UNITED STATES
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, 2001
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 001-15149
LENNOX INTERNATIONAL INC.
DELAWARE 42-0991521
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2140 LAKE PARK BLVD.
RICHARDSON, TEXAS
75080
(Address of principal executive offices)
(Zip Code)
(972) 497-5000
(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 9, 2001, the number of shares outstanding of the registrant's common
stock, par value $.01 per share, was 56,152,987.
i
LENNOX INTERNATIONAL INC.
INDEX
Page No
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 2001
(Unaudited)and December 31, 2000.................................. 3
Consolidated Statements of Income (Unaudited) -
Three Months Ended March 31, 2001 and 2000........................ 4
Consolidated Statements of Cash Flows (Unaudited) -
Three Months Ended March 31, 2001 and 2000........................ 5
Notes to Consolidated Financial Statements ....................... 6
(Unaudited)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk... 14
Part II. Other Information
Item 4. Exhibits and Reports on Form 8-K......................... 15
ii
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of March 31, 2001 and December 31, 2000
(In thousands, except share data)
ASSETS
March 31, December 31,
2001 2000
---- ----
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents.......................... $ 25,489 $ 40,633
Accounts and notes receivable, net................. 360,822 399,136
Inventories........................................ 374,156 359,531
Deferred income taxes.............................. 48,113 47,063
Other assets....................................... 62,020 54,847
----------- ----------
Total current assets........................ 870,600 901,210
PROPERTY, PLANT AND EQUIPMENT, net.................. 335,888 354,172
GOODWILL, net....................................... 726,269 739,468
OTHER ASSETS........................................ 57,769 60,181
---------- ----------
TOTAL ASSETS................................$1,990,526 $2,055,031
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt.................................... $ 31,404 $ 31,467
Current maturities of long-term debt............... 29,336 31,450
Accounts payable................................... 257,408 260,208
Accrued expenses................................... 251,206 242,347
Income taxes payable............................... 13,486 24,448
---------- ----------
Total current liabilities................... 582,840 589,920
LONG-TERM DEBT...................................... 610,162 627,550
DEFERRED INCOME TAXES............................... 1,058 941
POSTRETIREMENT BENEFITS, OTHER THAN PENSIONS........ 14,265 14,284
OTHER LIABILITIES................................... 77,241 77,221
---------- ----------
Total liabilities........................... 1,285,566 1,309,916
MINORITY INTEREST................................... 1,965 2,058
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 25,000,000 shares
authorized, no shares issued or outstanding..... -- --
Common stock, $.01 par value, 200,000,000 shares
authorized, 60,524,220 shares and 60,368,599
shares issued for 2001 and 2000, respectively... 605 604
Additional paid-in capital......................... 372,585 372,690
Retained earnings.................................. 431,796 447,377
Accumulated other comprehensive loss............... (65,659) (37,074)
Deferred compensation.............................. (5,910) (6,457)
Treasury stock, at cost, 2,980,846 and 3,332,784
shares for 2001 and 2000, respectively........... (30,422) (34,083)
---------- -----------
Total stockholders' equity.................. 702,995 743,057
---------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..$1,990,526 $2,055,031
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
3
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 2001 and 2000
(Unaudited, in thousands, except per share data)
FOR THE
THREE MONTHS ENDED
MARCH 31,
-------------------------
2001 2000
---- ----
NET SALES...........................................$ 715,966 $ 716,324
COST OF GOODS SOLD.................................. 502,381 487,561
---------- ----------
Gross Profit................................ 213,585 228,763
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE......... 217,556 205,280
---------- ----------
(Loss) income from operations............... (3,971) 23,483
INTEREST EXPENSE, net............................... 12,777 12,750
OTHER............................................... 663 229
MINORITY INTEREST................................... 107 (546)
---------- ----------
(Loss) income before income taxes........... (17,518) 11,050
(BENEFIT) PROVISION FOR INCOME TAXES................ (7,270) 5,310
---------- ----------
Net (loss) income.......................$ (10,248) $ 5,740
========== ==========
REPORTED (LOSS) EARNINGS PER SHARE
Basic.............................................$ (0.18) $ 0.10
Diluted...........................................$ (0.18) $ 0.10
The accompanying notes are an integral part of these consolidated financial
statements.
4
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2001 and 2000
(Unaudited, in thousands)
FOR THE
THREE MONTHS ENDED
MARCH 31,
------------------
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income................................................. $ (10,248) $ 5,740
Adjustments to reconcile net (loss) income to
net cash provided by (used in) operating activities:
Minority interest............................................. 107 (546)
Joint venture (profit) loss................................... (41) 329
Depreciation and amortization................................. 21,741 20,892
Loss on disposal of equipment................................. 113 1,788
Other......................................................... 983 315
Changes in assets and liabilities, net effects of acquisitions:
Accounts and notes receivable................................. 27,121 (26,828)
Inventories................................................... (23,814) (38,846)
Other current assets.......................................... (8,841) (5,038)
Accounts payable.............................................. 2,686 42,931
Accrued expenses.............................................. 14,813 3,577
Deferred income taxes......................................... (150) (2,150)
Income taxes payable and receivable........................... (12,287) 2,587
Long-term warranty, deferred income and other liabilities..... (4,033) 3,972
--------- ---------
Net cash provided by operating activities.................. 8,150 8,723
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the disposal of property, plant and equipment....... 769 86
Purchases of property, plant and equipment........................ (5,036) (17,470)
Acquisitions, net of cash acquired................................ (1,413) (183,423)
--------- ---------
Net cash used in investing activities...................... (5,680) (200,807)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving short-term debt........................... 1,997 7,939
(Repayments of) proceeds from revolving long-term debt............ (14,558) 206,673
Repayment of long-term debt....................................... -- (13,640)
Sales of common stock............................................. 1,036 --
Repurchases of common stock....................................... (214) (97)
Cash dividends paid............................................... (5,274) (5,453)
--------- ---------
Net cash (used in) provided by financing activities........ (17,013) 195,422
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS................... (14,543) 3,338
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS.............. (601) (547)
--------- ---------
CASH AND CASH EQUIVALENTS, beginning of period..................... 40,633 29,174
--------- ---------
CASH AND CASH EQUIVALENTS, end of period........................... $ 25,489 $ 31,965
========= =========
Supplementary disclosures of cash flow information:
Cash paid during the period for:
Interest................................................... $ 11,612 $ 8,816
========= =========
Income taxes ...............................................$ 2,380 $ 2,403
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
5
LENNOX INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION AND OTHER ACCOUNTING INFORMATION:
The accompanying unaudited consolidated balance sheet as of March 31, 2001,
and the consolidated statements of income and cash flows for the three months
ended March 31, 2001 and 2000 should be read in conjunction with Lennox
International Inc.'s (the "Company") consolidated financial statements and the
accompanying footnotes as of December 31, 2000 and 1999 and for each of the
three years in the period ended December 31, 2000. In the opinion of management,
the accompanying consolidated financial statements contain all material
adjustments, consisting principally of normal recurring adjustments, necessary
for a fair presentation of the Company's financial position, results of
operations, and cash flows. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
applicable rules and regulations, although the Company believes that the
disclosures herein are adequate to make the information presented not
misleading. The operating results for the interim periods are not necessarily
indicative of the results to be expected for a full year.
The Company's fiscal year ends on December 31 of each year, and the
Company's quarters are each comprised of 13 weeks. For convenience, throughout
these financial statements, the 13 weeks comprising each three month period are
denoted by the last day of the respective calendar quarter.
2. REPORTABLE BUSINESS SEGMENTS:
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
131, the Company discloses business segment data for its reportable business
segments, which have been determined using the "management approach." The
management approach is based on the way segments are organized within the
Company for making operating decisions and assessing performance. The Company's
business operations are organized within five reportable business segments as
follows (in thousands):
FOR THE
THREE MONTHS ENDED
MARCH 31,
-----------------------
NET SALES 2001 2000
--------- ---- ----
North American residential................ $ 282,025 $ 291,780
North American retail..................... 222,424 194,528
Commercial air conditioning............... 93,378 95,084
Commercial refrigeration.................. 85,089 91,672
Heat transfer (1)......................... 58,275 65,447
Eliminations.............................. (25,225) (22,187)
--------- ---------
$ 715,966 $ 716,324
========= =========
(1) The Heat Transfer segment had intersegment sales of $7,036 and $5,113 for
the three months ended March 31, 2001 and 2000, respectively.
FOR THE
THREE MONTHS ENDED
MARCH 31,
-------------------------
2001 2000
---- ----
(LOSS) INCOME FROM OPERATIONS
-----------------------------
North American residential................ $ 12,306 $ 20,765
North American retail..................... (9,973) 5,426
Commercial air conditioning............... (1,817) (3,053)
Commercial refrigeration.................. 6,221 7,050
Heat transfer............................. 1,788 4,934
Corporate and other....................... (11,003) (9,905)
Eliminations.............................. (1,493) (1,734)
--------- ---------
$ (3,971) $ 23,483
========= =========
6
AS OF AS OF
MARCH 31, DECEMBER 31,
TOTAL ASSETS 2001 2000
------------ ---- ----
North American residential................ $ 514,336 $ 529,492
North American retail..................... 785,144 800,719
Commercial air conditioning............... 214,459 215,656
Commercial refrigeration.................. 225,892 239,783
Heat transfer............................. 146,505 149,813
Corporate and other....................... 127,521 144,547
Eliminations.............................. (23,331) (24,979)
--------- ---------
$1,990,526 $2,055,031
========== ==========
3. INVENTORIES:
Components of inventories are as follows (in thousands):
AS OF AS OF
MARCH 31, DECEMBER 31,
2001 2000
---- ----
Finished goods........................... $ 240,870 $ 216,547
Repair parts............................. 42,309 35,024
Work in process.......................... 22,214 23,606
Raw materials............................ 117,710 132,298
--------- ---------
423,103 407,475
Reduction for last-in, first-out......... 48,947 47,944
--------- ---------
$ 374,156 $ 359,531
========= =========
4. SHIPPING AND HANDLING:
Shipping and handling costs are included as part of Selling, General and
Administrative Expense in the accompanying Consolidated Statements of Income in
the following amounts (in thousands):
For the
Three Months Ended
March 31,
------------------
2001 2000
---- ----
$30,955 $30,122
5. LINES OF CREDIT AND FINANCING ARRANGEMENTS:
The Company has bank lines of credit aggregating $552 million, of which
$391 million was outstanding at March 31, 2001 with the remaining $161 million
available for future borrowings, subject to covenant limitations. Included in
the lines of credit are a $300 million domestic facility and a $163 million
domestic facility, each governed by agreements between the Company and
syndicates of banks. The facilities contain certain financial covenants and bear
interest, at the Company's option, at a rate equal to either (a) the greater of
the bank's prime rate or the federal funds rate plus 0.5% or (b) the London
Interbank Offered Rate plus a margin equal to 0.5% to 1.25%, depending upon the
ratio of total funded debt to EBITDA. The Company pays a commitment fee equal to
0.10% to 0.30% of the unused commitment, depending upon the ratio of total
funded debt to EBITDA. The agreements provide restrictions on the Company's
ability to incur additional indebtedness, encumber its assets, sell its assets,
or pay dividends.
7
6. EARNINGS PER SHARE:
Basic earnings per share are computed by dividing net income by the
weighted average number of common shares outstanding during the period. Diluted
earnings per share are computed by dividing net income by the sum of the
weighted average number of shares and the number of equivalent shares assumed
outstanding, if dilutive, under the Company's stock-based compensation plans.
Diluted earnings per share are computed as follows (in thousands, except per
share data):
FOR THE
THREE MONTHS ENDED
MARCH 31,
----------------------
2001 2000
---- ----
Net (loss) income $(10,248) $ 5,740
======== ========
Weighted average shares outstanding................. 55,775 54,480
Effect of diluted securities attributable to stock
options and performance share awards............... -- 307
-------- --------
Weighted average shares outstanding, as adjusted.... 55,775 54,787
======== ========
Diluted (loss) earnings per share................... $ (0.18) $ 0.10
========= ========
7. DERIVATIVES:
Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No. 133"). SFAS No. 133 requires that all derivative
financial instruments be recognized as either assets or liabilities in the
balance sheet and carried at fair value. Changes in fair value of these
instruments are to be recognized periodically in earnings or stockholders'
equity depending on the intended use of the instrument. Gains or losses on
derivatives designated as fair value hedges are recognized in earnings in the
period of change. Gains or losses on derivatives designated as cash flow hedges
are initially reported as a component of other comprehensive income and later
classified into earnings in the period in which the hedged item also affects
earnings. The Company hedges its exposure to the fluctuation on the prices paid
for copper and aluminum metals by purchasing futures contracts on these metals.
Gains or losses recognized on the closing of these contracts negate the losses
or gains realized through physical deliveries of these metals. Quantities
covered by these commodity futures contracts are for less than expected actual
quantities to be purchased. As of March 31, 2001, the Company had metals futures
contracts maturing at various dates to December 31, 2002 with a fair value as an
asset of $0.2 million and as a liability of $3.7 million. These are hedges of
forecasted transactions, and under SFAS No. 133, such contracts are to be
considered cash flow hedges. Accordingly, the Company recorded an after-tax
charge to other comprehensive income (loss), a direct component of owner's
equity, of $2.0 million. The charge to other comprehensive income will be
reclassified into earnings when the related inventory is sold, generally within
three to six months.
The Company also hedges its exposure to fluctuations in foreign currency
exchange rates incurred by its Australian subsidiary. This subsidiary
manufactures sophisticated machine tools, which generally require long
manufacturing and installation times and which generally are sold at prices
denominated in the local currency of the purchasing entity. This exposure to the
fluctuations in foreign currency exchange rates is hedged through the sale of
futures contracts for the various currencies. Since the customers are not
invoiced and payments are not received until the equipment has been installed
and operating satisfactorily, the currency futures contracts are deemed to be
cash flow hedges and as such are recorded at fair value with an offset to other
comprehensive income (loss) until realized. Gains or losses on the currency
futures are transferred from other comprehensive income to the income statement
when the related equipment is sold, generally within three to six months. As of
March 31, 2001, the Company had currency futures contracts maturing at various
dates through December 31, 2001, for which the fair value was a liability of
$4.2 million. Accordingly, $3.0 million, net of applicable income tax, was
charged to other comprehensive income (loss).
8
8. COMPREHENSIVE LOSS:
Comprehensive loss is computed as follows (in thousands):
FOR THE
THREE MONTHS ENDED
MARCH 31,
----------------------
2001 2000
---- ----
Net (loss) income............................. $(10,248) $ 5,740
Foreign currency
translation adjustments...................... (23,558) (8,959)
Derivatives................................... (5,027) --
-------- --------
Total comprehensive (loss).................... $(38,833) $ (3,219)
======== ========
9. SUBSEQUENT EVENT:
The Company completed a restructuring plan for its North American retail
segment under which a number of under-performing service centers will be sold or
closed and a number of service centers will be merged with other existing
service centers. As a result, the Company has announced it intends to record a
pretax charge of approximately $38 million in the second quarter of 2001.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company participates in five reportable business segments of the
heating, ventilation, air conditioning and refrigeration ("HVACR") industry. The
first segment is the North American residential market, in which Lennox
manufactures and markets a full line of heating, air conditioning and hearth
products for the residential replacement and new construction markets in the
United States and Canada. The second segment is the North American retail market
which includes sales and installation of, and maintenance and repair services
for, HVACR equipment by Lennox-owned service centers in the United States and
Canada. The third segment is the global commercial air conditioning market, in
which Lennox manufactures and sells rooftop products and applied systems for
commercial applications. The fourth segment is the global commercial
refrigeration market, which consists of unit coolers, condensing units and other
commercial refrigeration products. The fifth segment is the heat transfer
market, in which Lennox designs, manufactures and sells evaporator and condenser
coils, copper tubing and related manufacturing equipment to original equipment
manufacturers and other specialty purchasers on a global basis.
Lennox sells its products to numerous types of customers, including
distributors, installing dealers, property owners, national accounts and
original equipment manufacturers. The demand for Lennox's products is influenced
by national and regional economic and demographic factors, such as interest
rates, the availability of financing, regional population and employment trends
and general economic conditions, especially consumer confidence. In addition to
economic cycles, demand for Lennox's products is seasonal and dependent on the
weather. Hotter than normal summers generate strong demand for replacement air
conditioning and refrigeration products and colder than normal winters have the
same effect on heating products. Conversely, cooler than normal summers and
warmer than normal winters depress sales of HVACR products.
The principal components of cost of goods sold are labor, raw materials,
component costs, factory overhead and estimated costs of warranty expense. The
principal raw materials used in Lennox's manufacturing processes are copper,
aluminum and steel. In instances where Lennox is unable to pass on to its
customers increases in the costs of copper and aluminum, Lennox enters into
forward contracts for the purchase of those materials. Lennox attempts to
minimize the risk of price fluctuations in key components by entering into
contracts, typically at the beginning of the year, which generally provide for
fixed prices for its needs throughout the year. These hedging strategies enable
Lennox to establish product prices for the entire model year while minimizing
the impact of price increases of components and raw materials on its margins.
Warranty expense is estimated based on historical trends and other factors.
On January 21, 2000, Lennox completed the acquisition of Service Experts,
Inc., an HVAC company comprised of retail businesses across the United States,
for approximately $307 million, including 12.2 million shares of Lennox common
stock and the assumption of $175 million of debt. The acquisition added an
additional 120 service centers to the U.S. retail network. As these centers have
been integrated into the retail operation with the 104 centers acquired by
Lennox since September 1, 1998, operating performance has not reached expected
levels. To improve profitability, the retail company will be restructured in the
second quarter of 2001. Ten centers will be closed or sold and 28 centers will
be merged together, merged into other company-owned service centers or
repositioned. These actions will reduce the total number of centers, which
currently total 224, by 26. This restructuring will result in a $38 million
charge in the second quarter of 2001.
Lennox's fiscal year ends on December 31 of each year, and its fiscal
quarters are each comprised of 13 weeks. For convenience, throughout this
Management's Discussion and Analysis of Financial Condition and Results of
Operations, the 13 week periods comprising each fiscal quarter are denoted by
the last day of the calendar quarter.
10
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of net sales, income data
for the three months ended March 31, 2001 and 2000:
FOR THE
THREE MONTHS ENDED
MARCH 31,
-------------------
2001 2000
---- ----
Net sales...................................... 100.0% 100.0%
Cost of goods sold............................. 70.2 68.1
------ ------
Gross profit................................ 29.8 31.9
Selling, general and administrative expenses... 30.4 28.6
------ ------
(Loss) income from operations............... (0.6) 3.3
Interest expense, net.......................... 1.8 1.8
Other.......................................... 0.0 0.1
Minority interest.............................. 0.0 (0.1)
------ ------
(Loss) income before income taxes........... (2.4) 1.5
(Benefit) provision for income taxes........... (1.0) 0.7
------ ------
Net (loss) income........................... (1.4)% 0.8%
====== ======
The following table sets forth net sales by business segment and geographic
market (dollars in millions):
THREE MONTHS ENDED MARCH 31,
----------------------------------------
2001 2000
------------------ ------------------
Amount % Amount %
Business Segment:
North American residential.............$ 282.0 39.4% $ 291.8 40.7%
North American retail................... 222.4 31.1 194.5 27.2
Commercial air conditioning............. 93.4 13.0 95.1 13.3
Commercial refrigeration................ 85.1 11.9 91.7 12.8
Heat transfer........................... 58.3 8.1 65.4 9.1
Eliminations............................ (25.2) (3.5) (22.2) (3.1)
-------- ----- -------- -----
Total net sales $ 716.0 100.0% $ 716.3 100.0%
======== ===== ====== =====
Geographic Market:
U.S. .................................. $ 562.4 78.5% $ 554.9 77.5%
International.......................... 153.6 21.5 161.4 22.5
-------- ----- -------- -----
Total net sales................ $ 716.0 100.0% $ 716.3 100.0%
======== ===== ====== =====
11
THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000
NET SALES. Net sales decreased $0.3 million, or 0.04%, to $716.0 million
for the three months ended March 31, 2001 from $716.3 million for the three
months ended March 31, 2000. Adjusted for the impact of currency translation,
net sales increased 2% compared to the first three months of 2000.
