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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
X.X. XxXXXXXX SUPPLY LIMITED
as McDonald
and
THE LENDER OR LENDERS NAMED IN
THE CREDIT AGREEMENT
as Lenders
and
GENERAL ELECTRIC CAPITAL CANADA INC.
as Agent
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XXXXXXXX XXXXX
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BARRISTERS & SOLICITORS
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, X.X. XxXxxxxx 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
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(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;
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(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
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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
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(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;
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(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 Xxxxxxx 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".
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(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:
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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,
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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.
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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
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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:
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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:
