LETTER AMENDMENT NO. 3
TO
MASTER SHELF AGREEMENT DATED AS OF OCTOBER 15, 1999
(Lennox International Inc.)
As of June 29, 2001
The Prudential Insurance Company of America
c/o Prudential Capital Group
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Managing Director
U.S. Private Placement Fund
Prudential Private Placement Investors, Inc.
Four Gateway Center
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Ladies and Gentlemen:
We refer to the Master Shelf Agreement dated as of October 15, 1999, as
amended by Letter Amendment No. 1 dated February 28, 2000 and Letter Amendment
No. 2 dated January 23, 2001 (as so amended, the “Shelf Agreement”),
among the undersigned, Lennox International Inc. (the “Company”) and The Prudential
Insurance Company of America (“Prudential”). Unless otherwise defined
herein, the terms defined in the Agreement shall be used herein as therein defined. Each
of you is a Holder of Notes issued pursuant to the Shelf Agreement.
The Company has requested the Holders to enter into this Letter Amendment
No. 3 (“Amendment No. 3”) to evidence amendment of the Shelf Agreement
as set forth herein. Such amendment shall become effective as set forth in Section 3.
Therefore, the Holders and the Company hereby agree as follows:
1. Amendment to Definitions. Subject to Section 3 hereof,
the definitions in the Shelf Agreement are hereby modified as follows:
Adjusted EBITDA. Clause (ii) of the definition of “
Adjusted EBITDA” is amended in full to read as follows:
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“(ii) to the extent deducted in computing such consolidated
net income (or loss), without duplication, the sum of (a) any
deduction for (or less any gain from) income or franchise taxes
included in determining such consolidated net income (or loss);
plus (b) interest expense (including the interest portion of
Capital Leases) deducted in determining such consolidated net
income (or loss); plus (c) amortization and depreciation expense
deducted in determining such consolidated net income (or loss);
plus (d) any non-recurring and non cash charges resulting from
the application of GAAP that requires a charge against earnings
for the impairment of goodwill to the extent not already added
back or not included in determining such consolidated net income
(or loss); minus,”
Consolidated Net Income. Clauses (f) and (g) of the definition of
“Consolidated Net Income” are amended in full to read as follows and clause
(h) is hereby added to the end of such definition to read as follows:
“(f) any non-recurring loss arising from the sale or other
disposition of assets recorded (i) during the fiscal quarter
ended June 30, 2001, but only to the extent that the aggregate
amount of such losses plus the restructuring charges allowed in
clause (g)(i) hereof for such fiscal quarter is less than
$32,400,000; and (ii) after June 30, 2001, in an aggregate amount
not to exceed $25,000,000;
(g) any non-recurring restructuring charges recorded (i)
during the fiscal quarter ended June 30, 2001, but only to the
extent that the aggregate amount of such restructuring charges
plus the losses allowed in clause (f)(i) hereof for such fiscal
quarter is less than $32,400,000; and (ii) after June 30, 2001,
in an aggregate amount not to exceed $25,000,000 but provided
that cash charges included in such restructuring charges shall
not exceed $12,500,000; and
(h) any non-recurring and non-cash charges resulting from
the application of GAAP that requires a charge against earnings
for the impairment of goodwill.”
EBITDA. The definition of “EBITDA” is hereby amended in full to read
as follows:
“EBITDA” means, for any period, the total of the following
calculated for the Company and the Restricted Subsidiaries
without duplication on a consolidated basis in accordance with
GAAP consistently applied for such period: (a) Consolidated Net
Income from operations; plus (b) any deduction for (or less any
gain from) income or franchise taxes included in determining
Consolidated Net Income; plus (c) interest expense (including the
interest portion of Capital Leases) deducted in determining
Consolidated Net Income;
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plus (d) amortization and depreciation expense deducted in
determining Consolidated Net Income; plus (e) any non-recurring
and non-cash charges resulting from application of GAAP that
requires a charge against earnings for the impairment of goodwill
to the extent not already added back or not included in
determining Consolidated Net Income.
Material Adverse Effect. The definition of “Material Adverse
Effect” is hereby amended in full to read as follows:
“Material Adverse Effect” shall mean a material adverse
effect on (a) the business, operations, affairs, financial
condition, assets or properties of the Company and its Restricted
Subsidiaries taken as a whole, or (b) the ability of the Company
to perform its obligations under this Agreement and the Notes and
the ability of the Material Restricted Subsidiaries to perform
their respective obligations under the Subsidiary Guaranty taken
as a whole, or (c) the validity or enforceability of this
Agreement, the Notes, the Pledge Agreement or the Subsidiary
Guaranty.
Prudential Affiliate. The definition of “Prudential Affiliate” is
hereby amended in full to read as follows:
“Prudential Affiliate” shall mean (i) any corporation or
other entity controlling, controlled by, or under common control
with, Prudential and (ii) any managed account or investment fund
which is managed by Prudential or a Prudential Affiliate
described in clause (i) of this definition. For purposes of this
definition, the terms “control”, “controlling” and “controlled”
shall mean the ownership, directly or through subsidiaries, of a
majority of a corporation's or other entity's Voting Stock or
equivalent voting securities or interests.