Net sales in the North American residential segment were $282.0 million for
the three months ended March 31, 2001, a decrease of $9.8 million, or 3.4%, from
$291.8 million for the three months ended March 31, 2000. The Air Conditioning
and Refrigeration Institute reported factory shipments of unitary air
conditioners and heat pumps were down 13% for the first two months of this year.
This decrease in industry shipments was a major factor in the Company's decline
in net sales for the quarter, as market share gains were realized by Lennox in
the core residential HVAC segment for this time period. The Company's Hearth
Products business was particularly impacted by the decline in housing starts and
the weakness in manufactured housing sales.
Net sales in the North American retail segment were $222.4 million for the
three months ended March 31, 2001, an increase of $27.9 million, or 14.3%, from
$194.5 million for the three months ended March 31, 2000. This growth was
achieved primarily by our acquisition of Service Experts Inc. in January of
2000.
Commercial air conditioning segment net sales decreased $1.7 million, or
1.8%, to $93.4 million for the three months ended March 31, 2001 compared to the
three months ended March 31, 2000. Adjusted for the impact of currency
translation, net sales increased 0.7% compared to the first three months of
2000. Although the commercial construction market has tightened somewhat in
North America, the effect on sales was minimized in the quarter as a result of
the introduction of the cost-effective Value Series product and by strengthened
sales in Europe. Adjusted for the impact of currency translation, European
commercial air conditioning sales grew 8.8%.
Net sales in the commercial refrigeration segment were $85.1 million for
the three months ended March 31, 2001, a decrease of $6.6 million, or 7.2%, from
$91.7 million for the three months ended March 31, 2000. Adjusted for the impact
of currency translation, net sales were equal to the prior year. Offsetting the
North American market slowdown in supermarket, convenience store, food service
and cold storage sectors were strong sales in our Australian refrigeration
business. Adjusting for the impact of currency translation, net trade sales in
Australia grew 9.0%.
Heat transfer segment revenues decreased $7.1 million, or 11.0%, to $58.3
million for the three months ended March 31, 2001 compared to the three months
ended March 31, 2000. Adjusted for the impact of currency translation, net trade
sales decreased 7.8% compared to the first three months of 2000. The sales
decline is attributable to a decrease in OEM customer orders as a result of the
general economic slowdown in the United States.
GROSS PROFIT. Gross profit was $213.6 million for the three months ended
March 31, 2001, compared to $228.8 million for the three months ended March 31,
2000, a decrease of $15.2 million. Gross profit margin was 29.8% for the three
months ended March 31, 2001, and 31.9% for the three months ended March 31,
2000. The primary cause of the decrease in gross profit margin was
under-utilization of labor at the retail service centers. Residential
replacement centers' sales volume was down and as a result service technicians
were not fully utilized. Several of the centers identified for closure were
struggling to efficiently utilize their labor. To a lesser extent, center
margins were negatively impacted by a shift in sales mix to lower margin
commercial and new construction business.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $217.6 million for the three months ended March 31,
2001, an increase of $12.3 million, or 6.0%, from $205.3 million for the three
months ended March 31, 2000. Selling, general and administrative expenses
represented 30.4% and 28.6% of total revenues for the three months ended 2001
and 2000, respectively. The increase in selling, general and administrative
expense is entirely due to acquisitions in the retail business segment.
INTEREST EXPENSE, NET. Interest expense, net, for the three months ended
March 31, 2001 was unchanged from the three months ended March 31, 2000 at $12.8
million.
OTHER. Other expense was $0.7 million for the three months ended March 31,
2001 and $0.2 million for the three months ended March 31, 2000. Other expense
is primarily comprised of currency exchange gains or losses, which relate
principally to the Company's operations in Canada, Australia and Europe.
MINORITY INTEREST. Minority interest was $0.1 million for the three months
ended March 31, 2001 and ($0.5) million for the three months ended March 31,
2000. The change is primarily a result of Lennox acquiring the remaining 30% of
its European operations in April 2000.
12
PROVISION FOR INCOME TAXES. The (benefit) provision for income taxes was
($7.3) million for the three months ended March 31, 2001 and $5.3 million for
the three months ended March 31, 2000. The effective tax rate of 41.5% and 48.1%
for the three months ended March 31, 2001 and 2000, respectively, differs from
the statutory federal rate of 35.0% principally due to state and local taxes,
non-deductible goodwill expenses and foreign operating losses for which no tax
benefits have been recognized.
LIQUIDITY AND CAPITAL RESOURCES
Lennox's working capital and capital expenditure requirements are generally
met through internally generated funds and bank lines of credit.
During the first three months of 2001, cash provided by operating
activities was $8.2 million compared to $8.7 million for the comparable period
in 2000. The 2001 amount includes $30 million received from the sale of accounts
receivable. If the sale of the accounts receivable were excluded, cash from
operating activities would have been a usage of $21.8 million in 2001. This
reduction relates primarily to the net, after tax, loss incurred in 2001. Net
cash used in investing activities was $195 million less than during the
comparable period in 2000 due to reduced capital expenditures and retail segment
acquisitions. Cash (used in) provided by financing activities was $212 million
less than the comparable 2000 period, reflecting reduced capital and acquisition
expenditures.
Capital expenditures in 2001 and 2000 were primarily for production
equipment at the Orangeburg, South Carolina and Marshalltown, Iowa manufacturing
plants.
Lennox has bank lines of credit aggregating $552 million, of which $391
million was outstanding at March 31, 2001 with the remaining $161 million
available for future borrowings, subject to covenant limitations. Included in
the lines of credit are a $300 million domestic facility and a $163 million
domestic facility, each governed by agreements between Lennox and syndicates of
banks. The facilities contain certain financial covenants and bear interest, at
Lennox's option, at a rate equal to either (a) the greater of the bank's prime
rate or the federal funds rate plus 0.5% or (b) the London Interbank Offered
Rate plus a margin equal to 0.5% to 1.25%, depending upon the ratio of total
funded debt to EBITDA. Lennox pays a commitment fee equal to 0.10% to 0.30% of
the unused commitment, depending upon the ratio of total funded debt to EBITDA.
The agreements provide restrictions on Lennox's ability to incur additional
indebtedness, encumber its assets, sell its assets, or pay dividends.
In June, 1999, James N. Kirby Pty. Ltd. was acquired for approximately $65
million. In addition, approximately $20.5 million of Kirby's debt was assumed.
The purchase price consisted of approximately $16 million in cash, $33 million
in deferred payments and 650,430 shares of common stock. If Lennox's common
stock does not trade at a price greater than $29.09 per share for five
consecutive days from the period of June 2000 to June 2001, then Lennox is
obligated to pay the former owners of Kirby the difference between the trading
price for the last five days of this period and $29.09 for 577,500 of the shares
of common stock (approximately $10.7 million as of March 31, 2001).
On April 24, 2001, Lennox announced it had completed a restructuring plan
for its North American retail segment under which a number of service centers
will be sold, closed or merged with other existing service centers. The net cash
cost of this restructuring is estimated to be approximately $7.0 million, most
of which is expected to be paid in the second quarter of 2001.
Lennox believes that cash flow from operations, as well as available
borrowings under its credit facilities, will be sufficient to fund operations
for the foreseeable future.
13
RECENT ACCOUNTING PRONOUNCEMENTS
None.
FORWARD LOOKING INFORMATION
This Report contains forward-looking statements and information that are
based on the beliefs of Lennox's management as well as assumptions made by and
information currently available to management. All statements other than
statements of historical fact included in this Report constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, including but not limited to statements identified by the words "may,"
"will," "should," "plan," "predict," "anticipate," "believe," "intend,"
"estimate" and "expect" and similar expressions. Such statements reflect
Lennox's current views with respect to future events, based on what it believes
are reasonable assumptions; however, such statements are subject to certain
risks, uncertainties and assumptions. These include, but are not limited to,
warranty and product liability claims; ability to successfully complete and
integrate acquisitions; ability to manage new lines of business; the
consolidation trend in the HVACR industry; adverse reaction from customers to
the Company's acquisitions or other activities; the impact of the weather on
business; competition in the HVACR business; increases in the prices of
components and raw materials; general economic conditions in the U.S. and
abroad; labor relations problems; operating risks and environmental risks.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may differ materially
from those in the forward-looking statements. Lennox disclaims any intention or
obligation to update or review any forward-looking statements or information,
whether as a result of new information, future events or otherwise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Lennox's results of operations can be affected by changes in exchange
rates. Net sales and expenses in currencies other than the United States dollar
are translated into United States dollars for financial reporting purposes based
on the average exchange rate for the period. Net sales from outside the United
States represented 21.5% and 22.5% of total net sales for the three months ended
March 31, 2001 and 2000, respectively. Historically, foreign currency
transaction gains (losses) have not had a material effect on Lennox's overall
operations.
The Company from time to time enters into foreign exchange contracts to
hedge receivables or payables denominated in foreign currencies. These contracts
do not subject the Company to risk from exchange rate movements because the
gains or losses on the contracts offset losses or gains, respectively, on the
items being hedged. As of March 31, 2001, the Company had obligations to deliver
$24.0 million of various currencies over the next 12 months and to take
possession of $8.0 million of various currencies over the next nine months. The
fair value of the various contracts was a liability of $4.2 million as of March
31, 2001.
The Company enters into commodity futures contracts to stabilize prices to
be paid for raw materials and parts containing high copper and aluminum content.
These contracts are for quantities equal to, or less than, quantities expected
to be consumed in future production. As of March 31, 2001, the Company was
committed for 32.0 million pounds of aluminum and 42.5 million pounds of copper
under such arrangements. The fair value of these commodity contracts was a net
liability of $3.5 million as of March 31, 2001.
The Company has contracts with various suppliers to purchase raw materials
with high aluminum content at fixed prices over the next 12 months, thereby
stabilizing costs for these products. As of March 31, 2001, 10.2 million pounds
of such aluminum content was so committed. The fair value of this commitment was
insignificant at March 31, 2001.
14
PART II -- OTHER INFORMATION
ITEM 4. EXHIBITS AND REPORTS ON FORM 8-K.
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
*3.1 -- Restated Certificate of Incorporation of Lennox (Incorporated herein by
reference to Exhibit 3.1 to Lennox's Registration Statement on Form S-1
(Registration No. 333-75725)).
*3.2 -- Amended and Restated Bylaws of Lennox (Incorporated herein by
reference to Exhibit 3.2 to Lennox's Registration Statement on Form S-1
(Registration No. 333-75725)).
*4.1 -- Specimen Stock Certificate for the Common Stock, par value $.01 per
share, of Lennox (Incorporated herein by reference to Exhibit 4.1 to
Lennox's Registration Statement on Form S-1 (Registration No.
333-75725)).
10.1 -- Amended and Restated Receivables Purchase Agreement, dated as of March
23, 2001, among LPAC Corp., Lennox Industries Inc., Blue Ridge Asset
Funding Corporation and Wachovia Bank, N.A. (filed herewith).
- ----------
* Incorporated herein by reference as indicated.
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.
LENNOX INTERNATIONAL INC.
Date: May 11, 2001 /s/ Richard A. Smith
--------------------
Principal Financial Officer
and Duly Authorized Signatory
AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT
Dated as of March 23, 2001
Among
LPAC CORP.
as the Seller
and
LENNOX INDUSTRIES INC.,
as the Master Servicer
and
BLUE RIDGE ASSET FUNDING CORPORATION
as the Purchaser
and
WACHOVIA BANK, N.A.
as the Administrative Agent
TABLE OF CONTENTS
Page
----
ARTICLE I PURCHASES AND REINVESTMENTS...................................................2
SECTION 1.1 Commitments to Purchase; Limits on Purchaser's Obligations...............2
SECTION 1.2 Purchase Procedures; Assignment of the Purchaser's Interests.............2
SECTION 1.3 Reinvestments of Certain Collections; Payment of Remaining Collections...3
SECTION 1.4 Asset Interest...........................................................5
ARTICLE II COMPUTATIONAL RULES..........................................................6
SECTION 2.1 Selection of Asset Tranches..............................................6
SECTION 2.2 Computation of Invested Amount and Purchaser's Tranche Investment........6
SECTION 2.3 Computation of Concentration Limits and Unpaid Balance...................7
SECTION 2.4 Computation of Earned Discount...........................................7
SECTION 2.5 Estimates of Earned Discount Rate, Fees, etc.............................7
ARTICLE III SETTLEMENTS.................................................................8
SECTION 3.1 Settlement Procedures....................................................8
SECTION 3.2 Deemed Collections; Reduction of Invested Amount, Etc...................10
SECTION 3.3 Payments and Computations, Etc..........................................12
SECTION 3.4 Treatment of Collections and Deemed Collections.........................13
ARTICLE IV FEES AND YIELD PROTECTION...................................................13
SECTION 4.1 Fees....................................................................13
SECTION 4.2 Yield Protection........................................................13
SECTION 4.3 Funding Losses..........................................................15
ARTICLE V CONDITIONS OF PURCHASES......................................................16
SECTION 5.1 Conditions Precedent to Initial Purchase................................16
SECTION 5.2 Conditions Precedent to All Purchases and Reinvestments.................18
ARTICLE VI REPRESENTATIONS AND WARRANTIES..............................................19
SECTION 6.1 Representations and Warranties of the Seller Parties....................19
ARTICLE VII GENERAL COVENANTS OF THE SELLER PARTIES....................................23
SECTION 7.1 Affirmative Covenants of the Seller Parties.............................23
SECTION 7.2 Reporting Requirements of the Seller Parties............................25
SECTION 7.3 Negative Covenants of the Seller Parties................................27
SECTION 7.4 Separate Corporate Existence of the Seller..............................30
ARTICLE VIII ADMINISTRATION AND COLLECTION.............................................32
SECTION 8.1 Designation of Master Servicer..........................................32
i
SECTION 8.2 Duties of Master Servicer...............................................33
SECTION 8.4 Servicer Defaults.......................................................34
SECTION 8.5 Rights of the Administrative Agent......................................35
SECTION 8.6 Responsibilities of the Seller Parties..................................36
SECTION 8.7 Further Action Evidencing Purchases and Reinvestments...................37
SECTION 8.8 Application of Collections..............................................38
ARTICLE IX SECURITY INTEREST...........................................................38
SECTION 9.1 Grant of Security Interest..............................................38
SECTION 9.2 Further Assurances......................................................38
SECTION 9.3 Remedies................................................................39
ARTICLE X LIQUIDATION EVENTS...........................................................39
SECTION 10.1 Liquidation Events......................................................39
SECTION 10.2 Remedies................................................................41
ARTICLE XI THE ADMINISTRATIVE AGENT....................................................42
SECTION 11.1 Authorization and Action................................................42
SECTION 11.2 Administrative Agent's Reliance, Etc....................................42
SECTION 11.3 Wachovia and Affiliates.................................................43
ARTICLE XII ASSIGNMENT OF THE PURCHASER'S INTEREST.....................................43
SECTION 12.1 Restrictions on Assignments.............................................43
SECTION 12.2 Rights of Assignee......................................................44
SECTION 12.3 Terms and Evidence of Assignment........................................44
SECTION 12.4 Rights of Liquidity Banks...............................................44
ARTICLE XIII INDEMNIFICATION...........................................................44
SECTION 13.1 Indemnities by the Seller...............................................44
SECTION 13.2 Indemnities by Master Servicer..........................................47
ARTICLE XIV MISCELLANEOUS..............................................................47
SECTION 14.1 Amendments, Etc.........................................................47
SECTION 14.2 Notices, Etc............................................................48
SECTION 14.3 No Waiver; Remedies.....................................................48
SECTION 14.4 Binding Effect; Survival................................................48
SECTION 14.5 Costs, Expenses and Taxes...............................................49
SECTION 14.6 No Proceedings..........................................................49
SECTION 14.7 Confidentiality of Seller Information...................................50
SECTION 14.8 [Reserved]..............................................................52
SECTION 14.9 Captions and Cross References...........................................52
SECTION 14.10 Integration.............................................................52
SECTION 14.11 Governing Law...........................................................52
SECTION 14.12 Waiver Of Jury Trial....................................................52
ii
SECTION 14.13 Consent To Jurisdiction; Waiver Of Immunities............................53
SECTION 14.14 Execution in Counterparts................................................53
SECTION 14.15 No Recourse Against Other Parties........................................53
SECTION 14.16 Severability of Provisions...............................................54
APPENDIX
Appendix A Definitions
SCHEDULES
Schedule 6.1(i) Description of Material Adverse Changes
Schedule 6.1(n) List of Offices of the Master Servicer and the Seller where Records are
Kept
Schedule 6.1(o) List of Lockbox Banks
Schedule 14.2 Notice Addresses
EXHIBITS
Exhibit 1.2(a) Form of Purchase Request
Exhibit 3.1(a) Form of Information Package
Exhibit A-1 Form of Lockbox Agreement
Exhibit B Form of Certificate of Financial Officer
Exhibit C-1 Credit and Collection Policy of Lennox
Exhibit C-2 Credit and Collection Policy of Heatcraft
Exhibit C-3 Credit and Collection Policy of Armstrong
iii
AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT
Dated as of March 23, 2001
THIS IS AN AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (the
"AGREEMENT") among:
(1) LPAC CORP., a Delaware corporation (together with its successors and
permitted assigns, the "SELLER"),
(2) LENNOX INDUSTRIES INC., an Iowa corporation (together with its
successors, "LENNOX"), as master servicer hereunder (in such capacity, together
with any successor master servicer appointed pursuant to SECTION 8.1, the
"MASTER SERVICER", Lennox in its capacity as the Master Servicer, together with
the Seller, each a "SELLER PARTY" and collectively the "SELLER PARTIES"),
(3) BLUE RIDGE ASSET FUNDING CORPORATION, a Delaware corporation (together
with its successors and assigns, the "PURCHASER"),
(4) WACHOVIA BANK, N.A., a national banking association ("WACHOVIA"), as
administrative agent for the Purchaser (in such capacity, together with any
successors thereto in such capacity, the "ADMINISTRATIVE AGENT")
and amends and restates in its entirety that certain Receivables Purchase
Agreement dated as of June 19, 2000 by and among the parties, as the same may
have been and may be amended from time to time (THE "EXISTING AGREEMENT").
Unless otherwise indicated, capitalized terms used in this Agreement are
defined in Appendix A.
Background
1. The Seller is jointly owned by the Originators and Heatcraft
Technologies.
2. The Originators are engaged in the heating, ventilating, air
conditioning and refrigeration businesses.
3. Each of the Originators and the Seller has entered into the Sale
Agreement pursuant to which the Originators have transferred, and hereafter will
transfer, to the Seller all of their respective right, title and interest in and
to the Pool Receivables and certain related property.
