<PAGE>
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 10-Q
(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------- --------
Commission file number 1-7955
-------------
INTERNATIONAL COMFORT PRODUCTS CORPORATION
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Canada 98-0045209
-----------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 Corporate Centre Drive, Suite 200, Franklin, Tennessee 37067
---------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(615) 771-0200
--------------------------------------------------
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
---- ----
As of May 11, 1999, there were 40,747,471 Ordinary Shares of International
Comfort Products Corporation outstanding.
=============================================================================
Page 1 of 64 pages
Exhibit index at page 19
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
INDEX TO FINANCIAL STATEMENTS INCLUDED IN THIS
QUARTERLY REPORT ON FORM 10-Q
INTERNATIONAL COMFORT PRODUCTS CORPORATION
AND SUBSIDIARIES
(Unaudited)
Page
----
Consolidated Statements of Income:
(Three months ended 3/31/99 and 3/31/98) 3
Consolidated Balance Sheets (3/31/99, 3/31/98 and 12/31/98) 4 - 5
Consolidated Statements of Cash Flows
(Three months ended 3/31/99 and 3/31/98) 6
Notes to Consolidated Financial Statements 7 - 10
-2-
<PAGE>
INTERNATIONAL COMFORT PRODUCTS CORPORATION
Consolidated Statements of Income
For the Three Months Ended March 31, 1999 and 1998 - UNAUDITED
(In Millions of U.S. Dollars) - Canadian GAAP
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
- ----------------------------------------------------------------------------
<S> <C> <C>
Net Sales $ 158.1 $ 132.8
Cost of Sales 126.2 104.3
- ----------------------------------------------------------------------------
Gross Profit 31.9 28.5
Selling, General and Administrative Expenses 24.5 20.2
Restructuring Costs 2.5 -
- ----------------------------------------------------------------------------
Operating Profit 4.9 8.3
- ----------------------------------------------------------------------------
Financial Expenses
Interest expense 4.5 4.5
Loss on foreign exchange .2 -
Amortization of debt issuance costs .2 .3
- ----------------------------------------------------------------------------
4.9 4.8
- ----------------------------------------------------------------------------
Net Income $ - $ 3.5
============================================================================
Average number of shares (in millions) 40.7 39.9
============================================================================
Earnings Per Share
Basic $ - $ 0.09
Fully diluted $ - $ 0.08
============================================================================
</TABLE>
See accompanying notes
-3-
<PAGE>
INTERNATIONAL COMFORT PRODUCTS CORPORATION
Consolidated Balance Sheets
(In Millions of U.S. Dollars) - Canadian GAAP - UNAUDITED
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31 December 31
------------------ ------------
1999 1998 1998
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 10.6 $ 10.1 $ 10.5
Accounts receivable 140.4 102.3 127.9
Inventories 131.8 125.4 120.9
Prepaid expenses and other 6.3 3.9 5.7
Deferred income taxes 14.1 1.7 12.8
- -----------------------------------------------------------------------------
303.2 243.4 277.8
- -----------------------------------------------------------------------------
Fixed Assets
Property, plant and equipment 250.7 222.6 241.4
Accumulated depreciation 144.8 124.5 139.8
- -----------------------------------------------------------------------------
105.9 98.1 101.6
- -----------------------------------------------------------------------------
Intangible Assets, net 53.5 26.7 35.8
Other Assets, net 13.0 10.6 12.6
- -----------------------------------------------------------------------------
$ 475.6 $ 378.8 $ 427.8
=============================================================================
</TABLE>
See accompanying notes
-4-
<PAGE>
INTERNATIONAL COMFORT PRODUCTS CORPORATION
Consolidated Balance Sheets
(In Millions of U.S. Dollars) - Canadian GAAP - UNAUDITED
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31 December 31
------------------ ------------
1999 1998 1998
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
LIABILITIES
Current Liabilities
Short-term borrowings $ 70.0 $ 37.4 $ 22.0
Accounts payable 54.8 51.0 58.4
Accrued liabilities 34.1 28.2 28.1
Product warranty 9.8 9.5 9.7
Current portion of long-term debt .7 .2 .7
- -----------------------------------------------------------------------------
169.4 126.3 118.9
Long-Term Debt 176.4 165.6 176.4
Product Warranty 12.7 14.6 13.2
Environmental Liabilities 11.7 12.3 11.9
Other Long-Term Liabilities 11.5 4.6 11.1
- -----------------------------------------------------------------------------
381.7 323.4 331.5
- -----------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Ordinary Shares 180.4 171.5 182.3
Deficit (81.2) (113.0) (81.2)
Foreign Currency
Translation Adjustment (5.3) (3.1) (4.8)
- -----------------------------------------------------------------------------
93.9 55.4 96.3
- -----------------------------------------------------------------------------
$ 475.6 $ 378.8 $ 427.8
=============================================================================
</TABLE>
See accompanying notes
-5-
<PAGE>
INTERNATIONAL COMFORT PRODUCTS CORPORATION
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1999 and 1998 - UNAUDITED
(In Millions of U.S. Dollars) - Canadian GAAP
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Cash Provided By (Used In) 1999 1998
- ----------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net income $ - $ 3.5
Adjustments to reconcile net income to net cash
used in operating activities
Depreciation and amortization 4.8 4.4
Deferred income taxes (1.3) -
Changes in assets and liabilities, net of acquisitions
(Increase) decrease in accounts receivable (9.5) 6.0
(Increase) in inventories (4.1) (25.5)
Increase (decrease) in accounts payable, accrued
liabilities and product warranty (3.0) 1.0
Other (1.8) .4
- ----------------------------------------------------------------------------------
Net cash used in operating activities (14.9) (10.2)
- ----------------------------------------------------------------------------------
INVESTING
Property, plant and equipment (5.5) (3.2)
Acquisition of Dettson and Granby Steel Tanks (25.6) -
Acquisition of United Electric Company - (25.6)
- ----------------------------------------------------------------------------------
Net cash used in investing activities (31.1) (28.8)
- ----------------------------------------------------------------------------------
FINANCING
Ordinary shares issued .4 .3
Ordinary shares repurchased (2.3) -
Proceeds on short-term borrowings 48.0 17.8
- ----------------------------------------------------------------------------------
Net cash provided by financing activities 46.1 18.1
- ----------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents .1 (20.9)
Cash and Cash Equivalents - Beginning of the period 10.5 31.0
- ----------------------------------------------------------------------------------
Cash and Cash Equivalents - End of the Period $ 10.6 $ 10.1
==================================================================================
</TABLE>
See accompanying notes
-6-
<PAGE>
INTERNATIONAL COMFORT PRODUCTS CORPORATION
Notes to Consolidated Financial Statements
For the Three Months Ended March 31, 1999 and 1998 - UNAUDITED
(In Millions of U.S. Dollars) - Canadian GAAP
- ----------------------------------------------------------------------------
1. Reference should be made to the consolidated financial statements for
the year ended December 31, 1998 included in Form 10-K filed on March
31, 1999, 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 March 31, 1999 and 1998, the results of operations and
cash flows for the three months then ended. The interim results are
not necessarily indicative of the results to be expected for the full
year.
3. Details of inventories are as follows:
<TABLE>
<CAPTION>
March 31 December 31
---------------- ------------
1999 1998 1998
---------------------------------------------------------------------
<S> <C> <C> <C>
Finished goods $ 79.1 $ 87.2 $ 69.3
Raw materials and work in process 22.6 15.9 20.2
Service parts 30.1 22.3 31.4
---------------------------------------------------------------------
$ 131.8 $ 125.4 $ 120.9
=====================================================================
</TABLE>
4. For the three months ended March 31, 1999, the Company recorded
restructuring costs of $2.5 million (or $1.5 million, net of income
taxes) consisting of: (i) plant closing costs and related asset
writedowns totaling $1.2 million associated with the Lincoln Barriere
manufacturing facility in Laval, Quebec due to the recently acquired
Dettson Inc. plant facility in Sherbrooke, Quebec; and (ii) severance
costs of $1.3 million for terminated U.S. and Canadian employees.
-7-
<PAGE>
INTERNATIONAL COMFORT PRODUCTS CORPORATION
Notes to Consolidated Financial Statements
For the Three Months Ended March 31, 1999 and 1998 - UNAUDITED
(In Millions of U.S. Dollars) - Canadian GAAP
- ----------------------------------------------------------------------------
5. 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 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:
(a) Net income under U.S. GAAP
- ------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------------------
1999 1998
<S> <C> <C>
Net income (as reported) $ - $ 3.5
Accounting for income taxes (.1) (.2)
Post-retirement benefits (.3) (.7)
--------------------
Net income (loss) under U.S. GAAP (.4) 2.6
Other comprehensive income
Foreign currency translation adjustment (.5) .2
--------------------
Comprehensive income (loss) under U.S. GAAP $ (.9) $ 2.8
====================
Weighted average number of ordinary shares
outstanding during the period under
U.S. GAAP (millions)
Basic 40.7 39.9
Diluted 40.7 41.8
Net income (loss) per share under
U.S. GAAP (in dollars)
Basic $ (0.01) $ 0.07
Diluted $ (0.01) $ 0.06
</TABLE>
-8-
<PAGE>
INTERNATIONAL COMFORT PRODUCTS CORPORATION
Notes to Consolidated Financial Statements
For the Three Months Ended March 31, 1999 and 1998 - UNAUDITED
(In Millions of U.S. Dollars) - Canadian GAAP
- ----------------------------------------------------------------------------
5. Significant Differences Between Canadian and U.S. Accounting
Practices (Cont'd)
(b) Consolidated Balance Sheets
- -------------------------------
<TABLE>
<CAPTION>
March 31 December 31
----------------- -------------
1999 1998 1998
--------------------------------------
<S> <C> <C> <C>
Total assets (as reported) $ 475.6 $ 378.8 $ 427.8
Items increasing reported total assets
Deferred income taxes 4.7 3.8 4.8
Pension benefits 3.6 4.7 3.6
-------------------------------------
Total assets - U.S. GAAP $ 483.9 $ 387.3 $ 436.2
=====================================
Shareholders' equity (as reported) $ 93.9 $ 55.4 $ 96.3
Items increasing (decreasing)
reported shareholders' equity
Deferred income taxes 2.0 3.8 2.1
Post-retirement and pension benefits (12.1) (5.2) (11.8)
-------------------------------------
Shareholders' equity - U.S. GAAP $ 83.8 $ 54.0 $ 86.6
=====================================
</TABLE>
6. 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 was declared
effective under the Securities Act of 1933 in 1998. As a result of
that registration statement being declared effective, ICP Holdings
ordinarily would be subject to the reporting requirements under
Section 13 or 15(d) of the Securities Act of 1934 (the "Exchange
Act"). Since 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 the securities, the
Company and ICP Holdings received an exemption from the reporting
requirements of the Exchange Act. Summarized financial information
relating to ICP Holdings is presented herein as an addition to the
notes to consolidated financial statements of the Company as follows:
-9-
<PAGE>
INTERNATIONAL COMFORT PRODUCTS CORPORATION
Notes to Consolidated Financial Statements
For the Three Months Ended March 31, 1999 and 1998 - UNAUDITED
(In Millions of U.S. Dollars) - Canadian GAAP
- ----------------------------------------------------------------------------
6. Summarized Financial Information (Cont'd)
Condensed Statement of Income Data
- ----------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1999 1998
<S> <C> <C>
Net Sales $ 146.9 $ 123.5
Gross Profit 28.4 25.9
Net Income 1.5 4.6
</TABLE>
Condensed Balance Sheet Data
- ----------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1999 1998
<S> <C> <C>
Current Assets $ 275.7 $ 213.0
Total Assets 446.2 342.8
Current Liabilities 159.9 118.4
Total Liabilities 384.1 311.4
Shareholder's Equity 62.1 31.4
</TABLE>
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- ----------------------------------------------------------------------------
FINANCIAL RESULTS
For the first quarter ended March 31, 1999, income before restructuring costs,
net of an income tax provision of $1.0 million, was $1.5 million or four cents
per share, compared with $3.5 million or nine cents per share for the
corresponding period in 1998. During 1998, no income tax expense was
recognized due to the utilization of net operating loss carryforwards. After
restructuring costs, net income for the quarter ended March 31, 1999 was nil
or zero cents per share.
Effective March 1, 1999, the Company acquired the assets and assumed certain
liabilities of Dettson Inc. ("Dettson") of Sherbrooke, Quebec and Granby Steel
Tank Inc. ("Granby") of Granby, Quebec for proceeds of approximately Cdn. $39
million, or U.S. $25.6 million. Dettson is engaged in the manufacture of warm
air oil furnaces, oil water heaters and gas and oil boilers for residential and
light commercial applications under the Dettson and Clare brand names. Granby
manufactures steel tanks for oil storage under the Granby Steel Tank brand
name. Combined annual sales of Dettson and Granby were approximately $35.0
million in 1998. The results of operations of Dettson and Granby are included
in the consolidated statement of income of the Company since the date of
acquisition.
The following table sets forth, for the first quarters presented, certain
information relating to the operations of the Company, expressed as a
percentage of net sales.
<TABLE>
<CAPTION>
1999 1998
-------------------------------------------------------------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 79.8 78.5
Gross profit 20.2 21.5
Selling, general and administrative expenses 15.5 15.2
Restructuring costs 1.6 -
Operating profit 3.1 6.3
Financial expenses 3.1 3.7
Net income - 2.6
-------------------------------------------------------------
</TABLE>
NET SALES
In the first quarter of 1999, net sales were $158.1 million compared to $132.8
million for the corresponding quarter of 1998, an increase of $25.3 million or
19.1%. The increase in net sales was primarily attributable to the Company's
North American residential products group and FAST parts group and the full
quarter's impact of 1998 acquisitions and the recently completed Dettson and
Granby acquisition. However, net sales were also negatively impacted by the
mild winter in North America and unfavorable sales mix towards the price-
sensitive new construction market versus the replacement market segment.
-11-
<PAGE>
GROSS PROFIT
For the three months ended March 31, 1999, gross profit was $31.9 million or
20.2% of net sales, compared with $28.5 million or 21.5% in the same period of
1998. The reduction in gross profit percentage was primarily due to an
unfavorable sales mix towards the price-sensitive new construction market
versus the replacement market segment in the United States and lower factory
absorption and higher spending in the Lewisburg, Tennessee manufacturing
facility as a result of the start-up of the enterprise resource planning (ERP)
system in January 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative ("SG&A") expenses amounted to $24.5 million
in 1999 or 15.5% of net sales, compared with $20.2 million or 15.2% for the
first quarter of 1998. The increase in SG&A expenses reflects the full
quarter's impact of 1998 acquisitions and the Dettson and Granby businesses.
RESTRUCTURING COSTS
Restructuring costs of $2.5 million (or $1.5 million, net of income taxes) for
the first quarter of 1999, consist of: (i) plant closing costs and related
asset writedowns totaling $1.2 million associated with the Lincoln Barriere
manufacturing facility in Laval, Quebec due to the recently acquired Dettson
facility in Sherbrooke, Quebec; and (ii) severance costs of $1.3 million for
terminated U.S. and Canadian employees.
OPERATING PROFIT
Before restructuring costs, operating profit was $7.4 million or 4.7% of net
sales for the three months ended March 31, 1999, compared with $8.3 million or
6.3% in the corresponding period in 1998. After restructuring costs, operating
profit was $4.9 million or 3.1% of net sales for the first quarter in 1999.
EBITDA (earnings before interest, taxes, depreciation and amortization) was
$9.5 million for the first quarter of 1999 compared with $12.4 million in the
three month period in 1998.
NET INCOME
For the first quarter ended March 31, 1999, income before restructuring costs,
net of an income tax provision of $1.0 million, was $1.5 million or four cents
per share, compared with $3.5 million or nine cents per share, in the first
quarter in 1998. After restructuring costs, net income was nil or zero cents
per share during the three months ended March 31, 1999.
-12-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company uses cash from operations and from financing activities to fund its
working capital needs, fund its capital expenditures and acquisitions and make
payments on outstanding indebtedness.
For the three months ended March 31, 1999, free cash flow (cash from operations
adjusted for cash received from or utilized in investing activities) was
negative $46.0 million compared to negative $39.0 million for the same period
in 1998, a decrease of $7.0 million. In 1999, investing activities included
the acquisition of Dettson and Granby of $25.6 million, whereas in the
corresponding period in 1998, investing activities included the acquisition of
United Electric Company. Excluding these acquisitions, free cash flow is $7.0
million lower in 1999 compared to 1998. As of March 31, 1999, working capital
was $133.8 million compared to $117.1 million a year earlier.
The Company has various credit facilities available to assist it in meeting its
liquidity requirements. These facilities consist of revolving lines of credit
and an accounts receivable securitization. At March 31, 1999, total
availability under the lines of credit and securitization totaled approximately
$116.0 million, of which $70.0 million was outstanding. In addition, the
Company has issued $150.0 million 8.625% Senior Notes due 2008 and a $25.0
million term bank loan is outstanding, which are both used in the long-term
financing of the Company. At March 31, 1999, the outstanding balance under
Long-Term Debt (including the current portion) is $177.1 million.
INTER-COMPANY DIVIDEND RESTRICTION
The Company has no substantial operations of its own and accordingly has no
independent means of generating revenue. As a holding company, the Company's
internal source of funds to meet its cash needs, including the payment of
expenses, are dividends and other permitted payments from direct and indirect
subsidiaries. Certain of the Company's lending arrangements impose upon
subsidiaries of International Comfort Products Holdings, Inc. ("ICP Holdings")
financial and operating covenants, including, among others, requirements that
subsidiaries of ICP Holdings maintain certain financial ratios and satisfy
certain financial tests, limit capital expenditures and restrict the ability
of such subsidiaries to incur debt or pay dividends. Pursuant to the terms of
the most restrictive covenant regarding restricted payments by such
subsidiaries, as of March 31, 1999, $120.0 million of tangible net assets of
subsidiaries of ICP Holdings were not available for payment of dividends to ICP
Holdings. The Company does not believe that these restrictions presently
impair the Company's ability to conduct its business through its subsidiaries
or to pursue its development plans.
-13-
<PAGE>
YEAR 2000 COMPLIANCE
The Company's tactical plan to ensure Year 2000 compliance is a six-step
program involving: inventory and assessment, risk analysis, prioritization and
resource estimating, implementation of solutions, developing a backup plan, and
testing. Extensive test plans were developed in 1998 and final testing for
virtually all operations, systems and processes will be completed in the second
quarter of 1999. Final testing at the two U.S. subsidiary companies acquired
in 1998 will also be completed in the second quarter of 1999. The compliance
of Dettson and Granby and the Spanish and Italian subsidiaries was confirmed
during their acquisition due diligence.
In 1996, the Company decided to replace its entire information management
systems, primarily because the systems in place were obsolete. The Company
believes that the new systems are Year 2000 compliant and integrate all aspects
of ICP's operations from ordering raw materials through production of finished
products, as well as for financial analysis and disclosure and general
management purposes. Start-up of various areas of the new system began in
November 1998. The total expected cost of the new information management
system is approximately $8.5 million, the majority of which was capitalized in
1997 and 1998. The total expected cost to the Company in 1999 for Year 2000
compliance is not anticipated to have a material adverse impact on its
financial condition or results of operations.
FORWARD-LOOKING INFORMATION
The foregoing discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's
consolidated results of operations and financial condition. The discussion
should be read in conjunction with the consolidated financial statements and
notes thereto. The forward-looking statements included in Management's
Discussion and Analysis of Financial Condition and Results of Operations
("MD&A") relating to certain matters involve risks and uncertainties, including
anticipated financial performance, business prospects, anticipated capital
expenditures and other similar matters, which reflect management's best
judgment based on factors currently known. Actual results and experience could
differ materially from the anticipated results or other expectations expressed
in the Company's forward-looking statements as a result of a number of factors,
including but not limited to those discussed in MD&A. Factors that might
affect such forward-looking statements include products, competitive factors
in the industry, regulatory approvals and uncertainty of consummation of future
acquisitions. Forward-looking information provided by the Company pursuant to
the safe harbor established under the Private Securities Litigation Reform Act
of 1995 should be evaluated in the context of these factors. In addition, the
Company disclaims any intent or obligation to update these forward-looking
statements.
-14-
<PAGE>
PART II- OTHER INFORMATION.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) In accordance with the provisions of Item 601 of Regulation
S-K, the following have been furnished as Exhibits to this Quarterly
Report on Form 10-Q:
Exhibit No. Description
----------- ------------
3(i), 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(ii), 4.2 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.
4.3 Indenture dated as of May 13, 1998, by and among International
Comfort Products Holdings, Inc. ("ICP Holdings"),
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 Registrant's Registration Statement on Form
S-4 (File No. 333-58837) filed with the Commission on July 10,
1998, and incorporated herein by this reference.
4.4, 10.1 Master Trust Pooling and Service Agreement, dated as of July
25, 1996 among Inter-City Products Receivables Company, L.P.
("ICP-Receivables"), International Comfort Products
Corporation (USA) ("ICP (USA)") and LaSalle National Bank, as
Trustee filed as Exhibit 10.1 to Amendment No. 1 to the
Registrant's Registration Statement on Form S-4 (File No. 333-
58837 and 333-58837-01) filed with the Commission on August
28, 1998, and incorporated herein by this reference.
4.5, 10.2 Series 1996-1 Supplement to Master Trust Pooling and Service
Agreement, dated as of July 25, 1996 among ICP-Receivables,
ICP (USA), and LaSalle National Bank, as Trustee (and
correlative form of Class A (Series 1996-1) Certificate and
form of Class B (Series 1996-1) Certificate, and form of
Guaranty from ICP (USA) filed as Exhibit 10.2 to Amendment No.
1 to the Registrant's Registration Statement on Form S-4 (File
No. 333-58837 and 333-58837-01) filed with the Commission on
August 28, 1998, and incorporated herein by this reference.
-15-
<PAGE>
4.6, 10.3 Receivables Purchase Agreement dated as of July 25, 1996 among
ICP (USA), Inter-City Products Partner Corporation ("ICP-
Partner") and ICP-Receivables filed as Exhibit 10.3 to
Amendment No. 1 to the Registrant's Registration Statement on
Form S-4 (File No. 333-58837 and 333-58837-01) filed with the
Commission on August 28, 1998, and incorporated herein by this
reference.
4.7, 10.4 Certificate Purchase Agreement (Series 1996-1, Class A) dated
as of July 25, 1996 among ICP-Receivables, ICP (USA), the
Purchasers named therein and The Chicago Corporation, as Agent
filed as Exhibit 10.4 to Amendment No. 1 to the Registrant's
Registration Statement on Form S-4 (File No. 333-58837 and
333-58837-01) filed with the Commission on August 28, 1998,
and incorporated herein by this reference.
4.8, 10.5 Certificate Purchase Agreement (Series 1996-1, Class B) dated
as of July 25, 1996 among ICP-Receivables, ICP-(USA) and Argos
Funding Corp. filed as Exhibit 10.5 to Amendment No. 1 to the
Registrant's Registration Statement on Form S-4 (File No. 333-
58837 and 333-58837-01) filed with the Commission on August
28, 1998, and incorporated herein by this reference.
4.9, 10.6 First Amendment to Certificate Purchase Agreement (Series
1996-1, Class A) dated as of December 1, 1996 among ICP-
Receivables, ICP (USA), the Purchasers named therein and The
Chicago Corporation, as Agent filed as Exhibit 4.9 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 filed with the Commission on November 14,
1997, and incorporated herein by this reference.
4.10, 10.7 First Amendment to Receivables Purchase Agreement and Second
Amendment to Certificate Purchase Agreement (Series 1996-1,
Class A) dated as of January 27, 1997 among ICP (USA), ICP-
Partner, General Heating and Cooling Company, Coastline
Distribution, Inc., ICP-Receivables, Anagram Funding Corp. and
ABN AMRO Chicago Corporation filed as Exhibit 10.7 to
Amendment No. 1 to the Registrant's Registration Statement on
Form S-4 (File No. 333-58837 and 333-58837-01) filed with the
Commission on August 28, 1998, and incorporated herein by this
reference.
4.11, 10.8 Second Amendment to Receivables Purchase Agreement as of
September 30, 1997 among ICP (USA), ICP-Partner, General
Heating and Cooling Company, ICP-Receivables, Anagram Funding
Corp. and ABN AMRO Chicago Corporation filed as Exhibit 10.8
to Amendment No. 1 to the Registrant's Registration Statement
on Form S-4 (File No. 333-58837 and 333-58837-01) filed with
the Commission on August 28, 1998, and incorporated herein by
this reference.
-16-
<PAGE>
10.9 Third Amendment to Credit Agreement made and entered into as
of January 31, 1999 between International Comfort Products
Corporation (Canada) (formerly known as Inter-City Products
Corporation) ("ICP Canada"), G.C. McDonald Supply Limited, the
Lenders named therein and General Electric Capital Canada
Inc., as agent.
10.10 Fourth Amendment to Credit Agreement made and entered into as
of March 24, 1999 between ICP Canada, the Lenders named
therein and General Electric Capital Canada Inc., as agent.
10.11 Change in Control Agreement with W. Michael Clevy
10.12 Change in Control Agreement with David P. Cain
10.13 Change in Control Agreement with Stephen L. Clanton *
10.14 Change in Control Agreement with Douglas K. Gibbs
10.15 Change in Control Agreement with Herman V. Kling *
10.16 Change in Control Agreement with Francis C. Harrell *
10.17 Change in Control Agreement with Robert C. Henningsen *
10.18 Change in Control Agreement with Augusto H. Millan *
10.19 Change in Control Agreement with David B. Schumacher #
10.20 Change in Control Agreement with Karla G. Smith #
10.21 Change in Control Agreement with James R. Wiese *
27 Financial Data Schedule.
_______________
* Document not filed because substantially identical to Exhibit 10.12
# Document not filed because substantially identical to Exhibit 10.14
(b) During the quarter ended March 31, 1999, there were no
Current Reports on Form 8-K filed by the Company.
-17-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized both on behalf of the registrant
and in his capacity as principal financial officer of the registrant.
Date: May 14, 1999 INTERNATIONAL COMFORT PRODUCTS CORPORATION
By:/s/ S. Clanton
---------------------------
Stephen L. Clanton
Senior Vice President
and Chief Financial Officer
(Principal Financial and
Chief Accounting Officer)
-18-
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit No. Description Page Number
- ---------- ---------------------------------- -----------
3(i), 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(ii), 4.2 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.
4.3 Indenture dated as of May 13, 1998, by and among
International Comfort Products Holdings, Inc. ("ICP
Holdings"), 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 Registrant's Registration
Statement on Form S-4 (File No. 333-58837) filed
with the Commission on July 10, 1998, and
incorporated herein by this reference.
4.4, 10.1 Master Trust Pooling and Service Agreement, dated
as of July 25, 1996 among Inter-City Products
Receivables Company, L.P. ("ICP-Receivables"),
International Comfort Products Corporation (USA)
("ICP (USA)") and LaSalle National Bank, as Trustee
filed as Exhibit 10.1 to Amendment No. 1 to the
Registrant's Registration Statement on Form S-4
(File No. 333-58837 and 333-58837-01) filed with
the Commission on August 28, 1998, and incorporated
herein by this reference.
4.5, 10.2 Series 1996-1 Supplement to Master Trust Pooling
and Service Agreement, dated as of July 25, 1996
among ICP-Receivables, ICP (USA), and LaSalle
National Bank, as Trustee (and correlative form of
Class A (Series 1996-1) Certificate and form of
Class B (Series 1996-1) Certificate, and form of
Guaranty from ICP (USA) filed as Exhibit 10.2 to
Amendment No. 1 to the Registrant's Registration
Statement on Form S-4 (File No. 333-58837 and 333-
58837-01) filed with the Commission on August 28,
1998, and incorporated herein by this reference.
4.6, 10.3 Receivables Purchase Agreement dated as of July 25,
1996 among ICP (USA), Inter-City Products Partner
Corporation ("ICP-Partner") and ICP-Receivables
filed as Exhibit 10.3 to Amendment No. 1 to the
Registrant's Registration Statement on Form S-4
(File No. 333-58837 and 333-58837-01) filed with
the Commission on August 28, 1998, and incorporated
herein by this reference.
-19-
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit No. Description Page Number
- ---------- ---------------------------------- -----------
4.7, 10.4 Certificate Purchase Agreement (Series 1996-1, Class
A) dated as of July 25, 1996 among ICP-Receivables,
ICP (USA), the Purchasers named therein and The
Chicago Corporation, as Agent filed as Exhibit 10.4
to Amendment No. 1 to the Registrant's Registration
Statement on Form S-4 (File No. 333-58837 and 333-
58837-01) filed with the Commission on August 28,
1998, and incorporated herein by this reference.
4.8, 10.5 Certificate Purchase Agreement (Series 1996-1, Class
B) dated as of July 25, 1996 among ICP-Receivables,
ICP-(USA) and Argos Funding Corp. filed as Exhibit
10.5 to Amendment No. 1 to the Registrant's
Registration Statement on Form S-4 (File No. 333-
58837 and 333-58837-01) filed with the Commission on
August 28, 1998, and incorporated herein by this
reference.
4.9, 10.6 First Amendment to Certificate Purchase Agreement
(Series 1996-1, Class A) dated as of December 1, 1996
among ICP-Receivables, ICP (USA), the Purchasers
named therein and The Chicago Corporation, as Agent
filed as Exhibit 4.9 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September
30, 1997 filed with the Commission on November 14,
1997, and incorporated herein by this reference.
