
and compliance with all provisions of this Agreement.
<PAGE>
Annex G to Credit Agreement
FINANCIAL COVENANTS
1. Financial Covenants. Borrower shall not breach or fail to comply with
any of the following financial covenants:
(a) Minimum Operating Cash Flow to Interest Expense Ratio.
Borrower shall maintain (or cause to be maintained), as of the end of each
Fiscal Quarter ending from and after December 31, 1996, for each Rolling
Period, a ratio of:
(1) EBITDA in respect of such Rolling Period, minus Capital
Expenditures made during such Rolling Period, to
(2) Interest Expense during such Rolling Period,
of not less 1.25:1.
(b) Minimum Tangible Net Worth. Borrower shall maintain (or cause
to be maintained), at all times, Tangible Net Worth of not less than
(1) $16,000,000 in respect of the period from the Closing Date to
December 31, 1996,
(2) in respect of the period from January 1, 1997 to December 31,
1997, the Tangible Net Worth required under (1) above plus 70%
of Borrower's positive net income plus retained earnings
adjustment, if any, related to tax credits of Borrower, shown
on the audited consolidated balance sheet of Borrower for the
Fiscal Year ending December 31, 1996 less the amount of any
Restricted Payments permitted under Section 6.15 and actually
made by Borrower in respect of such Fiscal Year;
(3) in respect of the period from January 1, 1998 to December 31,
1998, the Tangible Net Worth required under (2) above plus 70%
of Borrower's positive net income plus retained earning
adjustment, if any, related to tax credits of Borrower, shown
on the audited consolidated balance sheet of Borrower for the
Fiscal Year ending December 31, 1997 less the amount of any
Restricted Payments permitted under Section 6.15 and actually
made by Borrower in respect of such Fiscal Year; and
<PAGE>
(4) in respect of the period from January 1, 1999 to December 31,
1999, the Tangible Net Worth required under (3) above plus 70%
of Borrower's positive net income plus retained earning
adjustment, if any, related to tax credits of Borrower, shown
on the audited consolidated balance sheet of Borrower for the
Fiscal Year ending December 31, 1998 less the amount of any
Restricted Payments permitted under Section 6.15 and actually
made by Borrower in respect of such Fiscal Year.
(c) Capital Expenditures. Borrower on a consolidated basis shall
not make or commit to make Capital Expenditures exceeding $1,250,000 in the
aggregate in respect of any Fiscal Year of Borrower.
<PAGE>
Schedule 1.17 to Credit Agreement
LOCATION OF ELECTRONICALLY RECORDED DATA
1. in respect of Borrower,
The Toronto-Dominion Bank
Vaughan East Commercial Banking Centre
1700 Langstaff Road, Suite 100
Concord, Ontario
L4K3S3
Attention: Marlene Ferrante (Accounting Officer)
Telephone No: (905) 6600017
Telecopier No: (905) 7383827
2. in respect of LincolnBarriere (a division of Borrower),
Brocourt Data Inc.
750 Marcel Laurin, Suite 200
St. Laurent, Quebec
H4M 2M4
3. in respect of McDonald,
360 Elgin Street
Brantford, Ontario
N3T 5N3
<PAGE>
Schedule 3.2 to Credit Agreement
CHIEF EXECUTIVE OFFICES, COLLATERAL
LOCATIONS, CORPORATE OR OTHER NAMES
InterCity Products Corporation (Canada)
Corporate Name: InterCity Products Corporation (Canada)
Corporation Produits InterCite (Canada)
Registered office: 44 Elgin Street
Brantford, Ontario
N3R 1E7
Chief Executive Office and
Principal place of business: 141 Cidermill Avenue
Vaughan, Ontario
L4K 4G5
Leased Premises: 141 Cidermill Avenue
Vaughan, Ontario
L4K 4G5
225 Henry Street
Brantford, Ontario
N3T 5PA
4001 Boulevard Industriel
Laval, Quebec
H7L 4S3
3285 Ave. Jean Beraud
Laval, Quebec
H7T 2L2
1866 King Edward Street
Winnipeg, Manitoba
R2R 0Z9
(This location has been subleased).
<PAGE>
Warehouses re: inventory
locations: 141 Cidermill Avenue
Vaughan, Ontario
L4K 4G5
44 Elgin Street
Brantford, Ontario
N3R 1E7
1065 Perron Avenue
Laval, Quebec
H7L 1K5
1253 Perron Avenue
Laval, Quebec
H7L 1K5
4001 Boulevard Industriel
Laval, Quebec
H7L 4S3
Transplex International Distributors Centers
345 English Drive
Moncton, New Brunswick
E1E 3Y8
Guardian Overseas Shipping
2232 Gladwin Crescent
Ottawa, Ontario
K1B 4S6
Canamex International Distribution
3811 North Fraser Way
Burnaby, British Columbia
V5J 5J2
Unit 10 Printing House
Hayes Fr. Middlex, United Kingdom
<PAGE>
Records concerning collateral: 141 Cidermill Avenue
Vaughan, Ontario
L4K 4G5
and
InterCity Products
Lincoln Barriere Division
4001 Industrial Blvd.
Laval, Quebec
H7L 4S3
Trade Names: Heil Heating & Cooling Products
HVAC Supply (Ontario)
business names:
Heil Heating & Cooling Products
HVAC Supply (West)
HVAC Supply (East)
Fournisseur pour HVAC (Est)
HVAC Supply (Ontario)
trade names:
Heil Heating and Cooling Products
KeepRite Optima 2S
High Flyers
FAST & design
KeepRite
Tempstar & Design
Zoneaire & Design
Longlife
Comfortmaker
Arcoaire
Airquest
<PAGE>
G. C. McDonald Supply Limited
Corporate Name: G. C. McDonald Supply Limited
Registered office: P.O. Box 338
360 Elgin Street
Brantford, Ontario
N3T 5N3
Principal place of business: P.O. Box 338
360 Elgin Street
Brantford, Ontario
N3T 5N3
Leased Premises: P.O. Box 338
360 Elgin Street
Brantford, Ontario
N3T 5N3
608 Colby Drive
Waterloo, Ontario
N2V 1A2
Warehouses re: inventory
locations: P.O. Box 338
360 Elgin Street
Brantford, Ontario
N3T 5N3
608 Colby Drive
Waterloo, Ontario
N2V 1A2
Records concerning collateral: P.O. Box 338
360 Elgin Street
Brantford, Ontario
N3T 5N3
Trade Names: First Name Fireplace Distribution
<PAGE>
Schedule 3.4 to Credit Agreement
FINANCIALS AND PROJECTIONS
1. Financial Statements. All of the following balance sheets and
statements of operations and cash flows of the Loan Parties, copies of which
have been furnished by Borrower to Agent and Lenders prior to the date of
this Agreement, have been, except as noted therein, prepared in conformity
with GAAP and present fairly respective the financial positions of the Loan
Parties, as appropriate, in each case as at the dates thereof, and the
results of operations and cash flows for the periods then ended (as to the
unaudited interim financial statements, subject to normal yearend audit
adjustments and the absence of footnotes):
(a) the audited and certified balance sheet of Borrower at
December 31, 1995 and the income statements and statements of
retained earnings and cash flows for the Fiscal Year then
ended, with the unqualified opinion thereon of the
Accountants;
(b) the unaudited balance sheet of Borrower as at the Closing Date
and the interim income statement and statements of retained
earnings and cash flows for the period from September 30, 1996
to the Closing Date; and
(c) the unaudited balance sheet of the Loan Parties as at the
Closing Date after giving proforma effect to the transactions
contemplated on or before the Closing Date under this
Agreement.
2. Projections. The projections of (a) a capital budget
(including planned capital expenditures), (b) operating profit and loss, (c)
cash flows, and (d) balance sheets, in each case on a monthly basis for the
period ending on December 31, 1997 and on an annual basis until the
Commitment Termination Date (collectively, the "Projections"), each of which
is included in an operating plan approved by the Senior Vice President,
Canadian Operations of Borrower and copies of which have been previously
delivered by Borrower to Agent and Lenders, updated, in a manner acceptable
to Agent in both form and substance, to reflect the capital and debt
structure of Borrower after giving effect to and the credit facilities
provided for under this Agreement. The projections shall be made in
compliance with the full disclosure requirements set out in Section 3.16.
<PAGE>
Schedule 3.5 Credit Agreement
MATERIAL ADVERSE CHANGES AND RESTRICTED PAYMENTS
InterCity Products Corporation (Canada)
Nil
G. C. McDonald Supply Limited
Nil
<PAGE>
Schedule 3.6 to Credit Agreement
REAL PROPERTY AND LEASES
PART 1
InterCity Products Corporation (Canada)
Part 1 (a) Owned Property
30 Elgin Street
Brantford, Ontario
N3R 1E7
44 Elgin Street
Brantford, Ontario
N3R 1E7
(36 Elgin Street and
50 Elgin Street
Brantford, Ontario
N3R 1E7
are now part of
44 Elgin Street)
45 Elgin Street
Brantford, Ontario
N3R 1E5
119 Elgin Street
Brantford, Ontario
N3R 1E7
<PAGE>
Part 1 (b) Leased Property
141 Cidermill Avenue
Vaughan, Ontario
L4K 4G5
225 Henry Street
Brantford, Ontario
N3T 5PA
1866 King Edward Street
Winnipeg, Manitoba
R2R 0Z9
(This location has been subleased).
LincolnBarriere (a division of Borrower)
Part 1 (a) Owned Property
1065 Perron Avenue
Laval, Quebec
H7L 1K5
1253 Perron Avenue
Laval, Quebec
H7L 1K5
Part 1 (b)Leased Property
4001 Boulevard Industriel
Laval, Quebec
H7L 4S3
3285 Ave. Jean Beraud
Laval, Quebec
H7T 2L2
<PAGE>
PART 2
All deeds, landlord waivers etc. have been renewed and registrations effected
as required by Section 3.6 except:
141 Cidermill Avenue
Vaughan, Ontario
L4K 4G5
4001 Boulevard Industriel
Laval, Quebec
H7L 4S3
3285 Ave. Jean Beraud
Laval, Quebec
H7T 2L2
PART 3
Defaults of material obligations under any lease
Nil
Contractual rights to purchase or sell real property
Nil
Material damage to Real Property that has not been fully repaired
Nil
PART 1
G. C. McDonald Supply Limited
Part 1 (a) Owned Property
Nil
<PAGE>
Part 1 (b) Leased Property
608 Colby Drive
Waterloo, Ontario
N2V 1A2
360 Elgin Street
Brantford, Ontario
N3T 5N3
PART 2
All deeds, landlord waivers etc. have been renewed and registrations effected
as required by Section 3.6. except:
608 Colby Drive
Waterloo, Ontario
N2V 1A2
PART 3
Defaults of material obligations under any lease
Nil
Contractual rights to purchase or sell real property
Nil
Material damage to Real Property that has not been fully repaired
Nil
<PAGE>
Schedule 3.7 to Credit Agreement
MATERIAL CONTRACTS
InterCity Products Corporation (Canada)
1. Lease for real property located at 141 Cidermill Avenue, Vaughan,
Ontario between 760749 Ontario Ltd., as landlord and InterCity
Products Corporation (Canada), as tenant dated December 15, 1995.
2. Lease for real property located at 4001 Boulevard Industriel, Laval,
Quebec.
3. Lease for real property located at 225 Henry Street, Brantford,
Ontario between Brant Trade & Industrial Park Inc., as landlord and
InterCity Products Corporation (Canada), as tenant dated January 30,
1992.
4. Lease for real property located at 3285 Ave. Jean-Beraud, Laval,
Quebec.
5. Collective Agreement between InterCity Products Corporation (Canada)
and ICP Workers' Independent Union ratified September 26, 1996 and
effective from October 1, 1996 to September 30, 1999.
6. Collective Agreement between Lincoln Barriere (Division de:
Corporation Produits InterCite (Canada)) and Metallurgistes Unis
d'Amerique Local 7625 effective until October 31, 1997.