The following definitions are hereby added to the Agreement:
“1999 Lenders” means the lenders listed in Schedule 2.01 to the
Revolving Credit Facility Agreement dated as of July 29, 1999, as
amended, among the Company, The Chase Manhattan Bank, as
administrative agent, Wachovia Bank, N.A., as syndication agent, and
The Bank of Nova Scotia, as documentation agent.
“364 Day Facility” means that certain 364 Day Revolving
Credit Facility Agreement dated as of January 25, 2000 among the
Company, Chase Bank of Texas, National Association [now The Chase
Manhattan Bank], as administrative agent, the other agents named
therein and the lenders named therein, as the same has been and
may hereafter be amended or otherwise modified.
“Approved Receivables Securitization” means one or more
receivables securitizations or other receivables sale programs as
long as the aggregate amount of
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the commitments to purchase receivables under all such programs
does not at any time exceed $225,000,000.
“Collateral Agent” means The Chase Manhattan Bank, as
collateral agent under the terms of the Intercreditor Agreement
(for the benefit of the Holders, the Noteholders, the 1999
Lenders and the lenders under the 364 Day Facility and any other
lenders which become entitled to the benefits of the Liens
granted in the Pledge Agreement under the terms of the
Intercreditor Agreement), and its successors and assigns in such
capacity.
“Credit Agreement” means the Revolving Credit Facility
Agreement dated as of July 29, 1999, entered into among the
Company, the lenders listed in Schedule 2.01 thereto, The Chase
Manhattan Bank, as administrative agent, Wachovia Bank, N.A., as
syndication agent, and The Bank of Nova Scotia, as documentation
agent, as the same has been and may hereafter be amended or
otherwise modified.
“Intercreditor Agreement” means that certain Intercreditor
Agreement to be executed pursuant to Section 9.11 hereof
initially among the Company, the Material Restricted
Subsidiaries, The Chase Manhattan Bank, as collateral agent
thereunder, the administrative agent for the 1999 Lenders and the
lenders under the 364 Day Facility, the Holders and the
Noteholders, as the same may be amended or otherwise modified
from time to time.
“Material Restricted Subsidiary” means Lennox Industries
Inc., ▇▇▇▇▇▇▇▇▇ Air Conditioning Inc., Excel Comfort Systems
Inc., Service Experts Inc. and each other Restricted Subsidiary
(except LPAC Corp.) the book value (determined in accordance with
GAAP) of whose total assets equals or exceeds 10% of the book
value (determined in accordance with GAAP) of the consolidated
total assets of the Company and all Subsidiaries as determined as
of the last day of each fiscal quarter.
“Material Transfer” means, with respect to the Company or
any Restricted Subsidiary, any transaction or group of related
transactions having a value in excess of $10,000,000 in which
such Person sells, conveys, transfers or leases (as lessor) any
of its property, including capital stock of, or a Security issued
by, a Subsidiary; provided that the term “Material Transfer”
shall not include the sale of receivables sold by the Company and
the Restricted Subsidiaries under an Approved Receivables
Securitization. For purposes of this definition the term “value”
of any property transferred shall be equal to the transfer price
specified in the applicable sale, lease or other transfer
documents for the property in question.
“Note Agreements” means (i) nine separate Note Purchase
Agreements,
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dated as of December 1, 1993 (as amended, the “1993 Note
Agreements”), between the Company and each of Prudential,
Connecticut General Life Insurance Company, Connecticut General
Life Insurance Company, on behalf of One or More Separate
Accounts, Life Insurance Company of North America, United of
Omaha Life Insurance Company, Mutual of Omaha Insurance Company,
Companion Life Insurance Company, United World Life Insurance
Company, First Colony Life Insurance Company, General Electric
Capital Assurance Company (as a successor), and GE Life and
Annuity Assurance Company (as a successor) (collectively, and
together with their respective successors and assigns, the “1993
Holders”); (ii) the Note Purchase Agreement, dated as of July 6,
1995 (as amended, the “1995 Note Agreement”), between the Company
and Teachers Insurance and Annuity Association of America
(together with its successors and assigns, the “1995 Holder”);
(iii) eight separate Note Purchase Agreements, dated as of April
3, 1998 (as amended, the “1998 Note Agreements”), between the
Company and each of Prudential, U.S. Private Placement Fund,
Teachers Insurance and Annuity Association of America,
Connecticut General Life Insurance Company, Connecticut General
Life Insurance Company, on behalf of One or More Separate
Accounts, CIGNA Property and Casualty Insurance Company, United
of Omaha Life Insurance Company and Companion Life Insurance
Company (collectively, and together with their respective
successors and assigns, the “1998 Holders”); (iv) the letter
agreement dated July 29, 1999 (the “1999 Amendment Agreement”)
among the Company and the 1993 Holders, 1995 Holder and 1998
Holders (collectively referred to herein as the “Noteholders”)
amending the Note Agreements to add the “Additional Covenants”
set forth in Schedule A to the 1999 Amendment Agreement.