4.10, 10.7 First Amendment to Receivables Purchase Agreement and
Second Amendment to Certificate Purchase Agreement
(Series 1996-1, Class A) dated as of January 27, 1997
among ICP (USA), ICP-Partner, General Heating and
Cooling Company, Coastline Distribution, Inc., ICP-
Receivables, Anagram Funding Corp. and ABN AMRO
Chicago Corporation filed as Exhibit 10.7 to
Amendment No. 1 to the Registrant's Registration
Statement on Form S-4 (File No. 333-58837 and 333-
58837-01) filed with the Commission on August 28,
1998, and incorporated herein by this reference.
4.11, 10.8 Second Amendment to Receivables Purchase Agreement as
of September 30, 1997 among ICP (USA), ICP-Partner,
General Heating and Cooling Company, ICP-Receivables,
Anagram Funding Corp. and ABN AMRO Chicago
Corporation filed as Exhibit 10.8 to Amendment No. 1
to the Registrant's Registration Statement on Form S-
4 (File No. 333-58837 and 333-58837-01) filed with
the Commission on August 28, 1998, and incorporated
herein by this reference.
10.9 Third Amendment to Credit Agreement made and entered
into as of January 31, 1999 between International
Comfort Products Corporation (Canada) (formerly known
as Inter-City Products Corporation) ("ICP Canada"),
G.C. McDonald Supply Limited, the Lenders named
therein and General Electric Capital Canada Inc., as
agent. 22
10.10 Fourth Amendment to Credit Agreement made and entered
into as of March 24, 1999 between ICP Canada, the
Lenders named therein and General Electric Capital
Canada Inc., as agent. 33
-20-
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit No. Description Page Number
- ---------- ---------------------------------- -----------
10.11 Change in Control Agreement with W. Michael Clevy 46
10.12 Change in Control Agreement with David P. Cain 52
10.13 Change in Control Agreement with Stephen L. Clanton *
10.14 Change in Control Agreement with Douglas K. Gibbs 58
10.15 Change in Control Agreement with Herman V. Kling *
10.16 Change in Control Agreement with Francis C. Harrell *
10.17 Change in Control Agreement with Robert C. Henningsen *
10.18 Change in Control Agreement with Augusto H. Millan *
10.19 Change in Control Agreement with David B. Schumacher #
10.20 Change in Control Agreement with Karla G. Smith #
10.21 Change in Control Agreement with James R. Wiese *
27 Financial Data Schedule 64
_______________
* Document not filed because substantially identical to Exhibit 10.12
# Document not filed because substantially identical to Exhibit 10.14
-21-
<PAGE>
------------------------------------------------------------------
THIRD AMENDMENT TO CREDIT AGREEMENT
Dated as of January 31, 1999
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 McDonald
and
THE LENDER OR LENDERS NAMED IN
THE CREDIT AGREEMENT
as Lenders
and
GENERAL ELECTRIC CAPITAL CANADA INC.
as Agent
------------------------------------------------------------------
<PAGE>
THIRD AMENDMENT TO CREDIT AGREEMENT
This Third Amendment to Credit Agreement dated as of January 31, 1999 (this
"Third 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, and as further amended by Second Amendment to Credit Agreement dated
as of July 21, 1998 between Borrower, McDonald, Agent and Lenders (the "Credit
Agreement").
B. Borrower has requested that Agent and Lenders consent to Borrower
causing the dissolution of McDonald and the transfer of all of the assets and
undertakings of McDonald to Borrower pursuant to a dissolution agreement made
as of January 31, 1999 between Borrower and McDonald (the "Dissolution
Agreement").
C. ICP has agreed to provide a guarantee to Agent and Lenders dated as of
January 20, 1999 (the "ICP Guarantee") of all of the Obligations of Borrower
under the Credit Agreement.
D. In order to permit the dissolution of McDonald by Borrower and to
incorporate the ICP Guarantee into the terms of the Credit Agreement Agent and
Lenders have agreed to amend the Credit Agreement upon the terms and conditions
set out in this Third 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 Third Amendment have (unless otherwise provided
elsewhere in this Third Amendment) the meanings given to them in the Credit
Agreement, and
(1) Credit Agreement has the meaning given to it in Recital A;
(2) Dissolution Agreement has the meaning given to it in Recital B;
<PAGE>
-2-
(3) Effective Date has the meaning given to it in Section 3.1;
(4) ICP means International Comfort Products Corporation, formerly known
as Inter-City Products Corporation; and
(5) ICP Guarantee has the meaning given to it in Recital C.
1.2 Incorporation into Credit Agreement. The Credit Agreement and this
Third 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 Third Amendment are and shall be without substantive meaning or content
of any kind whatsoever and are not a part of this Third Amendment.
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 Third Amendment. References to Sections contained in
the text of this Third 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 Third Amendment, each of the Loan Parties makes the following
representations and warranties to Agent and Lenders with respect to Loan
Parties, 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 of the Loan
Parties of this Third 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 Third Amendment has been duly authorized, executed and
delivered by each Loan Party and this Third Amendment and the
Credit Agreement, as amended by this Third Amendment,
constitute legal, valid and binding obligations of each Loan
Party, enforceable against each Loan Party in accordance with
their terms,
<PAGE>
-3-
subject to bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights
generally; and
(3) after giving effect to this Third 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.
SECTION 3 - CONDITIONS PRECEDENT
3.1 Conditions to the Effectiveness of the Third Amendment. This Third
Amendment shall be effective as of January 31, 1999 (the "Effective Date") but
shall only become effective on the date upon which the following conditions
have been fulfilled to the satisfaction of the Agent:
(1) this Third Amendment or counterparts thereof shall have been
duly executed by, and delivered to, each Loan Party, Agent and
Lenders;
(2) Agent and Lenders shall have received an opinion from counsel
to Borrower and McDonald, in form and substance satisfactory
to the Agent, with respect to the due authorization,
execution, delivery, and enforceability of this Third
Amendment and the Credit Agreement as amended by this Third
Amendment and confirming that the Security Agreement executed
by Borrower as of December 19, 1996 is sufficient to charge
the assets of McDonald transferred to Borrower and that, other
than the registration of a financing change statement under
the Personal Property Security Act (Ontario), no further
registrations are necessary or advisable to preserve or
protect the interests of the Agent and Lenders in the assets
of McDonald transferred to Borrower;
(3) McDonald shall have assigned all of its assets and
undertakings to Borrower pursuant to the Dissolution Agreement
in accordance with Applicable Law and on terms in form and
substance satisfactory to Agent; and
(4) Agent and Lenders shall have received copies of the following
documents in form and substance satisfactory to Agent:
(a) Dissolution Agreement, a shareholder's resolution of
McDonald authorizing the entering into by McDonald of
the Dissolution Agreement and any other agreements
providing for the assignment of McDonald's assets and
undertaking to Borrower; and
(b) Evidence of insurance coverage required under Section
5.5 of the Credit Agreement covering all assets of
Borrower acquired from McDonald.
<PAGE>
-4-
SECTION 4 - COVENANTS
4.1 Covenants of Borrower and McDonald. Each of Borrower and McDonald
jointly and severally covenants and agrees that, unless Agent shall otherwise
consent in writing with the agreement of the Required Lenders:
(1) Borrower and McDonald will comply in all respects with
Sections 237 and 238 of the Business Corporations Act
(Ontario) with respect to the dissolution of McDonald and
shall forthwith complete the dissolution and provide the Agent
with a copy of the articles of dissolution and the certificate
of dissolution upon receipt thereof; and
(2) From and after the Effective Date McDonald shall cease all
activities and shall not enter into any agreements with any
Person for any reason, except as required to give effect to
its dissolution, and McDonald shall own no assets and shall
incur no debts or liabilities of any kind.
SECTION 5 - AMENDMENTS TO CREDIT AGREEMENT
5.1 Amendments to Section 2 - Conditions Precedent
(1) Amendment to Section 2.2(2). On and after the Effective Date, Section
2.2(2) of the Credit Agreement is amended by deleting "McDonald" in the first
line and inserting "ICP", and by deleting "McDonald Guarantee" in the first
line and inserting "ICP Guarantee".
5.2 Amendments to Section 3 - Representations and Warranties
(1) Amendment to Section 3.22. On and after the Effective Date, Section
3.22 of the Credit Agreement is amended and restated as follows:
3.22 Corporate Structure. Borrower is a wholly owned
Subsidiary of ICP and, prior to the McDonald Dissolution,
McDonald is a wholly owned Subsidiary of Borrower. Borrower
has no Subsidiaries other than, prior to the McDonald
Dissolution, McDonald. McDonald has no Subsidiaries.
(2) Amendment to Section 3.28(a). On and after the Effective Date, Section
3.28(a) of the Credit Agreement is amended by appending the following:
Subject to the Agent filing a financing change statement under
the Personal Property Security Act (Ontario), the Liens
granted to the Agent on behalf of the Agent and Lenders by
McDonald continue to be fully perfected first priority Liens
in and to the Collateral previously owned by McDonald and
transferred to Borrower upon the completion of the McDonald
Dissolution.
5.3 Amendments to Section 5 - Affirmative Covenants
<PAGE>
-5-
(1) Amendment to Section 5.12. On and after the Effective Date, Section
5.12 of the Credit Agreement is amended by inserting at the beginning of the
first line following the section title "At all times prior to the McDonald
Dissolution,".
5.4 Amendments to Section 6 - Negative Covenants
(1) Amendment to Section 6.1. On and after the Effective Date, Section 6.1
of the Credit Agreement is amended by inserting at the beginning of the first
line following the section title "Except as contemplated in the McDonald
Dissolution,".
(2) Amendment to Section 6.5(b). On and after the Effective Date, Section
6.5(b) of the Credit Agreement is amended by inserting at the beginning of the
first line "except as contemplated in the McDonald Dissolution,".
(3) Amendment to Section 6.5(c). On and after the Effective Date, Section
6.5(c) of the Credit Agreement is amended by inserting at the beginning of the
first line "except as contemplated in the McDonald Dissolution,".
(4) Amendment to Section 6.8(c). On and after the Effective Date, Section
6.8(c) of the Credit Agreement is amended and restated as follows:
(c) the McDonald Dissolution.
(5) Amendment to Section 8.1(i)(1). On and after the Effective Date,
Section 8.1(i)(1) of the Credit Agreement is amended by inserting at the
beginning of the first line "except as contemplated in the McDonald
Dissolution,".
SECTION 6 - AMENDMENTS TO ANNEXES TO CREDIT AGREEMENT
6.1 Amendments to Annex A - Definitions: Rules of Construction
(1) Amendment to Annex A, Section 1, Definition of "Change in Control",
paragraph (a). On and after the Effective Date, paragraph (a) of the
definition of "Change of Control" in Section 1 of Annex A of the Credit
Agreement is amended by inserting at the beginning of the first line "Except
as a result of the McDonald Dissolution".
(2) Amendment to Annex A, Section 1, Definition of "Change in Control",
paragraph (c). On and after the Effective Date, paragraph (c) of the
definition of "Change of Control" in Section 1 of Annex A of the Credit
Agreement is amended by inserting at the beginning of the first line "Except
as a result of the McDonald Dissolution".
(3) Amendment to Annex A, Section 1, Insertion of Definition "ICP
Guarantee". On and after the Effective Date, Section 1 of Annex A of the
Credit Agreement is amended by inserting the following definition of "ICP
Guarantee" in the applicable alphabetical order:
<PAGE>
-6-
ICP Guarantee means the guarantee dated as of January 20, 1999
given by ICP in favour of Agent on behalf of Agent and
Lenders.
(4) Amendment to Annex A, Section 1, Definition of "Loan Documents". On
and after the Effective Date, the definition "Loan Documents" in Section 1 of
Annex A of the Credit Agreement is amended and restated as follows:
Loan Documents mean this Agreement, the Revolving Credit
Notes, the Collateral Documents, the ICP Guarantee 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 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 and all agreements, instruments, documents and
certificates designated by the Agent, Lender, and Borrower as
Loan Documents.
(5) Amendment to Annex A, Section 1, Insertion of Definition "Loan Party".
On and after the Effective Date, the definition "Loan Party" in Section 1 of
Annex A of the Credit Agreement is amended and restated as follows:
Loan Party means Borrower and, prior to the completion of the
McDonald Dissolution, each of Borrower and McDonald.
(6) Amendment to Annex A, Section 1, Insertion of Definition "McDonald
Dissolution". On and after the Effective Date, Section 1 of Annex A of the
Credit Agreement is amended by inserting the following definition of "McDonald
Dissolution" in the applicable alphabetical order:
McDonald Dissolution means the following series of
transactions: (i) the transfer by McDonald of all of its
assets and undertaking to Borrower, and (ii) the dissolution
of McDonald pursuant to the provisions of the Business
Corporations Act (Ontario), in each case on terms satisfactory
to the Agent.
SECTION 7 - REAFFIRMATION OF GUARANTEES AND OTHER LOAN DOCUMENTS
7.1 Reaffirmation. The Borrower and each of the Loan Parties acknowledges
and agrees 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.
SECTION 8 - DISSOLUTION AND OTHER LOAN DOCUMENTS
<PAGE>
-7-
8.1 Acknowledgement. The Agent and Lenders agree that the McDonald
Dissolution as specifically permitted and contemplated under this Third
Amendment shall not constitute an Event of Default, provided however, that the
Loan Parties agree that nothing herein shall be deemed to be a waiver of any
covenant or agreement contained in the Credit Agreement or any other Loan
Document.
8.2 Termination of Borrower Pledge Agreement. Agent, Lenders and the
Borrower agree that, in order to give effect to the McDonald Dissolution, as
of the Effective Date the Borrower Pledge Agreement shall be terminated.
8.3 Transfer of Lock Boxes and Blocked Accounts. In accordance with the
McDonald Dissolution, the Agent and Lenders hereby consent to the transfer of
all of McDonald's Lock Boxes, Blocked Accounts and Disbursement Accounts to the
Borrower. Borrower hereby agrees such Lock Boxes, Blocked Accounts and
Disbursement Accounts shall become the Lock Boxes, Blocked Accounts and
Disbursement Accounts, respectively of the Borrower pursuant to the terms of
the Lock Box and Blocked Accounts Agreement made as of January 7, 1998 between
Agent, Borrower, McDonald and Royal Bank of Canada.
SECTION 9 - MISCELLANEOUS
9.1 Amendment of Credit Agreement. The Credit Agreement has not been
amended or otherwise modified in any respect except pursuant to this Third
Amendment, and the Credit Agreement, as amended by this Third Amendment, is in
full force and effect.
9.2 Remedies. The rights and remedies of Agent and Lenders under this
Third 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.
9.3 Severability. Wherever possible, each provision of this Third
Amendment shall be interpreted in such manner as to be effective and valid
under Applicable Laws, but if any provision of this Third 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 Third Amendment.
9.4 Enurement. This Third 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 Third 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 Third
Amendment.