7. Pension Trust Agreement between InterCity Gas Corporation and Canada
Trust Company dated October 1, 1986.
8. Trademark Licence Agreement between HeilQuaker Corporation and
KeepRite Inc. dated November 1, 1988.
9. Trademark Licence Agreement InterCity Products Corporation (Canada)
and National Refrigeration and Air Conditioning Products, Inc. dated
September 26, 1996.
10. Sales Representative Agreement between InterCity Products Corporation
(Canada) and Temacon Sales & Engineering Ltd. dated September 11,
1996.
<PAGE>
11. Sales Representative Agreement between InterCity Products Corporation
(Canada) and AirTech Sales of Ottawa dated July 1, 1996.
12. Letter of Understanding in respect of a proposed Supply Agreement
between Applied Comfort Products Inc. and InterCity Products
Corporation (Canada).
13. AS/400 Software License Agreement and Addendum between Information
Systems Development, Inc. and InterCity Products Corporation (Canada)
dated June 5, 1992.
14. Sales Agreement between InterCity Products Corporation (Canada),
formerly "KeepRite Inc." and White Consolidated Industries Inc. acting
through its division Frigidaire Company, Home Comfort Products made as
of December 18, 1992.
15. Employee Benefit Plans.
16. Retirement Plan for Brantford Hourly Employees of InterCity Products
Corporation (Canada) (formerly KeepRite Inc.).
17. Retirement Plan for Salaried Employees of InterCity Products
Corporation (Canada).
18. Agreement with Revenue Canada regarding Release of Goods from Customs
prior to Payment of Duties dated August 27, 1996.
G. C. McDonald Supply Limited
1. Lease for real property located at 360 Elgin Street, Brantford,
Ontario between Gerald-Carson McDonald and Christine McDonald, as
landlord, and G. C. McDonald Supply Limited, as tenant dated July 3,
1992.
2. Lease for real property located at 608 Colby Drive, Waterloo, Ontario
between Olmar Investments Inc., as landlord, and G. C. McDonald Supply
Limited, as tenant dated April 1, 1996.
<PAGE>
Schedule 3.8 to Credit Agreement
LABOUR MATTERS
InterCity Products Corporation (Canada)
Pending or Threatened Strikes or Labour Disputes
Nil
Collective Bargaining, Consulting and Management Agreements Requiring
Payments in Excess of $250,000 in any Fiscal Year
Nil (except for Collective Bargaining Agreements referred to below)
Pending Demands for Recognition and Charges re: termination of employment
Nil
Collective Bargaining Agreements
1. Collective Bargaining Agreement between InterCity Products Corporation
(Canada) and ICP Workers' Independent Union ratified September 26,
1996 and effective from October 1, 1996 to September 30, 1999.
2. Collective Bargaining Agreement between Lincoln Barriere (Division de:
Corporation Produits InterCite (Canada)) and Metallurgistes Unis
d'Amerique Local 7625 effective until October 31, 1997.
G. C. McDonald Supply Limited
Pending or Threatened Strikes or Labour Disputes
Nil
<PAGE>
Collective Bargaining, Consulting and Management Agreements Requiring
Payments in Excess of $250,000 in any Fiscal Year
Nil
Pending Demands for Recognition and Charges re: termination of employment
Nil
Collective Bargaining Agreements
Nil
<PAGE>
Schedule 3.9 to Credit Agreement
VENTURES, SUBSIDIARIES, AND AFFILIATES;
OUTSTANDING STOCK AND INDEBTEDNESS
InterCity Products Corporation (Canada) ("Borrower")
1. Subsidiaries, Joint Ventures, Partnerships and Affiliates:
G. C. McDonald Supply Limited, a wholly owned subsidiary
2. Issued and Outstanding Stock of Borrower:
* 3,053,790 common shares with no par value registered in the name
of ICP
3. Outstanding Purchase Options, Warrants or Similar Plans
Nil
4. Outstanding Indebtedness of Borrower:
* Amounts owing to The Toronto-Dominion Bank under the Existing
Credit Agreement to be fully repaid and cancelled on the
Closing Date
* Longterm, non-interest bearing subordinated loan from ICP in an
amount of not less than $37,900,000
* Obligations arising under a guarantee of Borrower in favour of
ICP under which Borrower guarantees the obligations of ICP to
Emerson under a reimbursement agreement in respect of the
indebtedness of CHL to SunTrust Bank
G. C. McDonald Supply Limited ("McDonald")
1. Subsidiaries, Joint Ventures, Partnerships and Affiliates:
Nil
2. Issued and Outstanding Stock of McDonald:
693,116 common shares registered in the name of Borrower as evidenced
by share certificate number 21
<PAGE>
3. Outstanding Purchase Options, Warrants or Similar Plans
Nil
4. Outstanding Indebtedness of McDonald:
* Uncommitted operating credit facility in the amount of $2,700,000
provided by The Toronto-Dominion Bank, to be repaid and cancelled
on the Closing Date
<PAGE>
Schedule 3.10 to Credit Agreement
TAXES
InterCity Products Corporation (Canada) ("Borrower")
1. Actions, suits, proceedings, investigations, audits or claims,
threatened or pending against Borrower:
Nil
2. Notices of Assessments:
* A Quebec CSST reassessment has been received. An amount equal to
approximately $270,000 has been fully accrued.
G. C. McDonald Supply Limited ("McDonald")
1. Actions, suits, proceedings, investigations, audits or claims,
threatened or pending against McDonald:
Nil
2. Notices of Assessments:
Nil
<PAGE>
Schedule 3.12 to Credit Agreement
CANADIAN BENEFIT AND PENSION PLANS
InterCity Products Corporation (Canada)
1. Canadian Benefit Plans
(a) Benefits for Salaried Employees. The benefits provided under
this Plan include:
(i) Disability Benefits
(ii) Death Benefits
(iii) Optional Benefits
(iv) Medical Dental Benefits
(v) Employee Share Ownership Plan
(vi) Retirement Income (Pension Plan)
(b) Benefits for Hourly Employees contained in the Collective
Agreement which include:
(i) Life and Accidental Death and Dismemberment Insurance
(ii) Group Sickness and Accident Indemnity
(iii) Hospital, Medical, Drug and Dental
(iv) Longterm Disability
(v) Family Income Protection Plan
(vi) Short Week Work Benefit Plan
2. Canadian Pension Plans
(a) Retirement Plan for Brantford Hourly Employees of InterCity
Products Corporation (Canada) (formerly KeepRite Inc.)
(b) Retirement Plan for Salaried Employees of InterCity Products
Corporation (Canada)
<PAGE>
3. ERISA Liability
Nil
G. C. McDonald Supply Limited
1. Canadian Benefit Plans
(a) Group Insurance Plan provided by Empire Life Insurance
Company. The benefits provided under this Plan include:
(i) Life Insurance
(ii) Dependent Life Insurance
(iii) Weekly Indemnity Benefit
(iv) Extended Health Care Benefit
(v) Dental Care
2. Canadian Pension Plans
Nil
3. ERISA Liability
Nil
<PAGE>
Schedule 3.13 to Credit Agreement
LITIGATION
InterCity Products Corporation (Canada)
Please see the attached chart.
G. C. McDonald Supply Limited
Nil
<PAGE>
INTER-CITY PRODUCTS CORPORATION (CANADA)
LITIGATION SCHEDULE<PAGE>
Schedule 3.15 to
Credit Agreement
INTELLECTUAL PROPERTY
InterCity Products Corporation (Canada):
1. PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES:
Patents:
Nil
Trademarks:
Trademark
(Country) Serial No. Filing Issue No. Issue Renewal
- ---------- ---------- Date --------- Date Date
------ ----- -------
AUTOSWEEP 469,714 05/08/81 264,944 12/11/81 12/11/96
(Canada)
CLIMATIZER A368256 11/17/81 11/17/02
(Australia)
CLIMETTE A368258 11/17/81 11/17/02
(Australia)
CLIMETTE 81/2561 06/24/83 06/24/00
(Barbados)
CLIMETTE 13895 07/06/87 02/20/97
(Trinidad/Tobago)
CLIMETTE 578,649 01/21/86 1,410,368 09/23/86 09/23/06
(United States)
COMFORT YOU 546,978 07/31/85 332,230 09/25/87 09/25/02
CAN COUNT ON
(Canada)
ENERFLO 500,795 03/24/83 288,285 02/24/84 02/24/99
(Canada)
HI/RE/LI 478,058 11/10/81 273,702 11/12/82 11/12/97
(Canada)
<PAGE>
Trademark
(Country) Serial No. Filing Issue No. Issue Renewal
- ---------- ---------- Date --------- Date Date
------ ----- -------
HIGH FLYERS 752,932 05/06/94 450,165 11/17/95 11/17/10
(Canada)
HIGH FLYERS DESIGN 752,933 05/06/94 Pending
(Canada)
HVAC SUPPLY & DESIGN 721,876 02/03/93 421,640 12/24/93 12/24/08
(Canada)
INTERCITY PRODUCTS 662,415 07/18/90 418,064 10/15/93
INTERCITY PRODUCTS 672,741 12/19/90 417,767 10/08/93
& DESIGN
PRODUITS INTERCITE 670,020 11/07/90 412,255 05/14/93
KEEPRITE B343843 03/13/80 03/13/01
(Australia)
KEEPRITE 81/2560 06/24/83 06/24/00
(Barbados)
KEEPRITE B 13896 11/17/87 02/20/97
(Trinidad/Tobago)
LIMITROL 77,373 07/09/59 708,406 12/13/60 12/13/00
(United States)
LINCOLN 231/488 07/06/55 107,200 07/05/57 07/05/02
(Canada)
LINCOLN (stylized) 615,451 09/19/88 361,075 10/27/89 10/27/04
(Canada)
LINCOLN & DESIGN 231,313 06/29/55 111,417 09/05/90 09/05/03
(Canada)
TRIANGLES DESIGN 721,877 02/03/93 421,287 12/17/93 12/17/08
(Canada)
<PAGE>
Trademark
(Country) Serial No. Filing Issue No. Issue Renewal
- ---------- ---------- Date --------- Date Date
------ ----- -------
NORTHERN 455,961 08/09/80 279,212 05/06/83 05/06/98
(Canada)
PRECIPITRON 173,053 03/30/38 UCA09809 03/30/38 03/30/98
(Canada)
QUALITY YOU 546,977 07/31/85 335,336 12/18/87 12/18/02
CAN COUNT ON
(Canada)
SEASONALL A368257 11/17/81 11/17/02
(Australia)
THE COMFORTING 633,619 06/06/89 402,495 09/11/92 09/11/07
CHOICE FOR
CANADIAN HOMES
(Canada)
VAPORMATIC 427,814 07/25/78 242,507 04/03/80 04/03/10
(Canada)
KEEPRITE 2,006,709 01/04/95 08/29/96 01/04/05
(Great Britain)
KEEPRITE 74/574,501 09/16/94 1,917,814 09/12/95 09/12/05
(United States)
KEEPRITE DESIGN 443,746 08/27/79 250,142 08/29/80 08/29/10
(Canada)
KEEPRITE OPTIMA 729,988 05/28/93 Pending
2-S & DESIGN
(Canada)
KEEPRITE 442,836 08/01/79 244,332 05/02/80 05/02/10
(Canada)
KEEPRITE 760,436 07/29/94 455,332 03/15/96
REFRIGERATION
(Canada)
<PAGE>
Trademark
(Country) Serial No. Filing Issue No. Issue Renewal
- ---------- ---------- Date --------- Date Date
------ ----- -------
KEEPRITE 2,006,708 01/04/95 04/09/96 01/04/05
REFRIGERATION
(Great Britain)
KEEPRITE 74/574,502 09/16/94 1,917,815 09/12/95 09/12/05
REFRIGERATION
(United States)
CLIMETTE 361,833 06/30/92 208,717 08/08/75 08/08/05
(Canada) renewed
08/08/00
Pending
KEEPRITE 46,911 06/12/89 06/13/09
CLASS 34
(Dominion Republic)
LINCOLN & Design 802,991 08/16/96 Pending
(Canada)
Copyrights:
Nil
2. INFRINGEMENTS OF INTELLECTUAL PROPERTY:
Nil
<PAGE>
3. LICENSE AGREEMENTS:
Licensee Licence Agreements
1. Licence Agreement dated March, 1982 between KeepRite Inc. (now
InterCity Products Corporation (Canada) and Electrohome Limited with
respect to the names "Electrohome", and "Frost Guard" and the stylized
"E" owned by Electrohome Limited.