4. As of the date hereof, Armstrong shall become an Originator and a party
to the Sale Agreement pursuant to which Armstrong will transfer to the Seller
all of its right, title and interest in and to the Pool Receivables originated
by Armstrong and certain related property.
5. The Seller has requested the Purchaser, and the Purchaser has agreed,
subject to the terms and conditions contained in this Agreement, to purchase
from the Seller from time to time an undivided percentage interest, referred to
herein as the Asset Interest, in Pool Receivables and related property.
6. The Seller and the Purchaser also desire that, subject to the terms and
conditions of this Agreement, certain of the daily Collections in respect of the
Asset Interest be reinvested in Pool Receivables, which reinvestment shall
constitute part of the Asset Interest.
7. Wachovia has been requested, and is willing, to act as the
Administrative Agent under this Agreement.
8. The parties wish to amend and restate the Existing Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto hereby agree as follows:
ARTICLE I
PURCHASES AND REINVESTMENTS
SECTION 1.1 COMMITMENTS TO PURCHASE; LIMITS ON PURCHASER'S OBLIGATIONS.
Upon the terms and subject to the conditions of this Agreement (including,
without limitation, ARTICLE V), from time to time during the Revolving Period,
prior to the Termination Date, the Seller may request that the Purchaser
purchase from the Seller ownership interests in Pool Receivables and Related
Assets, and the Purchaser shall make such purchase (each being a "PURCHASE");
PROVIDED that no Purchase shall be made by the Purchaser if, after giving effect
thereto, either (a) the Invested Amount would exceed $ 200,000,000 (as adjusted
pursuant to SECTION 3.2(b)) (the "PURCHASE LIMIT"), or (b) the Asset Interest,
expressed as a percentage of Net Pool Balance, would exceed 100% (the
"ALLOCATION LIMIT"); and provided, further that each Purchase made pursuant to
this SECTION 1.1 shall have a purchase price equal to at least $1,000,000 and
shall be an integral multiple of $100,000.
SECTION 1.2 PURCHASE PROCEDURES; ASSIGNMENT OF THE PURCHASER'S INTERESTS.
(a) PURCHASE REQUEST. Each Purchase from the Seller by the Purchaser shall
be made on notice from the Seller to the Administrative Agent (on behalf of the
Purchaser) received by the Administrative Agent not later than 12:00 noon (New
York City time) on the second Business Day preceding the date of such proposed
Purchase. Each such notice of a proposed Purchase shall be substantially in the
form of EXHIBIT 1.2(a) and shall specify, among other items, the desired amount
and date of such Purchase. The Administrative Agent shall promptly upon receipt
notify the Purchaser of any such notice. The Seller shall not request more than
one Purchase in any calendar week.
(b) FUNDING OF PURCHASE. On the date of each Purchase, the Purchaser shall,
upon satisfaction of the applicable conditions set forth in ARTICLE V, make
available to the Seller the amount of its Purchase in same day funds by wire
transfer to an account designated in writing by the Seller.
(c) ASSIGNMENT OF ASSET INTERESTS. The Seller hereby sells, assigns and
transfers to the Purchaser, effective on and as of the date of each Purchase and
each Reinvestment by the Purchaser hereunder, the Asset Interest.
SECTION 1.3 REINVESTMENTS OF CERTAIN COLLECTIONS; PAYMENT OF REMAINING
COLLECTIONS.
(a) On the close of business on each day during the period from the date
of the first Purchase to the Termination Date, the Master Servicer will, out of
all Collections received on such day from Pool Receivables and Related Assets:
(i) determine the portion of the Collections attributable to the Asset
Interest by multiplying (A) the amount of such Collections times (B) the
lesser of (1) the Asset Interest and (2) 100%;
(ii) out of the portion of such Collections allocated to the Asset
Interest pursuant to CLAUSE (i) above, identify and hold in trust for the
Purchaser (provided that unless otherwise requested by the Administrative
Agent, on behalf of the Purchaser, after a Credit Event, such Collections
shall not be required to be held in a separate account) an amount equal to
the sum of the estimated amount of Earned Discount and CP Costs accrued in
respect of each Asset Tranche (based on the rate information provided by
the Administrative Agent pursuant to SECTION 2.5), all other amounts due to
the Purchaser or the Administrative Agent hereunder and the Purchaser's
Share of the Servicing Fee (in each case, accrued through such day) and not
so previously identified; and
(iii) apply the Collections allocated to the Asset Interest pursuant
to CLAUSE (i) above and not required to be identified and held in trust
pursuant to CLAUSE (ii) above to the purchase from the Seller of ownership
interests in Pool Receivables and Related Assets (each such purchase being
a "REINVESTMENT"); provided that:
(A) if, after giving effect to such Reinvestment, (1) the Asset
Interest would exceed the Allocation Limit or (2) the Invested Amount
would exceed the Purchase Limit, then the Master Servicer shall not
make such Reinvestment, but shall identify and hold in trust for the
benefit of the Purchaser, a portion of such Collections which,
together with other Collections previously identified and then so
held, shall equal the amount necessary to reduce (x) the Invested
Amount to the Purchase Limit and (y) the Asset Interest to the
Allocation Limit; and
(B) if any of the conditions precedent to Reinvestment in CLAUSE
(a), (b) and (d) of SECTION 5.2, subject to the proviso set forth in
SECTION 5.2, are not
3
satisfied, then the Master Servicer shall not reinvest any of such
remaining Collections, but shall identify them and hold them in trust
for the benefit of the Purchaser;
(iv) out of the portion of Collections not allocated to the Asset
Interest pursuant to CLAUSE (i) above, pay to the Master Servicer or set
aside (at the option of the Master Servicer) the Seller's Share of the
Servicing Fee accrued through such day and not previously paid; and
(v) pay to the Seller (A) the remaining portion of Collections not
allocated to the Asset Interest pursuant to CLAUSE (i) above and (B) the
Collections applied to Reinvestment pursuant to CLAUSE (iii) above.
(b) UNREINVESTED COLLECTIONS. The Master Servicer shall identify and hold
in trust for the benefit of the Purchaser all Collections which, pursuant to
CLAUSE (iii) of SECTION 1.3(a), may not be reinvested in the Pool Receivables
and Related Assets, provided that unless otherwise requested by the
Administrative Agent after a Credit Event, such Collections need not be held in
a segregated account. If, prior to the date when such Collections are required
to be paid to the Administrative Agent for the benefit of the Purchaser pursuant
to SECTION 1.3(c)(iv), the amount of Collections so identified exceeds the
amount, if any, necessary to reduce (i) the Invested Amount to the Purchase
Limit and (ii) the Asset Interest to the Allocation Limit, and the conditions
precedent to Reinvestment set forth in CLAUSEs (a), (b) and (d) of SECTION 5.2,
subject to the proviso set forth in SECTION 5.2, are satisfied, then the Master
Servicer shall apply such Collections (or, if less, a portion of such
Collections equal to the amount of such excess) to the making of a Reinvestment.
(c) PAYMENT OF AMOUNTS.
(i) The Master Servicer shall pay all amounts identified pursuant to
SECTION 1.3(a)(ii) in respect of Earned Discount on an Asset Tranche funded
by a Liquidity Funding to the Administrative Agent, on the Purchaser's
behalf, on the last day of the then current Yield Period for an Asset
Tranche, as provided in SECTION 3.1.
(ii) The Master Servicer shall pay all amounts of Collections
identified pursuant to SECTION 1.3(a)(ii) in respect of Earned Discount on
any Asset Tranche funded by Commercial Paper Notes to the Administrative
Agent, on the Purchaser's behalf, on the Settlement Date following the last
day of each CP Accrual Period for such Asset Tranche, as provided in
SECTION 3.1.
(iii) The Master Servicer shall pay all amounts of Collections
identified pursuant to SECTION 1.3(a)(ii) and not applied pursuant to
CLAUSES (i) or (ii) above to the Administrative Agent, on the Purchaser's
behalf, on each Settlement Date for each Collection Period, as provided in
SECTION 3.1.
(iv) The Master Servicer shall pay all amounts identified pursuant to
SECTION 1.3(b) to the Administrative Agent for the account of the Purchaser
(A) on the last day of
4
the then current Yield Period for any Asset Tranche funded by a Liquidity
Funding, as provided in SECTION 3.1(b), in an amount not exceeding the
Purchaser's Tranche Investment of such Asset Tranche, and (B) on the last
day of the then current CP Accrual Period for any Asset Tranche funded by
Commercial Paper Notes, as provided in SECTION 3.1, in an amount not
exceeding the Purchaser's Tranche Investment of such Asset Tranche;
PROVIDED, HOWEVER, no payment shall be made under CLAUSE (B) above unless
the Purchaser's Tranche Investments of all Asset Tranches, if any, funded
by the Liquidity Fundings shall have been reduced to zero.
(d) FUNDS UNDER SALE AGREEMENT. Upon the written request of the
Administrative Agent, on the Purchaser's behalf, given at any time when (i)
based on the most recent Information Package, either (A) the Asset Interest
would exceed the Allocation Limit or, (B) the Invested Amount would exceed the
Purchase Limit, or (ii) a Liquidation Event or Unmatured Liquidation Event shall
have occurred and be continuing, the Seller shall identify all funds that under
the Sale Agreement would be applied to repay principal of the Initial Seller
Notes (as defined in the Sale Agreement) owing to the Originators. The Seller
may make withdrawals of such funds only for the purposes of (i) at any time,
purchasing Receivables from an Originator in accordance with the Sale Agreement;
(ii) on the Settlement Date for any Collection Period, making payments in
accordance with the last sentence of SECTION 3.1(c)(ii), and (iii) on the
Settlement Date for any Collection Period, if, on the basis of the most recent
Information Package, and after giving effect to any payment made to the Master
Servicer on such date pursuant to the last sentence of SECTION 3.1(c)(ii), both
(i) the Invested Amount does not exceed the Purchase Limit and (ii) the Asset
Interest does not exceed the Allocation Limit, and provided that no Liquidation
Event or Unmatured Liquidation Event shall have occurred and be continuing,
repaying principal of the Initial Seller Notes in accordance with this Agreement
and the Sale Agreement.
SECTION 1.4 ASSET INTEREST.
(a) COMPONENTS OF ASSET INTEREST. On any date the Asset Interest will
represent the Investors' undivided percentage ownership interest in all then
outstanding Pool Receivables and all Related Assets with respect to such Pool
Receivables as at such date.
(b) COMPUTATION OF ASSET INTEREST. On any date, the Asset Interest will be
equal to the percentage equivalent of the following fraction:
IA+RR
-----
NPB
where:
IA = the Invested Amount on the date of such computation;
RR = the Required Reserve on the date of such computation; and
NPB = the Net Pool Balance on the date of such computation;
5
PROVIDED, HOWEVER, that the Asset Interest during the Liquidation Period shall
equal 100% and shall at no time exceed 100%.
(c) FREQUENCY OF COMPUTATION. The Asset Interest shall be computed (i) as
provided in SECTION 3.1, as of the Cut-Off Date for each Collection Period, and
(ii) on the Settlement Date following each Reporting Date, after giving effect
to the payments made pursuant to SECTION 3.1. In addition, at any time, the
Administrative Agent, on the Purchaser's behalf, may require the Master Servicer
to provide an Information Package, based on the information then available to
the Master Servicer, for purposes of computing the Asset Interest or the
Purchase Limit as of any other date, and the Master Servicer agrees to do so
within five (5) (or three (3), if a Liquidation Event or a Credit Event has
occurred and is continuing) Business Days of its receipt of the Administrative
Agent's request.
ARTICLE II
COMPUTATIONAL RULES
SECTION 2.1 SELECTION OF ASSET TRANCHES.
The Administrative Agent shall, from time to time for purposes of computing
Earned Discount on that portion of the Asset Interest funded with Liquidity
Fundings, divide the Asset Interest into Asset Tranches. The applicable Earned
Discount Rate may be different for each Asset Tranche funded by a Liquidity
Funding. The Invested Amount shall be allocated to each Asset Tranche by the
Administrative Agent, on the Purchaser's behalf, to reflect the funding sources
for the Asset Interest, so that:
(a) there will be a single Asset Tranche equal to the excess of the
Invested Amount over the aggregate amount allocated at such time pursuant to
CLAUSE (b) below, which Asset Tranche shall reflect the portion of the Asset
Interest funded by Commercial Paper Notes; and
(b) there may be one or more Asset Tranches, selected by the Administrative
Agent, on the Purchaser's behalf, reflecting the portion or portions of the
Asset Interest funded by outstanding Liquidity Fundings.
SECTION 2.2 COMPUTATION OF INVESTED AMOUNT AND PURCHASER'S TRANCHE
INVESTMENT.
In making any determination of the Invested Amount and any Purchaser's
Tranche Investment, the following rules shall apply:
(a) the Invested Amount shall not be considered reduced by any allocation,
setting aside or distribution of any portion of Collections unless such
Collections shall have been actually delivered hereunder to the Administrative
Agent, on the Purchaser's behalf;
6
(b) the Invested Amount shall not be considered reduced by any distribution
of any portion of Collections if at any time such distribution is rescinded or
must otherwise be returned for any reason; and
(c) if there is any reduction in the Invested Amount, there shall be a
corresponding reduction in the Purchaser's Tranche Investment with respect to
one or more Asset Tranches selected by the Administrative Agent, on the
Purchaser's behalf, in its discretion.
SECTION 2.3 COMPUTATION OF CONCENTRATION LIMITS AND UNPAID BALANCE.
The Obligor Concentration Limits and the aggregate Unpaid Balance of Pool
Receivables of any Obligor and its Affiliated Obligors (if any) shall be
calculated as if such Obligor and its Affiliated Obligors were one Obligor.
SECTION 2.4 COMPUTATION OF EARNED DISCOUNT.
In making any determination of Earned Discount, the following rules shall
apply:
(a) the Administrative Agent, on the Purchaser's behalf, shall determine
the Earned Discount accruing with respect to each Asset Tranche funded by a
Liquidity Funding for each Yield Period), in accordance with the definition of
Earned Discount;
(b) no provision of this Agreement shall require the payment or permit the
collection of Earned Discount in excess of the maximum permitted by applicable
law; and
(c) the Earned Discount for any Asset Tranche shall not be considered paid
by any distribution if at any time such distribution is rescinded or must
otherwise be returned for any reason.
It is the intent of the Purchaser to fund the Asset Interest by the issuance of
Commercial Paper Notes. If, for any reason, the Purchaser is unable, or
determines that it is undesirable, to issue Commercial Paper Notes to fund the
Asset Interest, or is unable to repay such Commercial Paper Notes upon the
maturity thereof, the Purchaser will draw on Liquidity Fundings to the extent
available. If the Purchaser funds itself through Liquidity Fundings, the Earned
Discount payable by the Seller will be based on the Bank Rate.
SECTION 2.5 ESTIMATES OF EARNED DISCOUNT RATE, FEES, ETC.
For purposes of determining the amounts required to be identified by
Master Servicer pursuant to SECTION 1.3, the Administrative Agent, on the
Purchaser's behalf, shall notify the Master Servicer (and, if Lennox is not the
Master Servicer, the Seller) from time to time of the Purchaser's Tranche
Investment of each Asset Tranche, the Earned Discount Rate applicable to each
Asset Tranche funded by a Liquidity Funding and the rates at which fees and
other amounts are accruing hereunder. It is understood and agreed that (a) the
CP Costs for any Asset Tranche funded by the issuance of Commercial Paper are
determined in arrears and may change from one applicable CP Accrual Period to
the next, (b) the Earned Discount Rate for any Asset Tranche
7
funded by a Liquidity Funding may change from one applicable Yield Period to the
next, and the Bank Rate used to calculate the Earned Discount Rate may change
from time to time during an applicable Yield Period, (c) certain rate
information provided by the Administrative Agent to the Master Servicer shall be
based upon the Administrative Agent's good faith estimate, (d) the amount of
Earned Discount actually accrued with respect to an Asset Tranche funded by a
Liquidity Funding during any Yield Period may exceed, or be less than, the
amount identified with respect thereto by Master Servicer, and (e) the amount of
fees or other amounts payable by the Seller hereunder which have accrued
hereunder with respect to any Collection Period may exceed, or be less than, the
amount identified with respect thereto by the Master Servicer. Failure to
identify any amount so accrued shall not relieve the Master Servicer of its
obligation to remit Collections to the Administrative Agent, for the benefit of
the Purchaser, with respect to such accrued amount, as and to the extent
provided in SECTION 3.1.
ARTICLE III
SETTLEMENTS
SECTION 3.1 SETTLEMENT PROCEDURES.
The parties hereto will take the following actions with respect to each
Collection Period:
(a) INFORMATION PACKAGE. On the fifteenth day of each month or if such day
is not a Business Day, the next succeeding Business Day (each a "REPORTING
DATE"), the Master Servicer shall deliver to the Administrative Agent, on the
Purchaser's behalf, a report in the form of EXHIBIT 3.1(a), provided that, if a
Credit Event has occurred and is continuing, such Information Package shall be
accompanied by an electronic file in a form satisfactory to the Administrative
Agent (collectively, an "INFORMATION PACKAGE").
(b) EARNED DISCOUNT AND CP COSTS; OTHER AMOUNTS DUE. (i) (A) On or before
12:00 noon (Atlanta, Georgia, time) on the Business Day before the last day of
each Yield Period, the Administrative Agent shall notify the Master Servicer of
the amount of Earned Discount accrued with respect to any Asset Tranche funded
by a Liquidity Funding corresponding to such Yield Period, and (B) on or before
12:00 noon (Atlanta, Georgia time) five (5) Business Days before each Reporting
Date, the Administrative Agent shall notify the Servicer of the CP Costs accrued
during the most recently ended CP Accrual Period with respect to any Asset
Tranche funded with Commercial Paper Notes during all or any portion of such CP
Accrual Period (ii) the Master Servicer shall pay to the Administrative Agent
for the benefit of the Purchaser the amount of such Earned Discount before 12:00
noon (Atlanta, Georgia time) on the last day of such Yield Period and the amount
of such CP Costs before 12:00 noon (Atlanta, Georgia time) on each Settlement
Date (iii) on or before 12:00 noon (Atlanta, Georgia time) on the Business Day
before each Reporting Date, the Administrative Agent, on the Purchaser's behalf,
shall notify the Master Servicer of all Broken Funding Costs, fees and other
amounts accrued and payable by the Seller under this Agreement during the prior
calendar month (other than amounts described in CLAUSE (c) below). The Master
Servicer shall pay to the Administrative Agent, for the benefit of the
Purchaser, the amount of such Broken Funding Costs, fees and other amounts (to
the extent of Collections attributable to the Asset Interest during such
Collection Period) on the Settlement
8
Date for such month. Such payments shall be made out of amounts identified
pursuant to SECTION 1.3 for such payment; PROVIDED, HOWEVER, that to the extent
Collections attributable to the Asset Interest during such Collection Period are
not sufficient to make such payment, such payment shall be made out of funds
paid by the Master Servicer to the Seller (which amounts the Seller hereby
agrees to pay to the Master Servicer), up to the aggregate amount of Collections
applied to Reinvestments under SECTION 1.3(a) or (b) during such month.
(c) ASSET INTEREST COMPUTATIONS.