<PAGE>
-8-
9.5 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 Third Amendment and to complete the transactions
contemplated by this Third Amendment.
9.6 Governing Law. Except as otherwise provided in any of the Loan
Documents, in all respects, including all matters of construction, validity and
performance, this Third 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 Third Amendment or to any matter
arising out of or relating to this Third Amendment; provided that nothing in
this Third 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 Third 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.
9.7 Loan Document. For greater certainty, this Third Amendment constitutes
a Loan Document.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE>
-9-
9.8 Counterparts. This Third Amendment may be executed in any number of
separate counterparts which, collectively, shall constitute one Third
Amendment.
IN WITNESS WHEREOF the parties have executed this Third Amendment as of the
date first written above.
INTERNATIONAL COMFORT PRODUCTS
CORPORATION (CANADA)
By: /s/
Name:
Title:
G.C. McDONALD SUPPLY LIMITED
By: /s/
Name:
Title:
GENERAL ELECTRIC CAPITAL CANADA
INC., as Agent
By: /s/
Name:
Title:
GENERAL ELECTRIC CAPITAL CANADA
INC., as Lender
By: /s/
Name:
Title:
<PAGE>
-10-
The provisions of the foregoing Third Amendment to Credit Agreement are hereby
acknowledged and consented to as of January 31, 1999.
INTERNATIONAL COMFORT PRODUCTS
CORPORATION
By: /s/
Name:
Title:
By: /s/
Name:
Title:
<PAGE>
------------------------------------------------------------------
FOURTH AMENDMENT TO CREDIT AGREEMENT
Dated as of March 24, 1999
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 McDonald
and
THE LENDER OR LENDERS NAMED IN
THE CREDIT AGREEMENT
as Lenders
and
GENERAL ELECTRIC CAPITAL CANADA INC.
as Agent
------------------------------------------------------------------
MCMILLAN BINCH
------------
BARRISTERS & SOLICITORS
<PAGE>
FOURTH AMENDMENT TO CREDIT AGREEMENT
This Fourth Amendment to Credit Agreement dated as of March 24, 1999 (this
"Fourth Amendment") between INTERNATIONAL COMFORT PRODUCTS CORPORATION (CANADA)
(formerly known as Inter-City Products Corporation (Canada)), a Canada
Corporation ("Borrower"), 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, G.C. McDonald Supply Limited ("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, as further amended by Second Amendment to Credit
Agreement dated as of July 21, 1998 between Borrower, McDonald, Agent and
Lenders, and as further amended by Third Amendment to Credit Agreement dated
as of January 31, 1999 between Borrower, McDonald, Agent and Lenders (the
"Credit Agreement").
B. Pursuant to a dissolution agreement made as of January 31, 1999 Borrower has
assumed all of the assets and undertakings of McDonald including McDonald's
rights and obligations under the Credit Agreement.
C. Borrower has requested that Agent and Lenders further amend the Credit
Agreement and waive certain provisions of the Credit Agreement to permit
Borrower to acquire the Purchased Assets and assume the Assumed Liabilities of
Dettson Inc. ("Dettson") and Granby Steel Tank Inc. ("Granby") (collectively,
the "Vendors"), pursuant to a purchase agreement made as of March 10, 1999 (the
"Purchase Agreement").
D. Agent and Lenders have agreed to grant Borrower's request upon the terms and
conditions set out in this Fourth 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 Fourth Amendment have (unless otherwise provided
elsewhere in this Fourth Amendment) the meanings given to them in the Credit
Agreement, and
<PAGE>
-2-
(1) Acquisition means the purchase of the Purchased Assets and the
assumption of the Assumed Liabilities contemplated in the Purchase
Agreement;
(2) Assumed Liabilities has the meaning given to it in the Purchase
Agreement;
(3) Credit Agreement has the meaning given to it in Recital A;
(4) Effective Date has the meaning given to it in Section 3.1;
(5) ICP means International Comfort Products Corporation; and
(6) Purchased Assets has the meaning given to it in the Purchase Agreement.
1.2 Incorporation into Credit Agreement. The Credit Agreement and this
Fourth 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 contained in this Fourth Amendment
are and shall be without substantive meaning or content of any kind whatsoever
and are not a part of this Fourth Amendment.
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 Fourth Amendment. References to Sections contained in
the text of this Fourth Amendment, unless otherwise indicated, are references
to the Credit Agreement.
SECTION 2 - REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1 Representations and Warranties. To induce Agent and Lenders to enter
into this Fourth Amendment, Borrower makes the following representations and
warranties to Agent and Lenders with respect to Borrower, 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 Borrower of this
Fourth Amendment are within the corporate powers of Borrower,
have been duly authorized by all necessary corporate and
shareholder action, are not in contravention of any provision
of Borrower'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 Borrower is a party or by which Borrower or any of
its property is bound, will not result in the creation or
imposition of any Lien upon any of the property of Borrower,
and do not require the consent or approval of any Governmental
Body or any other Person;
<PAGE>
-3-
(2) this Fourth Amendment has been duly authorized, executed and
delivered by Borrower and this Fourth Amendment and the Credit
Agreement, as amended by this Fourth Amendment, constitute
legal, valid and binding obligations of Borrower, enforceable
against Borrower in accordance with their terms, subject to
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally;
(3) after giving effect to this Fourth Amendment, no Default or
Event of Default shall have occurred and be continuing;
(4) upon the completion of the Acquisition, no Default or Event of
Default shall have occurred and be continuing; and
(5) the book value of the Purchased Assets less the book value of
the Assumed Liabilities following any adjustments contemplated
or permitted under the Purchase Agreement will not be less
than $14.8 million.
2.2 Representations and Warranties in Credit Agreement. Borrower
represents and warrants that all representations and warranties contained in
the Credit Agreement are or were correct on the dates made or deemed to be
made.
2.3 Covenants. Borrower covenants and agrees with Agent and Lenders 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:
(1) Borrower will make available to Agent at all reasonable times
all agreements, consents from third parties and other
documents evidencing the Acquisition, disclosure documents
provided to Borrower in contemplation of the Acquisition and
all material contracts, licences, agreements, instruments,
leases, and permits related to or comprising the Purchased
Assets and the Assumed Liabilities, and each such document,
agreement, schedule, consent, licence, contract, instrument,
lease or permit shall be complete in all respects and duly
executed and delivered by the relevant parties thereto;
(2) Borrower will deliver to Agent or cause to be delivered to
Agent within 7 days of the Effective Date copies of all
agreements or documents disclosed in Schedule 3.25 of the
Credit Agreement; and
(3) Borrower will deliver to Agent within 45 days of the Effective
Date a copy of the audited balance sheet setting out the
respective book values of the Purchased Assets and the Assumed
Liabilities together with 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 three month period ending on June
30, 1999 and on an annual basis until the
<PAGE>
-4-
Commitment Termination Date, each of which is included in an
operating plan approved by the Senior Vice-President, Canadian
Operations of Borrower, in a manner acceptable to Agent in
both form and substance, to reflect the capital and debt
structure of Borrower after giving effect to the Acquisition.
The projections shall be made in compliance with the full
disclosure requirements set out in Section 3.16 of the Credit
Agreement.
SECTION 3 - CONDITIONS PRECEDENT
3.1 Conditions to the Effectiveness of the Fourth Amendment. This Fourth
Amendment shall be effective as of March 24, 1999 (the "Effective Date") but
shall only become effective on the date upon which the following conditions
have been fulfilled to the satisfaction of Agent:
(1) Borrower delivers to Agent (i) a copy of this Fourth Amendment
duly executed by Borrower; and (ii) an update of the Schedules
to the Credit Agreement in accordance with the terms of the
Credit Agreement to reflect the completion of the Acquisition
and to provide Agent and Lenders with accurate information
upon completion of the Acquisition;
(2) the representations and warranties contained in Section 2
above be true and correct on the date hereof based upon the
information contained in the updated Schedules to the Credit
Agreement, as if made on and with reference to such date;
(3) Agent shall have been provided with fully executed copies of
the Purchase Agreement and all schedules, exhibits, annexes
and appendices thereto and any agreement, instrument,
disclosure statement, contract or document of any kind related
to the Acquisition which could have a Material Adverse Effect;
(4) Agent shall have received a Postponement, Subordination and
Assignment Agreement executed by ICP (USA) and Borrower in
favour of Agent and Lenders with respect to Indebtedness owing
by Borrower to ICP(USA), other than Indebtedness of Borrower
to ICP(USA) permitted under Section 6.3 (h) of the Credit
Agreement, in form and substance satisfactory to Agent;
(5) The Purchased Assets shall be acquired by Borrower free and
clear of all claims, interests, liens, hypothecary interests,
security interests, charges, mortgages, or encumbrances of any
kind other than Permitted Encumbrances and Agent shall have
received discharges and releases in form and substance
satisfactory to Agent in respect of all such interests in the
Purchased Assets;
(6) Agent shall have received evidence satisfactory to Agent of
insurance coverage required under Section 5.5 of the Credit
Agreement insuring all of the Purchased Assets; and
<PAGE>
-5-
(7) Agent shall have received supplements to each Schedule to the
Credit Agreement as required pursuant to Section 5.8 of the
Credit Agreement setting out all information required to be
disclosed or necessary in order to make Borrower's
representations and warranties in the Credit Agreement true
and complete upon the completion of the Acquisition.
SECTION 4 - AMENDMENTS TO CREDIT AGREEMENT
4.1 Amendments to Section 3 - Representations and Warranties
(1) Amendment to Section 3.22. On and after the Effective Date, Section
3.22 of the Credit Agreement is amended and restated as follows:
3.22 Corporate Structure. Borrower is a wholly owned
Subsidiary of ICP. Borrower has no active Subsidiaries other
than Thermomax Inc. Each of McDonald, M.T.R. Controls Ltd.,
M.T.R. Controls (Manitoba) Ltd., and Have Wholesale Ltd. are
wholly owned inactive Subsidiaries which carry on no
activities, are not party to any agreements with any Person
for any reason, own no assets and have no debts or liabilities
of any kind, except in each case as is necessary in order to
give effect to their respective dissolutions. Borrower has no
other Subsidiaries.
4.2 Amendments to Section 6 - Negative Covenants
(1) Amendment to Section 6.2. On and after the Effective Date, Section 6.2
of the Credit Agreement is amended and restated as follows:
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;
(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;
<PAGE>
-6-
(e) Investments in the shares of Thermomax Inc. or loans
or other financial assistance to Thermomax Inc. which
shall not exceed in the aggregate $400,000.
(2) Amendment to Section 6.3. On and after the Effective Date, Section 6.3
of the Credit Agreement is amended and restated as follows:
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 ICP(USA) Indebtedness and any accrued but unpaid
interest thereon;
(f) the Emerson Indebtedness and any accrued but unpaid
interest thereon;
(g) 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;
(h) trade credit incurred by Borrower in favour of ICP
(USA) in accordance with Section 6.4; and
(i) Indebtedness on account of deferred purchase price in
connection with the Dettson Purchase Agreement.
(3) Amendment to Section 6.4. On and after the Effective Date, Section 6.4
of the Credit Agreement is amended by deleting on the third line "(other than
another Loan Party)" and inserting in its place "(other than Investments
permitted under Section 6.2(e))".
(4) Amendment to Section 6.16(a). On and after the Effective Date, Section
6.16(a) of the Credit Agreement is amended by deleting on the third line
"$100,000" and inserting in its place "$900,000".
<PAGE>
-7-
(5) Amendment to Section 6.16(b). On and after the Effective Date, Section
6.16(b) of the Credit Agreement is amended by deleting on the third line
"$100,000" and inserting in its place "$125,000".
SECTION 5 - AMENDMENTS TO ANNEXES TO CREDIT AGREEMENT
5.1 Amendments to Annex A - Definitions: Rules of Construction
(1) Amendment to Annex A, Section 1, Definition of "Affiliate Corporation".
On and after the Effective Date, the definition of "Affiliate Corporation" in
Section 1 of Annex A of the Credit Agreement is amended and restated as
follows:
Affiliate Corporation means any of ICP, CHL, ICP (USA) or
Thermomax Inc.
(2) Amendment to Annex A, Section 1, Definition of "Assumed Liabilities".
On and after the Effective Date, Section 1 of Annex A of the Credit Agreement
is amended by inserting the following definition of "Assumed Liabilities" in
applicable alphabetical order:
Assumed Liabilities has the meaning given to it in the Dettson
Purchase Agreement.
(3) Amendment to Annex A, Section 1, Definition of "Dettson Purchase
Agreement". On and after the Effective Date, Section 1 of Annex A of the
Credit Agreement is amended by inserting the following definition of "Dettson
Purchase Agreement" in applicable alphabetical order:
Dettson Purchase Agreement means the purchase agreement
entered into as of March 10, 1999 between Dettson Inc. and
Granby Steel Tank Inc., and completed March 24, 1999.
(4) Amendment to Annex A, Section 1, Definition of "ICP(USA) Indebtedness".
On and after the Effective Date, Section 1 of Annex A of the Credit Agreement
is amended by inserting the following definition of "ICP (USA) Indebtedness"
in applicable alphabetical order:
ICP (USA) Indebtedness means all present and future
Indebtedness, other than Indebtedness permitted under Section
6.3 (h), advanced to Borrower by ICP (USA) which for greater
certainty shall be subordinated on the terms set out in the
ICP Postponement and Subordination Agreement.
(5) Amendment to Annex A, Section 1, Definition of "ICP(USA) Postponement
and Subordination Agreement". On and after the Effective Date, Section 1 of
Annex A of the Credit Agreement is amended by inserting the following
definition of "ICP(USA) Postponement and Subordination Agreement" in applicable
alphabetical order:
<PAGE>
-8-
ICP Postponement and Subordination Agreement means the
Postponement, Subordination and Assignment Agreement made as
of March 24, 1999 between ICP(USA), Borrower and Agent.
(6) Amendment to Annex A, Section 1, Definition of "Purchased Assets". On
and after the Effective Date, Section 1 of Annex A of the Credit Agreement is
amended by inserting the following definition of "Purchased Assets" in
applicable alphabetical order:
Purchased Assets has the meaning given to it in the Dettson
Purchase Agreement.
5.2 Amendments to Annex B - Cash Management System
(1) Amendment to Annex B, paragraph (a). On and after the Effective Date,
paragraph (a) of Annex B to the Credit Agreement is amended on the third and
fourth lines by deleting the following "and shall request in writing and
otherwise take such reasonable steps to ensure that all Account Debtors forward
payment directly to such Lock Boxes".
5.3 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 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, calculated without reference to the
Purchased Assets acquired and Assumed Liabilities assumed
pursuant to the Dettson Purchase Agreement;
(2) 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,
<PAGE>
-9-
of not less than 1.25:1, calculated without reference to the
Purchased Assets acquired and Assumed Liabilities assumed
pursuant to the Dettson Purchase Agreement as well as a ratio
of:
(iii) Adjusted EBITDA in respect of such Rolling Period,
minus Capital Expenditures made during such Rolling
Period, to
(iv) Interest Expense during such Rolling Period,
of not less than 1.25:1.