2. License Agreement dated November 1, 1988 between HeilQuaker
Corporation (now InterCity Products Corporation (USA)) and KeepRite
Inc. (now InterCity Products Corporation (Canada)) with respect to
HeilQuaker being the owner of trademarks in connection with the
manufacture and sale of heating and cooling equipment. The trademarks
which InterCity Products Corporation (Canada) ("InterCity") is
licensed to use under this agreement are:
(a) TEMPSTAR, (registered in the US and Canada)
(b) TEMPSTAR (with design) (registered in the US and Canada)
(c) all other trademark registrations and applications for the
trademark TEMPSTAR and TEMPSTAR (with design) in all countries
for these classes of goods
3. A licensing arrangement between InterCity and InterCity Products
Corporation (USA) ("InterCity (USA)") whereby InterCity (USA) grants
InterCity a license to use the trademarks "ARCOAIRE", "COMFORTMAKER"
and "HEIL".
4. Software License Agreement and Addendum dated June 5, 1992 between
InterCity Products Corporation (Canada) and Information Systems
Development, Inc. in connection with distribution management system
including order entry/invoicing, A/R, inventory management,
production, purchasing, sales analysis, A/P and G/L.
Licensor Licence Agreements
1. A license agreement between InterCity Products Corporation (Canada)
("InterCity") and National Refrigeration and Air Conditioning Products
Inc. ("NRAC") dated September 26, 1996 whereby InterCity has granted
to NRAC a license to use the trademark "KEEPRITE REFRIGERATION" and
other stylistic variations thereof.
Restrictions on Borrower's ability to assign or encumber rights re:
Intellectual Property
Nil
<PAGE>
G. C. McDonald Supply Limited:
1. PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES:
Patents:
Nil
Trademarks:
Nil
Copyrights:
Nil
2. INFRINGEMENTS OF INTELLECTUAL PROPERTY:
Nil
3. LICENSE AGREEMENTS:
Nil
Restrictions on McDonald's ability to assign or encumber rights re:
Intellectual Property
Not applicable
<PAGE>
Schedule 3.17 to Credit Agreement
ENVIRONMENTAL MATTERS
InterCity Products Corporation (Canada)
Nil
G. C. McDonald Supply Limited
Nil
<PAGE>
Schedule 3.18 to Credit Agreement
INSURANCE POLICIES
InterCity Products Corporation (Canada)
POLICY NO.
(Expiry Date) ISSUED BY COVERING
- ------------- --------- --------
#6065179 Royal Insurance Company Canadian Commercial
(August 1, 1997) of Canada General Liability
* products and completed
operations;
* non-owned
automobiles;
* employee benefits and
medical payments;
* property damage and
bodily injury;
* tenants legal liability;
and
* damage to hired vehicles
#25001766 Royal Insurance Company Canadian Automobile
25001767 (Quebec) of Canada * third party liability
(August 1, 1997) * accident benefits; and
* physical damage
#KC960039 Northfield Insurance Primary Umbrella Liability
(August 1, 1997) Company * commercial general
liability and automobile
liability (US and
Canada)
* employers liability
#79731203 Federal Insurance First Excess Liability
(January 29, 1997) Company (CHUBB) (FEL)
#EUO3660964-01 Zurich Insurance Company Second Excess Liability
(January 29, 1997)
<PAGE>
#XXK0095616348 Fireman's Fund Insurance Third Excess Liability
(January 29, 1997) Co.
#WB24561 Fireman's Fund Insurance Ocean Marine Cargo
(August 1, 1997) Company * any one vessel, aircraft
or conveyance
#613801-96 The Protection Mutual Property
(February 1, 1999) Insurance Company (Blanket Limit -
$792,865,000)
* contemplates reduced
amounts for flood,
earthquake, transit,
floater, etc.
#8127-85-19-DCCG Federal Insurance Crime and Fiduciary
(August 1, 1997) Company (CHUBB) (covers fiduciary loss,
employee dishonesty,
premises, transit, funds
transfer fraud, depositors
forgery)
#4490807 American Home Assurance Directors' and Officers'
(August 1, 1997) Company Liability
<PAGE>
G. C. McDonald Supply Limited
POLICY NO.
(Expiry Date) ISSUED BY COVERING
- ------------- --------- --------
#60286310/R Royal Insurance Company * Commercial Building,
(December 11, 1997) of Canada Equipment and Stock
* Rent or Rental Value
(Broad Form)
* Office Contents
* Liability (Commercial,
General and SPF No. 6
- Standard Non-owned
Automobile Policy
<PAGE>
Schedule 3.19 to Credit Agreement
BANK ACCOUNTS AND LOCK BOXES
InterCity Products Corporation (Canada)
1. Blocked Accounts
(a) Canadian Account
Account No.: 18900316893
Branch, bank and transit number: Toronto-Dominion Bank
Pine Valley Commercial Banking Centre
4499 Highway 7 at Pine Valley Drive
Vaughan, Ontario
L4L 9A9
(905) 851-5556
Transit #18902
(b) US Account
Account No.: 18907302710
Branch, bank and transit number: Toronto-Dominion Bank
Pine Valley Commercial Banking Centre
4499 Highway 7 at Pine Valley Drive
Vaughan, Ontario
L4L 9A9
(905) 851-5556
Transit #18902
<PAGE>
2. Blocked Concentration Account
(a) Canadian Account
Account No.: 18900317253
Branch, bank and transit number: Toronto-Dominion Bank
Pine Valley Commercial Banking Centre
4499 Highway 7 at Pine Valley Drive
Vaughan, Ontario
L4L 9A9
(905) 851-5556
Transit #18902
(b) US Account
Account No.:18907302842
Branch, bank and transit number: Toronto-Dominion Bank
Pine Valley Commercial Banking Centre
4499 Highway 7 at Pine Valley Drive
Vaughan, Ontario
L4L 9A9
(905) 851-5556
Transit #18902
3. Disbursement Account
(a) Canadian Account
Account No.: 14660524166
Branch, bank and transit number: Toronto-Dominion Bank (Vaughan East)
1700 Langstaff Road
Suite 100
Concord, Ontario
L4K 3S3
(905) 660-0017
Transit #14662
<PAGE>
(b) US Account
Account No.: 14667371751
Branch, bank and transit number: Toronto-Dominion Bank (Vaughan East)
1700 Langstaff Road
Suite 100
Concord, Ontario
L4K 3S3
(905) 660-0017
Transit #14662
4. Lock Box
(a) Canadian Account
No.: T6216
Bank and address: Toronto-Dominion Bank
P.O. Box 6100
Postal Station "F"
Toronto, Ontario
M4Y 2Z2
(b) US Account
No.: T6216U
Bank and address: Toronto-Dominion Bank
P.O. Box 6100
Postal Station "F"
Toronto, Ontario
M4Y 2Z2
<PAGE>
5. Benefit Account
(a) Canadian Account
Account No.: 21680302026
Branch, bank and transit number: Toronto-Dominion Bank
Brantford Commercial Banking Centre
58 Market Street
Box 995
Brantford, Ontario
N3T 5S7
(519) 756-0550
Transit #21682
6. Payroll Accounts
(a) Canadian Account
Salary Payroll Account No.: 1172857
Hourly Payroll Account No.: 1172873
Branch, bank and transit number: Royal Bank of Canada
32 Market Street Branch
32 Market Street
Brantford, Ontario
N3T 5P4
(519) 753-4121
Transit #00522
<PAGE>
LincolnBarriere, Division of InterCity Products Corporation (Canada)
1. Blocked Accounts
(a) Canadian Account
Account No.: 18900316818
Branch, bank and transit number: Toronto-Dominion Bank
Pine Valley Commercial Banking Centre
4499 Highway 7 at Pine Valley Drive
Vaughan, Ontario
L4L 9A9
(905) 851-5556
Transit #18902
(b) US Account
Account No.: 18907302753
Branch, bank and transit number: Toronto-Dominion Bank
Pine Valley Commercial Banking Centre
4499 Highway 7 at Pine Valley Drive
Vaughan, Ontario
L4L 9A9
(905) 851-5556
Transit #18902
2. Blocked Concentration Account
(a) Canadian Account
Account No.: 18900317253
Branch, bank and transit number: Toronto-Dominion Bank
Pine Valley Commercial Banking Centre
4499 Highway 7 at Pine Valley Drive
Vaughan, Ontario
L4L 9A9
(905) 851-5556
Transit #18902
<PAGE>
(b) US Account
Account No.:18907302842
Branch, bank and transit number: Toronto-Dominion Bank
Pine Valley Commercial Banking Centre
4499 Highway 7 at Pine Valley Drive
Vaughan, Ontario
L4L 9A9
(905) 8515556
Transit #18902
3. Disbursement Account
(a) Canadian Account
Account No.: 44400626488
Branch, bank and transit number: Toronto-Dominion Bank
Laval Commercial Banking Centre
3080 Boul Le Carresour
Laval, Quebec
H7T 2R5
(514) 973-5400
Transit #44401
(b) US Account
Account No.: 44407300168
Branch, bank and transit number: Toronto-Dominion Bank
Laval Commercial Banking Centre
3080 Boul Le Carresour
Laval, Quebec
H7T 2R5
(514) 973-5400
Transit #44401
<PAGE>
4. Lock Box
(a) Canadian Account
No.: M2092
Bank and address: Toronto-Dominion Bank
C.P. 11013
Succursale CentreVille
Montreal, Quebec
H3C 4T9
(b) US Account
No.: M2092U
Bank and address: Toronto-Dominion Bank
C.P. 11013
Succursale CentreVille
Montreal, Quebec
H3C 4T9
G. C. McDonald Supply Limited
1. Blocked Accounts
(a) Canadian Account
Account No.: 18900316796
Branch, bank and transit number: Toronto-Dominion Bank
Pine Valley Commercial Banking Centre
4499 Highway 7 at Pine Valley Drive
Vaughan, Ontario
L4L 9A9
(905) 851-5556
Transit #18902
<PAGE>
2. Blocked Concentration Account
(a) Canadian Account
Account No.: 18900317253
Branch, bank and transit number: Toronto-Dominion Bank
Pine Valley Commercial Banking Centre
4499 Highway 7 at Pine Valley Drive
Vaughan, Ontario
L4L 9A9
(905) 851-5556
Transit #18902
3. Disbursement Account
(a) Canadian Account
Account No.:21680774564
Branch, bank and transit number: Toronto-Dominion Bank
Brantford Commercial Banking Centre
58 Market Street
Box 995
Brantford, Ontario
N3T 5S7
(519) 756-0550
Transit #21682
<PAGE>
(a) US Account
Account No.: 21687316753
Branch, bank and transit number: Toronto-Dominion Bank
Brantford Commercial Banking Centre
58 Market Street
Box 995
Brantford, Ontario
N3T 5S7
(519) 756-0550
Transit #21682
4. Lock Box
(a) Canadian Account
No.: T6231
Bank and address: Toronto-Dominion Bank
P.O. Box 6100
Postal Station "F"
Toronto, Ontario
M4Y 2Z2
<PAGE>
Schedule 3.24 to Credit Agreement
CUSTOMER AND TRADE RELATIONS
Affiliates (other than McDonald) from whom InterCity Products Corporation
(Canada)
purchases Inventory:
ICP (USA)
Affiliates (other than Borrower) from whom G. C. McDonald Supply Limited
purchases
Inventory:
Nil
<PAGE>
Schedule 3.25 to Credit Agreement
AGREEMENTS AND OTHER DOCUMENTS
InterCity Products Corporation (Canada)
(a) Supply and Purchase Agreements
1. Sales Agreement between White Consolidated Industries, Inc.,
acting through its Division, Frigidaire Company, Home Comfort
Products and InterCity Products Corporation (Canada) made as
of December 18, 1992.