“Letter Amendment No. 3” means the Letter Amendment No. 3
dated as of June 29, 2001, as the same may be modified from time
to time, among the Company and the Holders to amend certain
provisions and covenants of this Agreement.
“Pledge Agreement” means that certain Pledge Agreement to be
executed by the Company and in favor of the Collateral Agent
pursuant to Section 9.11 hereof, as the same may otherwise be
modified from time to time.
“Subsidiary Guaranty” means the guaranty of the Material
Restricted Subsidiaries in favor of the Holders and the
Noteholders, substantially in the form of Exhibit A to Letter
Amendment No. 3, as the same may be modified pursuant to one or
more Subsidiary Joinder Agreements and as the same may be
otherwise modified from time to time.
“Subsidiary Joinder Agreement” means an agreement which has
been or will be executed by a Material Restricted Subsidiary
adding it as a party to the
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Subsidiary Guaranty.
2. Amendments to Covenants and Events of Default. Subject to Section 3
hereof the Shelf Agreement is hereby amended as follows:
7.2. Officer's Certificate. Section 7.2(a) is hereby amended by
adding the phrase “the then existing Material Restricted Subsidiaries
and” immediately after the phrase “in order to establish”.
9.10. Interest Rate. Section 9.10 is hereby added to the Shelf
Agreement to read as follows:
“9.10 Interest Rate. Effective as of June 29, 2001, the interest
rates prior to the occurrence of any Event of Default with respect to
all Notes shall be immediately and automatically increased by 0.25%
per annum for so long as any amount shall remain outstanding under the
Notes. If upon any subsequent delivery of the compliance certificate
pursuant to Section 7.2(a) in connection with the financial statements
of the Company and its Restricted Subsidiaries required to be
delivered pursuant to Section 7.1, the Consolidated Indebtedness to
Adjusted EBITDA Ratio of the Company as set forth in Section
10.12.3(b) of this Agreement shall be less than or equal to 3.00 to
1.00 (the “Reset Event”), then the interest rates with respect to such
Notes shall be immediately and automatically reduced by 0.25% per
annum commencing upon the date such compliance certificate is
delivered, with such interest rates to be subject to increase again by
0.25% per annum at any time that such ratio exceeds 3.00 to 1.00 (and,
if so increased then reduced again when such ratio shall be less than
or equal to 3.00 to 1.00), and with such interest rates never to be
less than the respective interest rates in effect with respect to the
Notes on June 28, 2001. If an Event of Default occurs prior to any
Reset Event, then the Default Rate shall also be increased by 0.25%
for so long as such Event of Default is continuing.”
9.11. Post-closing Agreements; New Material Restricted
Subsidiaries. Section 9.11 is hereby added to the Shelf Agreement to
read as follows:
“9.11. Post-closing Agreements; New Material Restricted
Subsidiaries.
(a) Items Due by August 15, 2001. On or before August 15, 2001,
the Company shall deliver or cause to be delivered each of the
following items, each of which must be in form and substance
satisfactory to the Required Holders:
(i) to the Holders, the Intercreditor Agreement executed by
all the parties thereto, and the Pledge Agreement executed by the
Company pursuant to which the Company shall have pledged to the
Collateral Agent all the capital stock of each Material
Restricted Subsidiary; to the
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Collateral Agent, certificates representing all shares of the
capital stock of the Material Restricted Subsidiaries pledged
pursuant to the Pledge Agreement together with undated stock
powers duly executed in blank for all such certificates; to
counsel for the Holders, UCC, tax and judgment Lien search
reports listing all documentation on file against the Company and
each Material Restricted Subsidiary in each jurisdiction in which
it has its principal place of business and jurisdiction of
organization; to the Collateral Agent, such executed
documentation as the Collateral Agent may deem necessary to
perfect or protect the Liens under the Pledge Agreement,
including, without limitation, financing statements under the UCC
and other applicable documentation under the laws of any
jurisdiction with respect to the perfection of such Liens; and
duly executed UCC-3 Termination Statements and such other
documentation as shall be necessary to terminate or release all
Liens encumbering the collateral pledged pursuant to the Pledge
Agreement. To assist the Company in complying with the
requirements of this paragraph, the Holders agree to use
commercially reasonable efforts to cause the Required Holders to
approve an Intercreditor Agreement which is in form and substance
satisfactory to them on or before August 15, 2001.
(ii) a favorable written opinion from counsel to the Company
and the Material Restricted Subsidiaries addressed to the holders
as to such matters relating to the Intercreditor Agreement, the
Pledge Agreement, the collateral pledged pursuant thereto and the
capitalization of the Material Restricted Subsidiaries as the
Required Holders may request (and the Company hereby instructs
its counsel to deliver such opinion to the holders for their
benefit);
(iii) a certificate of the Secretary or an Assistant
Secretary of the Company certifying that attached thereto is a
true and complete copy of resolutions, duly adopted by the Board
of Directors authorizing the execution, delivery and performance
of the Pledge Agreement, the Intercreditor Agreement and the
transactions contemplated thereby, and that such resolutions have
not been modified, rescinded or amended and are in full force and
effect; and
(iv) a certificate of the Secretary or an Assistant
Secretary of each Material Restricted Subsidiary certifying that
attached thereto is a true and complete copy of resolutions, duly
adopted by the Board of Directors authorizing the execution,
delivery and performance of the Intercreditor Agreement and that
such resolutions have not been modified, rescinded or amended and
are in full force and effect.
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(b) New Material Restricted Subsidiaries. Within 45 days after
the end of each fiscal quarter, the Company shall cause each Material
Restricted Subsidiary created or acquired during the fiscal quarter
then ending, and each Restricted Subsidiary that, as a result of a
change in assets became a Material Restricted Subsidiary during such
fiscal quarter (any such Material Restricted Subsidiary, herein a “New
Material Subsidiary”), to execute and deliver to the Holders a
Subsidiary Joinder Agreement joining it as a guarantor under the
Subsidiary Guaranty and such other documentation, including, but not
limited to, corporate resolutions, charter and bylaws of such New
Material Subsidiary and an opinion of counsel for such New Material
Subsidiary, as the Required Holders may reasonably request in order to
cause such New Material Subsidiary to evidence or otherwise implement
the guaranty of the repayment of the obligations contemplated by the
Subsidiary Guaranty and this Agreement. In addition, within 45 days
after the end of a fiscal quarter in which a New Material Subsidiary
has been created, acquired or comes into existence, the Company shall
take such action as the Collateral Agent may request to cause the
capital stock of each such New Material Subsidiary to be pledged to
the Collateral Agent under the Pledge Agreement, including without
limitation, the proper completion, execution and delivery of an
amendment under the terms of the Pledge Agreement, the delivery of the
stock certificates evidencing the stock to be pledged, along with
stock powers executed in blank, Uniform Commercial Code Financing
Statements and such other documentation as the Collateral Agent may
reasonably request to cause such stock to be pledged under the Pledge
Agreement and for such pledge to be perfected and protected.”
9.12. Use of Material Transfer Proceeds. Section 9.12 is hereby added
to the Shelf Agreement to read as follows:
“9.12. Use of Material Transfer Proceeds. Immediately after
giving effect to a Transfer authorized under Section 10.3(c) that is a
Material Transfer, 60% of the net, after tax proceeds of such Transfer
shall be used to reduce the outstanding indebtedness under any Senior
Secured Credit Facility or Facilities. The Company shall have the
option of determining the Senior Secured Credit Facility or Facilities
to which to apply such proceeds. The term “Senior Secured Credit
Facilities” means this Agreement, the Note Agreements, the Credit
Agreement, the 364 Day Facility and any other facility providing
Indebtedness which refinances any of the foregoing or is entitled
under the Intercreditor Agreement to the benefits of the Liens granted
under the Pledge Agreement.”
9.13. Subsequent Indebtedness. Section 9.13 is hereby added to
the Shelf Agreement to read as follows:
“9.13. Subsequent Indebtedness. If the Company wants any
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Indebtedness that is hereafter incurred to be entitled under the
Intercreditor Agreement to the benefits of the Liens granted under the
Pledge Agreement, the Company shall use the proceeds of such
Indebtedness to reduce the commitments under the revolving Senior
Secured Credit Facilities in existence on June 29, 2001 and/or the
outstanding indebtedness under any other Senior Secured Credit
Facilities in existence on June 29, 2001. The Company shall have the
option of determining which Senior Secured Credit Facility or
Facilities to which to apply such proceeds.”
10.3 Sale of Assets, Etc. The last sentence of Section 10.3 is
deleted in its entirety, the “.” at the end of clause (c) is deleted
and replaced with “; or” and a new clause (d) is added to the end of
Section 10.3 to read as follows:
“(d) such Transfer is the sale of receivables, or undivided
interests therein, pursuant to an Approved Receivables
Securitization.”
10.4. Incurrence of Indebtedness. The last paragraph of Section
10.4 is deleted in its entirety from the Shelf Agreement and replaced
with the following:
“In addition to and not in limitation of the other provisions of
this Section 10.4, from June 29, 2001 until the date that the
Consolidated Indebtedness to Adjusted EBITDA Ratio is less than 3.00
to 1.00 as calculated for any fiscal quarter after March 31, 2001 and
established by the delivery of a Covenant Compliance Certificate under
Section 7.2(a) (such period being the “Restriction Period”), the
Company shall not permit any Restricted Subsidiary to, directly or
indirectly, create, incur, assume, guarantee, or otherwise become
directly or indirectly liable with respect to or otherwise permit any
Indebtedness, except Indebtedness of such Subsidiaries disclosed on
Schedule 10.4 and additional Indebtedness in an aggregate amount not
to exceed $10,000,000 for all Restricted Subsidiaries during the
Restriction Period. For purposes of this Section 10.4 any Person
becoming a Restricted Subsidiary after the date of this Agreement
shall be deemed to have incurred all of its then outstanding
Indebtedness at the time it becomes a Restricted Subsidiary.”