SECTION 6 - WAIVERS TO PERMIT ACQUISITION
6.1 Restrictions. Under the terms of the Credit Agreement, Borrower is
prohibited from:
(1) acquiring all or substantially all of the assets or shares of
any Person or acquiring any subsidiary, pursuant to Section
6.1;
(2) engaging in any business other than the business currently
engaged in, pursuant to Section 6.5;
(3) making Capital Expenditures in excess of $1,250,000 in the
aggregate in respect of any Fiscal Year, pursuant to Section
6.12 and Annex G.
6.2 Waivers. In reliance on the agreements, reaffirmation, restatement and
representations and warranties of the Credits Parties set out herein, and
subject to the satisfaction of the conditions precedent contained in Section
3 above, Agent hereby consents to the completion of the Acquisition by Borrower
and waives Sections 6.1, 6.5 and 6.12 solely as they relate to the completion
of the Acquisition by Borrower.
6.3 Limitation. Borrower agrees that, except for the specific consent and
waiver contained in Section 6.2 above, nothing herein shall be deemed to be a
waiver of any covenant or agreement contained in the Credit Agreement or any
other Loan Document.
SECTION 7 - CALCULATION OF BORROWING BASE
7.1 Audit of Purchased Assets. For greater certainty, Borrower
acknowledges and agrees that none of the Purchased Assets shall constitute
Eligible Accounts or Eligible Inventory until such time as Agent has conducted
all due diligence deemed necessary by Agent in Agent's sole discretion,
including without limitation the completion of an audit, and any Environmental
Assessment deemed necessary or prudent by Agent, the satisfactory review of
Borrower's compliance with Environmental Laws with respect to the Purchased
Assets, and such Purchased Assets qualify as Eligible Accounts or Eligible
Inventory, as applicable, in accordance with the provisions of the Credit
Agreement.
<PAGE>
-10-
SECTION 8 - REAFFIRMATION OF LOAN DOCUMENTS
8.1 Reaffirmation. Borrower acknowledges and agrees 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.
SECTION 9 - MISCELLANEOUS
9.1 Amendment of Credit Agreement. The Credit Agreement has not been
amended or otherwise modified in any respect except pursuant to this Fourth
Amendment, and the Credit Agreement, as amended by this Fourth Amendment, is
in full force and effect.
9.2 Remedies. The rights and remedies of Agent and Lenders under this
Fourth 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.
9.3 Severability. Wherever possible, each provision of this Fourth
Amendment shall be interpreted in such manner as to be effective and valid
under Applicable Laws, but if any provision of this Fourth 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 Fourth Amendment.
9.4 Enurement. This Fourth Amendment shall be binding upon and shall enure
to the benefit of, Borrower, Agent and Lenders and their respective successors
and the assigns, transferees and endorsees of Agent and any Lenders. Nothing
in this Fourth 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 Fourth Amendment.
9.5 Further Assurances. Borrower 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 Fourth Amendment and to complete the transactions contemplated by this
Fourth Amendment.
9.6 Governing Law. Except as otherwise provided in any of the Loan
Documents, in all respects, including all matters of construction, validity and
performance, this Fourth 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. Borrower hereby consents and agrees that the
courts located in the Province of
<PAGE>
-11-
Ontario shall have non-exclusive jurisdiction to hear and determine any claims
or disputes between Borrower, Agent and Lenders pertaining to this Fourth
Amendment or to any matter arising out of or relating to this Fourth Amendment;
provided that nothing in this Fourth 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 Fourth 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. Borrower expressly
submits and consents in advance to such jurisdiction in any action or suit
commenced in any such court and Borrower hereby waives any objection which
Borrower 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. Borrower 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 Borrower at the address set forth in Section 11.9 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 Fourth 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 Borrower's actual receipt thereof.
9.7 Loan Document. For greater certainty, this Fourth Amendment
constitutes a Loan Document.
9.8 Counterparts. This Fourth Amendment may be executed in any number of
separate counterparts which, collectively, shall constitute one Fourth
Amendment.
IN WITNESS WHEREOF the parties have executed this Fourth Amendment as of the
date first written above.
INTERNATIONAL COMFORT PRODUCTS
CORPORATION (CANADA)
By: /s/
Name:
Title:
<PAGE>
-12-
GENERAL ELECTRIC CAPITAL CANADA
INC., as Agent
By: /s/
Name:
Title:
GENERAL ELECTRIC CAPITAL CANADA
INC., as Lender
By: /s/
Name:
Title:
The provisions of the foregoing Fourth Amendment to Credit Agreement are hereby
acknowledged and consented to as of March 24, 1999.
INTERNATIONAL COMFORT PRODUCTS
CORPORATION
By: /s/
Name:
Title:
By: /s/
Name:
Title:
<PAGE>
[ICP LETTERHEAD]
March 15, 1999
Mr. W. Michael Clevy
9104 Heritage Drive
Brentwood, TN 37027
Dear Mr. Clevy:
The Board of Directors of the International Comfort Products
Corporation recognizes the contribution that you have made to International
Comfort Products Corporation or one of its direct or indirect subsidiaries
(collectively herein "Company") and wishes to ensure your continuing
commitment. Accordingly, in exchange for your continuing commitment to the
Company, the Company hereby agrees to the following, which sets forth certain
rights that you have in the event your employment with the Company is
terminated following a Change in Control:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
1.1 "Cause" shall mean any one of the following:
(a) personal dishonesty;
(b) willful misconduct;
(c) breach of fiduciary duty; or
(d) conviction of any felony or crime involving moral
turpitude.
1.2 "Change in Control" means that a person (other than you or a
group of which you are a member or participant) hereafter becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding voting securities.
1.3 "Change in Control Period" means a twenty-four (24) month
period beginning the day after there occurs a Change in Control.
1.4 "Change in Duties or Compensation" means any one of: (a) a
material change in your duties and responsibilities for the Company from those
duties and responsibilities for the Company in effect at the time a Change in
Control occurs, which change results in the assignment of duties and
responsibilities inferior to your duties and responsibilities at the time such
Change in Control occurs (it being understood and acknowledged by you that a
Change in Control that results in two persons of which you are one having
similar or sharing duties and responsibilities shall not be a material change
in your duties and responsibilities); (b) a reduction in your salary and
benefits (excluding discretionary bonuses), from the salary and benefits in
effect at the time a Change in Control occurs; (c) a change in the location of
your work assignment from your location at the time a Change in Control occurs
to any other city or geographical location that is located further than one
hundred (100) miles from that location; or (d) the Company terminates or amends
any Incentive Plan so that, when considered in the aggregate with any
substitute plan or other substitute compensation, the Incentive Plan in which
you are participating fails to provide you with a level of benefits equivalent
to at least 85% of the value of the level of benefits provided in the aggregate
by the terminated or amended Incentive Plan at the date of such termination or
amended Incentive Plan at the date of such termination or amendment; provided,
however, that a Change in Duties or Compensation shall not be deemed to exist
under this clause (d) if the decline in Incentive Plan compensation is related
to a decline in performance.
<PAGE>
1.5 "Incentive Plans" shall mean any incentive, bonus, deferred
compensation, pension, retirement or similar plan or arrangement currently or
hereafter made available by Company in which you are eligible to participate.
1.6 "Welfare Plans" shall mean any health and dental plan,
disability plan, survivor income plan and life insurance plan or arrangement
currently or hereafter made available by Company in which you are eligible to
participate.
2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL;
SEVERANCE. The Company's Board of Directors may terminate your employment,
with or without cause, at any time by giving you written notice of such
termination, such termination of employment to be effective on the date
specified in such notice. You also may terminate your employment with the
Company at any time. The effective date of termination (the "Effective Date")
shall be the last day of your employment with the Company, as specified in a
notice by you, or if you are terminated by the Company, the date that is
specified by the Company in its notice to you. The following sections set
forth your rights to severance in the event of the termination of your
employment in certain circumstances following a Change in Control by either the
Company or you. Section 6 also sets forth certain restrictions on your
activities in the event that your employment with the Company is terminated,
whether by the Company or you. That section shall survive any termination of
this Agreement or your employment with the Company.
2.1. Termination by the Company for Cause. If you are terminated
for Cause, the Company shall have no obligation whatsoever under the Agreement
to you, and your participation in all of the Company's benefit plans and
programs shall cease as of the Effective Date. In the event of a termination
for Cause, you shall not be entitled to receive severance benefits described
in Section 3.
2.2. Termination by the Company Without Cause. If, during a Change
in Control Period, your employment with the Company is terminated by the
Company without Cause, you shall be entitled to receive Benefits (as defined
in Section 3) for thirty-six (36) months following the Effective Date.
2.3. Termination By You For Change in Duties or Compensation During
a Change in Control Period. In addition to your rights under Section 2.2, if
during a Change in Control Period there occurs a Change in Duties or
Compensation, you may terminate your employment with the Company at any time
by giving, within thirty (30) days after the occurrence of the Change in Duties
or Compensation, not less than one hundred twenty (120) nor more than one
hundred eighty (180) days' notice of such termination to the Company. During
whatever notice period that you work any reduction in your Compensation will
be restored. At the option of the Company, following receipt of such notice,
it may: (a) change and/or cure, within fifteen (15) days, the condition that
you claim has caused the Change in Duties or Compensation, in which case, your
rights to terminate your employment with the Company pursuant to this Section
2.3 shall cease (unless there occurs thereafter another Change in Duties or
Compensation) and you shall continue in the employment of the Company
notwithstanding the notice that you have given; (b) allow you to continue your
employment through the date of that you have specified in your notice; or (c)
immediately terminate your employment pursuant to Section 2.2. In the event
you terminate your employment with the Company pursuant to this Section 2.3,
you shall be entitled to receive Benefits (as defined in Section 3) for thirty-
six (36) months following the Effective Date. Your failure to provide the
notice required by this Section 2.3 shall result in you having no right to
receive any further compensation from the Company except for any base salary
or vacation earned but not paid plus any bonus earned and accrued by the
Company through the Effective Date. It is expressly understood and agreed that
you shall have no rights arising under this Section 2.3 following a Change in
Control if the Change in Control results from you or a group of which you are
a member or participant becoming the beneficial owner, directly or indirectly,
of securities of the Company representing 50% or more of the combined voting
power of the Company's then outstanding voting securities.
3. SEVERANCE BENEFITS. In the event that your employment with
the Company is terminated as described in Section 2.2 or 2.3, you shall be
entitled to the following benefits contained in subsections 3.1, 3.2, 3.3 and
3.4 (herein "Benefits") for the respective period of time set forth in the
applicable section. The thirty-six (36) month period of time described in
either Sections 2.2 or 2.3 is hereinafter referred to as the "Severance
Period". Notwithstanding anything to the contrary in this Agreement, no
benefits under Sections 3.1 or 4 shall be paid to you until and unless any
amounts then owed by you to the Company have been paid in full and the Company
may offset against any such benefits any amounts that are owed, irrespective
of the maturity date thereof.
-2-
<PAGE>
3.1 Salary Continuance. Throughout the applicable Severance
Period, you shall continue to be paid, on an annual basis, an amount equal to
the average of your regular salary and bonus, (excluding reimbursements for
certain expenses or costs and/or gross-ups designed to reimburse you for
certain expenses or costs) that you received during the three (3) years
preceding your termination. Such amounts shall be paid on a periodic basis
using the Company's regular payroll periods. At the option of the Company,
which may be exercised by the Company in writing at any time after the
Effective Date, you shall receive a single lump sum payment equal to the
present value payment of any remaining payments that you would receive during
the remaining portion of the applicable Severance Period. The determination
of the amount of this payment shall be made by the Company's actuaries and
benefit consultants and, absent manifest error, shall be final, binding and
conclusive upon you and the Company.
3.2 Continuation of Benefits. During the applicable Severance
Period, you shall continue to receive all benefits to which you were entitled
and which you were receiving on the day preceding the Effective Date. Without
limiting the generality of the foregoing, the following provisions shall apply:
(a) For purposes of any Incentive Plans, you shall be given
service credit for all purposes for, and shall be deemed to be
an employee of Company during the Severance Period,
notwithstanding the fact that you are not an employee of
Company or any of its affiliates during the Severance Period;
provided that, if the terms of any of such Incentive Plans do
not permit such credit or deemed employee treatment, Company
will make payments and distributions to you outside of the
Incentive Plans in amounts substantially equivalent to the
payments and distributions you would have received pursuant to
the terms of the Incentive Plans and attributable to such
credit or deemed employee treatment, had such credit or deemed
employee treatment been permitted pursuant to the terms of the
Incentive Plans.
(b) During the Severance Period, you and your spouse and family
will continue to be covered by all Welfare Plans maintained by
Company in which you or your spouse or family were
participating immediately prior to the date of your
termination as if you continued to be an employee of Company;
provided that, if participation in any one or more of such
Welfare Plans is not possible under the terms thereof, Company
will provide substantially identical benefits. If, however,
you obtain employment with another employer during the
Severance Period such coverage shall be provided until the
earlier of: (i) the end of the Severance Period or (ii) the
date on which you and your spouse and family can be covered
under the plans of a new employer without being excluded from
full coverage because of any actual pre-existing condition.
Nothing contained herein is intended to in any way limit your
rights under COBRA.
3.3 Unused or Accrued Vacation. You will be paid for any unused
or accrued vacation that you had earned as of the Effective Date.
3.4 Automobile. You shall continue to have use of the automobile
provided to you by the Company. At the end of the applicable Severance Period,
you shall have the option to purchase any automobile furnished by the Company
for your use. The exercise price of this option shall be the net book value,
as set forth on the Company's books, of the automobile at such time.
4. EFFECT OF TERMINATION ON STOCK OPTIONS. In the event of any
termination of your employment, all stock options held by you that are vested
prior to the Effective Date shall be exercisable in accordance with their
terms; all stock options held by you that are not vested prior to the Effective
Date shall lapse and be void; provided, however, in the event that your
employment with the Company is terminated as described in Section 2.2 or 2.3,
then, unless your option provides that it is immediately exercisable in the
event of a Change in Control, in which case the terms of your option agreement
shall control, you shall receive, within thirty (30) days after the Effective
Date, a lump sum cash distribution equal to: (a) the number of shares of the
Company's ordinary shares that are subject to options held by you that are not
vested on the Effective Date; multiplied by (b) the difference between: (i) the
closing price of a share of the Company's ordinary shares on the American Stock
Exchange as reported by The Wall Street Journal as of the day prior to the
Effective Date (or, if the American Stock Exchange is closed on that date, on
the last preceding date on which the American Stock Exchange was open for
trading), and (ii) the applicable exercise price(s) of such non-vested shares.