(i) On the Reporting Date for each Collection Period, the Master
Servicer shall compute, as of the related Cut-Off Date and based upon the
assumptions in the next sentence, (A) the Asset Interest, (B) the amount of
the reduction or increase (if any) in the Asset Interest since the next
preceding Cut-Off Date, (C) the excess (if any) of the Asset Interest over
the Allocation Limit, and (D) the excess (if any) of the Invested Amount
over the Purchase Limit. Such calculations shall be based upon the
assumptions that (A) the information in the Information Package is correct,
and (B) Collections identified pursuant to SECTION 1.3(b) will be paid to
the Administrative Agent, for the benefit of the Purchaser, on the
Settlement Date for such Collection Period.
(ii) If, according to the computations made pursuant to CLAUSE (i)
above, either (A) the Asset Interest exceeds the Allocation Limit or (B)
the Invested Amount exceeds the Purchase Limit, then on the Settlement Date
for such Collection Period, the Master Servicer shall pay to the
Administrative Agent, for the benefit of the Purchaser, (to the extent of
Collections during the related Collection Period attributable to all Asset
Tranches and not previously paid to the Administrative Agent) the amount
necessary to reduce both (A) the Invested Amount to the Purchase Limit and
(B) the Asset Interest to the Allocation Limit, SUBJECT, HOWEVER, to the
PROVISO to SECTION 1.3(c)(iv). Such payment shall be made out of amounts
identified pursuant to SECTION 1.3 for such purpose and, to the extent such
amounts were not so identified, the Seller hereby agrees to pay such
amounts to the Master Servicer to the extent of Collections applied to
Reinvestment under SECTION 1.3 during the relevant Collection Period.
(iii) In addition to the payments described in CLAUSE (ii) above,
during the Liquidation Period, the Master Servicer shall pay to the
Administrative Agent, for the benefit of the Purchaser, all amounts
identified pursuant to SECTION 1.3 (A) on the last day of the current Yield
Period for any Asset Tranche funded by a Liquidity Funding, in an amount
not exceeding the Purchaser's Tranche Investment of such Asset Tranche, and
(B) after reduction to zero of the Purchaser's Tranche Investments of the
Asset Tranches, if any, funded by Liquidity Fundings, on the last day of
the each CP Accrual Period, in an amount not exceeding the Purchaser's
Tranche Investment of the Asset Tranche funded by Commercial Paper Notes.
(d) ORDER OF APPLICATION. Upon receipt by the Administrative Agent, on the
Purchaser's behalf, of funds distributed pursuant to this SECTION 3.1, the
Administrative Agent shall apply them to the items specified in the subCLAUSEs
below, in the order of priority of such subCLAUSEs:
9
(i) to accrued Earned Discount, CP Costs and Broken Funding Costs,
plus any previously accrued Earned Discount, CP Costs and Broken Funding
Costs not paid;
(ii) to the Purchaser's Share of the accrued and unpaid Servicing Fee
(if the Master Servicer is not Lennox or its Affiliate);
(iii) to the Program Fee and the Unused Fee accrued during such
Collection Period, plus any previously accrued Program Fee and the Unused
Fee not paid on a prior Settlement Date;
(iv) to the reduction of the Invested Amount, to the extent such
reduction is required under SECTION 3.1(c);
(v) to other accrued and unpaid amounts owing to the Purchaser or the
Administrative Agent hereunder (except Earned Discount on any Asset Tranche
funded by a Liquidity Funding which has accrued but is not yet overdue
under SECTION 1.3(c));
(vi) to the Purchaser's Share of the accrued and unpaid Servicing Fee
(if the Master Servicer is Lennox or its Affiliate); and
(vii) to purchase newly originated Receivables during the Revolving
Period.
(e) NON-DISTRIBUTION OF SERVICING FEE. The Administrative Agent hereby
consents (which consent may be revoked at any time after the occurrence and
during the continuance of a Liquidation Event or a Credit Event), to the
retention by the Master Servicer of the amounts (if any) identified pursuant to
SECTION 1.3 in respect of the Servicing Fee, in which case no distribution shall
be made in respect of the Servicing Fee pursuant to CLAUSE (d) above.
(f) DELAYED PAYMENT. If on any day described in this SECTION 3.1 (or in
SECTION 1.3(c) in respect of accrued Earned Discount on Asset Tranches funded by
Liquidity Fundings or accrued CP Costs on Asset Tranches funded by the issuance
of Commercial Paper Notes), because Collections during the relevant CP Accrual
Period or Yield Period were less than the aggregate amounts payable, the Master
Servicer shall not make any payment otherwise required, the next available
Collections in respect of the Asset Interest shall be applied to such payment,
and no Reinvestment shall be permitted hereunder until such amount payable has
been paid in full.
SECTION 3.2 DEEMED COLLECTIONS; REDUCTION OF INVESTED AMOUNT, ETC.
(a) DEEMED COLLECTIONS. If on any day:
(i) the Unpaid Balance of any Pool Receivable is:
(A) reduced as a result of any defective, rejected or returned
merchandise or services, any cash discount, or any other adjustment by
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any Seller Party or any Affiliate thereof, or as a result of any
tariff or other governmental or regulatory action, or
(B) reduced or canceled as a result of a setoff in respect of any
claim by the Obligor thereof (whether such claim arises out of the
same or a related or an unrelated transaction, including without
limitation, any setoff or claim arising as a result of any amount at
any time owed by any Originator in connection with any account
receivable owed by any such Originator to such Obligor), or
(C) reduced on account of the obligation of any Seller Party or
any Affiliate thereof to pay to the related Obligor any rebate or
refund, or
(D) less than the amount included in calculating the Net Pool
Balance for purposes of any Information Package (for any reason other
than such Receivable becoming a Defaulted Receivable), or
(ii) any of the representations or warranties of the Seller set forth
in SECTION 6.1(j), (l) or (p) were not true when made with respect to any
Pool Receivable, or any of the representations or warranties of the Seller
set forth in SECTION 6.1(l) are no longer true with respect to any Pool
Receivable, or any Pool Receivable is repurchased by an Originator pursuant
to the Sale Agreement,
then, on such day, the Seller shall be deemed to have received a Collection of
such Pool Receivable
(A) in the case of CLAUSE (i) above, in the amount of such
reduction or cancellation or the difference between the actual Unpaid
Balance and the amount included in calculating such Net Pool Balance,
as applicable; and
(B) in the case of CLAUSE (ii) above, in the amount of the Unpaid
Balance of such Pool Receivable.
Collections deemed received by the Seller under this SECTION 3.2(a) are herein
referred to as "DEEMED COLLECTIONS."
(b) SELLER'S OPTIONAL REDUCTION OF THE INVESTED AMOUNT. The Seller may at
any time elect to reduce the Invested Amount as follows:
(i) the Seller shall give the Administrative Agent, on the Purchaser's
behalf, at least five (5) Business Days' prior written notice of such
reduction (including the amount of such proposed reduction and the proposed
date on which such reduction will commence),
(ii) on the proposed date of commencement of such reduction and on
each day thereafter, the Master Servicer shall refrain from reinvesting
Collections pursuant to
11
SECTION 1.3 until the amount thereof not so reinvested shall equal the
desired amount of reduction, and
(iii) the Master Servicer shall hold such Collections in trust for the
Purchaser, pending payment to the Administrative Agent, as provided in
SECTION 1.3;
PROVIDED that:
(A) the amount of any such reduction shall be in (1) an amount of
$1,000,000, (2) an integral multiple thereof or (3) an amount equal to
the remaining Invested Amount,
(B) the Seller shall use reasonable efforts to attempt to choose
a reduction amount, and the date of commencement thereof, so that such
reduction shall commence and conclude in the same Collection Period,
and
(C) unless the Invested Amount will be reduced to zero, after
giving effect to such reduction, the Invested Amount will be at least
$25,000,000.
SECTION 3.3 PAYMENTS AND COMPUTATIONS, ETC.
(a) PAYMENTS. All amounts to be paid to the Administrative Agent or any
other Person or deposited by the Seller or the Master Servicer hereunder (other
than amounts payable under SECTION 4.2) shall be paid or deposited in accordance
with the terms hereof no later than 12:00 noon (Atlanta, Georgia time) on the
day when due in lawful money of the United States of America in same day funds
to the Purchaser in care of Wachovia Bank, N.A., ABA #8735-098787, Account #0531
00494, for credit: Blue Ridge Asset Funding Corporation, Reference: LPAC Corp.,
Attention: John Dillon (336) 732-2690, or to such other account at the bank
named therein or at such other bank as the Administrative Agent on behalf of the
Purchaser may designate by written notice to the Person making such payment.
(b) LATE PAYMENTS. The Seller or the Master Servicer, as applicable, shall
to the extent permitted by law, pay to the Person to whom payment is due
interest on all amounts not paid or deposited when due hereunder at 2% per annum
above the Base Rate, payable on demand, PROVIDED, HOWEVER, that such interest
rate shall not at any time exceed the maximum rate permitted by applicable law.
(c) METHOD OF COMPUTATION. All computations of interest, CP Costs, Broken
Funding Costs, Earned Discount, any fees payable under SECTION 4.1 and any other
fees payable by the Seller to the Purchaser or the Administrative Agent
hereunder shall be made on the basis of a year of 360 days for the actual number
of days (including the first day but excluding the last day) elapsed.
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SECTION 3.4 TREATMENT OF COLLECTIONS AND DEEMED COLLECTIONS.
The Seller shall forthwith deliver to the Master Servicer all Deemed
Collections, and the Master Servicer shall hold or distribute such Deemed
Collections as Earned Discount, CP Costs, Broken Funding Costs, accrued
Servicing Fee, repayment of the Invested Amount, and to other accrued amounts
owing hereunder to the same extent as if such Deemed Collections had actually
been received on the date of such delivery to the Master Servicer. If
Collections are then being paid to the Administrative Agent, on the Purchaser's
behalf, or its designee, or to lock boxes or accounts directly or indirectly
owned or controlled by the Administrative Agent, the Master Servicer shall
forthwith cause such Deemed Collections to be paid to the Administrative Agent,
on the Purchaser's behalf, or its designee or to such lock boxes or accounts, as
applicable, or as the Administrative Agent shall request. So long as the Seller
shall hold any Collections (including Deemed Collections) required to be paid to
the Master Servicer or the Administrative Agent, it shall hold such Collections
in trust for the benefit of the Administrative Agent, on behalf of the
Purchaser, and shall clearly mark its records to reflect such trust; provided
that unless the Administrative Agent shall have requested it in writing to do
so, the Seller shall not be required to hold such Collections in a separate
deposit account containing only such Collections.
ARTICLE IV
FEES AND YIELD PROTECTION
SECTION 4.1 FEES.
The Seller shall pay to the Purchaser certain fees from time to time in
amounts and payable on such dates as are set forth in the letter dated on or
about the date hereof (as amended from time to time, the "FEE LETTER") among the
Seller, the Purchaser and the Administrative Agent. The Seller shall pay or
cause to be paid to the Administrative Agent the structuring fee set forth in
the First Amendment to Fee Letter dated as of the date hereof on or before the
date this Agreement is executed.
SECTION 4.2 YIELD PROTECTION.
(a) If (i) Regulation D or (ii) any Regulatory Change occurring after June
19, 2000:
(A) shall subject an Affected Party to any tax, duty or other
charge with respect to the Asset Interest owned by or funded by it, or
any obligations or right to make Purchases or Reinvestments or to
provide funding therefor, or shall change the basis of taxation of
payments to the Affected Party of any Invested Amount or Earned
Discount owned by, owed to or funded in whole or in part by it or any
other amounts due under this Agreement in respect of the Asset
Interest owned by or funded by it or its obligations or rights, if
any, to make Purchases or Reinvestments or to provide funding therefor
(except for (1) taxes based on, or measured by, net income, or changes
in the rate of tax on or determined by reference to the overall net
income, of such Affected Party imposed by the United States of
America, by the jurisdiction in which such Affected Party's principal
13
executive office is located and, if such Affected Party's principal
executive office is not in the United States of America, by the
jurisdiction where such Affected Party's principal office in the
United States is located or, (2) franchise taxes, taxes on, or in the
nature of, doing business taxes or capital taxes); or
(B) shall impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by the Federal
Reserve Board, but excluding any reserve included in the determination
of Earned Discount), special deposit or similar requirement against
assets of any Affected Party, deposits or obligations with or for the
account of any Affected Party or with or for the account of any
affiliate (or entity deemed by the Federal Reserve Board to be an
affiliate) of any Affected Party, or credit extended by any Affected
Party; or
(C) shall change the amount of capital maintained or required or
requested or directed to be maintained by any Affected Party; or
(D) shall impose any other condition affecting any Asset Interest
owned or funded in whole or in part by any Affected Party, or its
obligations or rights, if any, to make Purchases or Reinvestments or
to provide funding therefor; or
(E) shall change the rate for, or the manner in which the Federal
Deposit Insurance Corporation (or a successor thereto) assesses,
deposit insurance premiums or similar charges;
and the result of any of the foregoing is or would be
(A) to increase the cost to or to impose a cost on (1) an
Affected Party funding or making or maintaining any Purchases or
Reinvestments, any purchases, reinvestments, or loans or other
extensions of credit under the Liquidity Agreement, or any commitment
of such Affected Party with respect to any of the foregoing, or (2)
the Administrative Agent for continuing its or the Seller's
relationship with the Purchaser, in each case, in an amount deemed to
be material by such Affected Party,
(B) to reduce the amount of any sum received or receivable by an
Affected Party under this Agreement or under the Liquidity Agreement,
or
(C) in the reasonable determination of such Affected Party, to
reduce the rate of return on the capital of an Affected Party as a
consequence of its obligations hereunder or arising in connection
herewith to a level below that which such Affected Party could
otherwise have achieved,
then, within thirty days after demand by such Affected Party (which demand shall
be accompanied by a certificate setting forth, in reasonable detail, the basis
of such demand and the methodology for calculating, and the calculation of, the
amounts claimed by the Affected Party), the Seller shall pay directly to such
Affected Party such additional amount or amounts as will
14
compensate such Affected Party for such additional or increased cost or such
reduction; PROVIDED, HOWEVER, the Seller shall only be required to compensate
any such Affected Party for such amounts to the extent that such Affected Party
is requiring all of its other similarly situated customers to compensate it for
such amounts.
(b) Each Affected Party will promptly notify the Seller and the
Administrative Agent of any event of which it has knowledge (including any
future event that, in the judgment of such Affected Party, is reasonably certain
to occur) which will entitle such Affected Party to compensation pursuant to
this SECTION 4.2; PROVIDED, HOWEVER, no failure to give or delay in giving such
notification shall adversely affect the rights of any Affected Party to such
compensation.
(c) In determining any amount provided for or referred to in this SECTION
4.2, an Affected Party may use any reasonable averaging and attribution methods
(consistent with its ordinary business practices) that it (in its reasonable
discretion) shall deem applicable. Any Affected Party when making a claim under
this SECTION 4.2 shall submit to the Seller the certificate (referred to in
SUBSECTION (a) above) as to such increased cost or reduced return (including
calculation thereof in reasonable detail), which statement shall, in the absence
of demonstrable error, be conclusive and binding upon the Seller.
SECTION 4.3 FUNDING LOSSES.
In the event that the Purchaser or any Liquidity Bank shall actually incur
any loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by the Purchaser
through the issuance of Commercial Paper Notes to fund any Purchase or such
Liquidity Bank to make any Liquidity Funding or maintain any Liquidity Funding)
as a result of (a) any settlement with respect to the Purchaser's Tranche
Investment of any Asset Tranche being made on any day other than the scheduled
last day of an applicable CP Accrual Period or Yield Period with respect thereto
(it being understood that the foregoing shall not apply to any portion of the
Invested Amount that is accruing Earned Discount calculated by reference to the
Base Rate), or (b) any Purchase not being made in accordance with a request
therefor under SECTION 1.2, then, upon written notice from the Administrative
Agent to the Seller and the Master Servicer, the Seller shall pay to the Master
Servicer, and the Master Servicer shall pay to the Administrative Agent for the
account of the Purchaser or such Liquidity Bank, as the case may be, the amount
of such loss or expense. Such written notice (which shall include the
methodology for calculating, and the calculation of, the amount of such loss or
expense, in reasonable detail) shall, in the absence of demonstrable error, be
conclusive and binding upon the Seller and the Master Servicer.
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ARTICLE V
CONDITIONS OF PURCHASES
SECTION 5.1 CONDITIONS PRECEDENT TO INITIAL PURCHASE.
The initial Purchase pursuant to the Existing Agreement was subject to the
following conditions precedent:
(a) the Administrative Agent, on the Purchaser's behalf, shall have
received, on or before the date of such initial Purchase, the following each
(unless otherwise indicated) dated such date and in form and substance
reasonably satisfactory to the Administrative Agent:
(i) The Sale Agreement and any other Transaction Document, duly
executed by the parties thereto;
(ii) A certificate of the Secretary or Assistant Secretary of each
Seller Party certifying the names and true signatures of the officers
authorized on its behalf to sign this Agreement and the other Transaction
Documents to be delivered by it hereunder (on which certificate the
Administrative Agent and the Purchaser may conclusively rely until such
time as the Administrative Agent, on the Purchaser's behalf, shall receive
from such Seller Party a revised certificate meeting the requirements of
this SUBSECTION (ii));
(iii) The Articles or Certificate of Incorporation of each Seller
Party, duly certified by the Secretary of State of such Seller Party's
state of incorporation, as of a recent date acceptable to Administrative
Agent, on the Purchaser's behalf, in each case together with a copy of the
by-laws of such Seller Party, duly certified by the Secretary or an
Assistant Secretary of such Seller Party;
(iv) A true and complete copy of the resolutions of the Board of
Directors of each Seller Party authorizing the execution, delivery and
performance of this Agreement and the Transaction Documents to which it is
a party and the transactions contemplated hereby and thereby;
(v) Copies of good standing certificates for each Seller Party, issued
by the Secretaries of State of the state of incorporation of such Seller
Party and the state where such Seller Party's principal place of business
is located;
(vi) Acknowledgment copies (or other evidence of filing reasonably
acceptable to the Administrative Agent, on the Purchaser's behalf) of (A)
proper financing statements (Form UCC-1), in such form as the
Administrative Agent, on the Purchaser's behalf, may reasonably request,
naming each of the Originators as the debtor and the seller of the
Receivables and Related Assets, the Seller as the secured party and
purchaser thereof and the Administrative Agent, as agent for the Secured
Parties as assignee, and (B) financing statements (Form UCC-1), in such
form as the Administrative Agent, on the Purchaser's behalf, may reasonably
request, naming the Seller as the debtor and the
16
seller of an undivided percentage interest in the Pool Receivables and
Related Assets and the Administrative Agent, as agent for the Secured
Parties as the secured party and purchaser thereof, or other, similar
instruments or documents as may be necessary or, in the opinion of the
Administrative Agent, on the Purchaser's behalf, desirable under the UCC or
any comparable law of all appropriate jurisdictions to perfect the sale by
each Originator to the Seller of, and the Purchaser's undivided percentage
interest in, the Pool Receivables and Related Assets;
(vii) Search reports provided in writing to the Administrative Agent,
on the Purchaser's behalf, (A) listing all effective financing statements
that name any Seller Party or Originator (including legal names and
tradenames) as debtor and that are filed in the jurisdictions in which
filings were made pursuant to SUBSECTION (vi) above and in such other
jurisdictions that the Administrative Agent shall reasonably request,
together with copies of such financing statements (none of which (other
than any of the financing statements described in SUBSECTION (vi) above)
shall cover any Receivables or Related Assets, and (B) listing all tax
liens and judgment liens (if any) filed against any debtor referred to in
CLAUSE (A) above in the jurisdictions described therein and showing no such
Liens;
(viii) Evidence that the Initial Seller Notes have been duly executed
and delivered by the Seller;
(ix) [RESERVED];
(x) A favorable opinion of Locke Liddell & Sapp LLP, counsel to the
Seller Parties and Lennox International, as to:
(A) the existence of a "true sale" of the Receivables from the
Originators to the Seller under the Sale Agreement;
(B) the inapplicability of the doctrine of substantive
consolidation to the Seller and the Originators in connection with any
bankruptcy proceeding involving Heatcraft Technologies, Armstrong or
the Originators;
(C) the creation of a first priority perfected security interest
in favor of the Purchaser in (1) all the Pool Receivables and Related
Assets (and including specifically any undivided interest therein
retained by Seller hereunder), the Sale Agreement and other
Transaction Documents and (2) all proceeds of any of the foregoing;
(D) due authorization, execution, delivery, enforceability and
other corporate matters of the Seller Parties and Lennox International
as to the Transaction Documents (however, the opinion as to certain
New York law matters may be provided by in-house counsel); and
17
(E) such other matters as the Administrative Agent, acting on
behalf of the Purchaser, may reasonably request.