10.5. Liens. Sections 10.5(f), (g) and (i) are deleted in their
entirety from the Shelf Agreement and replaced with the following:
“(f) Liens on property or assets of the Company (other than the
capital stock of the Material Restricted Subsidiaries) or any of its
Restricted Subsidiaries securing Indebtedness or other obligations
owing to the Company or to a Wholly Owned Restricted Subsidiary;”
“(g) financing statements filed in respect of operating leases,
liens
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granted under capital leases in existence as of June 29, 2001 provided
that the amount secured thereby does not exceed $25,000, other Liens
existing on the date of this Agreement and described on Schedule 10.5
and Liens granted to the Collateral Agent under the Pledge Agreement;"
“(i) other Liens not otherwise permitted by Subsections (a)
through (h) above, provided that (i) the fair market value of the
assets subject to such other Liens shall not exceed $15,000,000, (ii)
such Liens secure Indebtedness of the Company or a Restricted
Subsidiary permitted hereby, (iii) the aggregate principal amount of
the Indebtedness secured by all Liens granted under the permissions of
this clause (i) does not exceed $10,000,000 and (iv) immediately after
giving effect to the creation thereof, no Default or Event of Default
shall exist.”
10.6. Restricted Payments. Section 10.6 is amended to add the
following to the end thereof:
“In addition to the foregoing restrictions, the Company will not,
and will not permit any of its Restricted Subsidiaries to, redeem or
otherwise acquire any of its stock or other equity interests or any
warrants, rights or other options to purchase such stock or other
equity interests except:
(a) when solely in exchange for such stock or other equity
interests;
(b) when made contemporaneously from the net proceeds of a
sale of such stock or other equity interests;
(c) the repurchase of up to 577,500 shares of the Company's
capital stock for an aggregate purchase price not to exceed
$7,500,000 in connection with its obligation to do so arising in
connection with the documentation of its acquisition of ▇▇▇▇▇ ▇
▇▇▇▇▇ Pty Ltd;
(d) the repurchase by LPAC Corp. from Restricted
Subsidiaries of LPAC Corp.'s preferred stock with proceeds of
collections on accounts receivable in connection with an Approved
Receivables Securitization; and
(e) other redemptions or acquisitions of such stock or
equity interests if, as of the date of the payment thereof, the
Consolidated Indebtedness to Adjusted EBITDA Ratio is less than
3.00 to 1.00 as calculated for any fiscal quarter: (i) that has
elapsed since March 31, 2001; (ii) that has ended before the date
of payment; and (iii) for which a Covenant Compliance Certificate
under Section 7.2(a) has been delivered.”
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10.12.3. Financial Covenants. Section 10.12.3(a) of the Shelf
Agreement is hereby amended in full to read as follows:
“(a) Coverage Ratio. As of the end of each fiscal quarter, the
Company shall not permit the ratio of Cash Flow for the four fiscal
quarters then ending to Interest Expenses for such period to be less
than (i) 2.65 to 1.00 for the fiscal quarter ended June 30, 2001; (ii)
2.75 to 1.00 for the fiscal quarter ended September 30, 2001; and
(iii) 3.00 to 1.00 for all fiscal quarters ending thereafter.”
Section 10.12.3(b) of the Shelf Agreement is amended in full to
read as follows:
“(b) Consolidated Indebtedness to Adjusted Ebitda. As of the last
day of each fiscal quarter during the periods described below, the
Company shall not permit the ratio of Consolidated Indebtedness
outstanding as of such day to the Adjusted EBITDA for the four fiscal
quarters then ended to exceed: (i) 3.90 to 1.00 for the fiscal quarter
ended June 30, 2001; (ii) 3.75 to 1.00 for the fiscal quarters ended
September 30, 2001 and December 31, 2001; (iii) 3.50 to 1.00 for the
fiscal quarters ended March 31, 2002 and June 30, 2002; (iv) 3.25 to
1.00 for the fiscal quarters ended September 30, 2002 and December 31,
2002; and (v) 3.00 to 1.00 for all fiscal quarters ending after
December 31, 2002. For the purposes of this Section 10.12.3, the
following terms shall have the indicated meanings:”
10.12.5. Restrictions On Transfers to Unrestricted Subsidiaries.
Section 10.12.5 is hereby added to the Shelf Agreement to read as
follows:
“10.12.5. Restrictions On Transfers to Unrestricted Subsidiaries.