-3-
<PAGE>
5. ADDITIONAL AMOUNT.
(a) The Company will pay you an amount (the "Additional Amount")
equal to the excise tax under the United States Internal Revenue Code of 1986,
as amended (the "Code"), if any, incurred by you by reason of the payments
under this Agreement and any other plan, agreement or understanding between you
and the Company or its parent, subsidiaries or affiliates (collectively,
"Separation Payments") constituting excess parachute payments under Section
280G of the Code (or any successor provision thereof). In addition, the
Company will pay you an amount equal to all excise taxes and federal, state and
local income taxes incurred by you with respect to receipt of the Additional
Amount.
(b) All determinations required to be made under this Section 5,
including whether an Additional Amount is required and the amount of any
Additional Amount, will be made by the independent auditors engaged by the
Company immediately prior to the Change in Control (the "Accounting Firm"),
which will provide detailed supporting calculations to the Company and you.
In computing taxes, the Accounting Firm will use the highest marginal federal,
state and local income tax rates applicable to you and will assume the full
deductibility of state and local income taxes for purposes of computing federal
income tax liability, unless you demonstrate that you will not in fact be
entitled to such a deduction for the year of payment.
(c) The Additional Amount, computed assuming all of the Separation
Payments constitute excess parachute payments as defined in Section 280G of the
Code (or any successor provision thereof), will be paid to you in proportion
to and at the times that the Separation Payments are received unless the
Company, prior to the Severance Period, provides you with an opinion of the
Accounting Firm that you will not incur an excise tax on part or all of the
Separation Payments. Any such opinion will be based upon the applicable
regulations under Sections 280G and 4999 of the Code (or any successor
provisions thereof) or substantial authority within the meaning of Section 6662
of the Code. If such opinion applies only to part of the Separation Payments,
the Company will pay you the Additional Amount with respect to that part of the
Separation Payments not covered by the opinion.
6. DISCLOSURE OF INFORMATION. You recognize and acknowledge
that, as a result of your employment by the Company, you have or will become
familiar with and acquire knowledge of confidential information and certain
trade secrets that are valuable, special, and unique assets of the Company.
You agree that any such confidential information and trade secrets are the
property of the Company. Therefore, you agree that, for and during your
employment with the Company and continuing following the termination of your
employment for any reason whatsoever, any such confidential information and
trade secrets shall be considered to be proprietary to the Company and kept as
the private records of the Company and will not be divulged to any firm,
individual, or institution, or used to the detriment of the Company. The
parties agree that nothing herein shall be construed as prohibiting the Company
from pursuing any remedies available to it for any breach or threatened breach
of this Section 6, including, without limitation, the recovery of damages from
you or any person or entity acting in concert with you.
7. GENERAL PROVISIONS.
7.1 Full Satisfaction. You acknowledge and agree that the
payments and benefits that may be provided to you pursuant to Sections 2.2,
2.3, 3, 4 and 5 of this Agreement are reasonable and sufficient and that you
are not entitled to any additional notice or pay in lieu of notice, termination
pay, severance pay, stock options or other payments or benefits whether under
statute, common law, Company policy, contract or otherwise as a result of any
termination of your employment with the Company following a Change in Control.
Upon compliance by the Company with the terms of this Agreement, the Company
shall be released and held harmless by you from any and all claims which you
may have for whatever reason or cause in connection with your employment with
the Company, or the termination thereof following a Change in Control.
7.2 Plans. Nothing in this Agreement shall affect your rights
during your employment to receive increases in compensation, responsibilities
or duties or to participate in and receive benefits from any pension plan,
benefit plan or profit sharing plans except such plans which specifically
address benefit(s) of the type addressed in Sections 3 and 4 of this Agreement.
7.3 Death During Severance Period. If you die during the
applicable Severance Period, any Benefits remaining to be paid to you shall be
paid to the beneficiary designated by you to receive such Benefits (or in the
absence of such a designation, to your surviving spouse or next of kin).
-4-
<PAGE>
7.4 Notices. Any notices to be given hereunder by either party to
the other may be effected by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested. Mailed
notices shall be addressed to the parties at the addresses appearing on the
first page of this Agreement (to the attention of the Secretary in the case of
notices to the Company), but each party may change such address by written
notice in accordance with this Section 7.4. Notices delivered personally shall
be deemed communicated as of actual receipt; mailed notices shall be deemed
communicated as of the second day following deposit in the United States Mail.
7.5 Entire Agreement. This Agreement supersedes any and all
previous oral or written agreements, understandings or arrangements between the
Company and you regarding a termination of your employment with the Company or
a change in your status, scope or authority and the salary, benefits or other
compensation that you receive from the Company as a result of the termination
of your employment with the Company following a Change in Control (the "Subject
Matter"), all of which are hereby wholly terminated and canceled. Any benefits
that you receive as a result of your termination following a Change in control
shall be determined solely and exclusively by this Agreement and,
notwithstanding any policy of the Company or the terms of any other agreement
or understanding, you will be entitled to no other benefits in the event of
such a termination. This Agreement contains all of the covenants and
agreements between the parties with respect to the Subject Matter. Each party
to this Agreement acknowledges that no representations, inducements, promises,
or agreements, orally or otherwise, have been made with respect to the Subject
Matter by any party, or anyone acting on behalf of any party, which are not
embodied herein. Any subsequent agreement relating to the Subject Matter or
any modification of this Agreement will be effective only if it is in writing
signed by the party against whom enforcement of such modification is sought.
Subject to the foregoing, this Agreement, however, does not affect or supersede
any policy or other agreements that you may have with the Company regarding
termination of your employment with the Company or a change in your status,
scope or authority and the salary, benefits or other compensation that you
receive from the Company as a result of the termination of your employment in
the absence of a Change in Control.
7.6 Partial Invalidity. If any provision in this Agreement is
held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remaining provisions shall nevertheless continue in full
force without being impaired or invalidated in any way.
7.7 Law Governing Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the State of Tennessee and the
courts of the State of Tennessee USA.
7.8 Waiver of Jury Trial. The Company and you hereby expressly
waive any right to a trial by jury in any action or proceeding to enforce or
defend any rights under this Agreement, and agree that any such action or
proceeding shall be tried before a court and not a jury. You irrevocably
waive, to the fullest extent permitted by law, any objection that you may have
or hereafter have to the laying of the venue of any such action or proceeding
and any claim that any such action or proceeding brought in such a court has
been brought in an inconvenient forum.
7.9 Miscellaneous. Failure or delay of either party to insist upon
compliance with any provision hereof will not operate as and is not to be
construed to be a waiver or amendment of the provision or the right of the
aggrieved party to insist upon compliance with such provision or to take
remedial steps to recover damages or other relief for noncompliance. Any
express waiver of any provision of this Agreement will not operate and is not
to be construed as a waiver of any subsequent breach, irrespective of whether
occurring under similar or dissimilar circumstances. You may not assign any
of your rights under this Agreement. The rights and obligations of the Company
under this Agreement shall inure to the benefit of and shall be binding upon
the successors and assigns of the Company. The Company agrees that it will
assign this Agreement to any successor company and ensure that its terms are
continued.
-5-
<PAGE>
If all of the foregoing contained in this Agreement is agreed to by
you, please signify your agreement by executing the enclosed duplicate of this
letter and returning the same to us upon which this letter, as so agreed upon,
shall constitute an Agreement between us.
INTERNATIONAL COMFORT PRODUCTS INTERNATIONAL COMFORT PRODUCTS
CORPORATION CORPORATION
/s/ Robert C. Henningsen /s/ David P. Cain
Robert C. Henningsen David P. Cain
Senior Vice President, Human Senior Vice President, General
Resources and Administration Counsel and Secretary
The foregoing is agreed to and accepted by:
Company Employee's Signature: /s/ W. Michael Clevy
________________________
Please Print or Type Name: W. Michael Clevy
___________________________
Please Print or Type Title: President and CEO
____________________________
-6-
<PAGE>
[ICP LETTERHEAD]
March 15, 1999
Mr. David P. Cain
4610 Churchwood Drive
Nashville, TN 37220
Dear Mr. Cain:
The Board of Directors of the International Comfort Products
Corporation recognizes the contribution that you have made to International
Comfort Products Corporation or one of its direct or indirect subsidiaries
(collectively herein "Company") and wishes to ensure your continuing
commitment. Accordingly, in exchange for your continuing commitment to the
Company, the Company hereby agrees to the following, which sets forth certain
rights that you have in the event your employment with the Company is
terminated following a Change in Control:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
1.1 "Cause" shall mean any one of the following:
(a) personal dishonesty;
(b) willful misconduct;
(c) breach of fiduciary duty; or
(d) conviction of any felony or crime involving moral
turpitude.
1.2 "Change in Control" means that: (a) a person (other than you
or a group of which you are a member or participant) hereafter becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding voting securities.
1.3 "Change in Control Period" means a twenty-four (24) month
period beginning the day after there occurs a Change in Control.
1.4 "Change in Duties or Compensation" means any one of: (a) a
material change in your duties and responsibilities for the Company from those
duties and responsibilities for the Company in effect at the time a Change in
Control occurs, which change results in the assignment of duties and
responsibilities inferior to your duties and responsibilities at the time such
Change in Control occurs (it being understood and acknowledged by you that a
Change in Control that results in two persons of which you are one having
similar or sharing duties and responsibilities shall not be a material change
in your duties and responsibilities); (b) a reduction in your salary and
benefits (excluding discretionary bonuses), from the salary and benefits in
effect at the time a Change in Control occurs; (c) a change in the location of
your work assignment from your location at the time a Change in Control occurs
to any other city or geographical location that is located further than one
hundred (100) miles from that location; or (d) the Company terminates or amends
any Incentive Plan so that, when considered in the aggregate with any
substitute plan or other substitute compensation, the Incentive Plan in which
you are participating fails to provide you with a level of benefits equivalent
to at least 85% of the value of the level of benefits provided in the aggregate
by the terminated or amended Incentive Plan at the date of such termination or
amended Incentive Plan at the date of such termination or amendment; provided,
however, that a Change in Duties or Compensation shall not be deemed to exist
under this clause (d) if the decline in Incentive Plan compensation is related
to a decline in performance.
<PAGE>
1.5 "Incentive Plans" shall mean any incentive, bonus, deferred
compensation, pension, retirement or similar plan or arrangement currently or
hereafter made available by Company in which you are eligible to participate.
1.6 "Welfare Plans" shall mean any health and dental plan,
disability plan, survivor income plan and life insurance plan or arrangement
currently or hereafter made available by Company in which you are eligible to
participate.
2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL;
SEVERANCE. The Company's Board of Directors may terminate your employment,
with or without cause, at any time by giving you written notice of such
termination, such termination of employment to be effective on the date
specified in such notice. You also may terminate your employment with the
Company at any time. The effective date of termination (the "Effective Date")
shall be the last day of your employment with the Company, as specified in a
notice by you, or if you are terminated by the Company, the date that is
specified by the Company in its notice to you. The following sections set
forth your rights to severance in the event of the termination of your
employment in certain circumstances following a Change in Control by either the
Company or you. Section 6 also sets forth certain restrictions on your
activities in the event that your employment with the Company is terminated,
whether by the Company or you. That section shall survive any termination of
this Agreement or your employment with the Company.
2.1. Termination by the Company for Cause. If you are terminated
for Cause, the Company shall have no obligation whatsoever under this Agreement
to you, and your participation in all of the Company's benefit plans and
programs shall cease as of the Effective Date. In the event of a termination
for Cause, you shall not be entitled to receive severance benefits described
in Section 3.
2.2. Termination by the Company Without Cause. If, during a Change
in Control Period, your employment with the Company is terminated by the
Company without Cause, you shall be entitled to receive Benefits (as defined
in Section 3) for twenty-four (24) months following the Effective Date.
2.3. Termination By You For Change in Duties or Compensation During
a Change in Control Period. In addition to your rights under Section 2.2, if
during a Change in Control Period there occurs a Change in Duties or
Compensation, you may terminate your employment with the Company at any time
by giving, within thirty (30) days after the occurrence of the Change in Duties
or Compensation, not less than one hundred twenty (120) nor more than one
hundred eighty (180) days' notice of such termination to the Company. During
whatever notice period that you work any reduction in your Compensation will
be restored. At the option of the Company, following receipt of such notice,
it may: (a) change and/or cure, within fifteen (15) days, the condition that
you claim has caused the Change in Duties or Compensation, in which case, your
rights to terminate your employment with the Company pursuant to this Section
2.3 shall cease (unless there occurs thereafter another Change in Duties or
Compensation) and you shall continue in the employment of the Company
notwithstanding the notice that you have given; (b) allow you to continue your
employment through the date of that you have specified in your notice; or (c)
immediately terminate your employment pursuant to Section 2.2. In the event
you terminate your employment with the Company pursuant to this Section 2.3,
you shall be entitled to receive Benefits (as defined in Section 3) for twenty-
four (24) months following the Effective Date. Your failure to provide the
notice required by this Section 2.3 shall result in you having no right to
receive any further compensation from the Company except for any base salary
or vacation earned but not paid plus any bonus earned and accrued by the
Company through the Effective Date. It is expressly understood and agreed that
you shall have no rights arising under this Section 2.3 following a Change in
Control if the Change in Control results from you or a group of which you are
a member or participant becoming the beneficial owner, directly or indirectly,
of securities of the Company representing 50% or more of the combined voting
power of the Company's then outstanding voting securities.
3. SEVERANCE BENEFITS. In the event that your employment with
the Company is terminated as described in Section 2.2 or 2.3, you shall be
entitled to the following benefits contained in subsections 3.1, 3.2, 3.3 and
3.4 (herein "Benefits") for the respective period of time set forth in the
applicable section. The twenty-four (24) month period of time described in
either Sections 2.2 or 2.3 is hereinafter referred to as the "Severance
Period". Notwithstanding anything to the contrary in this Agreement, no
benefits under Sections 3.1 or 4 shall be paid to you until and unless any
amounts then owed by you to the Company have been paid in full and the Company
may offset against any such benefits any amounts that are owed, irrespective
of the maturity date thereof.
-2-
<PAGE>
3.1 Salary Continuance. Throughout the applicable Severance
Period, you shall continue to be paid, on an annual basis, an amount equal to
the average of your regular salary and bonus (excluding reimbursements for
certain expenses or costs and/or gross-ups designed to reimburse you for
certain expenses or costs) that you received during the three (3) years
preceding your termination. Such amounts shall be paid on a periodic basis
using the Company's regular payroll periods. At the option of the Company,
which may be exercised by the Company in writing at any time after the
Effective Date, you shall receive a single lump sum payment equal to the
present value payment of any remaining payments that you would receive during
the remaining portion of the applicable Severance Period. The determination
of the amount of this payment shall be made by the Company's actuaries and
benefit consultants and, absent manifest error, shall be final, binding and
conclusive upon you and the Company.