2. Letter of Understanding in respect of a proposed Supply
Agreement between Applied Comfort Products Inc. and InterCity
Products Corporation (Canada).
(b) Equipment Leases
1. IBM Total System Lease #0132 dated December 9, 1994
2. IBM Total System Lease #0133 dated February 21, 1995
(c) Licenses and Permits
1. Canada Customs Bond Number TM0003001714 effective June 17,
1996 in the amount of $65,000 deposited with Revenue Canada
for the release of goods from Customs prior to payment of
duties.
<PAGE>
(d) Documents evidencing Indebtedness and Security Interests Granted
1. Existing Credit Agreement as defined in Annex A
2. ICP Indebtedness as defined in Annex A
(e) Real Property Leases
1. Lease for real property located at 141 Cidermill Avenue,
Vaughan, Ontario between 760749 Ontario Ltd., as landlord and
InterCity Products Corporation (Canada), as tenant dated
December 15, 1995.
2. Lease for real property located at 225 Henry Street,
Brantford, Ontario between Brant Trade & Industrial Park Inc.,
as landlord and InterCity Products Corporation (Canada), as
tenant dated January 30, 1992.
3. Lease for real property located at 4001 Boulevard Industriel,
Laval, Quebec.
4. Lease for real property located at 3285 Ave. Jean-Beraud,
Laval, Quebec.
5. Lease for real property located at 1866 King Edward Street,
Winnipeg, Manitoba (fully subleased).
(f) Securities, Rights, Options or Warrants Agreements
Nil
<PAGE>
G. C. McDonald Supply Limited
(a) Supply and Purchase Agreements
Nil
(b) Equipment Leases
Nil
(c) Licenses and Permits
1. Vendor Permit No. 25911406 dated September 17, 1996 pursuant
to the Retail Sales Tax Act.
(d) Documents evidencing Indebtedness and Security Interests Granted
1. Uncommitted operating credit facility in the amount of
$2,700,000 provided by The Toronto-Dominion Bank, to be repaid
and cancelled on the Closing Date.
(e) Real Property Leases
1. Lease for real property located at 360 Elgin Street,
Brantford, Ontario.
2. Lease for real property located at 608 Colby Drive, Waterloo,
Ontario.
(f) Securities, Rights, Options or Warrants Agreements
Nil
<PAGE>
Schedule 6.2 to Credit Agreement
INVESTMENTS
InterCity Products Corporation (Canada)
* Ownership of all of the issued and outstanding shares in the capital
stock of G. C. McDonald Supply Limited
* Obligations arising under a guarantee of Borrower in favour of ICP
under which Borrower guarantees the obligations of ICP to Emerson
under a reimbursement agreement in respect of the indebtedness of CHL
to SunTrust Bank
G. C. McDonald Supply Limited
Nil
<PAGE>
Schedule 6.7 to Credit Agreement
LIENS
Inter-City Products Corporation (Canada)
Inter-City Products Corporation (Canada)
Corporation Produits Inter-Cite (Canada)
- ----------------------------------------
Reference File No. &
Secured Collateral General Collateral Registration
Party(ies) Classification Description Number(s)
- ----------------------------------------------------------------------------
IBM Canada Equipment, 424906146-
Limited Accounts, 921009 1451 0043 4705
Other (5 years)
Toronto- Inventory, 007889139-
Dominion Equipment, 900402 1104 0043 9563
Bank of Accounts, Other, (25 years)
Canada Motor Vehicles
The Toronto- Inventory, 007889166-
Dominion Bank Equipment, 900402 1104 0043 9561
Accounts, Other, (25 years)
Motor Vehicles
Inter-City Products Corporation (Canada)
- ----------------------------------------
Reference File No. &
Secured Collateral General Collateral Registration
Party(ies) Classification Description Number(s)
- ----------------------------------------------------------------------------
IBM Canada Equipment, 811027503-
Ltd Accounts, Other 941206 2155 1529 3383
(7 years)
QE Financial Equipment, Other 2 Canon Laser Class 5500 075584349-
Services Inc. fax with accessories 941130 1441 0024 8534
2 Canon Laser Class 7500 (4 years)
fax with accessories c/n
584759 1/n 605666
<PAGE>
Reference File No. &
Secured Collateral General Collateral Registration
Party(ies) Classification Description Number(s)
- ----------------------------------------------------------------------------
National Accounts Absolute assignment of 075126663-
Refrigeration certain accounts 941011 1115 0020 2999
& Air receivable from Inter- (5 years)
Conditioning City Products Corporation
Products, Inc. (Canada)/Corporation
Produits Inter-Cite
(Canada) to National
Refrigeration & Air
Conditioning Products, Inc.
Xerox Canada Equipment, Other Xerox equipment 065618901-
Ltd/Ltee 940304 0802 00882967
(5 years)
Xerox Canada Equipment, Other Xerox equipment 065618919-
Ltd/Ltee 940304 0801 0088 2926
(3 years)
Environmental Accounts Absolute assignment from 804991437-
Technologies Inter-City Products 931220 2225 1531 5350
International Corporation (Canada) to (5 years)
Inc. Environmental
Technologies Internatinal
Inc. of an account
receivable from CFC-TEK Inc.
(sic)
Xerox Canada Equipment, Other Xerox equipment 058953465-
Ltd/Ltee 930624 0819 0088 2002
(5 years)
The Toronto- Accounts, Other 069124875-
Dominion Bank 930624 1017 0043 0429
(10 years)
IBM Canada Equipment, Accounts, 424906146-
Limited Other 921009 1451 0043 4705
(5 years)
The Toronto Inventory, Equipment, 007889139-
Dominion Bank Accounts, Other, 90402 1104 0043 9563
Motor Vehicles (25 years)
The Toronto- Inventory, Equipment, 007889166-
Dominion Bank Accounts, Other, 900402 1104 0043 9561
Motor Vehicles (25 years)
<PAGE>
Corporation Produits Inter-Cite (Canada)
- ----------------------------------------
Reference File No. &
Secured Collateral General Collateral Registration
Party(ies) Classification Description Number(s)
- ----------------------------------------------------------------------------
National Accounts Absolute assignment of 07512663-
Refrigeration certain accounts 941011 1115 0020 2999
& Air receivable from Inter- (5 years)
Conditioning City Products Corporation
Products, Inc. (Canada)/Corporation
Produits Inter-Cite
(Canada) to National
Refrigeration & Air
Conditioning Products, Inc.
IBM Canada Equipment, 424906146-
Limited Accounts,Other 921009 1451 0043 4705
(5 years)
The Toronto- Inventory, 007889139-
Dominion Bank Equipment, 900402 1104 0043 9563
Accounts, Other, (25 years)
Motor Vehicles
The Toronto- Inventory, 007889166-
Dominion Bank Equipment, 900402110400439561
Accounts, Other, (25 years)
Motor Vehicles
KeepRite Inc.
- -------------
Reference File No. &
Secured Collateral General Collateral Registration
Party(ies) Classification Description Number(s)
- ----------------------------------------------------------------------------
GE Capital Equipment, 4 specific motor 431765694-
Quebec Other, Motor vehicles were 920506 0837 0043 0428
Acquisitions Vehicles identified and boites (6 years)
Inc. de camion aluminium 26'
long x 96" haut x
102" large two units
The Toronto- Inventory, 007889139-
Dominion Bank Equipment, 900402 1104 0043 9563
Accounts, Other, (25 years)
Motor Vehicles
The Toronto- Inventory, 007889166-
Dominion Bank Equipment, 900402 1104 0043 9561
Accounts, Other, (25 years)
Motor Vehicles
<PAGE>
G.C. McDonald Supply Limited
G.C. McDonald Supply Limited
- ----------------------------
Reference File No. &
Secured Collateral General Collateral Registration
Party(ies) Classification Description Number(s)
- ----------------------------------------------------------------------------
GMAC Leaseco Equipment, Other, 96 Pontiac Trans Sport 825547815-
Limited Motor Vehicles VIN#1GMDU06E5TT209015 961010 1636 1737 1963
(3 years)
GMAC Leaseco Equipment, Other, 96 Pontiac Trans Sport 825039855-
Limited Motor Vehicles VIN#1GMDU06E4TT224380 960919 1624 1737 6941
(3 years)
GMAC Leaseco Equipment, Other, 96 GMC Sierra 821765484-
Limited Motor Vehicles VIN#2GETC19WXT1SI692I 960508 1627 1737 4672
(4 years)
GMAC Leaseco Equipment, Other, 96 Pontiac Trans Sport 821765493-
Limited Motor Vehicles VIN#IGMDU06ESTT2I249S 960508 1627 1737 4673
(3 years)
GMAC Leaseco Equipment, Other, 96 Pontiac Trans Sport 821765502-
Limited Motor Vehicles VIN#IGMDU06EZIT2I2714 960508 1627 1737 4674
(3 years)
GMAC Leaseco Equipment, Other, 96 Pontiac Trans Sport 821765511-
Limited Motor Vehicles VIN#JGMDU06E7TT2O1479 960508 1627 1737 4675
(3 years)
Teletech Equipment, Other 814686273-
Financial 950614 1859 1529 8207
Corporation (6 years)
Forbes Bros. Consumer Goods, 94 Chevrolet 068324841-
Inc. Motor Vehicle 3/4 Ton Pick Up 940603 1544 0043 8496
VIN#1GCGC24K2RE237134 (4 years)
The Toronto- Inventory, General Security 940557204-
Dominion Bank Equipment, Agreement
Accounts, Other,
Motor Vehicles
The Toronto- Inventory, 956265804-
Dominion Bank Equipment, 800507 1419 05 8224
Accounts, Other,
Motor Vehicles
The Toronto Accounts, Other 956096028-
Dominion Bank 760617 1048 05 1555
<PAGE>
In addition, the following registration was made under the Corporation
Securities Registration Act (the "CSRA") or a predecessor statute:
1. CSRA Number: 048191
Reference File Number: 900481914
Parties: G. C. McDonald Supply Limited
The Toronto-Dominion Bank
Instrument: Demand Debenture
Date of Execution: May 5, 1980
Principal Amount: $500,000.00
<PAGE>
Exhibit 1.1(c) to Credit Agreement
NOTICE OF REVOLVING CREDIT ADVANCE
Date:
--------------------------
To: GENERAL ELECTRIC CAPITAL CANADA INC.
2300 Meadowvale Blvd.
Mississauga, Ontario
L5N 5P9
Attention: Vice President, Commercial Finance
Telecopier No.: (905) 858-5456
And To: GENERAL ELECTRIC CAPITAL CORPORATION
105 West Madison Street
Suite 1600
Chicago, Illinois 60602
Telecopier: (312) 4195977
Attention: Vice President, InterCity Account Manager
Dear Sirs:
Reference is made to the credit agreement dated as of December 19,
1996 between InterCity Products Corporation (Canada), as borrower (the
"Borrower"), McDonald, each of the lenders named therein (the "Lenders") and
General Electric Capital Canada Inc., as agent for the Lenders (as amended,
restated, supplemented and otherwise modified, the "Credit Agreement"). All
capitalized terms used in this Notice and not defined herein have the
meanings given to them in the Credit Agreement.
Notice is hereby given by Borrower of its request for a Revolving
Credit Advance under Section 1.1(c) of the Credit Agreement as follows:
(a) Proposed Borrowing Date:
---------------------------
(b) Amount of proposed Revolving Credit Advance: $
----------------
(c) Type of Proposed Revolving Credit Advance:
-------------------
(d) The term of the Interest Period (if applicable) is
-----------
- - days.