(xi) A pro forma Information Package, prepared as of the Cut-Off Date
of May 31, 2000;
(xii) A report in form and substance satisfactory to the
Administrative Agent, on the Purchaser's behalf, from the Initial Due
Diligence Auditor as to a pre-closing due diligence audit by the Initial
Due Diligence Auditor;
(xiii) The Liquidity Agreement, in form and substance satisfactory to
the Administrative Agent, on the Purchaser's behalf, duly executed by the
Purchaser, the Liquidity Agent and each Liquidity Bank;
(xiv) Lockbox Agreements with respect to each Lockbox Account;
(xv) Evidence that the Assurance Agreement has been duly executed and
delivered by Lennox International;
(xvi) [RESERVED];
(xvii) With respect to Lennox International, a consolidated balance
sheet, income statement and statement of shareholders' equity as at
December 31, 1999 and with respect to the Seller, a balance sheet, income
statement and statement of shareholders' equity as at June 9, 2000, each of
the foregoing together with a certification of the chief financial officer,
chief accounting officer, controller or treasurer in the form attached
hereto as EXHIBIT B; and
(xviii) such other agreements, instruments, certificates, opinions and
other documents as the Administrative Agent may reasonably request; and
(b) Lennox shall have paid or caused to be paid (i) the Structuring Fee and
(ii) all Transaction Fees.
SECTION 5.2 CONDITIONS PRECEDENT TO ALL PURCHASES AND REINVESTMENTS.
Each Purchase (including the initial Purchase) and each Reinvestment shall
be subject to the further conditions precedent that on the date of such Purchase
or Reinvestment the following statements shall be true (and the Seller, by
accepting the amount of such Purchase or by receiving the proceeds of such
Reinvestment, and each other Seller Party, upon such acceptance or receipt by
the Seller, shall be deemed to have certified that):
(a) the representations and warranties contained in SECTION 6.1 are correct
in all material respects on and as of such day as though made on and as of such
day and shall be deemed to have been made on such day,
18
(b) no event has occurred and is continuing, or would result from such
Purchase or Reinvestment, that constitutes a Liquidation Event or Unmatured
Liquidation Event,
(c) after giving effect to each proposed Purchase or Reinvestment, the
Invested Amount will not exceed the Purchase Limit, and the Asset Interest will
not exceed the Allocation Limit,
(d) the Termination Date shall not have occurred,
(e) in the case of a Purchase, the Administrative Agent shall have timely
received an appropriate notice of the proposed Purchase in accordance with
SECTION 1.2(a),
(f) a completed Information Package shall have been delivered by the Master
Servicer to the Administrative Agent, on the Purchaser's behalf, as of the
applicable Reporting Date,
(g) both prior to and after giving effect to each proposed Purchase or
Reinvestment, the requirements of the Credit Agreement and any other agreement
evidencing any Material Indebtedness of Lennox International with respect to
transfers of assets and creation of liens shall not have been violated,
(h) after giving effect to each proposed Purchase or Reinvestment, the
Weighted Average Term (with respect to Receivables included in the Net Pool
Balance) shall not exceed 60 days, and
(i) such other agreements, instruments, certificates, opinions and
other documents as the Administrative Agent may reasonably request have
been delivered;
PROVIDED, HOWEVER, the absence of the occurrence and continuance of an Unmatured
Liquidation Event shall not be a condition precedent to any Reinvestment or any
Purchase on any day which does not cause the Invested Amount, after giving
effect to such Reinvestment or Purchase, to exceed the Invested Amount as of the
opening of business on such day.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES.
Each Seller Party represents and warrants as to itself, except when
specifically provided, in which case, the specified Seller Party represents and
warrants as follows:
(a) ORGANIZATION AND GOOD STANDING; OWNERSHIP. It has been duly organized
and is validly existing as a corporation in good standing under the laws of the
State of its incorporation, with power and authority to own its properties and
to conduct its business as such properties are presently owned and such business
is presently conducted. The Seller had at all relevant times,
19
and now has, all necessary power, authority, and legal right to acquire and own
the Pool Receivables and Related Assets. The Originators, Armstrong and
Heatcraft Technologies own directly all the issued and outstanding capital stock
of the Seller.
(b) DUE QUALIFICATION. It is duly qualified to do business as a foreign
corporation in good standing, and has obtained all necessary licenses and
approvals, in all jurisdictions in which the ownership or lease of property or
the conduct of its business requires such qualification, licenses or approvals,
except where the failure to be so qualified or have such licenses or approvals
would not have a Material Adverse Effect.
(c) POWER AND AUTHORITY; DUE AUTHORIZATION. It (i) has all necessary power,
authority and legal right (A) to execute and deliver this Agreement and the
other Transaction Documents to which it is a party, (B) to carry out the terms
of the Transaction Documents to which it is a party, (C) in the case of the
Master Servicer, to service the Receivables and the Related Assets in accordance
with this Agreement and the Sale Agreement, and (D) in the case of the Seller,
sell and assign the Asset Interest on the terms and conditions herein provided,
and (ii) has duly authorized by all necessary corporate action the execution,
delivery and performance of this Agreement and the other Transaction Documents
and, in the case of the Seller, the sales and assignments described in CLAUSE
(i)(D) above.
(d) VALID SALE; BINDING OBLIGATIONS. (i) This Agreement constitutes a valid
sale, transfer, and assignment of the Asset Interest to the Purchaser,
enforceable against creditors of, and purchasers from, the Seller, and (ii) this
Agreement and each other Transaction Document signed by such Seller Party
constitutes, a legal, valid and binding obligation of such Seller Party,
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, or other similar laws from
time to time in effect affecting the enforcement of creditors' rights generally
and by general principles of equity, regardless of whether such enforceability
is considered in a proceeding in equity or at law.
(e) NO VIOLATION. The execution, delivery and performance by it of this
Agreement and the other Transaction Documents to which it is a party and the
consummation by it of the transactions contemplated hereby and thereby will not
(i) conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time or both) a default under,
its articles or certificate of incorporation or by-laws, or any material
indenture, loan agreement, receivables purchase agreement, mortgage, deed of
trust, or other agreement or instrument to which it is a party or by which it or
any of its properties is bound (including, but not limited to, those agreements
or instruments evidencing Material Indebtedness of Lennox International), (ii)
result in the creation or imposition of any Lien upon any its properties
pursuant to the terms of any such material indenture, loan agreement,
receivables purchase agreement, mortgage, deed of trust, or other agreement or
instrument, other than this Agreement and the other Transaction Documents, or
(iii) violate any law or any order, rule, or regulation applicable to it of any
court or of any federal or state regulatory body, administrative agency, or
other governmental instrumentality having jurisdiction over it or any of its
properties.
(f) NO PROCEEDINGS. There are no proceedings or investigations pending, or,
to its knowledge, threatened, before any court, regulatory body, administrative
agency, or other
20
tribunal or governmental instrumentality (i) asserting the invalidity of this
Agreement or any other Transaction Document, (ii) seeking to prevent the sale
and assignment of the Receivables under the Sale Agreement or of the Asset
Interest under this Agreement or the consummation of any of the other
transactions contemplated by this Agreement or any other Transaction Document,
or (iii) that would have a Material Adverse Effect.
(g) BULK SALES ACT. No transaction contemplated hereby requires compliance
with any bulk sales act or similar law.
(h) GOVERNMENT APPROVALS. No authorization or approval or other action by,
and no notice to or filing with, any Governmental Authority or regulatory body
is required for the due execution, delivery and performance by it of this
Agreement and each other Transaction Document to which it is a party, except, in
the case of the Seller, for (i) the filing of the UCC financing statements
referred to in ARTICLE V, and (ii) the filing of any UCC continuation statements
and amendments from time to time required in relation to any UCC financing
statements filed in connection with this Agreement, as provided in SECTION 8.7,
all of which, at the time required in ARTICLE V or SECTION 8.7, as applicable,
shall have been duly made and shall be in full force and effect.
(i) FINANCIAL CONDITION. (i) The consolidated and consolidating balance
sheets of the Lennox International and its consolidated subsidiaries as at
December 31, 1999, and the related statements of income and shareholders' equity
of Lennox International and its consolidated subsidiaries for the fiscal year
then ended, certified by Arthur Andersen LLP, independent certified public
accountants, copies of which have been furnished to the Administrative Agent,
fairly present in all material respects the consolidated financial condition of
Lennox International and its consolidated subsidiaries as at such date and the
consolidated results of the operations of Lennox International and its
consolidated subsidiaries for the period ended on such date, all in accordance
with GAAP consistently applied, (ii) since December 31, 1999 there has been no
material adverse change in any such financial condition, business or operations
except as described in SCHEDULE 6.1(i), (iii) the balance sheet of the Seller as
at June 9, 2000, certified by the chief financial officer or treasurer of the
Seller by means of a Certificate of Financial Officer in the form attached
hereto as EXHIBIT B, copies of which have been furnished to the Administrative
Agent, fairly present in all material respects the financial condition, assets
and liabilities of the Seller as at such date, all in accordance with GAAP
consistently applied, and (iv) since June 9, 2000, there has been no material
adverse change in the Seller's financial condition, business or operations.
(j) NATURE OF RECEIVABLES. Each Receivable constitutes an "account" as such
term is defined in the UCC.
(k) MARGIN REGULATIONS. The use of all funds obtained by such Seller Party
under this Agreement or any other Transaction Document will not conflict with or
contravene any of Regulation T, U and X promulgated by the Federal Reserve Board
from time to time.
(l) QUALITY OF TITLE. (i) Each Pool Receivable, together with the Related
Assets, is owned by the Seller free and clear of any Lien (other than any Lien
arising solely as the result of
21
any action taken by the Purchaser (or any assignee thereof) or by the
Administrative Agent); (ii) when the Purchaser makes a Purchase or Reinvestment,
it shall have acquired and shall at all times thereafter continuously maintain a
valid and perfected first priority undivided percentage ownership interest to
the extent of the Asset Interest in each Pool Receivable, each Related Asset and
Collections with respect thereto, free and clear of any Lien (other than any
Lien arising as the result of any action taken by the Purchaser (or any assignee
thereof or by the Administrative Agent); and (iii) no financing statement or
other instrument similar in effect covering any Pool Receivable, any interest
therein, the Related Assets or Collections with respect thereto is on file in
any recording office except such as may be filed (A) in favor of the Originators
in accordance with the Contracts, (B) in favor of the Seller in connection with
the Sale Agreement or (C) in favor of the Purchaser or the Administrative Agent
in accordance with this Agreement or in connection with any Lien arising solely
as the result of any action taken by the Purchaser (or any assignee thereof) or
by the Administrative Agent.
(m) ACCURATE REPORTS. No Information Package (if prepared by such Seller
Party, or to the extent information therein was supplied by such Seller Party)
or other information, exhibit, financial statement, document, book, record or
report furnished or to be furnished, in each case in writing, by or on behalf of
such Seller Party to the Administrative Agent or the Purchaser pursuant to this
Agreement was or will be inaccurate in any material respect as of the date it
was or will be dated or (except as otherwise disclosed to the Administrative
Agent or Purchaser at such time) as of the date so furnished, or contained or
(in the case of information or other materials to be furnished in the future)
will contain any material misstatement of fact or omitted or (in the case of
information or other materials to be furnished in the future) will omit to state
a material fact or any fact necessary to make the statements contained therein
not materially misleading in light of the circumstances made or presented.
(n) OFFICES. The principal places of business and chief executive offices
of the Master Servicer and the Seller are located at the respective addresses
set forth on SCHEDULE 14.2, and the offices where the Master Servicer and the
Seller keep all their books, records and documents evidencing Pool Receivables,
the related Contracts and all purchase orders and other agreements related to
such Pool Receivables are located at the addresses specified in SCHEDULE 6.1(n)
(or at such other locations, notified to the Administrative Agent, on the
Purchaser's behalf, in accordance with SECTION 7.1(f), in jurisdictions where
all action required by SECTION 8.5 has been taken and completed).
(o) LOCKBOX ACCOUNTS. The names and addresses of all the Lockbox Banks,
together with the account numbers of the accounts of the Originators or the
Seller at such Lockbox Banks, are specified in SCHEDULE 6.1(o) (or have been
notified to and approved by the Administrative Agent, on the Purchaser's behalf,
in accordance with SECTION 7.3(d)).
(p) ELIGIBLE RECEIVABLES. Each Receivable included in the Net Pool Balance
as an Eligible Receivable on the date of any Purchase, Reinvestment or
computation of Net Pool Balance shall be an Eligible Receivable on such date.
22
(q) SERVICING PROGRAMS. No license or approval is required for the
Administrative Agent's use of any program used by the Master Servicer in the
servicing of the Receivables, other than those which have been obtained and are
in full force and effect.
(r) COMPLIANCE WITH CREDIT AND COLLECTION POLICY. With respect to each
Eligible Receivable, it has complied in all material respect with the Credit and
Collection Policy.
(s) [RESERVED].
(t) NAMES. Since the date of its incorporation, the Seller has not used any
corporate names, trade names or assumed names other than the name in which it
has executed this Agreement.
(u) OWNERSHIP OF THE SELLER. The Originators, Armstrong and Heatcraft
Technologies own 100% of the issued and outstanding capital stock of the Seller,
free and clear of any Lien. Such capital stock is validly issued, fully paid and
nonassessable, and there are no options, warrants or other rights to acquire
securities of the Seller.
(v) INVESTMENT COMPANY. The Seller is not an "investment company" within
the meaning of the Investment Company Act of 1940, as amended from time to time,
or any successor statute.
(w) TAXES. Each Seller Party has filed all material tax returns and reports
required by law to have been filed by it and has paid all taxes and governmental
charges thereby shown to be owing, except for immaterial amounts, unless such
immaterial amounts give rise to a Lien, and except for any such taxes which are
not yet delinquent or are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
generally accepted accounting principles shall have been set aside on its books.
(x) COMPLIANCE WITH LAWS. Each Seller Party is in compliance with all
applicable laws, rules, regulations and orders, including those with respect to
the Pool Receivables and related Contracts, except where the failure to so
comply would not individually or in the aggregate have a Material Adverse
Effect.
ARTICLE VII
GENERAL COVENANTS OF THE SELLER PARTIES
SECTION 7.1 AFFIRMATIVE COVENANTS OF THE SELLER PARTIES.
From June 19, 2000 until the Final Payout Date, unless the Administrative
Agent shall otherwise consent in writing:
(a) COMPLIANCE WITH LAWS, ETC. Each Seller Party will comply in all
material respects with all applicable laws, rules, regulations and orders,
including those with respect to
23
the Pool Receivables and related Contracts, except where the failure to so
comply would not individually or in the aggregate have a Material Adverse
Effect.
(b) PRESERVATION OF CORPORATE EXISTENCE. Each Seller Party will preserve
and maintain its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified in good
standing as a foreign corporation in each jurisdiction where the failure to
preserve and maintain such existence, rights, franchises, privileges and
qualification would have a Material Adverse Effect.
(c) AUDITS. Each Seller Party will (i) at any time and from time to time
upon not less than five (5) Business Days' notice (unless a Liquidation Event
has occurred and is continuing (or the Administrative Agent, on the Purchaser's
behalf, believes in good faith that a Liquidation Event has occurred and is
continuing), in which case no such notice shall be required) during such Seller
Party's regular business hours, permit the Administrative Agent, on the
Purchaser's behalf, or any of its agents or representatives, (A) to examine and
make copies of and abstracts from all books, records and documents (including,
without limitation, computer tapes and disks) in the possession or under the
control of such Seller Party relating to Pool Receivables, including, without
limitation, the related Contracts and purchase orders and other agreements, and
(B) to visit the offices and properties of such Seller Party for the purpose of
examining such materials described in CLAUSE (i)(A) next above, and to discuss
matters relating to Pool Receivables or such Seller Party's performance
hereunder with any of the officers or employees (with notification to and
coordination with the treasurer of such Seller or his designee) of such Seller
Party having knowledge of such matters; (ii) permit the Administrative Agent or
any of its agents or representatives, upon not less than five (5) Business Days'
notice from the Administrative Agent and the consent (which consent shall not
unreasonably be withheld) of such Seller Party (unless a Liquidation Event has
occurred and is continuing (or the Administrative Agent believes in good faith
that a Liquidation Event has occurred and is continuing) in which case no such
notice or consent shall be required), to meet with the independent auditors of
such Seller Party, to review such auditors' work papers and otherwise to review
with such auditors the books and records of such Seller Party with respect to
the Pool Receivables and Related Assets; and (iii) without limiting the
provisions of CLAUSE (i) or (ii) next above, from time to time, at the expense
of such Seller Party, permit certified public accountants or other auditors
acceptable to the Administrative Agent to conduct a review of such Seller
Party's books and records with respect to the Pool Receivables and Related
Assets; provided, that, so long as no Liquidation Event has occurred and is
continuing, (i) such reviews shall not be done more than two (2) times in any
one calendar year and (ii) the Seller Parties shall only be responsible for the
costs and expenses of one such review in any one calendar year.
(d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Master Servicer will
maintain and implement administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing Pool Receivables
in the event of the destruction of the originals thereof), and keep and
maintain, all documents, books, records and other information reasonably
necessary or advisable for the collection of all Pool Receivables (including,
without limitation, records adequate to permit the daily identification of
outstanding Unpaid Balances by Obligor and related debit and credit details of
the Pool Receivables).
24
(e) PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND CONTRACTS. Each Seller
Party will, at its expense, timely and fully perform and comply with all
material provisions, covenants and other promises, if any, required to be
observed by it under the Contracts related to the Pool Receivables and all
agreements related to such Pool Receivables.
(f) LOCATION OF RECORDS. Each Seller Party will keep its chief place of
business and chief executive office, and the offices where it keeps its records
concerning the Pool Receivables, all related Contracts and all agreements
related to such Pool Receivables (and all original documents relating thereto),
at the address(es) of the Master Servicer and the Seller referred to in SECTION
6.1(n) or, upon 30 days' prior written notice to the Administrative Agent, at
such other locations in jurisdictions where all action required by SECTION 8.5
shall have been taken and completed.
(g) CREDIT AND COLLECTION POLICIES. Each Seller Party will comply in all
material respects with the Credit and Collection Policy in regard to each Pool
Receivable and the related Contract.