3.2 Continuation of Benefits. During the applicable Severance
Period, you shall continue to receive all benefits to which you were entitled
and which you were receiving on the day preceding the Effective Date. Without
limiting the generality of the foregoing, the following provisions shall apply:
(a) For purposes of any Incentive Plans, you shall be given
service credit for all purposes for, and shall be deemed to be
an employee of Company during the Severance Period,
notwithstanding the fact that you are not an employee of
Company or any of its affiliates during the Severance Period;
provided that, if the terms of any of such Incentive Plans do
not permit such credit or deemed employee treatment, Company
will make payments and distributions to you outside of the
Incentive Plans in amounts substantially equivalent to the
payments and distributions you would have received pursuant to
the terms of the Incentive Plans and attributable to such
credit or deemed employee treatment, had such credit or deemed
employee treatment been permitted pursuant to the terms of the
Incentive Plans.
(b) During the Severance Period, you and your spouse and family
will continue to be covered by all Welfare Plans maintained by
Company in which you or your spouse or family were
participating immediately prior to the date of your
termination as if you continued to be an employee of Company;
provided that, if participation in any one or more of such
Welfare Plans is not possible under the terms thereof, Company
will provide substantially identical benefits. If, however,
you obtain employment with another employer during the
Severance Period such coverage shall be provided until the
earlier of: (i) the end of the Severance Period or (ii) the
date on which you and your spouse and family can be covered
under the plans of a new employer without being excluded from
full coverage because of any actual pre-existing condition.
Nothing contained herein is intended to in any way limit your
rights under COBRA.
3.3 Unused or Accrued Vacation. You will be paid for any unused
or accrued vacation that you had earned as of the Effective Date.
3.4 Automobile. You shall continue to have use of the automobile
provided to you by the Company. At the end of the applicable Severance Period,
you shall have the option to purchase any automobile furnished by the Company
for your use. The exercise price of this option shall be the net book value,
as set forth on the Company's books, of the automobile at such time.
4. EFFECT OF TERMINATION ON STOCK OPTIONS. In the event of any
termination of your employment, all stock options held by you that are vested
prior to the Effective Date shall be exercisable in accordance with their
terms; all stock options held by you that are not vested prior to the Effective
Date shall lapse and be void; provided, however, in the event that your
employment with the Company is terminated as described in Section 2.2 or 2.3,
then, unless your option provides that it is immediately exercisable in the
event of a Change in Control, in which case the terms of your option agreement
shall control, you shall receive, within thirty (30) days after the Effective
Date, a lump sum cash distribution equal to: (a) the number of shares of the
Company's ordinary shares that are subject to options held by you that are not
vested on the Effective Date; multiplied by (b) the difference between: (i) the
closing price of a share of the Company's ordinary shares on the American Stock
Exchange as reported by The Wall Street Journal as of the day prior to the
Effective Date (or, if the American Stock Exchange is closed on that date, on
the last preceding date on which the American Stock Exchange was open for
trading), and (ii) the applicable exercise price(s) of such non-vested shares.
-3-
<PAGE>
5. ADDITIONAL AMOUNT.
(a) The Company will pay you an amount (the "Additional Amount")
equal to the excise tax under the United States internal Revenue Code of 1986,
as amended (the "Code"), if any, incurred by you by reason of the payments
under this Agreement and any other plan, agreement or understanding between you
and the Company or its parent, subsidiaries or affiliates (collectively,
"Separation Payments") constituting excess parachute payments under Section
280G of the Code (or any successor provision thereof). In addition, the
Company will pay you an amount equal to all excise taxes and federal, state and
local income taxes incurred by you with respect to receipt of the Additional
Amount.
(b) All determinations required to be made under this Section 5,
including whether an Additional Amount is required and the amount of any
Additional Amount, will be made by the independent auditors engaged by the
Company immediately prior to the Change in Control (the "Accounting Firm"),
which will provide detailed supporting calculations to the Company and you.
In computing taxes, the Accounting Firm will use the highest marginal federal,
state and local income tax rates applicable to you and will assume the full
deductibility of state and local income taxes for purposes of computing federal
income tax liability, unless you demonstrate that you will not in fact be
entitled to such a deduction for the year of payment.
(c) The Additional Amount, computed assuming all of the Separation
Payments constitute excess parachute payments as defined in Section 280G of the
Code (or any successor provision thereof), will be paid to you in proportion
to the and at the times that the Separation Payments are received unless the
Company, prior to the Severance Period, provides you with an opinion of the
Accounting Firm that you will not incur an excise tax on part or all of the
Separation Payments. Any such opinion will be based upon the applicable
regulations under Sections 280G and 4999 of the Code (or any successor
provisions thereof) or substantial authority within the meaning of Section 6662
of the Code. If such opinion applies only to part of the Separation Payments,
the Company will pay you the Additional Amount with respect to that part of the
Separation Payments not covered by the opinion.
6. DISCLOSURE OF INFORMATION. You recognize and acknowledge
that, as a result of your employment by the Company, you have or will become
familiar with and acquire knowledge of confidential information and certain
trade secrets that are valuable, special, and unique assets of the Company.
You agree that any such confidential information and trade secrets are the
property of the Company. Therefore, you agree that, for and during your
employment with the Company and continuing following the termination of your
employment for any reason whatsoever, any such confidential information and
trade secrets shall be considered to be proprietary to the Company and kept as
the private records of the Company and will not be divulged to any firm,
individual, or institution, or used to the detriment of the Company. The
parties agree that nothing herein shall be construed as prohibiting the Company
from pursuing any remedies available to it for any breach or threatened breach
of this Section 6, including, without limitation, the recovery of damages from
you or any person or entity acting in concert with you.
7. GENERAL PROVISIONS.
7.1 Full Satisfaction. You acknowledge and agree that the
payments and benefits that may be provided to you pursuant to Sections 2.2,
2.3, 3, 4 and 5 of this Agreement are reasonable and sufficient and that you
are not entitled to any additional notice or pay in lieu of notice, termination
pay, severance pay, stock options or other payments or benefits whether under
statute, common law, Company policy, contract or otherwise as a result of any
termination of your employment with the Company following a Change in Control.
Upon compliance by the Company with the terms of this Agreement, the Company
shall be released and held harmless by you from any and all claims which you
may have for whatever reason or cause in connection with your employment with
the Company, or the termination thereof following a Change in Control.
7.2 Plans. Nothing in this Agreement shall affect your rights
during your employment to receive increases in compensation, responsibilities
or duties or to participate in and receive benefits from any pension plan,
benefit plan or profit sharing plans except such plans which specifically
address benefit(s) of the type addressed in Sections 3 and 4 of this Agreement.
7.3 Death During Severance Period. If you die during the
applicable Severance Period, any Benefits remaining to be paid to you shall be
paid to the beneficiary designated by you to receive such Benefits (or in the
absence of such a designation, to your surviving spouse or next of kin).
-4-
<PAGE>
7.4 Notices. Any notices to be given hereunder by either party to
the other may be effected by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested. Mailed
notices shall be addressed to the parties at the addresses appearing on the
first page of this Agreement (to the attention of the Secretary in the case of
notices to the Company), but each party may change such address by written
notice in accordance with this Section 7.4. Notices delivered personally shall
be deemed communicated as of actual receipt; mailed notices shall be deemed
communicated as of the second day following deposit in the United States Mail.
7.5 Entire Agreement. This Agreement supersedes any and all
previous oral or written agreements, understandings or arrangements between the
Company and you regarding a termination of your employment with the Company or
a change in your status, scope or authority and the salary, benefits or other
compensation that you receive from the Company as a result of the termination
of your employment with the Company following a Change in Control (the "Subject
Matter"), all of which are hereby wholly terminated and canceled. Any benefits
that you receive as a result of your termination following a Change in control
shall be determined solely and exclusively by this Agreement and,
notwithstanding any policy of the Company or the terms of any other agreement
or understanding, you will be entitled to no other benefits in the event of
such a termination. This Agreement contains all of the covenants and
agreements between the parties with respect to the Subject Matter. Each party
to this Agreement acknowledges that no representations, inducements, promises,
or agreements, orally or otherwise, have been made with respect to the Subject
Matter by any party, or anyone acting on behalf of any party, which are not
embodied herein. Any subsequent agreement relating to the Subject Matter or
any modification of this Agreement will be effective only if it is in writing
signed by the party against whom enforcement of such modification is sought.
Subject to the foregoing, this Agreement, however, does not affect or supersede
any policy or other agreements that you may have with the Company regarding
termination of your employment with the Company or a change in your status,
scope or authority and the salary, benefits or other compensation that you
receive from the Company as a result of the termination of your employment in
the absence of a Change in Control.
7.6 Partial Invalidity. If any provision in this Agreement is
held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remaining provisions shall nevertheless continue in full
force without being impaired or invalidated in any way.
7.7 Law Governing Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the State of Tennessee and the
courts of the State of Tennessee USA.
7.8 Waiver of Jury Trial. The Company and you hereby expressly
waive any right to a trial by jury in any action or proceeding to enforce or
defend any rights under this Agreement, and agree that any such action or
proceeding shall be tried before a court and not a jury. You irrevocably
waive, to the fullest extent permitted by law, any objection that you may have
or hereafter have to the laying of the venue of any such action or proceeding
and any claim that any such action or proceeding brought in such a court has
been brought in an inconvenient forum.
7.9 Miscellaneous. Failure or delay of either party to insist upon
compliance with any provision hereof will not operate as and is not to be
construed to be a waiver or amendment of the provision or the right of the
aggrieved party to insist upon compliance with such provision or to take
remedial steps to recover damages or other relief for noncompliance. Any
express waiver of any provision of this Agreement will not operate and is not
to be construed as a waiver of any subsequent breach, irrespective of whether
occurring under similar or dissimilar circumstances. You may not assign any
of your rights under this Agreement. The rights and obligations of the Company
under this Agreement shall inure to the benefit of and shall be binding upon
the successors and assigns of the Company. The Company agrees that it will
assign this Agreement to any successor company and ensure that its terms are
continued.
-5-
<PAGE>
If all of the foregoing contained in this Agreement is agreed to by
you, please signify your agreement by executing the enclosed duplicate of this
letter and returning the same to us upon which this letter, as so agreed upon,
shall constitute an Agreement between us.
INTERNATIONAL COMFORT PRODUCTS INTERNATIONAL COMFORT PRODUCTS
CORPORATION CORPORATION
/s/ Robert C. Henningsen /s/ W. Michael Clevy
Robert C. Henningsen W. Michael Clevy
Senior Vice President, Human President and Chief Executive Officer
Resources and Administration
The foregoing is agreed to and accepted by:
Company Employee's Signature: /s/ David P. Cain
________________________
Please Print or Type Name: David P. Cain
___________________________
Please Print or Type Title: Sr. V.P., General Counsel, and Secretary
____________________________
-6-
<PAGE>
[ICP LETTERHEAD]
March 15, 1999
Mr. Doug K. Gibbs
1661 Valley Close
Burlington, Ontario L7P 4W3
Dear Mr. Gibbs:
The Board of Directors of the International Comfort Products
Corporation recognizes the contribution that you have made to International
Comfort Products Corporation or one of its direct or indirect subsidiaries
(collectively herein "Company") and wishes to ensure your continuing
commitment. Accordingly, in exchange for your continuing commitment to the
Company, the Company hereby agrees to the following, which sets forth certain
rights that you have in the event your employment with the Company is
terminated following a Change in Control:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
1.1 "Cause" shall mean any one of the following:
(a) personal dishonesty;
(b) willful misconduct;
(c) breach of fiduciary duty; or
(d) conviction of any felony or crime involving moral
turpitude.
1.2 "Change in Control" means that a person (other than you or a
group of which you are a member or participant) hereafter becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding voting securities.
1.3 "Change in Control Period" means a twenty-four (24) month
period beginning the day after there occurs a Change in Control.
1.4 "Change in Duties or Compensation" means any one of: (a) a
material change in your duties and responsibilities for the Company from those
duties and responsibilities for the Company in effect at the time a Change in
Control occurs, which change results in the assignment of duties and
responsibilities inferior to your duties and responsibilities at the time such
Change in Control occurs (it being understood and acknowledged by you that a
Change in Control that results in two persons of which you are one having
similar or sharing duties and responsibilities shall not be a material change
in your duties and responsibilities); (b) a reduction in your salary and
benefits (excluding discretionary bonuses), from the salary and benefits in
effect at the time a Change in Control occurs; (c) a change in the location of
your work assignment from your location at the time a Change in Control occurs
to any other city or geographical location that is located further than one
hundred (100) miles from that location; or (d) the Company terminates or amends
any Incentive Plan so that, when considered in the aggregate with any
substitute plan or other substitute compensation, the Incentive Plan in which
you are participating fails to provide you with a level of benefits equivalent
to at least 85% of the value of the level of benefits provided in the aggregate
by the terminated or amended Incentive Plan at the date of such termination or
amended Incentive Plan at the date of such termination or amendment; provided,
however, that a Change in Duties or Compensation shall not be deemed to exist
under this clause (d) if the decline in Incentive Plan compensation is related
to a decline in performance.
<PAGE>
1.5 "Incentive Plans" shall mean any incentive, bonus, deferred
compensation, pension, retirement or similar plan or arrangement currently or
hereafter made available by Company in which you are eligible to participate.
1.6 "Welfare Plans" shall mean any health and dental plan,
disability plan, survivor income plan and life insurance plan or arrangement
currently or hereafter made available by Company in which you are eligible to
participate.
2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL;
SEVERANCE. The Company's Board of Directors may terminate your employment,
with or without cause, at any time by giving you written notice of such
termination, such termination of employment to be effective on the date
specified in such notice. You also may terminate your employment with the
Company at any time. The effective date of termination (the "Effective Date")
shall be the last day of your employment with the Company, as specified in a
notice by you, or if you are terminated by the Company, the date that is
specified by the Company in its notice to you. The following sections set
forth your rights to severance in the event of the termination of your
employment in certain circumstances by either the Company or you following a
Change in Control. Section 6 also set forth certain restrictions on your
activities in the event that your employment with the Company is terminated,
whether by the Company or you. That section shall survive any termination of
this Agreement or your employment with the Company.
2.1. Termination by the Company for Cause. If you are terminated
for Cause, the Company shall have no obligation whatsoever under this Agreement
to you, and your participation in all of the Company's benefit plans and
programs shall cease as of the Effective Date. In the event of a termination
for Cause, you shall not be entitled to receive severance benefits described
in Section 3.
2.2. Termination by the Company Without Cause After a Change in
Control. If, during a Change in Control, your employment with the Company is
terminated by the Company without Cause, you shall be entitled to receive
Benefits (as defined in Section 3) for eighteen (18) months following the
Effective Date.