<PAGE>
(e) The proceeds of the proposed Revolving Credit Advance are to
be deposited into the Disbursement Account
------------------
(f) The principal amount of the Revolving Credit Loan (after
giving effect to the proposed Revolving Credit Advance) will
be $
---------------------
(g) The Borrowing Base, as calculated in the Borrowing Base
Certificate dated being the most
------------------
recent Borrowing Base Certificate that we have delivered to
the Agent pursuant to Annex E to the Credit Agreement), is
$
----------------------
Borrower hereby certifies and represents that the following statements
are true on the date hereof, and will be true on the date of the proposed
Revolving Credit Advance as to which this Notice is made:
(a) each Loan Party's representations and warranties contained in
the Credit Agreement or in any other Loan Document were true
and correct on and as of the Closing Date and are true and
correct before and after giving effect to the proposed
Revolving Credit Advance and the application of the proceeds
thereof, with the same effect as though made on and as of the
date of the proposed Revolving Credit Advance (unless such
representation and warranty expressly relates solely to an
earlier date, in which case such representation and warranty
was true and correct on such date, and except for changes
permitted or contemplated by the Credit Agreement);
(b) no event has occurred and is continuing, or would result from
the making of the proposed Revolving Credit Advance, which
constitutes or would constitute a Default or an Event of
Default;
(c) after giving effect to the Revolving Credit Advance requested
hereunder, the aggregate principal amount of the Revolving
Credit Loan shall not exceed the Borrowing Base and there shall
be no requirement under Section 1.4(b) to repay any Revolving
Credit Advance; and
<PAGE>
(d) a Material Adverse Effect is not continuing.
Yours truly,
INTERCITY PRODUCTS CORPORATION (CANADA)
By:
-----------------------------------
Name:
Title:
<PAGE>
Exhibit 1.1(d) to Credit Agreement
FORM OF REVOLVING CREDIT NOTE
Cdn$30,000,000.00 Date:_________________
FOR VALUE RECEIVED, INTERCITY PRODUCTS CORPORATION (CANADA), a Canada
corporation (the "Borrower"), hereby promises to pay to or to the order of
GENERAL ELECTRIC CAPITAL CANADA INC., as agent (together with any successor
agent which may be appointed from time to time and its assigns, the "Agent")
at the offices of the Agent at 2300 Meadowvale Blvd., Mississauga, Ontario
L5N 5P9, or at such other place as the Agent may designate from time to time
in writing, in lawful money of Canada and in immediately available funds, the
principal amount of THIRTY MILLION CANADIAN DOLLARS, or such lesser principal
amount as shall then constitute the Revolving Credit Loan, together with
interest on the unpaid principal amount of this Revolving Credit Note
outstanding from time to time from the Closing Date at the rates and times
provided in the Credit Agreement (as hereafter defined).
All capitalized terms, unless otherwise defined herein, shall have the
meanings given to them in the Credit Agreement (as the same may be restated,
amended, modified or supplemented, the "Credit Agreement"), dated as of
December 19, 1996, between the Agent, on its own behalf and on behalf of the
financial institutions or other entities (each, a "Lender" and collectively,
the "Lenders") who may become parties to the Credit Agreement, the Lenders,
the Borrower and McDonald. This Revolving Credit Note is issued pursuant to
the Credit Agreement, is the Revolving Credit Note referred to therein, and
is entitled to the benefit and security of the Loan Documents provided for
therein, to which reference is hereby made for a statement of all of the
terms and conditions under which the loans evidenced hereby are made. All of
the terms, covenants and conditions of the Credit Agreement (including,
without limitation, the terms of payment and prepayment) and all other
instruments evidencing or securing the indebtedness hereunder, including,
without limitation, the Loan Documents, are hereby made a part of this
Revolving Credit Note and are deemed incorporated herein in full.
The principal amount of the indebtedness from time to time evidenced
hereby shall be payable in the amounts and on the dates specified in the
Credit Agreement, and if not sooner paid in full, on the Commitment
Termination Date. Interest on the outstanding principal amount of this
Revolving Credit Note shall be paid until such principal amount is paid in
full at such interest rates, including the Default Rate, if applicable, and
at such times as are specified in the Credit Agreement.
<PAGE>
Upon the occurrence and during the continuance of an Event of Default,
this Revolving Credit Note may be declared, and upon such declaration
immediately shall become, or upon certain circumstances set forth in the
Credit Agreement may become without declaration, due and payable in full as
provided in the Credit Agreement.
Wherever possible, each provision of this Revolving Credit Note shall
be interpreted in such a manner as to be effective and valid under applicable
law, but if any provision of this Revolving Credit Note shall be prohibited
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity without invalidating the remainder
of such provision or remaining provisions of this Revolving Credit Note.
Notwithstanding any provision to the contrary in the Credit Agreement
or in this Revolving Credit Note, this Revolving Credit Note does not
constitute a title of indebtedness under the Civil Code of Quebec.
Time is of the essence of this Revolving Credit Note. To the fullest
extent permitted by applicable law, Borrower waives: (a) presentment, demand
and protest, and notice of presentment, dishonour, intent to accelerate,
acceleration, protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all Loan Documents, notes,
commercial paper, accounts, contract rights, documents, instruments, chattel
paper, other collateral and guarantees at any time held by the Agent or any
Lender on which the Borrower or any other person may in any way be liable,
and hereby ratifies and confirms whatever the Agent or any Lender may do in
this regard; (b) all rights to notice and a hearing prior to the Agent's
taking possession or control of, or to the Agent's replevy, attachment or
levy upon, the Collateral or any bond or security which might be required by
any court prior to allowing the Agent to exercise any of its remedies; (c)
all rights to receive notices from the Agent or any Lender with respect to,
or otherwise sent to, any other person; and (d) the benefit of all valuation,
appraisal and exemption laws.
INTERCITY PRODUCTS CORPORATION (CANADA)
By:
------------------------------------
Name:
Title:
<PAGE>
Exhibit 1.1(e) to Credit Agreement
BORROWING BASE CERTIFICATE
Reference is made to the credit agreement dated as of December 19,
1996 between InterCity Products Corporation (Canada), as borrower (the
"Borrower"), McDonald, each of the lenders named therein (the "Lenders") and
General Electric Capital Canada Inc., as agent for the Lenders ("Agent")(as
amended, restated, supplemented and otherwise modified, the "Credit
Agreement"). All capitalized terms used herein and not defined herein have
the meanings given to them in the Credit Agreement.
Borrower hereby certifies that this Borrowing Base Certificate,
including Schedules A and B hereto, is a true and complete statement
regarding the status of Borrower's Eligible Accounts and Eligible Inventory
and that the amounts set forth in Schedule A are in compliance with the
provisions of the Credit Agreement. Borrower acknowledges that the Advances
under the Revolving Credit Loan made to Borrower shall be based upon the
Agent's reliance on the information contained therein and herein.
Borrower hereby certifies, represents and warrants that Borrower has
been in compliance with the Borrowing Base throughout the period subsequent
to the delivery of the Borrowing Base Certificate most recently delivered
prior to this Borrowing Base Certificate.
Date: INTERCITY PRODUCT CORPORATION (CANADA)
------------------------
By:
---------------------------------------
Name:
Title:
<PAGE>
SCHEDULE A
INTERCITY PRODUCTS CORPORATION (CANADA)
BORROWING BASE CERTIFICATE
ACCOUNTS
Total Accounts $__________ (1)
Less: Ineligible Accounts $__________ (2)
Eligible Accounts [(1) - (2)] $__________ (3)
85% of Eligible Accounts [.85 X (3)] $__________ (4)
INVENTORY
Total Inventory $___________ (5)
Ineligible Inventory $___________ (6)
Eligible Inventory $___________ (7)
50% of Eligible Inventory [.50 X 7] $___________ (8)
RESERVES
Prior Claims $___________ (9)
Landlord Reserve $___________ (10)
Other Reserves $___________ (11)
Total Reserves $___________ (12)
Borrowing Base [(4) + (8) - (12)] $___________ (13)
This Schedule A is completed on the basis of Schedule B attached to this
Borrowing Base Certificate, as amended from time to time by Agent in the
exercise of its reasonable credit judgment.
<PAGE>
SCHEDULE B
INTER-CITY PRODUCTS CORPORATION (CANADA)
AVAILABILITY SCHEDULE AS AT DECEMBER 19, 1996
<PAGE>
Exhibit 1.2 to Credit Agreement
FORM OF NOTICE OF ROLLOVER
Date: [ ]
To: GENERAL ELECTRIC CAPITAL CANADA INC.
2300 Meadowvale Blvd.
Mississauga, Ontario
L5N 5P9
Attention: Vice President, Commercial Finance
Telecopier No.: (905) 858-5456
And To: GENERAL ELECTRIC CAPITAL CORPORATION
105 West Madison Street
Suite 1600
Chicago, Illinois 60602
Telecopier: (312) 419-5977
Attention: Vice President, InterCity Account Manager
Dear Sirs:
Reference is made to the credit agreement dated as of December 19,
1996 between InterCity Products Corporation (Canada), as borrower (the
"Borrower"), McDonald, each of the lenders named therein (the "Lenders") and
General Electric Capital Canada Inc., as agent for the Lenders (as amended,
restated, supplemented and otherwise modified, the "Credit Agreement"). All
capitalized terms used in this Notice and not defined herein have the
meanings given to them in the Credit Agreement.
Notice is hereby given by Borrower under Section 1.2 of the Credit
Agreement that its Revolving Credit Advance that is outstanding as a BA Rate
Loan, with an Interest Period ending on _______________, is not to be repaid
or converted into an Prime Rate Loan on such date. The next Interest Period
applicable to this BA Rate Loan commences on _______________ and ends on
_______________.
Borrower hereby certifies and represents that the following statements
are true on the date hereof, and will be true as of the first day of the next
Interest Period applicable to the BA Rate Loan as to which this Notice is
made:
<PAGE>
(a) each Loan Party's representations and warranties contained in
the Credit Agreement or in any other Loan Document were true
and correct on and as of the Closing Date and are true and
correct on and as of the first day of the next Interest
Period applicable to the BA Rate Loan as to which this Notice
is made, with the same effect as though made on and as of such
day (unless such representation and warranty expressly relates
solely to an earlier date, in which case such representation
and warranty was true and correct on such date, and except for
changes permitted or contemplated by the Credit Agreement);
(b) no event has occurred and is continuing, or would result from
the continuation of the BA Rate Loan as to which this Notice
is made, which constitutes or would constitute a Default or an
Event of Default;
(c) after giving effect to the continuation of the BA Rate Loan in
respect of which this Notice is made, the aggregate principal
amount of the Revolving Credit Loan shall not exceed the
Borrowing Base and there shall be no requirement under Section
1.4(b) to repay any Revolving Credit Advance; and
(d) a Material Adverse Effect is not continuing.
Yours truly,
INTERCITY PRODUCTS (CORPORATION) (CANADA)
By:
-------------------------------------
Name:
Title:
<PAGE>
Exhibit 1.3 to Credit Agreement
FORM OF NOTICE OF CONVERSION
Date: [ ]
To: GENERAL ELECTRIC CAPITAL CANADA INC.
2300 Meadowvale Blvd.
Mississauga, Ontario
L5N 5P9
Attention: Vice President, Commercial Finance
Telecopier: (905) 858-5456
And To: GENERAL ELECTRIC CAPITAL CORPORATION
105 West Madison Street
Suite 1600
Chicago, Illinois 60602
Attention: Vice President, InterCity Account Manager
Telecopier: (312) 419-5977
Dear Sirs:
Reference is made to the credit agreement dated as of December 19,
1996 between InterCity Products Corporation (Canada), as borrower (the
"Borrower"), McDonald, each of the lenders named therein (the "Lenders") and
General Electric Capital Canada Inc., as agent for the Lenders (as amended,
restated, supplemented and otherwise modified, the "Credit Agreement"). All
capitalized terms used in this Notice and not defined herein have the
meanings given to them in the Credit Agreement.
Notice is hereby given by Borrower of its request for conversion of a
Prime Rate Loan under Section 1.3 of the Credit Agreement.