In addition to the other limitations of this Agreement, from June 29,
2001 until the date that the Consolidated Indebtedness to Adjusted
EBITDA Ratio is less than 3.00 to 1.00 as calculated for any fiscal
quarter after March 31, 2001 and established by the delivery of a
Covenant Compliance Certificate under Section 7.2(a) (such period,
herein the “Section 10.12 Restriction Period”), the Company will not,
and will not permit any Restricted Subsidiary to, consummate any
Unrestricted Subsidiary Transfer except:
(a) the sale of inventory to Unrestricted Subsidiaries in
the ordinary course of business;
(b) payments made to Unrestricted Subsidiaries after June
30, 2001 in an aggregate amount not to exceed $30,500,000 to be
used to satisfy the obligation owed to the seller(s) arising
under the documentation
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governing the acquisition of ▇▇▇▇▇ ▇ ▇▇▇▇▇ Pty Ltd; and
(c) if no Default or Event of Default exists or would result
therefrom, Unrestricted Subsidiary Transfers, in addition to the
Transfers described in clauses (a) and (b) above, provided that
the aggregate amount of the Unrestricted Subsidiary Transfers
consummated during the Section 10.12 Restriction Period under
this clause (c) shall not exceed $60,000,000. The aggregate
amount of the Unrestricted Subsidiary Transfers for purposes of
determining compliance with this clause (c) as of any date shall
equal the sum of the following: (i) the aggregate outstanding
amount of all loans, advances and extensions of credit made by
the Company and the Restricted Subsidiaries to Unrestricted
Subsidiaries and outstanding on such date; plus (ii) the
aggregate amount of all obligations of the Unrestricted
Subsidiaries outstanding on such date that are guaranteed by the
Company or any Restricted Subsidiary or secured by a Lien granted
by the Company or a Restricted Subsidiary; plus (iii) the
aggregate Fair Market Value (determined for each Unrestricted
Subsidiary Transfer as of the date of the applicable Unrestricted
Subsidiary Transfer) of all other property (i.e., other than the
property described in clauses (i) and (ii) of this sentence)
disposed of during the Restriction Period in Unrestricted
Subsidiary Transfers consummated under this clause (c).
The term “Unrestricted Subsidiary Transfer” means, a transaction
in any form in which an Unrestricted Subsidiary receives (either
directly or indirectly) anything (including money or other property)
of value from the Company or any Restricted Subsidiary, including, any
loan, advance or other extension of credit; any sale, lease, or other
disposition of assets; any merger, consolidation or other corporate
combination; any purchase or repurchase of stocks, bonds, notes,
debentures or other securities or any other capital contribution or
investment; any transaction in which a Person provides a Guaranty or
grants Liens to secure obligations or Indebtedness of another Person.
All covenants in this Agreement shall be given independent effect so
that if a particular action or condition is not permitted by any of
such covenants (including this Section 10.12), the fact that it would
be permitted by an exception to, or be otherwise within the
limitations of, another covenant shall not avoid the occurrence of a
Default if such action is taken or such condition exists.”
11. Events of Default. Sections 11(c), (d) and (e) of the Shelf
Agreement are amended in full to read as follows:
“(c) the Company defaults in the performance of or
compliance with any term applicable to the Company and contained
in Sections 7.1(d), 9.6, 9.11, 10.2 through 10.11 or 10.12.2,
10.12.3, 10.12.4 or 10.12.5 or contained in the Pledge Agreement,
or any Material Restricted Subsidiary defaults in the
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performance of or compliance with any term applicable to it
contained in clause (c) of paragraph 6 of the Subsidiary
Guaranty; or
(d) (i) the Company defaults in the performance of or
compliance with any term contained herein (other than those
referred to in paragraphs (a), (b) and (c) of this Section 11) or
contained in the Intercreditor Agreement or with any Additional
Covenant and such default is not remedied within 30 days after
the earlier of (A) a Responsible Officer obtaining actual
knowledge of such default and (B) the Company receiving written
notice of such default from any holder of a Note (any such
written notice to be identified as a “notice of default” and to
refer specifically to this paragraph (d) of Section 11) or (ii)
any Material Restricted Subsidiary defaults in the performance of
or compliance with any term contained in the Subsidiary Guaranty
(other than those referred to in paragraphs (a), (b) and (c) of
this Section 11) or contained in the Intercreditor Agreement or
with any Additional Covenant and such default is not remedied
within 30 days after the earlier of (A) a Responsible Officer
obtaining actual knowledge of such default and (B) the Company
receiving written notice of such default from any holder of a
Note (any such written notice to be identified as a “notice of
default” and to refer specifically to this paragraph (d) of
Section 11); or
(e) any representation or warranty made in writing by or on
behalf of the Company or any Material Restricted Subsidiary or by
any officer of the Company or any Material Restricted Subsidiary
in this Agreement, the Pledge Agreement, the Intercreditor
Agreement, the Subsidiary Guaranty, or in any writing furnished
in connection with the transactions contemplated hereby proves to
have been false or incorrect in any material respect on the date
as of which made; or”
Section 11(k) is hereby added to the Shelf Agreement to read
as follows:
“(k) the occurrence of an Event of Default (as defined in
the Intercreditor Agreement); or”
Section 11(l) is hereby added to the Shelf Agreement to read
as follows:
“(l) either the Subsidiary Guaranty or the Pledge Agreement
shall for any reason cease to be in full force and effect and
valid, binding and enforceable in accordance with its terms, or
the Company or any Material Restricted Subsidiary shall so state
in writing.”