(h) SALE AGREEMENT. The Seller will perform and comply in all material
respects with all of its covenants and agreements set forth in the Sale
Agreement, and will enforce the performance by the Originators of their
respective obligations under the Sale Agreement.
(i) LOCKBOX AGREEMENTS. The Seller and the Master Servicer shall enter
into a Lockbox Agreement with Wachovia with respect to each Lockbox Bank
with respect to each Lockbox Account, and shall instruct all Obligors to
deposit all Collections to the Lockbox Accounts. Upon the establishment of
the Collection Account, if any, the Master Servicer shall instruct each
Lockbox Bank to deposit all Collections to the Collection Account. The
Seller will not give any contrary or conflicting instructions, and will,
upon the request of the Master Servicer or the Administrative Agent,
confirm such instructions by the Master Servicer or take such other action
as may be reasonably required to give effect to such instructions.
SECTION 7.2 REPORTING REQUIREMENTS OF THE SELLER PARTIES.
From the date hereof until the Final Payout Date, unless the Administrative
Agent, on the Purchaser's behalf, shall otherwise consent in writing:
(a) QUARTERLY FINANCIAL STATEMENTS - LENNOX INTERNATIONAL. The Master
Servicer will furnish to the Administrative Agent, on the Purchaser's behalf, as
soon as available and in any event within 45 days after the end of each of the
first three quarters of each fiscal year of Lennox International, copies of its
consolidated, and, to the extent otherwise available, consolidating balance
sheets and related statements of income and statements of cash flow, showing the
financial condition of Lennox International and its consolidated Subsidiaries as
of the close of such fiscal quarter and the results of its operations and the
operations of such Subsidiaries during such fiscal quarter and the then elapsed
portion of the fiscal year, together with a Certificate of Financial Officer in
the form attached hereto as EXHIBIT B executed by the chief financial officer or
treasurer of the Lennox International.
25
(b) ANNUAL FINANCIAL STATEMENTS - LENNOX INTERNATIONAL. The Master Servicer
will furnish to the Administrative Agent, as soon as available and in any event
within 90 days after the end of each fiscal year of Lennox International, copies
of its consolidated and consolidating balance sheets and related statements of
income and statements of cash flow, showing the financial condition of Lennox
International and its consolidated Subsidiaries as of the close of such fiscal
year and the results of its operations and the operations of such Subsidiaries
during such year, all audited by Arthur Andersen LLP or other independent public
accountants of recognized national standing acceptable to the Administrative
Agent and accompanied by an opinion of such accountants (which shall not be
qualified in any material respect) to the effect that such consolidated
financial statements fairly present the financial condition and results of
operations of Lennox International on a consolidated basis (except as noted
therein) in accordance with GAAP consistently applied;
(c) QUARTERLY FINANCIAL STATEMENTS - SELLER. The Seller will furnish to the
Administrative Agent, as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the Seller,
copies of the financial statements of the Seller, consisting of at least a
balance sheet as at the close of such quarter and statements of earnings and
changes in cash flows for such quarter and for the period from the beginning of
the fiscal year to the close of such quarter, together with a Certificate of
Financial Officer in the form attached hereto as EXHIBIT B executed by the chief
financial officer, chief accounting officer, controller or treasurer of the
Seller or Lennox International;
(d) ANNUAL FINANCIAL STATEMENTS - SELLER. The Seller will furnish to the
Administrative Agent, as soon as available and in any event within 90 days after
the end of each fiscal year of the Seller, copies of the financial statements of
the Seller, consisting of at least a balance sheet of the Seller for such year
and statements of earnings, cash flows and shareholders' equity, setting forth
in each case in comparative form corresponding figures from the preceding fiscal
year, together with a Certificate of Financial Officer in the form attached
hereto as EXHIBIT B executed by the chief financial officer or treasurer of the
Seller;
(e) REPORTS TO HOLDERS AND EXCHANGES. In addition to the reports required
by SUBSECTIONs (a), (b), (c) and (d) above, promptly upon the Administrative
Agent's request, the Master Servicer will furnish or cause to be furnished to
the Administrative Agent, on the Purchaser's behalf, copies of any reports
specified in such request which the Master Servicer sends to any of its
securityholders, and any reports, final registration statements (excluding
exhibits), and each final prospectus and all amendments thereto that the Master
Servicer files with the Securities and Exchange Commission or any national
securities exchange other than registration statements relating to employee
benefit plans and registrations of securities for selling securities;
(f) ERISA. Promptly after the filing or receiving thereof, each Seller
Party will furnish to the Administrative Agent, on the Purchaser's behalf,
copies of all reports and notices with respect to any Reportable Event defined
in Article IV of ERISA which any Seller Party or ERISA Affiliate thereof files
under ERISA with the Internal Revenue Service, the Pension Benefit Guaranty
Corporation or the U.S. Department of Labor or which such Seller Party or
26
ERISA Affiliate thereof receives from the Pension Benefit Guaranty Corporation,
which Reportable Event(s) individually or in the aggregate could have a Material
Adverse Effect;
(g) LIQUIDATION EVENTS, ETC. As soon as possible and in any event within
three (3) Business Days after obtaining knowledge of the occurrence of any
Liquidation Event, any Unmatured Liquidation Event, or any Credit Event, each
Seller Party will furnish to the Administrative Agent, on the Purchaser's
behalf, a written statement of the chief financial officer, treasurer or chief
accounting officer of such Seller Party setting forth details of such event and
the action that such Seller Party will take with respect thereto;
(h) LITIGATION. As soon as possible and in any event within ten (10)
Business Days of any Seller Party's knowledge thereof, such Seller Party will
furnish to the Administrative Agent, on the Purchaser's behalf, notice of (i)
any litigation, investigation or proceeding which may exist at any time which
could reasonably be expected to have a Material Adverse Effect and (ii) any
development in previously disclosed litigation which development could
reasonably be expected to have a Material Adverse Effect;
(i) [RESERVED];
(j) CHANGE IN CREDIT AND COLLECTION POLICY. Prior to its effective date,
each Seller Party will furnish to the Administrative Agent,on the Purchaser's
behalf, notice of (i) any material change in the character of such Seller
Party's business, and (ii) any material change in the Credit and Collection
Policy;
(k) CREDIT EVENT. Within five (5) Business Days of the occurrence thereof,
each Seller Party will furnish to the Administrative Agent, on the Purchaser's
behalf, notice of any Credit Event;
(l) [RESERVED]; and
(m) OTHER. Promptly, from time to time, each Seller Party will furnish to
the Administrative Agent, on the Purchaser's behalf, such other information,
documents, records or reports respecting the Receivables or the condition or
operations, financial or otherwise, of such Seller Party as the Administrative
Agent may from time to time reasonably request in order to protect the interests
of the Administrative Agent or Purchaser under or as contemplated by this
Agreement.
SECTION 7.3 NEGATIVE COVENANTS OF THE SELLER PARTIES.
From June 19, 2000 until the Final Payout Date, without the prior written
consent of the Administrative Agent:
(a) SALES, LIENS, ETC. (i) The Seller will not, except as otherwise
provided herein and in the other Transaction Documents, sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create or suffer to
exist any Lien upon or with respect to, any Pool Receivable or any Related
Asset, or any interest therein, or any account to which any Collections of any
Pool
27
Receivable are sent, or any right to receive income or proceeds from or in
respect of any of the foregoing (except, prior to the execution of Lockbox
Agreements, set-off rights of any bank at which any such account is maintained),
and (ii) the Master Servicer will not assert any interest in the Receivables,
except as Master Servicer.
(b) EXTENSION OR AMENDMENT OF RECEIVABLES. No Seller Party will, except as
otherwise permitted in SECTION 8.2(c), extend, amend or otherwise modify the
terms of any Pool Receivable, or amend, modify or waive any material term or
condition of any Contract related thereto in any way that adversely affects the
collectibility of any Pool Receivable or the Purchaser's rights therein.
(c) CHANGE IN CREDIT AND COLLECTION POLICY. No Seller Party will make or
permit to be made any material change in the Credit and Collection Policy, which
change would impair the collectibility of any significant portion of the Pool
Receivables or otherwise adversely affect the interests or remedies of the
Purchaser under this Agreement or any other Transaction Document.
(d) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. No Seller Party will add or
terminate any bank as a Lockbox Bank from those listed in SCHEDULE 6.1(o) or,
after Lockbox Accounts have been delivered pursuant to SECTION 7.1(i), make any
change in its instructions to Obligors regarding payments to be made to the
Seller or Master Servicer or payments to be made to any Lockbox Bank (except for
a change in instructions solely for the purpose of directing Obligors to make
such payments to another existing Lockbox Bank), unless (i) the Administrative
Agent shall have received prior written notice of such addition, termination or
change and (ii) if a Credit Event has occurred, the Administrative Agent shall
have received duly executed copies of Lockbox Agreements with each new Lockbox
Bank.
(e) DEPOSITS TO COLLECTION ACCOUNT. No Seller Party will deposit or
otherwise credit, or cause or permit to be so deposited or credited, to the
Collection Account, any cash or cash proceeds other than Collections of Pool
Receivables.
(f) CHANGES TO OTHER DOCUMENTS. The Seller will not enter into any
amendment or modification of, or supplement to, the Sale Agreement or the
Seller's certificate of incorporation.
(g) [RESERVED].
(h) SELLER INDEBTEDNESS. The Seller will not incur or permit to exist any
Indebtedness or liability on account of deposits or advances or for borrowed
money or for the deferred purchase price of any property or services, except (i)
indebtedness of the Seller to the Originators incurred in accordance with the
Sale Agreement, (ii) current accounts payable arising under the Transaction
Documents and not overdue and (iii) other current accounts payable arising in
the ordinary course of business and not overdue, in an aggregate amount at any
time outstanding not to exceed $10,000.
(i) NEGATIVE PLEDGES. No Seller Party will enter into or assume any
agreement (other than this Agreement and the other Transaction Documents)
prohibiting the creation or assumption of any Lien upon any Pool Receivables or
Related Assets, whether now owned or
28
hereafter acquired, except as contemplated by the Transaction Documents, or
otherwise prohibiting or restricting any transaction contemplated hereby or by
the other Transaction Documents.
(j) CHANGE OF NAME. The Seller will not change its name, any trade name or
corporate structure, or commence the use of any new trade name unless it has
given the Administrative Agent at least 30 days prior written notice thereof and
has taken all steps necessary to continue the perfection of the Purchaser's
interest, including the filing of amendments to the UCC financing statements
filed pursuant to SECTION 5.1(a).
(k) [RESERVED].
(l) MERGERS, CONSOLIDATIONS AND ACQUISITIONS.
(i) The Master Servicer will not, nor will it permit any subservicer
to merge into or consolidate with any other Person, or permit any other
Person to merge into or consolidate with it, or purchase, lease or
otherwise acquire (in one transaction or a series of transactions) all or
substantially all of the assets of any other Person (whether directly by
purchase, lease or other acquisition of all or substantially all of the
assets of such Person or indirectly by purchase or other acquisition of all
or substantially all of the capital stock of such other Person) other than
acquisitions in the ordinary course of their business, except that if at
the time thereof and immediately after giving effect thereto no Liquidation
Event or Unmatured Liquidation Event shall have occurred and be continuing
(A) the Master Servicer or such subservicer may merge or consolidate with
any Subsidiary (other than Seller) in a transaction in which such Master
Servicer or such subservicer is the surviving corporation, and (B) the
Master Servicer or such subservicer may purchase, lease or otherwise
acquire from any Subsidiary (other than Seller) all or substantially all of
its assets and may purchase or otherwise acquire all or substantially all
of the capital stock of any Person who immediately thereafter is a
Subsidiary.
(ii) Seller will not merge into or consolidate with any other Person,
or permit any other Person to merge into or consolidate with it, or
purchase, lease or otherwise acquire (in one transaction or a series of
transactions) all or substantially all of the assets of any other Person
(whether directly by purchase, lease or other acquisition of all or
substantially all of the assets of such Person or indirectly by Purchase or
other acquisition of all or substantially all of the capital stock of such
other Person) other than the acquisition of the Receivables and Related
Assets pursuant to the Sale Agreement and the sale of an interest in the
Pool Receivables and Related Assets hereunder.
(m) [RESERVED].
(n) CHANGE IN BUSINESS. No Seller Party will make or permit to be made any
material change in the character of its business, which change would impair the
collectibility of any significant portion of the Pool Receivables or otherwise
adversely affect the interests or remedies of the Purchaser under this Agreement
or any other Transaction Document.
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SECTION 7.4 SEPARATE CORPORATE EXISTENCE OF THE SELLER.
Each Seller Party hereby acknowledges that the Purchaser and the
Administrative Agent are entering into the transactions contemplated hereby in
reliance upon the Seller's identity as a legal entity separate from the Master
Servicer and its other Affiliates. Therefore, each Seller Party shall take all
steps specifically required by this Agreement or reasonably required by the
Administrative Agent to continue the Seller's identity as a separate legal
entity and to make it apparent to third Persons that the Seller is an entity
with assets and liabilities distinct from those of its Affiliates, and is not a
division of the Master Servicer or any other Person. Without limiting the
foregoing, each Seller Party will take such actions as shall be required in
order that:
(a) The Seller will be a limited purpose corporation whose primary
activities are restricted in its Certificate of Incorporation to purchasing or
otherwise acquiring from the Originators, owning, holding, granting security
interests, or selling interests, in Receivables in the Receivables Pool and
Related Assets, entering into agreements for the selling and servicing of the
Receivables Pool, and conducting such other activities as it deems necessary or
appropriate to carry out its primary activities;
(b) At least one member of the Seller's Board of Directors (the
"INDEPENDENT DIRECTOR") shall be an individual who is not, and never has been, a
direct, indirect or beneficial stockholder, officer, director, employee,
affiliate, associate, material supplier or material customer of any Seller Party
or any of its Affiliates. The certificate of incorporation of the Seller shall
provide that (i) at least one member of the Seller's Board of Directors shall be
an Independent Director, (ii) the Seller's Board of Directors shall not approve,
or take any other action to cause the filing of, a voluntary bankruptcy petition
with respect to the Seller unless the Independent Director shall approve the
taking of such action in writing prior to the taking of such action and (iii)
the provisions requiring an Independent Director and the provisions described in
CLAUSES (i) and (ii) of this PARAGRAPH (b) cannot be amended without the prior
written consent of the Independent Director;
(c) The Independent Director shall not at any time serve as a trustee in
bankruptcy for the Seller or any Affiliate thereof;
(d) Any employee, consultant or agent of the Seller will be compensated
from the Seller's funds for services provided to the Seller. The Seller will not
engage any agents other than its attorneys, auditors and other professionals,
and a servicer and any other agent contemplated by the Transaction Documents for
the Receivables Pool (the parties acknowledge that the Master Servicer will be
fully compensated for its services by payment of the Servicing Fee), and certain
organizational expenses in connection with the formation of the Seller;
(e) The Seller will contract with the Master Servicer to perform for the
Seller all operations required on a daily basis to service the Receivables Pool.
The Seller will pay the Master Servicer the Servicing Fee pursuant hereto. The
Seller will not incur any material indirect or overhead expenses for items
shared with the Master Servicer (or any other Affiliate thereof) which are not
reflected in the Servicing Fee. To the extent, if any, that the Seller (or any
other Affiliate thereof) shares items of expenses not reflected in the Servicing
Fee, for legal,
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auditing and other professional services and directors' fees, such expenses will
be allocated to the extent practical on the basis of actual use or the value of
services rendered, and otherwise on a basis reasonably related to the actual use
or the value of services rendered, it being understood that Lennox shall pay or
cause to be paid all expenses relating to the preparation, negotiation,
execution and delivery of the Transaction Documents, including, without
limitation, legal, rating agency and other fees;
(f) The Seller's operating expenses will not be paid by any other Seller
Party or other Affiliate of the Seller;
(g) The Seller will have its own stationery;
(h) The books of account, financial reports and corporate records of the
Seller will be maintained separately from those of the Master Servicer and each
other Affiliate of the Seller;
(i) Any financial statements of any Seller Party or Affiliate thereof which
are consolidated to include the Seller will contain detailed notes clearly
stating that (i) all of the Seller's assets are owned by the Seller, and (ii)
the Seller is a separate corporate entity with its own separate creditors that
will be entitled to be satisfied out of the Seller's assets prior to any value
in the Seller becoming available to the Seller's equity holders; and the
accounting records and the published financial statements of the Originators
will clearly show that, for accounting purposes, the Pool Receivables and
Related Assets have been sold by the Originators to the Seller;
(j) The Seller's assets will be maintained in a manner that facilitates
their identification and segregation from those of the Master Servicer and the
other Affiliates;
(k) Each Affiliate of the Seller will strictly observe corporate
formalities in its dealings with the Seller, and, except as permitted pursuant
to this Agreement with respect to Collections, funds or other assets of the
Seller will not be commingled with those of any of its Affiliates;
(l) No Affiliate of the Seller will maintain joint bank accounts with the
Seller or other depository accounts with the Seller to which any such Affiliate
(other than in its capacity as the Master Servicer hereunder or under the Sale
Agreement) has independent access, provided that prior to the occurrence of a
Credit Event, Collections may be deposited into general accounts of the Master
Servicer, subject to the obligations of the Master Servicer hereunder;
(m) No Affiliate of the Seller shall, directly or indirectly, name the
Seller or enter into any agreement to name the Seller as a direct or contingent
beneficiary or loss payee on any insurance policy covering the property of any
Affiliate of the Seller;
(n) Each Affiliate of the Seller will maintain arm's length relationships
with the Seller, and each Affiliate of the Seller that renders or otherwise
furnishes services or merchandise to the Seller will be compensated by the
Seller at market rates for such services or merchandise;
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(o) No Affiliate of the Seller will be, nor will it hold itself out to be,
responsible for the debts of the Seller or the decisions or actions in respect
of the daily business and affairs of the Seller. The Master Servicer and the
Seller will immediately correct any known misrepresentation with respect to the
foregoing and they will not operate or purport to operate as an integrated
single economic unit with respect to each other or in their dealing with any
other entity;
(p) The Seller will keep correct and complete books and records of account
and minutes of the meetings and other proceedings of its stockholder and board
of directors, as applicable, and the resolutions, agreements and other
instruments of the Seller will be continuously maintained as official records by
the Seller; and
(q) The Seller, on the one hand, and each Originator, on the other hand,
will conduct its business solely in its own corporate name and in such a
separate manner so as not to mislead others with whom they are dealing.
ARTICLE VIII
ADMINISTRATION AND COLLECTION
SECTION 8.1 DESIGNATION OF MASTER SERVICER.
(a) LENNOX AS INITIAL MASTER SERVICER. The servicing, administering and
collection of the Pool Receivables shall be conducted by the Person designated
as Master Servicer hereunder from time to time in accordance with this SECTION
8.1. Until the Administrative Agent, on the Purchaser's behalf, gives to Lennox
a Successor Notice (as defined in SECTION 8.1(b)), Lennox is hereby designated
as, and hereby agrees to perform the duties and obligations of, the Master
Servicer pursuant to the terms hereof. Each of the Originators named in the Sale
Agreement, has agreed to act as subservicer for the purpose of performing
certain duties and obligations with respect to all Receivables purchased by the
Seller from such Originator pursuant to the terms of the Sale Agreement. In so
acting as subservicer, each of the Originators has agreed to comply with, and be
bound by, all of the terms and provisions of this Agreement applicable to such
Originator in the performance of its duties as subservicer; PROVIDED, HOWEVER,
that each such Originator (i) shall cease to act as subservicer upon the
Administrative Agent's delivery of a Successor Notice to Lennox, and (ii) shall
not be entitled to receive any Servicing Fee provided for herein (except that
the Master Servicer may agree to pay to the subservicers a proportional share of
the Servicing Fee which obligation shall be that of the Master Servicer).