Borrower has outstanding $__________________ by way of Prime Rate
Loan. Please convert $__________________ [amount equal to or greater than
$1,000,000 and multiples of $500,000 in excess thereof] outstanding by way of
Prime Rate Loan into a BA Rate Loan on the ___ day of ____________, 19__.
The Interest Period of the proposed BA Rate Loan will end on
________________________________.
<PAGE>
Borrower hereby certifies and represents that the following statements
are true on the date hereof, and will be true on the date of the first day of
the Interest Period of the BA Rate Loan as to which this Notice is made:
(a) each Loan Party's representations and warranties contained in
the Credit Agreement or in any other Loan Document were true
and correct on and as of the Closing Date and are true and
correct after giving effect to the proposed BA Rate Loan and
the application of the proceeds thereof, with the same effect
as though made on and as of the date of the proposed Revolving
Credit Advance (unless such representation and warranty
expressly relates solely to an earlier date, in which case
such representation and warranty was true and correct on such
date, except for changes permitted or contemplated by the
Credit Agreement);
(b) no event has occurred and is continuing, or would result from
the making of the proposed BA Rate Loan, which constitutes or
would constitute a Default or an Event of Default;
(c) after giving effect to the BA Rate Loan requested hereunder,
the aggregate principal amount of the Revolving Credit Loan
shall not exceed the Borrowing Base and there shall be no
requirement under Section 1.4(b) of the Credit Agreement to
repay any Revolving Credit Advance; and
(d) a Material Adverse Effect is not continuing.
Yours truly,
INTERCITY PRODUCTS CORPORATION (CANADA)
By:
-----------------------------------
Name:
Title:
<PAGE>
EXHIBIT 3.4
FOR THE YEAR END - DECEMBER 31, 1997
<PAGE>
INTER-CITY PRODUCTS CORPORATION (CANADA)
FORECASTED BALANCE SHEET
AS AT DECEMBER 31, 1997
(CDN $ 000'S)
<PAGE>
INTER-CITY PRODUCTS CORPORATION (CANADA)
FORECASTED DEFICIT SHEET
AS AT DECEMBER 31, 1997
(CDN $ 000'S)
<PAGE>
INTER-CITY PRODUCTS CORPORATION (CANADA)
FORECASTED STATEMENT OF EARNINGS
AS AT DECEMBER 31, 1997
(CDN $ 000'S)
<PAGE>
EXHIBIT A
INTER-CITY PRODUCTS CORPORATION (CANADA)
COMPLIANCE CERTIFICATE
This Certificate is being made and delivered to the Agent and the
Lenders pursuant to Section 3(c) or Section 5(c) of Annex E of the Credit
Agreement dated as of December 19, 1996 (the "Credit Agreement") between
InterCity Products Corporation (Canada) (the "Borrower"), McDonald, the
Lenders and the Agent.
Capitalized terms not defined herein shall have the meanings given to
them in the Credit Agreement. Fiscal Month shall mean the Fiscal Month of
Borrower ending (the "Effective Date") and, where the Effective Date is also
the last day of a Fiscal Quarter, Fiscal Quarter shall mean the Fiscal
Quarter ending on the Effective Date and Rolling Period shall mean the
Rolling Period.
I, ______________________________, being the duly elected, qualified
and acting [Senior Vice President, Canadian Operations] [Chief Financial
Officer] of Borrower, and authorized by the board of directors of Borrower to
sign on behalf of Borrower, hereby certify on behalf of Borrower, and not in
my personal capacity, as follows:
1. I am fully familiar with all of Borrower's business and financial
affairs, including, without limitation, all of the matters hereinafter
described.
2. I have read the provisions of the Credit Agreement which are relevant
to this Compliance Certificate and have made such examination or
investigation as is reasonably necessary to enable me to express an informed
opinion on the matters contained in this Compliance Certificate.
3. The representations and warranties of each Loan Party contained in the
Credit Agreement and each other Loan Document are true and correct in all
material respects on and as of the date hereof.
4. No event has occurred and is continuing, which constitutes or would
constitute a Default or an Event of Default.
5. There has not occurred a Material Adverse Effect which has not been
cured or waived in writing by the Required Lenders.
<PAGE>
6. [Note: Complete this paragraph 6 only in respect of a month end which
coincides with the ending of a Fiscal Quarter] As of the end of the Fiscal
Quarter, the ratio of (a) the EBITDA in respect of the Rolling Period minus
Capital Expenditures made during the Rolling Period (being Cdn$____________)
to (b) Interest Expense during the Rolling Period (being Cdn$_______________)
was not less than 1.25:1 (Actual ____:1).
7. As of the Effective Date, Tangible Net Worth of Borrower was not less
than Cdn$_______________ (Actual Cdn$_____________).
8. As of the Effective Date, Borrower has not made aggregate Capital
Expenditures in excess of Cdn$1,250,000 (Actual Cdn$_____________) for the
applicable Fiscal Year.
9. I hereby acknowledge and agree that the Agent and Lenders (as defined
in the Credit Agreement) have relied upon this Certificate in making the
loans and other financial accommodations provided for in the Credit
Agreement.
DATED: *.
INTERCITY PRODUCTS CORPORATION (CANADA)
By:
-----------------------------------
Name: Title:
<PAGE>
EXHIBIT B
SUPPLIER WAIVER, ASSIGNMENT AND AGREEMENT
<PAGE>
=========================================================
FIRST AMENDMENT TO CREDIT AGREEMENT
Dated as of May 13, 1998
Between
INTERNATIONAL COMFORT PRODUCTS CORPORATION (CANADA)
(formerly known as Inter-City Products Corporation (Canada))
as Borrower and Loan Party
and
G.C. McDONALD SUPPLY LIMITED,
as Loan Party
and
LENDER OR LENDERS NAMED IN
THE CREDIT AGREEMENT
as Lenders
and
GENERAL ELECTRIC CAPITAL CANADA INC.
as Agent
=========================================================
<PAGE>
FIRST AMENDMENT TO CREDIT AGREEMENT
This First Amendment to Credit Agreement dated as of May 13, 1998 (this
"FIRST AMENDMENT") between INTERNATIONAL COMFORT PRODUCTS CORPORATION
(CANADA) (formerly known as Inter-City Products Corporation (Canada)), a
Canada Corporation ("BORROWER"), G.C. McDONALD SUPPLY LIMITED, an Ontario
corporation, ("MCDONALD"), each of the lenders listed on the signature pages
hereof or which pursuant to Section 10.2 of the Credit Agreement becomes a
"Lender" (each, a "LENDER", and, collectively, "LENDERS"), and GENERAL
ELECTRIC CAPITAL CANADA INC., a Canada corporation, as agent hereunder for
Lenders (in such capacity, together with its successors in such capacity,
"AGENT").
RECITALS
A. Borrower, McDonald, Agent and the Lender are parties to a Credit
Agreement dated as of December 19, 1996 (the "ORIGINAL CREDIT AGREEMENT".
B. The Borrower has requested that Agent and Lender amend the Original
Credit Agreement in order to permit certain Restricted Payments by Borrower
to the Borrower's holding body corporate, ICP.
C. Agent and Lender have agreed to grant the Borrower's request and amend
the Original Credit Agreement for the purpose described in Recital B of this
First Amendment upon the terms and conditions set out in this First
Amendment.
FOR VALUE RECEIVED, the parties agree as follows:
SECTION 1 -- INTERPRETATION
1.1 DEFINITIONS. In addition to the defined terms appearing above,
capitalized terms used in this First Amendment have (unless otherwise
provided elsewhere in this First Amendment) the meanings given to them in the
Original Credit Agreement (as amended, restated, supplemented or otherwise
modified from time to time, the "CREDIT AGREEMENT").
1.2 INCORPORATION INTO ORIGINAL CREDIT AGREEMENT. The Original Credit
Agreement and this First Amendment shall henceforth be read together and
shall have the effect as if all the provisions of such agreements were
contained in one instrument.
1.3 SECTION TITLES. The Section titles and Table of Contents contained
in this First Amendment are and shall be without substantive meaning or
content of any kind whatsoeverand are not a part of this First Amendment.
1.4 INTREPRETATION. Except as otherwise provided for herein, the rules
of construction set forth in Annex A of the Credit Agreement shall govern the
interpretation of this First Amending Agreement. References to Sections
contained in the text of this First Amendment, unless otherwise indicated,
are references to the Credit Agreement.
SECTION 2 -- REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATONS AND WARRANTIES. To induce Agent and Lender to enter
into this First Amendment, Borrower makes the following representations and
warranties to Agent and Lender with respect to itself and McDonald, and
McDonald makes the following representations and warranties to Agent and
Lender, which representations and warranties shall continue to be effective
as of and after the Effective Date and shall be continuously made until the
Termination Date:
(1) the execution, delivery and performance by each Loan Party of
this First Amendment are within the corporate powers of the
applicable Loan Party, have been duly authorized by all
necessary corporate and shareholder action, are not in
contravention of any provision of any Loan Partys articles,
certificate of incorporation, bylaws or other organizational
documents, will not violate any Applicable Laws, will not<PAGE>
conflict with or result in the breach or termination of,
constitute a default under or accelerate any performance
required by any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which any Loan Party is a party
or by which any Loan Party or any of its property is bound, will
not result in the creation or imposition of any Lien upon any of
the property of any Loan Party; and do not require the consent
or approval of any Governmental Body or any other Person;
(2) this First Amendment has been duly authorized, executed and
delivered by each Loan Party and this First Amendment and the
Original Credit Agreement, as amended by this First Amendment,
constitute legal, valid and binding obligations of each Loan
Party, enforceable against each Loan Party in accordance with
their terms, subject to bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of
creditors rights generally; and
(3) after giving effect to this First Amendment, no Default or Event
of Default shall have occurred and be continuing.
2.2 REPRESENTATIONS AND WARRANTIES IN CREDIT AGREEMENT. The Loan
Partiesrepresent and warrant that the representations and warranties
contained in the Credit Agreement are or were correct on the dates made or
deemed to be made.
SECTION 3 -- CONDITIONS PRECEDENT
3.1 CONDITIONS TO THE EFFECTIVENESS OF THE FIRST AMENDMENT. This First
Amendment shall become effective on the date upon which the following
conditions have been fulfilled to the satisfaction of the Agent (the
"EFFECTIVE DATE"):
(1) this First Amendment or counterparts thereof shall have been
duly executed by, and delivered to, each Loan Party, Agent and
Lender;
(2) the Agent shall have received copies of and be satisfied with
the form and substance of the the following:
i. a true and correct copy of the ICP Holdings Offering
Memorandum; and
ii. a true and correct copy of the provisions of any
agreement binding upon ICP which restricts or could
potentially restrict any payment of funds by ICP by way
of investment, loan or otherwise to the Borrower.
SECTION 4 -- AMENDMENTS
4.1 AMENDMENTS TO SECTION 6.15 - RESTRICTED PAYMENTS. On and after the
Effective Date, Section 6.15 is amended and restated as follows:
6.15 RESTRICTED PAYMENTS. No Loan Party shall make any Restricted
Payment to any Person, other than:
(a) Restricted Payments to Affiliates who are individuals and
serve as directors, officers or employees of any Loan Party
consisting of reasonable compensation or indemnification of
such Affiliates in the ordinary course and consistent with
past practice and Applicable Laws;
(b) after receipt by Agent of the audited consolidated financial
statements of Borrower referred to in ANNEX E for a Fiscal
Year of Borrower and a certificate of the Director of Finance
-2-<PAGE>
of Borrower satisfactory to Agent certifying that no Default
or Event of Default has occurred that is continuing or would
occur as a result of any proposed Restricted Payment and
certifying in reasonable detail the Borrower's compliance on
a pro-forma basis with the financial covenants in Annex G
after making the proposed Restricted Payment, Restricted
Payments by Borrower to ICP not exceeding in the aggregate
the lesser of: (i) the EBITDA of Borrower for such Fiscal
Year based on such audited financial statements, and (ii) the
aggregate of the mandatory scheduled semi-annual interest
payments of ICP Holdings pursuant to the ICP Holdings Notes
during the Fiscal Year of Borrower following such Fiscal
Year; provided that, no Default or Event of Default has
occurred that is continuing or would result from any
Restricted Payment and Borrowing Availability immediately
after making any Restricted Payment would not be less than
CDN$1,500,000.