12. Remedies On Default, Etc. A new sentence is added to end of
Section 12.2 as follows:
“In addition to the other rights and remedies that the
holders of Notes may
13
have upon the occurrence of an Event of Default, the Required
Holders may direct the Collateral Agent to exercise the rights
and remedies available to the Collateral Agent under the
Intercreditor Agreement and the Pledge Agreement.”
3. Effectiveness of Amendment Agreement; Counsel Fees and Expenses.
This Amendment No. 3 shall be effective upon the satisfaction of the following
conditions:
(i) the Holders shall have received a Subsidiary Guaranty executed by
each of the Material Restricted Subsidiaries as of the date hereof;
(ii) the Holders shall have received a favorable legal opinion or
opinions from Bennack & ▇▇▇▇▇▇ L.L.P., special counsel to the Company and
the Material Restricted Subsidiaries, satisfactory to such Holder;
(iii) the Holders shall have received certified copies of the
resolutions of the Board of Directors of the Company authorizing this
Amendment No. 3, and of all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to this Amendment
No. 3;
(iv) the Holders shall have received certified copies of the
resolutions of the Board of Directors of each Material Restricted
Subsidiary authorizing the Subsidiary Guaranty, and of all documents
evidencing other necessary corporate action and governmental approvals, if
any, with respect to the Subsidiary Guaranty;
(v) the Holders shall have received a certificate of the Secretary or
Assistant Secretary of the Company certifying the names and true signatures
of the officers of the Company authorized to sign this Amendment No. 3 and
the other documents to be delivered by the Company hereunder;
(vi) the Holders shall have received evidence satisfactory to them
that the Credit Agreement, the 364 Day Facility and the Note Agreements
shall have been amended in a manner similar to the manner in which the
Shelf Agreement is proposed to be amended as herein contemplated and the
amendments of the Credit Agreement, the 364 Day Facility and Note
Agreements shall be in form and substance satisfactory to the Holders; and
(xiii) the Company shall have paid to each of the Holders an amendment
fee by wire transfer of immediately available funds in an amount equal to
the product of 0.25% and the aggregate principal amount of such Holder's
outstanding Notes on the date on which this Amendment No. 3 becomes
effective.
4. Continued Effectiveness of Amendment No. 3; Release.
(a) Except for Section 9.10, each of the Covenants and Events of
Default set forth in Section 2 hereof shall remain in effect only as long as the
Company is bound by a substantially
14
similar covenant or event of default contained in the Credit Agreement or the
364 Day Facility or any other agreement creating or evidencing Indebtedness
(collectively, the “Additional Agreements”), including but not limited to any
covenant or event of default contained in any amendment to or refinancing of the
Credit Agreement, the 364 Day Facility or any Additional Agreement. If the
Company ceases to be bound by any such Covenant or Event of Default in all
Additional Agreements, this Amendment No. 3 shall, without further action on the
part of the Company or any Holder, be deemed to be amended automatically to
delete such Additional Covenant or Event of Default.
(ii) The Holders agree that if the 1999 Lenders and the lenders
party to the 364 Day Facility release the obligations of the guarantors under
their respective guaranty of Material Restricted Subsidiaries and no new
guaranties of Material Restricted Subsidiaries are executed in favor of the
Lenders, then the Holders agree to release the obligations of the Guarantors
under the Subsidiary Guaranty.
5. Representations and Warranties. The Company represents and
warrants to the Holders that:
(i) The Company has all requisite corporate power to execute, deliver
and perform its obligations under this Amendment No. 3. The Company has duly
executed and delivered this Amendment No. 3, and this Amendment No. 3
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
(ii) Neither the execution and delivery of this Amendment No. 3 by the
Company, nor the consummation of the transactions contemplated hereby, nor
fulfillment of nor compliance with the terms and provisions hereof or thereof
will conflict with, or result in a breach of the terms, conditions or provisions
of, or constitute a default under, or result in any violation of, or except as
contemplated by the Pledge Agreement or herein, result in the creation of any
security interest, lien or other encumbrance upon any of the properties or
assets of the Company or any of its Subsidiaries pursuant to, the charter or
bylaws of the Company or any of its Subsidiaries, any award of any arbitrator or
any agreement, instrument, order, judgment, decree, statute, law, rule or
regulation to which the Company or any of its Subsidiaries is subject.
(iii) Except for notice given to and consents required from the 1999
Lenders, the lenders under the 364 Day Facility and the Noteholders, neither the
nature of the business conducted by the Company, nor any of its properties, nor
any relationship between the Company and any other Person, nor any circumstance
in connection with the transactions contemplated by this Amendment No. 3 is such
as to require any authorization, consent, approval, exemption or other action by
or notice to or filing with any court or administrative or governmental body or
any other Person in connection with the execution and delivery of any amendment
document or the fulfillment of or compliance with the terms and provisions
hereof or thereof.
(iv) Upon the effectiveness of this Amendment No. 3, no Event of
Default or Default shall have occurred and be continuing.
15
6. Miscellaneous.
(i) Except as expressly amended by this Amendment No. 3, the Shelf
Agreement shall remain in full force and effect. This Amendment No. 3 shall be
binding upon and inure to the benefit of the Holders and their respective
successors and permitted assigns.