(b) SUCCESSOR NOTICE; MASTER SERVICER TRANSFER EVENTS. Upon Lennox's
receipt of a notice from the Administrative Agent of the Administrative Agent's
designation, on the Purchaser's behalf, of a new Master Servicer (a "SUCCESSOR
NOTICE"), Lennox agrees that it will terminate its activities as Master Servicer
hereunder in a manner that the Administrative Agent believes will facilitate the
transition of the performance of such activities to the new Master Servicer, and
the Administrative Agent (or its designee) shall assume each and all of Lennox's
obligations to service and administer such Receivables, on the terms and subject
to the
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conditions herein set forth, and Lennox shall use its best efforts to assist the
Administrative Agent (or its designee) in assuming such obligations. Without
limiting the foregoing, Lennox agrees, at its expense, to take all actions
necessary to provide the new Master Servicer with access to all computer
software necessary or useful in collecting, billing or maintaining records with
respect to the Receivables. The Administrative Agent agrees not to give Lennox a
Successor Notice until after the occurrence and during the continuance of any
Liquidation Event or a Credit Event (any such event being herein called a
"SERVICER TRANSFER EVENT"), in which case such Successor Notice may be given at
any time in the Administrative Agent's discretion. If Lennox disputes the
occurrence of a Servicer Transfer Event, Lennox may take appropriate action to
resolve such dispute; provided that Lennox must terminate its activities
hereunder as Master Servicer and allow the newly designated Master Servicer to
perform such activities on the date provided by the Administrative Agent as
described above, notwithstanding the commencement or continuation of any
proceeding to resolve the aforementioned dispute, if the Administrative Agent,
on the Purchaser's behalf, reasonably determines, in good faith, that such
termination is necessary or advisable to protect the Purchaser's interests
hereunder.
(c) SUBCONTRACTS. The Master Servicer may, with the prior consent of the
Administrative Agent, subcontract with any other Person for servicing,
administering or collecting the Pool Receivables, provided that the Master
Servicer shall remain liable for the performance of the duties and obligations
of the Master Servicer pursuant to the terms hereof and such subservicing
arrangement may be terminated at the Administrative Agent's request, on the
Purchaser's behalf, at anytime after a Successor Notice has been given.
SECTION 8.2 DUTIES OF MASTER SERVICER.
(a) APPOINTMENT; DUTIES IN GENERAL. Each of the Seller, the Purchaser and
the Administrative Agent hereby appoints as its agent the Master Servicer, as
from time to time designated pursuant to SECTION 8.1, to enforce its rights and
interests in and under the Pool Receivables, the Related Security and the
related Contracts. The Master Servicer shall take or cause to be taken all such
actions as may be necessary or advisable to collect each Pool Receivable from
time to time, all in accordance with applicable laws, rules and regulations,
with reasonable care and diligence, and in accordance with the Credit and
Collection Policy.
(b) ALLOCATION OF COLLECTIONS; SEGREGATION. The Master Servicer shall
identify for the account of the Seller and Purchaser their respective allocable
shares of the Collections of Pool Receivables in accordance with SECTION 1.3 but
shall not be required (unless otherwise requested by the Administrative Agent,
on the Purchaser's behalf, after the occurrence of a Credit Event) to segregate
the funds constituting such portions of such Collections prior to the remittance
thereof in accordance with said SECTION. If instructed by the Administrative
Agent, on the Purchaser's behalf, after the occurrence of a Credit Event, the
Master Servicer shall segregate and deposit into the Collection Account, the
Purchaser's share of Collections of Pool Receivables, on the second Business Day
following receipt by the Master Servicer of such Collections in immediately
available funds.
(c) MODIFICATION OF RECEIVABLES. So long as no Liquidation Event and no
Unmatured Liquidation Event shall have occurred and be continuing, Lennox, while
it is Master Servicer,
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may, in accordance with the applicable Credit and Collection Policy, (i) extend
the maturity or adjust the Unpaid Balance of any Defaulted Receivable as the
Master Servicer may reasonably determine to be appropriate to maximize
Collections thereof, and (ii) adjust the Unpaid Balance of any Receivable to
reflect the reductions or cancellations described in the first sentence of
SECTION 3.2(a).
(d) DOCUMENTS AND RECORDS. Each Seller Party shall deliver to the Master
Servicer, and the Master Servicer shall hold in trust for the Seller and the
Purchaser in accordance with their respective interests, all documents,
instruments and records (including, without limitation, computer tapes or disks)
that evidence or relate to Pool Receivables.
(e) CERTAIN DUTIES TO THE SELLER. The Master Servicer shall, as soon as
practicable following receipt, turn over to the Seller (i) that portion of
Collections of Pool Receivables representing its undivided percentage interest
therein, less the Seller's Share of the Servicing Fee, and, in the event that
neither Lennox nor any other Seller Party or Affiliate thereof is the Master
Servicer, all reasonable and appropriate out-of-pocket costs and expenses of the
Master Servicer of servicing, collecting and administering the Pool Receivables
to the extent not covered by the Servicing Fee received by it, and (ii) the
Collections of any Receivable which is not a Pool Receivable. The Master
Servicer, if other than Lennox or any other Seller Party or Affiliate thereof,
shall, as soon as practicable upon demand, deliver to the Seller all documents,
instruments and records in its possession that evidence or relate to Receivables
of the Seller other than Pool Receivables, and copies of documents, instruments
and records in its possession that evidence or relate to Pool Receivables.
(f) TERMINATION. The Master Servicer's authorization under this Agreement
shall terminate upon the Final Payout Date.
(g) POWER OF ATTORNEY. The Seller hereby grants to the Master Servicer an
irrevocable power of attorney, with full power of substitution, coupled with an
interest, to take in the name of the Seller all steps which are necessary or
advisable to endorse, negotiate or otherwise realize on any writing or other
right of any kind held or transmitted by the Seller or transmitted or received
by the Purchaser (whether or not from the Seller) in connection with any
Receivable.
SECTION 8.3 [RESERVED].
SECTION 8.4 SERVICER DEFAULTS.
If any one of the following events (a "SERVICER DEFAULT") shall occur and
be continuing:
(a) any failure by the Master Servicer to make any payment, transfer or
deposit or to give instructions or notice to the Administrative Agent as
required by this Agreement including, without limitation, delivery of any
Information Package and, (i) in the case of failure to deliver an Information
Package such failure shall remain unremedied for two (2) Business Days after the
earliest to occur of (A) written notice thereof shall have been given by the
Administrative Agent to the Master Servicer or (B) the Master Servicer shall
have otherwise become aware of such
34
failure and (ii) in the case of failure to make any payment or deposit to be
made by the Master Servicer such failure shall remain unremedied for three (3)
Business Days after the due date thereof;
(b) any failure on the part of the Master Servicer duly to observe or
perform in any material respect any other covenants or agreements of the Master
Servicer set forth in this Agreement or any other Transaction Document to which
the Master Servicer is a party, which failure continues unremedied for a period
of 30 days after the first to occur of (i) the date on which written notice of
such failure requiring the same to be remedied shall have been given to the
Master Servicer by the Administrative Agent and (ii) the date on which the
Master Servicer becomes aware thereof;
(c) any representation, warranty or certification made by the Master
Servicer in this Agreement or in any certificate delivered pursuant to this
Agreement shall prove to have been incorrect when made, which continues to be
unremedied for a period of 30 days after the first to occur of (i) the date on
which written notice of such incorrectness requiring the same to be remedied
shall have been given to the Master Servicer by the Administrative Agent and
(ii) the date on which the Master Servicer becomes aware thereof; PROVIDED,
HOWEVER, that in the case of any representation, warranty or certification that
was not made in writing, a Servicer Default shall occur hereunder only if such
representation, warranty or certification was reasonably relied upon by the
Administrative Agent and/or the Purchaser;
(d) a Credit Event shall occur or any bankruptcy, insolvency or similar
event occurs with respect to the Master Servicer; or
(e) any change in the control of the Master Servicer which takes the form
of either a merger or consolidation in which the Master Servicer is not the
surviving entity.
Notwithstanding anything herein to the contrary, so long as any such Servicer
Default shall not have been remedied, the Administrative Agent, by written
notice to the Master Servicer (a "TERMINATION NOTICE"), may terminate all of the
rights and obligations of the Master Servicer as Master Servicer under this
Agreement and appoint a successor Master Servicer satisfactory to the
Administrative Agent (in the Administrative Agent's sole discretion).
SECTION 8.5 RIGHTS OF THE ADMINISTRATIVE AGENT.
(a) NOTICE TO OBLIGORS. At any time when a Liquidation Event has occurred
and is continuing, the Administrative Agent may notify the Obligors of Pool
Receivables, or any of them, of the ownership of the Asset Interest by the
Purchaser.
(b) NOTICE TO LOCKBOX BANKS. At any time following the occurrence of a
Liquidation Event, if Lockbox Agreements have been executed, the Administrative
Agent is hereby authorized to give notice to the Lockbox Banks, as provided in
the Lockbox Agreements, of the transfer to the Administrative Agent of dominion
and control over the lockboxes and related accounts to which the Obligors of
Pool Receivables make payments. The Seller and the Master Servicer hereby
transfer to the Administrative Agent, effective when the Administrative Agent
35
shall give notice to the Lockbox Banks as provided in the Lockbox Agreements,
the exclusive dominion and control over such lockboxes and accounts, and shall
take any further action that the Administrative Agent may reasonably request to
effect such transfer.
(c) RIGHTS ON SERVICER TRANSFER EVENT. At any time following the
designation of a Master Servicer other than Lennox pursuant to SECTION 8.1:
(i) The Administrative Agent may direct the Obligors of Pool
Receivables, or any of them, to pay all amounts payable under any Pool
Receivable directly to the Administrative Agent or its designee.
(ii) Any Seller Party shall, at the Administrative Agent's request and
at such Seller Party's expense, give notice of the Purchaser's ownership
and security interests in the Pool Receivables to each Obligor of Pool
Receivables and direct that payments be made directly to the Administrative
Agent or its designee.
(iii) Each Seller Party shall, at the Administrative Agent's request,
(A) assemble all of the documents, instruments and other records
(including, without limitation, computer programs, tapes and disks) which
evidence the Pool Receivables, and the related Contracts and Related
Security, or which are otherwise necessary or desirable to collect such
Pool Receivables, and make the same available to the successor Master
Servicer at a place selected by the Administrative Agent, and (B) segregate
all cash, checks and other instruments received by it from time to time
constituting Collections of Pool Receivables in a manner acceptable to the
Administrative Agent and promptly upon receipt, remit all such cash, checks
and instruments, duly endorsed or with duly executed instruments of
transfer, to the successor Master Servicer.
(iv) Each Seller Party and Purchaser hereby authorizes the
Administrative Agent, on the Purchaser's behalf, and grants to the
Administrative Agent an irrevocable power of attorney (which shall
terminate on the Final Payout Date), to take any and all steps in such
Seller Party's name and on behalf of the Seller Parties and Purchaser which
are necessary or desirable, in the determination of the Administrative
Agent, to collect all amounts due under any and all Pool Receivables,
including, without limitation, endorsing any Seller Party's name on checks
and other instruments representing Collections and enforcing such Pool
Receivables and the related Contracts.
SECTION 8.6 RESPONSIBILITIES OF THE SELLER PARTIES.
Anything herein to the contrary notwithstanding:
(a) CONTRACTS. Each Seller Party shall remain responsible for performing
all of its obligations (if any) under the Contracts related to the Pool
Receivables and under the related agreements to the same extent as if the Asset
Interest had not been sold hereunder, and the exercise by the Administrative
Agent or its designee of its rights hereunder shall not relieve any Seller Party
from such obligations.
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(b) LIMITATION OF LIABILITY. The Administrative Agent and Purchaser shall
not have any obligation or liability with respect to any Pool Receivables,
Contracts related thereto or any other related agreements, nor shall any of them
be obligated to perform any of the obligations of any Seller Party or any
Originator thereunder.
SECTION 8.7 FURTHER ACTION EVIDENCING PURCHASES AND REINVESTMENTS.
(a) FURTHER ASSURANCES. Each Seller Party agrees that from time to time, at
its expense, it will promptly execute and deliver all further instruments and
documents, and take all further action that the Administrative Agent or its
designee may reasonably request in order to perfect, protect or more fully
evidence the Purchases hereunder and the resulting Asset Interest, or to enable
Purchaser or the Administrative Agent or its designee to exercise or enforce any
of their respective rights hereunder or under any Transaction Document in
respect thereof. Without limiting the generality of the foregoing, each Seller
Party will:
(i) upon the request of the Administrative Agent, execute and file
such financing or continuation statements, or amendments thereto or
assignments thereof, and such other instruments or notices, as may be
necessary or appropriate, in accordance with the terms of this Agreement;
(ii) upon the request of the Administrative Agent after the occurrence
and during the continuance of a Liquidation Event, mark conspicuously each
Contract evidencing each Pool Receivable with a legend, acceptable to the
Administrative Agent, evidencing that the Asset Interest has been sold in
accordance with this Agreement; and
(iii) mark its master data processing records evidencing such Pool
Receivables and related Contracts with a legend, acceptable to the
Administrative Agent, evidencing that the Asset Interest has been sold in
accordance with this Agreement.
(b) ADDITIONAL FINANCING STATEMENTS; PERFORMANCE BY ADMINISTRATIVE AGENT.
Each Seller Party hereby authorizes the Administrative Agent, on the Purchaser's
behalf, or its designee to file one or more financing or continuation
statements, and amendments thereto and assignments thereof, relative to all or
any of the Pool Receivables and the Related Assets now existing or hereafter
arising in the name of any Seller Party. If any Seller Party fails to promptly
execute and deliver to the Administrative Agent, on the Purchaser's behalf, any
financing statement or continuation statement or amendment thereto or assignment
thereof requested by the Administrative Agent, on the Purchaser's behalf, each
Seller Party hereby authorizes the Administrative Agent, on the Purchaser's
behalf, to execute such statement on behalf of such Seller Party. If any Seller
Party fails to perform any of its agreements or obligations under this
Agreement, the Administrative Agent or its designee may (but shall not be
required to) itself perform, or cause performance of, such agreement or
obligation, and the reasonable expenses of the Administrative Agent or its
designee incurred in connection therewith shall be payable by the Seller Parties
as provided in SECTION 14.5.
(c) CONTINUATION STATEMENTS; OPINION. Without limiting the generality of
SUBSECTION (a), the Seller will, not earlier than six (6) months and not later
than three (3) months
37
prior to the fifth anniversary of the date of filing of the financing statements
referred to in SECTION 5.1(a) or any other financing statement filed pursuant to
this Agreement or in connection with any Purchase hereunder, if the Final Payout
Date shall not have occurred:
(i) if necessary, execute and deliver and file or cause to be filed an
appropriate continuation statement with respect to such financing
statement; and
(ii) deliver or cause to be delivered to the Administrative Agent an
opinion of the counsel for the Seller Parties (which may be an opinion of
in-house counsel for the Seller Parties), in form and substance reasonably
satisfactory to the Administrative Agent, confirming and updating the
opinion delivered pursuant to SECTION 5.1(a) to the effect that the Asset
Interest hereunder continues to be a valid and perfected ownership or
security interest, subject to no other Liens of record except as provided
herein or otherwise permitted hereunder.
SECTION 8.8 APPLICATION OF COLLECTIONS.
Any payment by an Obligor in respect of any indebtedness owed by it to any
Originator or Seller shall, except as otherwise specified by such Obligor or
required by the underlying Contract or law, be applied, first, as a Collection
of any Pool Receivable or Receivables then outstanding of such Obligor in the
order of the age of such Pool Receivables, starting with the oldest of such Pool
Receivables and, second, to any other indebtedness of such Obligor.
ARTICLE IX
SECURITY INTEREST
SECTION 9.1 GRANT OF SECURITY INTEREST.
To secure all obligations of the Seller arising in connection with this
Agreement and each other Transaction Document, whether now or hereafter
existing, due or to become due, direct or indirect, or absolute or contingent,
including, without limitation, all Indemnified Amounts, payments on account of
Collections received or deemed to be received and fees, in each case pro rata
according to the respective amounts thereof, the Seller hereby assigns and
pledges to the Administrative Agent, as agent for the Purchaser and its
successors and assigns, for the benefit of the Secured Parties, and hereby
grants to the Administrative Agent, as agent for the Purchaser, for the benefit
of the Secured Parties, a security interest in, all of the Seller's right, title
and interest now or hereafter existing in, to and under (a) all the Pool
Receivables and Related Assets (and including specifically any undivided
interest therein retained by the Seller hereunder), (b) the Sale Agreement and
the other Transaction Documents and (c) all proceeds of any of the foregoing.
SECTION 9.2 FURTHER ASSURANCES.
The provisions of SECTION 8.7 shall apply to the security interest granted
under SECTION 9.1 as well as to the Purchases, Reinvestments and all the Asset
Interests hereunder.
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SECTION 9.3 REMEDIES.
Upon the occurrence of a Liquidation Event, the Purchaser shall have, with
respect to the collateral granted pursuant to SECTION 9.1, and in addition to
all other rights and remedies available to the Purchaser or the Administrative
Agent under this Agreement and the other Transaction Documents or other
applicable law, all the rights and remedies of a secured party upon default
under the UCC.
ARTICLE X
LIQUIDATION EVENTS
SECTION 10.1 LIQUIDATION EVENTS.