(d) payments by Borrower to Emerson on account of the Emerson
Indebtedness to the extent permitted by the Emerson
Postponement, Subordination and Assignment Agreement; and
(e) payments by any Loan Party on account of any other
Indebtedness (not mentioned above) of that Loan Party to the
extent permitted under Section 6.3.
SECTION 5 -- AMENDMENTS TO ANNEXES TO CREDIT AGREEMENT
5.1 AMENDMENTS TO SECTION 1 OF ANNEX A - DEFINITIONS; RULES OF
CONSTRUCTION.
(1) INSERTION OF DEFINITION - "ICP HOLDINGS". On and after the Effective
Date, the definition of "ICP HOLDINGS" is inserted into Annex A to the
Original Credit Agreement immediately after the definition of "ICP (USA)
Acknowledgment and Consent" as follows:
ICP HOLDINGS means International Comfort Products Holdings, Inc., a
wholly owned subsidiary of ICP.
(2) INSERTION OF DEFINITION -- "ICP HOLDINGS NOTES". On and after the
Effective Date, the definition of "ICP HOLDINGS NOTES" is inserted into Annex
A to the Original Credit Agreement immediately after the definition of "ICP
Holdings" as follows:
ICP HOLDINGS NOTES means the senior notes and the exchange notes
issued in exchange therefore, due 2008, in the original aggregate
principal amount of USD$150,000,000 and in a maximum aggregate
principal amount of USD$225,000,000, bearing interest at the rate of
8.625% per annum, unconditionally guaranteed on a senior basis by
ICP, issued or to be issued under the ICP Holdings Offering
Memorandum.
(3) INSERTION OF DEFINITION -- "ICP HOLDINGS OFFERING MEMORANDUM". On
and after the Effective Date, the definition of "ICP HOLDINGS OFFERING
MEMORANDUM" is inserted into Annex A to the Original Credit Agreement
immediately after the definition of "ICP Holdings" Notes as follows:
ICP HOLDINGS OFFERING MEMORANDUM means the Final Offering Memorandum
of ICP Holdings dated May 8, 1998 pursuant to which the ICP Notes
have been or will be issued.
SECTION 6 -- REAFFIRMATION OF GUARANTEES AND OTHER LOAN DOCUMENTS
6.1 REAFFIRMATION. The Borrower and each of the Loan Parties acknowledge
-3-<PAGE>
and agree that all of the Loan Documents executed and delivered pursuant to
the Original Credit Agreement remain in full force and effect and hereby
reaffirm all of the terms thereof.
SECTION 7 MISCELLANEOUS
7.1 AMENDMENT OF ORIGINAL CREDIT AGREEMENT. The Original Credit
Agreement has not been amended or otherwise modified in any respect except
pursuant to this First Amendment, and the Original Credit Agreement,
asamended by this First Amendment, is in full force and effect.
7.2 REMEDIES. The rights and remedies of Agent and Lender under this
First Amendment shall be cumulative and nonexclusive of any other rights and
remedies which Agent or any Lender may have under any other agreement,
including the Loan Documents, by operation of law or otherwise. Recourse to
the Collateral shall not be required.
7.3 SEVERABILITY. Wherever possible, each provision of this First
Amendment shall be interpreted in such manner as to be effective and valid
under Applicable Laws, but if any provision of this First Amendment shall be
prohibited by or invalid under Applicable Laws, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this First Amendment.
7.4 ENUREMENT. This First Amendment shall be binding upon and shall
enure to the benefit of, each Loan Party, Agent and Lender and their
respective successors and the assigns, transferees and endorsees of Agent and
any Lender. Nothing in this First Amendment, express or implied, shall give
to any Person, other than the parties hereto and their successors and assigns
hereunder, any benefit or any legal or equitable right, remedy or claim under
this First Amendment.
7.5 FURTHER ASSURANCES. Each Loan Party shall, from time to time, upon
each request by Agent, and Agent and Lender shall, from time to time, upon
each request by any Loan Partyto Agent, at the Loan Party's cost and expense
in each case, make, do, execute, or cause to be made, done or executed, all
such further and other lawful acts, documents and assurances whatsoever which
Agent or Loan Party, respectively, reasonably determines may be necessary in
order to give effect to the provisions, purpose and intent of this First
Amendment and to complete the transactions contemplated by this First
Amendment.
7.6 GOVERNING LAW. Except as otherwise provided in any of the Loan
Documents, in all respects, including all matters of construction, validity
and performance, this First Amendment and the obligations arising hereunder
shall be governed by, and construed and enforced in accordance with, the laws
of the Province of Ontario applicable to contracts made and performed in such
Province, and any laws of Canada applicable therein. Each Loan Party hereby
consents and agrees that the courts located in the Province of Ontario shall
have non-exclusive jurisdiction to hear and determine any claims or disputes
between such Loan Party, Agent and Lender pertaining to this First Amendment
or to any matter arising out of or relating to this First Amendment; PROVIDED
that nothing in this First Amendment shall be deemed to or shall operate to
preclude Agent from bringing suit or taking other legal action in any other
jurisdiction to realize on the Collateral or any other security for the
obligations or to enforce a judgment or other court order in favour of Agent.
Each Loan Party expressly submits and consents in advance to such
jurisdiction in any action or suit commenced in any such court and each Loan
Party hereby waives any objection which such Loan Party may have based upon
lack of personal jurisdiction, improper venue or forum non conveniens and
hereby consents to the granting of such legal or equitable relief as is
deemed appropriate by such court. Each Loan Party hereby waives personal
-4- <PAGE>
service of process issued in any such action or suit and agrees that service
of process may be made by registered or certified mail addressed to such Loan
Party at the address set forth in Section 11.10 of the Credit Agreement and
that service so made shall be deemed completed upon the earlier of Borrower'
actual receipt thereof or three Business Days after deposit in the Canadian
mail, proper postage prepaid; PROVIDED, however, that if service of a process
has been made by mail and before the third Business Day after mailing there
is a discontinuance or interruption of regular postal service so that such
service of process cannot be reasonably expected to be completed within three
Business Days after mailing, such service of process shall be deemed to have
been completed upon the Loan Party' actual receipt thereof.
7.7 LOAN DOCUMENTS. For greater certainty, this First Amendment
constitutes a Loan Document.
7.8 COUNTERPARTS. This First Amendment may be executed in any number of
separate counterparts which, collectively, shall constitute one First
Amendment.
IN WITNESS WHEREOF the parties have executed this First Amendment as of
the date first written above.
INTERNATIONAL COMFORT PRODUCTS
CORPORATION (CANADA)
By:
-----------------------------
Name:
Title:
G.C. McDONALD SUPPLY LIMITED
By:
-----------------------------
Name:
Title:
GENERAL ELECTRIC CAPITAL CANADA
INC., as Agent
By:
-----------------------------
Name:
Title:
GENERAL ELECTRIC CAPITAL CANADA
INC., as Lender
By:
-----------------------------
Name:
Title:
-5-
<PAGE>
===================================================================
SECOND AMENDMENT TO CREDIT AGREEMENT
Dated as of July 21, 1998
Between
INTERNATIONAL COMFORT PRODUCTS CORPORATION (CANADA)
(FORMERLY KNOWN AS INTER-CITY PRODUCTS CORPORATION (CANADA))
as Borrower and Loan Party
and
G.C. MCDONALD SUPPLY LIMITED,
as Loan Party
and
THE LENDER OR LENDERS NAMED IN
THE CREDIT AGREEMENT
as Lenders
and
GENERAL ELECTRIC CAPITAL CANADA INC.
as Agent
====================================================================
<PAGE>
SECOND AMENDMENT TO CREDIT AGREEMENT
This Second Amendment to Credit Agreement dated as of July 21, 1998 (this
"SECOND AMENDMENT") between INTERNATIONAL COMFORT PRODUCTS CORPORATION
(CANADA) (formerly known as Inter-City Products Corporation (Canada)), a
Canada Corporation ("BORROWER"), G.C. MCDONALD SUPPLY LIMITED, an Ontario
corporation, ("MCDONALD"), each of the lenders listed on the signature pages
hereof or which pursuant to Section 10.2 of the Credit Agreement becomes a
"Lender" (each, a "LENDER", and, collectively, "LENDERS"), and GENERAL
ELECTRIC CAPITAL CANADA INC., a Canada corporation, as agent hereunder for
Lenders (in such capacity, together with its successors in such capacity,
"AGENT").
RECITALS
A. Borrower, McDonald, Agent and Lenders are parties to a Credit
Agreement dated as of December 19, 1996, as amended by First Amendment to
Credit Agreement dated as of May 13, 1998 between Borrower, McDonald, Agent
and Lenders (the "CREDIT AGREEMENT").
B. The Borrower has requested that Agent and Lenders further amend the
Credit Agreement in order to modify the financial covenants of the Borrower.
C. Agent and Lenders have agreed to grant the Borrower's request and
amend the Credit Agreement for the purpose described in Recital B of this
Second Amendment upon the terms and conditions set out in this Second
Amendment.
FOR VALUE RECEIVED, the parties agree as follows:
SECTION 1 INTERPRETATION
1.1 DEFINITIONS. In addition to the defined terms appearing above,
capitalized terms used in this Second Amendment have (unless otherwise
provided elsewhere in this Second Amendment) the meanings given to them in
the Credit Agreement.
1.2 INCORPORATION INTO CREDIT AGREEMENT. The Credit Agreement and this
Second Amendment shall henceforth be read together and shall have the effect
as if all the provisions of such agreements were contained in one instrument.
1.3 SECTION TITLES. The Section titles and Table of Contents contained in
this Second Amendment are and shall be without substantive meaning or content
of any kind whatsoever and are not a part of this Second Amendment.
<PAGE>
1.4 INTERPRETATION. Except as otherwise provided for herein, the rules of
construction set forth in Annex A of the Credit Agreement shall govern the
interpretation of this Second Amendment. References to Sections contained in
the text of this Second Amendment, unless otherwise indicated, are references
to the Credit Agreement.
SECTION 2 REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES. To induce Agent and Lenders to enter
into this Second Amendment, Borrower makes the following representations and
warranties to Agent and Lenders with respect to itself and McDonald, and
McDonald makes the following representations and warranties to Agent and
Lenders, which representations and warranties shall continue to be effective
as of and after the Effective Date and shall be continuously made until the
Termination Date:
(1) the execution, delivery and performance by each Loan Party of
this Second Amendment are within the corporate powers of the
applicable Loan Party, have been duly authorized by all necessary
corporate and shareholder action, are not in contravention of any
provision of any Loan Party's articles, certificate of
incorporation, bylaws or other organizational documents, will not
violate any Applicable Laws, will not conflict with or result in
the breach or termination of, constitute a default under or
accelerate any performance required by any indenture, mortgage,
deed of trust, lease, agreement or other instrument to which any
Loan Party is a party or by which any Loan Party or any of its
property is bound, will not result in the creation or imposition
of any Lien upon any of the property of any Loan Party; and do
not require the consent or approval of any Governmental Body or
any other Person;
(2) this Second Amendment has been duly authorized, executed and
delivered by each Loan Party and this Second Amendment and the
Credit Agreement, as amended by this Second Amendment, constitute
legal, valid and binding obligations of each Loan Party,
enforceable against each Loan Party in accordance with their
terms, subject to bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of
creditors' rights generally; and
(3) after giving effect to this Second Amendment, no Default or Event
of Default shall have occurred and be continuing.
2.2 REPRESENTATIONS AND WARRANTIES IN CREDIT AGREEMENT. The Loan Parties
represent and warrant that the representations and warranties contained in
the Credit Agreement are or were correct on the dates made or deemed to be
made.