(ii) Other than as expressly set forth herein, the execution, delivery
and effectiveness of this Amendment No. 3 shall not operate as a waiver of any
right, power or remedy of any Holder nor constitute a waiver of any provision of
the Shelf Agreement, the Notes or any other document, instrument or agreement
executed and delivered in connection with this Amendment No. 3.
(iii) The Company confirms its agreement, pursuant to Section 15.1 of
the Shelf Agreement, to pay all costs and expenses of the Holders related to
this Amendment No. 3, the Intercreditor Agreement, the Pledge Agreement and the
Subsidiary Guaranty and all matters contemplated herein, including without
limitation the reasonable fees and expenses of the Holders' special counsel.
(iv) This Amendment No. 3 shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
the State of New York, excluding choice-of-law principles of the law of such
State that would require the application of the laws of a jurisdiction other
than such State.
(v) This Amendment No. 3 may be executed in any number of
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same document. Delivery of this Amendment
No. 3 may be made by telecopy of a duly executed counterpart copy hereof.
16
If the foregoing correctly describes our understanding with respect
to the subject matter of this Amendment No. 3, please execute this letter in the
place indicated below.
Very truly yours,
LENNOX INTERNATIONAL INC.
By:
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
ACCEPTED AND AGREED:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By:
----------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇
Title: Vice President
U.S. PRIVATE PLACEMENT FUND
By: Prudential Private Placement Investors, L.P.,
Investment Advisor
By: Prudential Private Placement Investors, Inc.,
its General Partner
By:
-------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇
Title: Vice President
17
Exhibit A
Form of Subsidiary Guaranty
Schedule 10.4
LENNOX INTERNATIONAL INC.
AND RESTRICTED SUBSIDIARIES
INDEBTEDNESS AS OF
May 26, 2001 (except as noted)
▇. ▇▇▇▇▇▇ INTERNATIONAL INC.
(1) Note Purchase Agreement dated as of December 1, 1993 $88,889,000
among Lennox International Inc. and the Noteholders
identified at the end thereof, pursuant to which Lennox
International Inc. delivered its 6.73% Senior
Promissory Notes due 2008
(2) Note Purchase Agreement dated as of July 6, 1995 20,000,000
between Lennox International Inc. and Teachers
Insurance and Annuity Association of America, pursuant
to which Lennox International Inc. delivered its 7.06%
Senior Promissory Notes due 2005.
(3) Guaranty dated September 19, 1995 from Lennox 475,000
International Inc. to First Bank of Natchitoches &
Trust Company and Regions Bank of Louisiana
guaranteeing 50% of debt of Alliance Compressors to
such Banks under a Promissory Note dated September 19,
1995.
(4) Guaranty of 50% of amounts due from Alliance Compressors 176,762
under a master Equipment Lease Agreement dated March
28, 1995 with NationsBanc Leasing Corporation
(5) Note Purchase Agreement dated as of April 3, 1998,
between Lennox International Inc. and the Noteholders
identified therein, pursuant to which Lennox
International Inc. delivered its:
6.56% Senior Notes due April 3, 2005 25,000,000
6.75% Senior Notes due April 3, 2008 50,000,000
(6) Revolving Credit Facility Agreement dated as of July 29, 240,000,000
1999
(7) Revolving Credit Facility Agreement dated as of January 115,700,000
25, 2000
(8) Master Shelf Agreement dated as of October 15, 1999
between Lennox International Inc. and Prudential
Insurance Company of America, pursuant to which Lennox
International Inc. delivered its:
7.75% Senior Notes due August 25, 2005 25,000,000
8.00% Senior Notes due June 1, 2010 35,000,000
(9) Promissory Note dated April 18, 2001 from Lennox
International Inc to Mizuho Financial Group 5,000,000
B. SERVICE EXPERTS INC.
Convertible Notes and miscellaneous debt 9,981,479
related to original
acquisitions of centers
C. MISCELLANEOUS OTHER DEBT 125,000
TOTAL OUTSTANDING INDEBTEDNESS OF LENNOX INTERNATIONAL
INC. AND RESTRICTED SUBSIDIARIES $615,347,241
2
Schedule 10.5
EXISTING LIENS
JURISDICTION SECURED PARTY UCC-1 FILE NO. DATE FILED
DEBTOR: LENNOX INDUSTRIES INC.
Texas Secretary of Wachovia Bank, N.A., 00-00521016 6/16/00
State as Administrative Agent
for the Secured Parties
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇
Mail Code GA 04-23
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
DEBTOR: ▇▇▇▇▇▇▇▇▇ AIR CONDITIONING INC
Ohio Secretary of State Wachovia Bank, N.A., AP322733 3/27/01
as Administrative Agent
for the Secured Parties
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇
Mail Code GA 04-23
Atlanta, GA 30303
Huron County, Ohio Wachovia Bank, N.A., 000084073 3/27/01
as Administrative Agent
for the Secured Parties
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇
Mail Code GA 04-23
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