2.3. Termination By You For Change in Duties or Compensation During
a Change in Control Period. In addition to your rights under Section 2.2, if
during a Change in Control Period there occurs a Change in Duties or
Compensation, you may terminate your employment with the Company at any time
by giving, within thirty (30) days after the occurrence of the Change in Duties
or Compensation, not less than one hundred twenty (120) nor more than one
hundred eighty (180) days' notice of such termination to the Company. During
whatever notice period that you work any reduction in your Compensation will
be restored. At the option of the Company, following receipt of such notice,
it may: (a) change and/or cure, within fifteen (15) days, the condition that
you claim has caused the Change in Duties or Compensation, in which case, your
rights to terminate your employment with the Company pursuant to this Section
2.3 shall cease (unless there occurs thereafter another Change in Duties or
Compensation) and you shall continue in the employment of the Company
notwithstanding the notice that you have given; (b) allow you to continue your
employment through the date of that you have specified in your notice; or (c)
immediately terminate your employment pursuant to Section 2.2. In the event
you terminate your employment with the Company pursuant to this Section 2.3,
you shall be entitled to receive Benefits (as defined in Section 3) for
eighteen (18) months following the Effective Date. Your failure to provide the
notice required by this Section 2.3 shall result in you having no right to
receive any further compensation from the Company except for any base salary
or vacation earned but not paid plus any bonus earned and accrued by the
Company through the Effective Date. It is expressly understood and agreed that
you shall have no rights arising under this Section 2.3 following a Change in
Control if the Change in Control results from you or a group of which you are
a member or participant becoming the beneficial owner, directly or indirectly,
of securities of the Company representing 50% or more of the combined voting
power of the Company's then outstanding voting securities.
3. SEVERANCE BENEFITS. In the event that your employment with
the Company is terminated as described in Section 2.2 or 2.3, you shall be
entitled to the following benefits contained in subsections 3.1, 3.2, 3.3 and
3.4 (herein "Benefits") for the respective period of time set forth in the
applicable section. The eighteen (18) month period of time described in either
Sections 2.2 or 2.3 is hereinafter referred to as the "Severance Period".
Notwithstanding anything to the contrary in this Agreement, no benefits under
Sections 3.1 or 4 shall be paid to you until and unless any amounts then owed
by you to the Company have been paid in full and the Company may offset against
any such benefits any amounts that are owed, irrespective of the maturity date
thereof.
-2-
<PAGE>
3.1 Salary Continuance. Throughout the applicable Severance
Period, you shall continue to be paid, on an annual basis, an amount equal to
the average of your regular salary and bonus (excluding reimbursements for
certain expenses or costs and/or gross-ups designed to reimburse you for
certain expenses or costs) that you received during the three (3) years
preceding your termination. Such amounts shall be paid on a periodic basis
using the Company's regular payroll periods. At the option of the Company,
which may be exercised by the Company in writing at any time after the
Effective Date, you shall receive a single lump sum payment equal to the
present value payment of any remaining payments that you would receive during
the remaining portion of the applicable Severance Period. The determination
of the amount of this payment shall be made by the Company's actuaries and
benefit consultants and, absent manifest error, shall be final, binding and
conclusive upon you and the Company.
3.2 Continuation of Benefits. During the applicable Severance
Period, you shall continue to receive all benefits to which you were entitled
and which you were receiving on the day preceding the Effective Date. Without
limiting the generality of the foregoing, the following provisions shall apply:
(a) For purposes of any Incentive Plans, you shall be given
service credit for all purposes for, and shall be deemed to be
an employee of Company during the Severance Period,
notwithstanding the fact that you are not an employee of
Company or any of its affiliates during the Severance Period;
provided that, if the terms of any of such Incentive Plans do
not permit such credit or deemed employee treatment, Company
will make payments and distributions to you outside of the
Incentive Plans in amounts substantially equivalent to the
payments and distributions you would have received pursuant to
the terms of the Incentive Plans and attributable to such
credit or deemed employee treatment, had such credit or deemed
employee treatment been permitted pursuant to the terms of the
Incentive Plans.
(b) During the Severance Period, you and your spouse and family
will continue to be covered by all Welfare Plans maintained by
Company in which you or your spouse or family were
participating immediately prior to the date of your
termination as if you continued to be an employee of Company;
provided that, if participation in any one or more of such
Welfare Plans is not possible under the terms thereof, Company
will provide substantially identical benefits. If, however,
you obtain employment with another employer during the
Severance Period such coverage shall be provided until the
earlier of: (i) the end of the Severance Period or (ii) the
date on which you and your spouse and family can be covered
under the plans of a new employer without being excluded from
full coverage because of any actual pre-existing condition.
Nothing contained herein is intended to in any way limit your
rights under COBRA.
3.3 Unused or Accrued Vacation. You will be paid for any unused
or accrued vacation that you had earned as of the Effective Date.
3.4 Automobile. You shall continue to have use of the automobile
provided to you by the Company. At the end of the applicable Severance Period,
you shall have the option to purchase any automobile furnished by the Company
for your use. The exercise price of this option shall be the net book value,
as set forth on the Company's books, of the automobile at such time.
4. EFFECT OF TERMINATION ON STOCK OPTIONS. In the event of any
termination of your employment, all stock options held by you that are vested
prior to the Effective Date shall be exercisable in accordance with their
terms; all stock options held by you that are not vested prior to the Effective
Date shall lapse and be void; provided, however, in the event that your
employment with the Company is terminated as described in Section 2.2 or 2.3,
then, unless your option provides that it is immediately exercisable in the
event of a Change in Control, in which case the terms of your option agreement
shall control, you shall receive, within thirty (30) days after the Effective
Date, a lump sum cash distribution equal to: (a) the number of shares of the
Company's ordinary shares that are subject to options held by you that are not
vested on the Effective Date; multiplied by (b) the difference between: (i) the
closing price of a share of the Company's ordinary shares on the American Stock
Exchange as reported by The Wall Street Journal as of the day prior to the
Effective Date (or, if the American Stock Exchange is closed on that date, on
the last preceding date on which the American Stock Exchange was open for
trading), and (ii) the applicable exercise price(s) of such non-vested shares.
-3-
<PAGE>
5. ADDITIONAL AMOUNT.
(a) The Company will pay you an amount (the "Additional Amount")
equal to the excise tax under the United States internal Revenue Code of 1986,
as amended (the "Code"), if any, incurred by you by reason of the payments
under this Agreement and any other plan, agreement or understanding between you
and the Company or its parent, subsidiaries or affiliates (collectively,
"Separation Payments") constituting excess parachute payments under Section
280G of the Code (or any successor provision thereof). In addition, the
Company will pay you an amount equal to all excise taxes and federal, state and
local income taxes incurred by you with respect to receipt of the Additional
Amount.
(b) All determinations required to be made under this Section 5,
including whether an Additional Amount is required and the amount of any
Additional Amount, will be made by the independent auditors engaged by the
Company immediately prior to the Change in Control (the "Accounting Firm"),
which will provide detailed supporting calculations to the Company and you.
In computing taxes, the Accounting Firm will use the highest marginal federal,
state and local income tax rates applicable to you and will assume the full
deductibility of state and local income taxes for purposes of computing federal
income tax liability, unless you demonstrate that you will not in fact be
entitled to such a deduction for the year of payment.
(c) The Additional Amount, computed assuming all of the Separation
Payments constitute excess parachute payments as defined in Section 280G of the
Code (or any successor provision thereof), will be paid to you in proportion
to the and at the times that the Separation Payments are received unless the
Company, prior to the Severance Period, provides you with an opinion of the
Accounting Firm that you will not incur an excise tax on part or all of the
Separation Payments. Any such opinion will be based upon the applicable
regulations under Sections 280G and 4999 of the Code (or any successor
provisions thereof) or substantial authority within the meaning of Section 6662
of the Code. If such opinion applies only to part of the Separation Payments,
the Company will pay you the Additional Amount with respect to that part of the
Separation Payments not covered by the opinion.
6. DISCLOSURE OF INFORMATION. You recognize and acknowledge
that, as a result of your employment by the Company, you have or will become
familiar with and acquire knowledge of confidential information and certain
trade secrets that are valuable, special, and unique assets of the Company.
You agree that any such confidential information and trade secrets are the
property of the Company. Therefore, you agree that, for and during your
employment with the Company and continuing following the termination of your
employment for any reason whatsoever, any such confidential information and
trade secrets shall be considered to be proprietary to the Company and kept as
the private records of the Company and will not be divulged to any firm,
individual, or institution, or used to the detriment of the Company. The
parties agree that nothing herein shall be construed as prohibiting the Company
from pursuing any remedies available to it for any breach or threatened breach
of this Section 6, including, without limitation, the recovery of damages from
you or any person or entity acting in concert with you.
7. GENERAL PROVISIONS.
7.1 Full Satisfaction. You acknowledge and agree that the
payments and benefits that may be provided to you pursuant to Sections 2.2,
2.3, 3, 4 and 5 of this Agreement are reasonable and sufficient and that you
are not entitled to any additional notice or pay in lieu of notice, termination
pay, severance pay, stock options or other payments or benefits whether under
statute, common law, Company policy, contract or otherwise as a result of any
termination of your employment with the Company following a Change in Control.
All payments made by the Company pursuant to this Agreement specifically
include termination and severance pay under common law and the Ontario
Employment Standards Act. Upon compliance by the Company with the terms of
this Agreement, the Company shall be released and held harmless by you from any
and all claims which you may have for whatever reason or cause in connection
with your employment with the Company, or the termination thereof following a
Change in Control. In agreeing to the terms set out in this Agreement, you
specifically agree to execute a formal release document to that effect, and
will deliver upon request appropriate resignations from all offices and
positions with the Company if and when requested to do so upon the termination
of your employment in the circumstances contemplated by this Agreement.
-4-
<PAGE>
7.2 Other Plans. Nothing in this Agreement shall affect your
rights during your employment to receive increases in compensation,
responsibilities or duties or to participate in and receive benefits from any
pension plan, benefit plan or profit sharing plans except such plans which
specifically address benefit(s) of the type addressed in Sections 3 and 4 of
this Agreement.
7.3 Death During Severance Period. If you die during the
applicable Severance Period, any Benefits remaining to be paid to you shall be
paid to the beneficiary designated by you to receive such Benefits (or in the
absence of such a designation, to your surviving spouse or next of kin).
7.4 Notices. Any notices to be given hereunder by either party to
the other may be effected by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested. Mailed
notices shall be addressed to the parties at the addresses appearing on the
first page of this Agreement (to the attention of the Secretary in the case of
notices to the Company), but each party may change such address by written
notice in accordance with this Section 7.4. Notices delivered personally shall
be deemed communicated as of actual receipt; mailed notices shall be deemed
communicated as of the second day following deposit in the United States Mail.
7.5 Entire Agreement. This Agreement supersedes any and all
previous oral or written agreements, understandings or arrangements between the
Company and you regarding a termination of your employment with the Company or
a change in your status, scope or authority and the salary, benefits or other
compensation that you receive from the Company as a result of the termination
of your employment with the Company following a Change in Control (the "Subject
Matter"), all of which are hereby wholly terminated and canceled. Any benefits
that you receive as a result of your termination following a Change in control
shall be determined solely and exclusively by this Agreement and,
notwithstanding any policy of the Company or the terms of any other agreement
or understanding, you will be entitled to no other benefits in the event of
such a termination. This Agreement contains all of the covenants and
agreements between the parties with respect to the Subject Matter. Each party
to this Agreement acknowledges that no representations, inducements, promises,
or agreements, orally or otherwise, have been made with respect to the Subject
Matter by any party, or anyone acting on behalf of any party, which are not
embodied herein. Any subsequent agreement relating to the Subject Matter or
any modification of this Agreement will be effective only if it is in writing
signed by the party against whom enforcement of such modification is sought.
Subject to the foregoing, this Agreement, however, does not affect or supersede
any policy or other agreements that you may have with the Company regarding
termination of your employment with the Company or a change in your status,
scope or authority and the salary, benefits or other compensation that you
receive from the Company as a result of the termination of your employment in
the absence of a Change in Control.
7.6 Partial Invalidity. If any provision in this Agreement is
held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remaining provisions shall nevertheless continue in full
force without being impaired or invalidated in any way.
7.7 Law Governing Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the Province of Ontario and the
courts of the Province of Ontario, Canada.
7.8 Waiver of Jury Trial. The Company and you hereby expressly
waive any right to a trial by jury in any action or proceeding to enforce or
defend any rights under this Agreement, and agree that any such action or
proceeding shall be tried before a court and not a jury. You irrevocably
waive, to the fullest extent permitted by law, any objection that you may have
or hereafter have to the laying of the venue of any such action or proceeding
and any claim that any such action or proceeding brought in such a court has
been brought in an inconvenient forum.
7.9 Miscellaneous. Failure or delay of either party to insist upon
compliance with any provision hereof will not operate as and is not to be
construed to be a waiver or amendment of the provision or the right of the
aggrieved party to insist upon compliance with such provision or to take
remedial steps to recover damages or other relief for noncompliance. Any
express waiver of any provision of this Agreement will not operate and is not
to be construed as a waiver of any subsequent breach, irrespective of whether
occurring under similar or dissimilar circumstances. You may not assign any
of your rights under this Agreement. The rights and obligations of the Company
under this Agreement shall inure to the benefit of and shall be binding upon
the successors and assigns of the Company. The Company agrees that it will
assign this Agreement to any successor company and ensure that its terms are
continued.
-5-
<PAGE>
If all of the foregoing contained in this Agreement is agreed to by
you, please signify your agreement by executing the enclosed duplicate of this
letter and returning the same to us upon which this letter, as so agreed upon,
shall constitute an Agreement between us.
INTERNATIONAL COMFORT PRODUCTS INTERNATIONAL COMFORT PRODUCTS
CORPORATION CORPORATION
/s/ Robert C. Henningsen /s/ W. Michael Clevy
Robert C. Henningsen W. Michael Clevy
Senior Vice President, Human President and Chief Executive Officer
Resources and Administration
The foregoing is agreed to and accepted by:
Company Employee's Signature: /s/ Douglas K. Gibbs
________________________
Please Print or Type Name: Douglas K. Gibbs
___________________________
Please Print or Type Title: Sr. Vice President
____________________________
-6-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS
SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL
STATEMENTS OF INTERNATIONAL
COMFORT PRODUCTS CORPORATION
FOR THE PERIOD ENDED MARCH 31,
1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<PERIOD-START> JAN-01-1999
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 10,600
<SECURITIES> 0
<RECEIVABLES> 140,400
<ALLOWANCES> 0
<INVENTORY> 131,800
<CURRENT-ASSETS> 303,200
<PP&E> 250,700
<DEPRECIATION> 144,800
<TOTAL-ASSETS> 475,600
<CURRENT-LIABILITIES> 169,400
<BONDS> 176,400
<COMMON> 180,400
0
0
<OTHER-SE> (81,200)
<TOTAL-LIABILITY-AND-EQUITY> 475,600
<SALES> 0
<TOTAL-REVENUES> 158,100
<CGS> 126,200
<TOTAL-COSTS> 24,500
<OTHER-EXPENSES> 2,500
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,500
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