-2-<PAGE>
SECTION 3 CONDITIONS PRECEDENT
3.1 CONDITIONS TO THE EFFECTIVENESS OF THE SECOND AMENDMENT. This Second
Amendment shall become effective on the date upon which the following
condition has been fulfilled to the satisfaction of the Agent (the "EFFECTIVE
DATE"):
(1) this Second Amendment or counterparts thereof shall have been
duly executed by, and delivered to, each Loan Party, Agent and
Lenders.
SECTION 4 AMENDMENTS TO ANNEXES TO CREDIT AGREEMENT
4.1 AMENDMENTS TO SECTION 1 OF ANNEX A - DEFINITIONS; RULES OF CONSTRUCTION.
(1) INSERTION OF DEFINITION - "ADJUSTED EBITDA". On and after the
Effective Date, the definition of "ADJUSTED EBITDA" is inserted into Annex A
to the Credit Agreement in the applicable alphabetical order as follows:
ADJUSTED EBITDA shall mean, with respect to any fiscal period of
Borrower,
(a) EBITDA;
PLUS
(b) Foreign Exchange Expense to the extent deducted in determining Net
Income;
MINUS
(c) Foreign Exchange Gain to the extent added in determining Net
Income.
(2) INSERTION OF DEFINITION - "FOREIGN EXCHANGE EXPENSE". On and after
the Effective Date, the definition of "FOREIGN EXCHANGE EXPENSE" is inserted
into Annex A to the Credit Agreement in the applicable alphabetical order as
follows:
FOREIGN EXCHANGE EXPENSE shall mean with respect to any fiscal period
of Borrower, the net decrease in Net Income attributable to exchange
rate fluctuations affecting the Canadian Dollar Equivalent Amount of
ordinary course obligations payable by Borrower, or receivables
payable to Borrower, in USD.
-3-<PAGE>
(3) INSERTION OF DEFINITION - "FOREIGN EXCHANGE GAIN". On and after the
Effective Date, the definition of "FOREIGN EXCHANGE GAIN" is inserted into
Annex A to the Credit Agreement in the applicable alphabetical order as
follows:
FOREIGN EXCHANGE GAIN shall mean with respect to any fiscal period of
Borrower, the net increase in Net Income attributable to exchange rate
fluctuations affecting the Canadian Dollar Equivalent Amount of
ordinary course obligations payable by Borrower, or receivables
payable to Borrower, in USD.
4.2 AMENDMENT TO SECTION 1(A) OF ANNEX G - MINIMUM OPERATING CASH FLOW TO
INTEREST EXPENSE RATIO. On and after the Effective Date, Section 1(a) of
Annex G to the Credit Agreement is amended and restated as follows:
(a) MINIMUM OPERATING CASH FLOW TO INTEREST EXPENSE RATIO. Borrower
shall maintain (or cause to be maintained):
(1) as of the end of each Fiscal Quarter ending from and after
December 31, 1996 up to and including June 30, 1998, for each
Rolling Period, a ratio of:
(i) EBITDA in respect of such Rolling Period, MINUS Capital
Expenditures made during such Rolling Period, to
(ii) Interest Expense during such Rolling Period,
of not less than 1.25:1;
(2) as of the end of the Fiscal Quarter ending September 30, 1998
for the 9 month period then ended a ratio of:
(i) Adjusted EBITDA in respect of the 9 month period ending
September 30, 1998, MINUS Capital Expenditures made
during such 9 month period; to
(ii) Interest Expense during such 9 month period,
of not less than 0.27:1;
(3) as of the end of the Fiscal Quarter ending December 31, 1998
a ratio of:
-4-<PAGE>
(i) Adjusted EBITDA in respect of the Fiscal Year ending December
31, 1998, MINUS Capital Expenditures made during such
Fiscal Year, to
(ii) Interest Expense during such Fiscal Year,
of not less than 1.25:1;
(4) as of the end of the Fiscal Quarter ending on March 31, 1999,
for the Rolling Period, a ratio of:
(i) Adjusted EBITDA in respect of that Rolling Period, MINUS
Capital Expenditures made during that Rolling Period, to
(ii) Interest Expense during such Rolling Period,
of not less than 0.7:1; and
(5) as of the end of each Fiscal Quarter ending on and after June
30, 1999, for each Rolling Period, a ratio of:
(i) Adjusted EBITDA in respect of such Rolling Period, MINUS
Capital Expenditures made during such Rolling Period, to
(ii) Interest Expense during such Rolling Period,
of not less than 1.25:1.
SECTION 5 REAFFIRMATION OF GUARANTEES AND OTHER LOAN DOCUMENTS
5.1 REAFFIRMATION. The Borrower and each of the Loan Parties acknowledge
and agree that all of the Loan Documents executed and delivered pursuant to
the Credit Agreement remain in full force and effect and hereby reaffirm all
of the terms thereof.
-5-<PAGE>
SECTION 6 MISCELLANEOUS
6.1 AMENDMENT OF CREDIT AGREEMENT. The Credit Agreement has not been
amended or otherwise modified in any respect except pursuant to this Second
Amendment, and the Credit Agreement, as amended by this Second Amendment, is
in full force and effect.
6.2 REMEDIES. The rights and remedies of Agent and Lenders under this
Second Amendment shall be cumulative and nonexclusive of any other rights and
remedies which Agent or any Lenders may have under any other agreement,
including the Loan Documents, by operation of law or otherwise. Recourse to
the Collateral shall not be required.
6.3 SEVERABILITY. Wherever possible, each provision of this Second
Amendment shall be interpreted in such manner as to be effective and valid
under Applicable Laws, but if any provision of this Second Amendment shall be
prohibited by or invalid under Applicable Laws, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Second Amendment.
6.4 ENUREMENT. This Second Amendment shall be binding upon and shall
enure to the benefit of, each Loan Party, Agent and Lenders and their
respective successors and the assigns, transferees and endorsees of Agent and
any Lenders. Nothing in this Second Amendment, express or implied, shall
give to any Person, other than the parties hereto and their successors and
assigns hereunder, any benefit or any legal or equitable right, remedy or
claim under this Second Amendment.
6.5 FURTHER ASSURANCES. Each Loan Party shall, from time to time, upon
each request by Agent, at Borrower's cost and expense, make, do, execute, or
cause to be made, done or executed, all such further and other lawful acts,
documents and assurances whatsoever which Agent determines in its reasonable
opinion may be necessary in order to give effect to the provisions, purposes
and intent of this Second Amendment and to complete the transactions
contemplated by this Second Amendment.
6.6 GOVERNING LAW. Except as otherwise provided in any of the Loan
Documents, in all respects, including all matters of construction, validity
and performance, this Second Amendment and the obligations arising hereunder
shall be governed by, and construed and enforced in accordance with, the laws
of the Province of Ontario applicable to contracts made and performed in such
Province, and any laws of Canada applicable therein without reference to
principles of conflicts of law. Each Loan Party hereby consents and agrees
that the courts located in the Province of Ontario shall have non-exclusive
jurisdiction to hear and determine any claims or disputes between such Loan
Party, Agent and Lenders pertaining to this Second Amendment or to any matter
-6-<PAGE>
arising out of or relating to this Second Amendment; PROVIDED that nothing in
this Second Amendment shall be deemed to or shall operate to preclude Agent
from bringing suit or taking other legal action in any other jurisdiction to
collect amounts owing under this Second Amendment, realize on the Collateral
or any other security for the obligations or to enforce a judgment or other
court order in favour of Agent. Each Loan Party expressly submits and
consents in advance to such jurisdiction in any action or suit commenced in
any such court and each Loan Party hereby waives any objection which such
Loan Party may have based upon lack of personal jurisdiction, improper venue
or FORUM NON CONVENIENS and hereby consents to the granting of such legal or
equitable relief as is deemed appropriate by such court. Each Loan Party
hereby waives personal service of process issued in any such action or suit
and agrees that service of process may be made by registered or certified
mail addressed to such Loan Party at the address set forth in Section 11.10
of the Credit Agreement and that service so made shall be deemed completed
upon the earlier of Borrower's actual receipt thereof or three Business Days
after deposit in the Canadian mail, proper postage prepaid; PROVIDED,
however, that if service of a process has been made by mail and before the
third Business Day after mailing there is a discontinuance or interruption of
regular postal service so that such service of process cannot be reasonably
expected to be completed within three Business Days after mailing, such
service of process shall be deemed to have been completed upon the Loan
Party's actual receipt thereof.
6.7 LOAN DOCUMENT. For greater certainty, this Second Amendment
constitutes a Loan Document.
6.8 COUNTERPARTS. This Second Amendment may be executed in any number of
separate counterparts which, collectively, shall constitute one Second
Amendment.
IN WITNESS WHEREOF the parties have executed this Second Amendment as of
the date first written above.
INTERNATIONAL COMFORT PRODUCTS
CORPORATION (CANADA)
By:
-------------------------
Name: Paul Antoniadis
Title:
-7-<PAGE>
G.C. MCDONALD SUPPLY LIMITED
By:
-------------------------
Name: Paul Antoniadis
Title:
GENERAL ELECTRIC CAPITAL CANADA
INC., as Agent
By:
-------------------------
Name: Francois Wentzel
Title: Senior Vice President
GENERAL ELECTRIC CAPITAL CANADA
INC., as Lender
By:
-------------------------
Name: Francois Wentzel
Title: Senior Vice President
-8-
<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>
-------------- -------------------------------
Six Months
Ended June 30, Year Ended December 31,
-------------- -------------------------------
1997 1998 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income (loss) before
income taxes $11.7 $14.1 $ (5.5) $ (68.4) $ 11.6 $ 22.0
Add:
Interest expense 9.6 9.5 20.2 21.7 19.4 18.2
Amortization of debt
issuance costs 0.6 0.6 1.7 1.3 1.8 1.3
Write-off of debt
issuance costs - - 1.2 2.1 0.6 -
Refinancing costs - 5.0 - - - -
Rental expense
representative
of interest(a) 0.6 0.6 2.6 2.3 2.0 1.3
----- ----- ----- ----- ----- ----
Total Earnings $ 22.5 $ 29.8 $ 20.2 $ (41.0) $ 35.4 $42.8
==== ==== ==== ===== ===== =====
FIXED CHARGES:
Interest expense 9.6 9.5 20.2 21.7 19.4 18.2
Amortization of debt
issuance costs 0.6 0.6 1.7 1.3 1.8 1.3
Write-off of debt
issuance costs - - 1.2 2.1 0.6 -
Refinancing costs - 5.0 - - - -
Rental expense
representative
of interest(a) 0.6 0.6 2.6 2.3 2.0 1.3
---- ---- ---- ----- ----- -----
Total Fixed Charges $ 10.8 $ 15.7 $ 25.7 $ 27.4 $ 23.8 $ 20.8
==== ==== ==== ===== ===== =====
Ratio of Earnings to
Fixed Charges 2.08 1.90 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>
ARTHUR
ANDERSEN
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-4 (File
No. 333-58837) of our reports, dated February 9, 1998 (except as to Note 20,
which is as of July 10, 1998), on our audit of the consolidated financial
statements and schedules of International Comfort Products Corporation.
/s/ Arthur Andersen
August 27, 1998
Mississauga, Canada
<PAGE>
PricewaterhouseCoopers
- -----------------------------------------------------------------------
[ PricewaterhouseCoopers
[ 145 King Street West
[ Toronto, Ontario
[ Canada M5H 1V8
[ Tel: + 1(416) 869-1130
[ Facsimile: +1(416) 869-0926
[ Direct fax (416) 941-8446
CONSENT OF CHARTERED ACCOUNTANTS
We agree to the inclusion and the incorporation by reference in this
registration statement on Form S-4 (File No. 333-58837) of our report,
dated February 11, 1997, on our audit of the financial statements of
International Comfort Products Corporation (formerly Inter-City Products
Corporation). We also consent to the references to our firm under the
caption "Experts".
/s/ PricewaterhouseCoopers
Chartered Accountants
Toronto, Canada
August 26, 1998