The following events shall be "LIQUIDATION EVENTS" hereunder:
(a) The Master Servicer (if any Seller Party or Affiliate thereof is the
Master Servicer) or the Seller (in the case of CLAUSE (ii) below) (i) shall fail
to perform or observe any term, covenant or agreement that is an obligation of
the Master Servicer hereunder (other than as referred to in CLAUSE (ii) below or
in other paragraphs of this SECTION 10.1), and such failure shall remain
unremedied for thirty (30) days after written notice thereof shall have been
given by the Administrative Agent to the Master Servicer or the Master Servicer
shall have otherwise become aware, or (ii) shall fail to make any payment or
deposit to be made by it hereunder when due which failure shall continue for
three (3) Business Days; or
(b) Any representation or warranty made or deemed to be made by any Seller
Party or Lennox International (or any of its officers) under this Agreement or
any other Transaction Document or any Information Package or other information
or report delivered pursuant hereto shall prove to have been false or incorrect
in any material respect when made PROVIDED, HOWEVER, that in the case of any
representation, warranty or information that was not made or provided in
writing, a Liquidation Event shall occur hereunder only if such representation,
warranty or information was reasonably relied upon by the Administrative Agent
and/or the Purchaser; or
(c) Any Seller Party shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement or any of the other
Transaction Documents on its part to be performed or observed and any such
failure shall remain unremedied for thirty (30) days after written notice
thereof shall have been given by the Administrative Agent to any Seller Party or
such Seller Party shall have otherwise become aware; or
(d) (i) Any Seller Party or Lennox International shall (A) fail to pay any
principal or interest, regardless of amount, due in respect of any Indebtedness
when the aggregate unpaid principal amount is in excess of in the case of the
Seller, $10,000, or in the case of Lennox International or the Master Servicer
$7,500,000 when and as the same shall become due and payable (after expiration
of any applicable grace period) or (B) fail to observe or perform any other
term, covenant, condition or agreement (after expiration of any applicable grace
period)
39
contained in any agreement or instrument evidencing or governing any such
Indebtedness if the effect of any failure referred to in this CLAUSE (B) is to
cause such Indebtedness to become due prior to its stated maturity; (ii) any
default under any other agreement or instrument of the Seller, Master Servicer
or Lennox International relating to the purchase of receivables in an aggregate
amount in excess of in the case of the Seller, $10,000, or in the case of the
Master Servicer or Lennox International $50,000,000, or any other event, shall
occur and shall continue after the applicable grace period, if any, specified in
such agreement or instrument, if the effect of such default is to terminate the
commitment of any party to such agreement or instrument to purchase receivables
or the right of such Seller Party to reinvest in receivables the principal
amount paid by any party to such agreement or instrument for its interest in
receivables; or (iii) a default or trigger event shall occur under any asset
securitization agreement or arrangement entered into by any Seller Party for the
sale of receivables or an interest therein in excess of $10,000,000, if the
effect of such default or trigger event is to cause the amounts owing in
connection therewith to become payable prior to the stated maturity; or
(e) An Event of Bankruptcy shall have occurred and remain continuing with
respect to Lennox International or any Seller Party; or
(f) The Seller shall become an "investment company" within the meaning of
the Investment Company Act of 1940; or
(g) The rolling 3 month average Dilution Ratio at any Cut-Off Date exceeds
12.00%; or
(h) The rolling 3 month average Default Ratio at any Cut-Off Date exceeds
2.65%; or
(i) The rolling 3 month average Delinquency Ratio at any Cut-Off Date
exceeds 3.95%; or
(j) On any Settlement Date, after giving effect to the payments made under
SECTION 3.1(c), (i) the Asset Interest exceeds 100% or (ii) the Invested Amount
exceeds the Purchase Limit; or
(k) There shall have occurred any event which materially adversely impairs
the ability of the Originators to originate Receivables of a credit quality
which are at least of the credit quality of the Receivables included in the
first Purchase, or any other event occurs that is reasonably likely to have a
Material Adverse Effect; or
(l) Any Seller Party, Originator or Lennox International is subject to a
Change in Control; or
(m) The Internal Revenue Service shall file notice of a lien pursuant to
SECTION 6323 of the Internal Revenue Code with regard to any of the Receivables
or Related Assets and such lien shall not have been released within seven (7)
days, or the Pension Benefit Guaranty Corporation shall, or shall indicate its
intention to, file notice of a lien pursuant to SECTION 4068
40
of the Employee Retirement Income Security Act of 1974 with regard to any of the
Receivables or Related Assets; or
(n) Any Seller Party or any Originator shall make any material change in
the policies as to origination of Receivables or in its Credit and Collection
Policy without prior written notice to and consent of the Administrative Agent;
or
(o) The Purchaser, for any reason, does not have a valid, perfected first
priority interest in the Pool Receivables and the Related Assets; or
(p) A final judgment or judgments shall be rendered against Lennox
International, the Master Servicer, the Seller or any combination thereof for
the payment of money with respect to which an aggregate amount in excess of
$10,000 with respect to the Seller and $7,500,000 with respect to Lennox
International or the Master Servicer is not covered by insurance and the same
shall remain undischarged for a period of 30 consecutive days during which
execution shall not be effectively stayed, or any action shall be legally taken
by a judgment creditor to levy upon assets or properties of Lennox
International, the Master Servicer or the Seller to enforce any such judgment;
or
(q) A Reportable Event or Reportable Events, or a failure to make a
required installment or other payment (within the meaning of SECTION 412(n)(1)
of the Code), shall have occurred with respect to any Plan or Plans that
reasonably could be expected to result in liability of any Master Servicer or
any ERISA Affiliate to the Pension Benefit Guaranty Corporation ("PBGC") or to a
Plan in an aggregate amount exceeding $5,000,000 and, within 30 days after the
reporting of any such Reportable Event to the Administrative Agent, on the
Purchaser's behalf, the Administrative Agent shall have notified the Master
Servicer in writing that (i) the Administrative Agent, on the Purchaser's
behalf, has made a determination that, on the basis of such Reportable Event or
Reportable Events or the failure to make a required payment, there are
reasonable grounds (A) for the termination of such Plan or Plans by the PBGC,
(B) for the appointment by the appropriate United States District Court of a
trustee to administer such Plan or Plans or (C) for the imposition of a lien in
favor of a Plan and (ii) as a result thereof a Liquidation Event exists
hereunder; or a trustee shall be appointed by a United States District Court to
administer any such Plan or Plans; or the PBGC shall institute proceedings to
terminate any Plan or Plans;
(r) The occurrence of a Servicer Default; or
(s) The Seller's Net Worth shall be less than the Threshold Amount.
SECTION 10.2 REMEDIES.
(a) OPTIONAL LIQUIDATION. Upon the occurrence of a Liquidation Event (other
than a Liquidation Event described in SUBSECTION (e) of SECTION 10.1), the
Administrative Agent shall, at the request, or may with the consent, of the
Purchaser, by notice to the Seller declare the Funding Termination Date to have
occurred and the Liquidation Period to have commenced.
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(b) AUTOMATIC LIQUIDATION. Upon the occurrence of a Liquidation Event
described in SUBSECTION (e) of SECTION 10.1, the Funding Termination Date shall
occur and the Liquidation Period shall commence automatically.
(c) ADDITIONAL REMEDIES. Upon any Funding Termination Date pursuant to this
SECTION 10.2, no Purchases or Reinvestments thereafter will be made, and the
Administrative Agent, the Purchaser and Wachovia shall have, in addition to all
other rights and remedies under this Agreement or otherwise, all other rights
and remedies provided under the UCC of each applicable jurisdiction and other
applicable laws, which rights shall be cumulative.
ARTICLE XI
THE ADMINISTRATIVE AGENT
SECTION 11.1 AUTHORIZATION AND ACTION.
Pursuant to agreements entered into with the Administrative Agent, the
Purchaser has appointed and authorized the Administrative Agent (or its
designees) to take such action as agent on its behalf and to exercise such
powers under this Agreement as are delegated to the Administrative Agent by the
terms hereof, together with such powers as are reasonably incidental thereto.
SECTION 11.2 ADMINISTRATIVE AGENT'S RELIANCE, ETC.
The Administrative Agent and its directors, officers, agents or employees
shall not be liable for any action taken or omitted to be taken by it or them in
good faith under or in connection with the Transaction Documents (including,
without limitation, the servicing, administering or collecting Pool Receivables
as Master Servicer pursuant to SECTION 8.1), except for its or their own breach
of the terms of the applicable terms of the Transaction Documents or its or
their own gross negligence or willful misconduct. Without limiting the
generality of the foregoing, the Administrative Agent: (a) may consult with
legal counsel (including counsel for the Seller), independent certified public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (b) makes no warranty or
representation to the Purchaser or any other holder of any interest in Pool
Receivables and shall not be responsible to the Purchaser or any such other
holder for any statements, warranties or representations made by any Seller
Party in or in connection with any Transaction Document; (c) shall not have any
duty to ascertain or to inquire as to the performance or observance of any of
the terms, covenants or conditions of any Transaction Document on the part of
any Seller Party or to inspect the property (including the books and records) of
any Seller Party; (d) shall not be responsible to the Purchaser or any other
holder of any interest in Pool Receivables for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of any Transaction
Document; and (e) shall incur no liability under or in respect of this Agreement
by acting upon any notice (including notice by telephone where permitted
herein), consent, certificate or other instrument or writing (which may be by
facsimile or telex) in good faith believed by it to be genuine and signed or
sent by the proper party or parties.
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SECTION 11.3 WACHOVIA AND AFFILIATES.
Wachovia and any of its Affiliates may generally engage in any kind of
business with any Seller Party or any Obligor, any of their respective
Affiliates and any Person who may do business with or own securities of any
Seller Party or any Obligor or any of their respective Affiliates, all as if
Wachovia was not the Administrative Agent, and without any duty to account
therefor to the Purchaser or any other holder of an interest in Pool
Receivables, but in any event subject to SECTION 14.7.
ARTICLE XII
ASSIGNMENT OF THE PURCHASER'S INTEREST
SECTION 12.1 RESTRICTIONS ON ASSIGNMENTS.
(a) No Seller Party may assign its rights, or delegate its duties hereunder
or any interest herein without the prior written consent of the Administrative
Agent (except a Seller Party may delegate certain administrative duties to an
Affiliate, such as payroll, financial reporting, tax and the like, so long as
such Seller Party remains liable for performance of such duties). The Purchaser
may not assign its rights hereunder (although it may delegate its duties
hereunder as expressly indicated herein) or the Asset Interest (or any portion
thereof) to any Person without the prior written consent of the Seller, which
consent shall not be unreasonably withheld; PROVIDED, HOWEVER, that
(i) The Purchaser may assign all of its rights and interests in the
Transaction Documents, together with all its interest in the Asset
Interest, to any Liquidity Bank, Wachovia, or any Affiliate thereof, or to
any "bankruptcy remote" special purpose entity, the business of which is
administered by Wachovia or any Affiliate thereof (which assignee shall
then be subject to this ARTICLE XII); and
(ii) The Purchaser may assign and grant a security interest in all of
its rights in the Transaction Documents, together with all of its rights
and interest in the Asset Interest, to secure the Purchaser's obligations
under or in connection with the Commercial Paper Notes, the Liquidity
Agreement, and certain other obligations of the Purchaser incurred in
connection with the funding of the Purchases and Reinvestments hereunder,
which assignment and grant of a security interest shall not be considered
an "assignment" for purposes of SECTION 12.1(b) or, prior to the
enforcement of such security interest, for purposes of any other provision
of this Agreement (other than SECTION 12.3).
(b) The Seller agrees to advise the Administrative Agent within five (5)
Business Days after notice to the Seller of any proposed assignment by the
Purchaser of the Asset Interest (or any portion thereof), not otherwise
permitted under SUBSECTION (a), of the Seller's consent or non-consent to such
assignment, and if it does not consent, the reasons therefor. If Seller does not
consent to such assignment, the Purchaser may immediately or at any time
thereafter assign
43
such Asset Interest (or portion thereof) to any Person or Persons permitted
under CLAUSE (i) of SECTION 12.1(a).
SECTION 12.2 RIGHTS OF ASSIGNEE.
Upon the assignment by the Purchaser in accordance with this ARTICLE XII,
the assignee receiving such assignment shall have all of the rights of the
Purchaser with respect to the Transaction Documents and the Asset Interest (or
such portion thereof as has been assigned).
SECTION 12.3 TERMS AND EVIDENCE OF ASSIGNMENT.
Any assignment of the Asset Interest (or any portion thereof) to any Person
which is otherwise permitted under this ARTICLE XII shall be upon such terms and
conditions as Purchaser and the assignee may mutually agree, and may be
evidenced by such instrument(s) or document(s) as may be satisfactory to the
Purchaser, the Administrative Agent and the assignee.
SECTION 12.4 RIGHTS OF LIQUIDITY BANKS.
The Seller hereby agrees that, upon notice to the Seller, the Liquidity
Banks may exercise all the rights of the Administrative Agent and Purchaser
hereunder, with respect to the Asset Interest (or any portions thereof), and
Collections with respect thereto, which are owned by the Purchaser, and all
other rights and interests of the Purchaser in, to or under this Agreement or
any other Transaction Document. Without limiting the foregoing, upon such notice
or at any time thereafter (but subject to any conditions applicable to the
exercise of such rights by the Administrative Agent), the Liquidity Banks may
request the Master Servicer to segregate Purchaser's allocable shares of
Collections from the Seller's allocable share, may give a Successor Notice
pursuant to and in accordance with SECTION 8.1(b), may give or require the
Administrative Agent to give notice to the Lockbox Banks as referred to in
SECTION 8.5(b) and may direct the Obligors of Pool Receivables to make payments
in respect thereof directly to an account designated by them, in each case, to
the same extent as the Administrative Agent might have done.
ARTICLE XIII
INDEMNIFICATION
SECTION 13.1 INDEMNITIES BY THE SELLER.
(a) GENERAL INDEMNITY. Without limiting any other rights which any such
Person may have hereunder or under applicable law, the Seller hereby agrees to
indemnify each of Wachovia, both individually and as the Administrative Agent,
the Purchaser, the Liquidity Banks, the Liquidity Agent, each of their
respective Affiliates, and all successors, transferees, participants and assigns
and all officers, directors, shareholders, controlling persons, and employees of
any of the foregoing, and any successor servicer and subservicer not affiliated
with Lennox (each an "INDEMNIFIED PARTY"), forthwith on demand, from and against
any and all damages, losses, claims, liabilities and related costs and expenses,
including attorneys' fees and disbursements (all
44
of the foregoing being collectively referred to as "INDEMNIFIED AMOUNTS")
awarded against or incurred by any of them arising out of or relating to the
Transaction Documents or the ownership or funding of the Asset Interest or in
respect of any Receivable or any Contract, excluding, however, (a) Indemnified
Amounts to the extent determined by a court of competent jurisdiction to have
resulted from gross negligence or willful misconduct on the part of such
Indemnified Party or (b) recourse (except as otherwise specifically provided in
this Agreement) for Defaulted Receivables; the Seller further agrees to
indemnify any agent (which is not otherwise an Indemnified Party) of any of
Wachovia, the Administrative Agent, the Purchaser, the Liquidity Banks, and the
Liquidity Agent forthwith on demand, from and against any and all Indemnified
Amounts awarded against or incurred by any of them arising out of or caused by
the gross negligence or willful misconduct of the Seller (unless otherwise
expressly agreed to in writing by the Seller). Without limiting the foregoing,
the Seller shall indemnify each Indemnified Party for Indemnified Amounts
arising out of or relating to:
(i) the transfer by any Seller Party of any interest in any Receivable
other than the transfer of Receivables and related property by the
Originators to the Seller pursuant to the Sale Agreement, the transfer of
an Asset Interest to the Purchaser pursuant to this Agreement and the grant
of a security interest to the Purchaser pursuant to SECTION 9.1;
(ii) any representation or warranty made in writing by any Seller
Party (or any of its officers) under or in connection with any Transaction
Document, any Information Package or any other information or report
delivered by or on behalf of any Seller Party pursuant hereto, which shall
have been false, incorrect or misleading in any material respect when made
or deemed made or delivered, as the case may be; PROVIDED, HOWEVER, that in
the case of any representation, warranty or information that was not made
or delivered in writing, indemnification shall be available to an
Indemnified Party hereunder only if such representation, warranty or
information was reasonably relied upon by such Indemnified Party;
(iii) the failure by any Seller Party to comply with any applicable
law, rule or regulation with respect to any Pool Receivable or the related
Contract, or the nonconformity of any Pool Receivable or the related
Contract with any such applicable law, rule or regulation;
(iv) the failure to vest and maintain vested in Purchaser an undivided
percentage ownership interest, to the extent of the Asset Interest, in the
Receivables in, or purporting to be in, the Receivables Pool, free and
clear of any Lien, other than a Lien arising solely as a result of an act
of the Purchaser or the Administrative Agent, whether existing at the time
of any Purchase or Reinvestment of such Asset Interest or at any time
thereafter;
(v) the failure to file, or any delay in filing, financing statements
or other similar instruments or documents under the UCC of any applicable
jurisdiction or other applicable laws with respect to any Receivables in,
or purporting to be in, the Receivables Pool, whether at the time of any
Purchase or Reinvestment or at any time thereafter;
45
(vi) any dispute, claim, offset or defense (other than discharge in
bankruptcy) of the Obligor to the payment of any Receivable in, or
purporting to be in, the Receivables Pool (including, without limitation, a
defense based on such Receivables or the related Contract not being a
legal, valid and binding obligation of such Obligor enforceable against it
in accordance with its terms), or any other claim resulting from the sale
of the merchandise or services related to such Receivable or the furnishing
or failure to furnish such merchandise or services;
(vii) any matter described in CLAUSE (i) or (ii) of SECTION 3.2(a);
(viii) any failure of any Seller Party, as the Master Servicer or
otherwise, to perform its duties or obligations in accordance with the
provisions of ARTICLE III or ARTICLE VIII;
(ix) any product liability claim arising out of or in connection with
merchandise or services that are the subject of any Pool Receivable;
(x) any claim of breach by any Seller Party of any related Contract
with respect to any Pool Receivable; or
(xi) any tax or governmental fee or charge (but not including
franchise taxes or taxes upon or measured by net income), all interest and
penalties thereon or with respect thereto, and all out-of-pocket costs and
expenses, including the reasonable fees and expenses of counsel in
defending against the same, which may arise by reason of the purchase or
ownership of any Asset Interest, or any other interest in the Pool
Receivables or in any goods which secure any such Pool Receivables.
(c) CONTEST OF TAX CLAIM; AFTER-TAX BASIS. If any Indemnified Party shall
have notice of any attempt to impose or collect any tax or governmental fee or
charge for which indemnification will be sought from any Seller Party under
SECTION 13.1(a)(xi), such Indemnified Party shall give prompt and timely notice
of such attempt to the Seller and the Seller shall have the right, at its
expense, to participate in any proceedings resisting or objecting to the
imposition or collection of any such tax, governmental fee or charge.
Indemnification hereunder shall be in an amount necessary to make the
Indemnified Party whole after taking into account any tax consequences to the
Indemnified Party of the payment of any of the aforesaid taxes (including any
deduction) and the receipt of the indemnity provided hereunder or of any refund
of any such tax previously indemnified hereunder, including the effect of such
tax, deduction or refund on the amount of tax measured by net income or profits
which is or was payable by the Indemnified Party.
(d) CONTRIBUTION. If for any reason the indemnification provided above in
this SECTION 13.1 (and subject to the exceptions set forth therein) is
unavailable to an Indemnified Party or is insufficient to hold an Indemnified
Party harmless, then the Seller shall contribute to the amount paid or payable
by such Indemnified Party as a result of such loss, claim, damage or liability
in such proportion as is appropriate to reflect not only the relative benefits
received by such
46
Indemnified Party on the one hand and the Seller on the other hand but also the
relative fault of such Indemnified Party as well as any other relevant equitable
considerations.
SECTION 13.2 INDEMNITIES BY MASTER SERVICER.
Without limiting any other rights which any Indemnified Party may have
hereunder or under applicable law, the Master Servicer hereby agrees to
indemnify each of the Indemnified Parties forthwith on demand, from and against
any and all Indemnified Amounts awarded against or incurred by any of them
arising out of or relating to the Master Servicer's performance of, or failure
to perform, any of its obligations under or in connection with any Transaction
Document, or any representation or warranty made by the Master Servicer (or any
of its officers) under or in connection with any Transaction Document, any
Information Package or any other information or report delivered by or on behalf
of the Master Servicer, which shall have been false, incorrect or misleading in
any material respect when made or deemed made or delivered, as the case may be,
or the failure of the Master Servicer to comply with any applicable law, rule or
regulation with respect to any Pool Receivable or the related Contract;
PROVIDED, HOWEVER, that in the case of any representation, warranty or
information that was not made or delivered in writing, indemnification shall be
available to an Indemnified Party hereunder only if such representation,
warranty or information was reasonably relied upon by such Indemnified Party.
Notwithstanding the foregoing, in no event shall any Indemnified Party be
awarded any Indemnified Amounts (a) to the extent determined by a court of
competent jurisdiction to have resulted from gross negligence or willful
misconduct on the part of such Indemnified Party or (b) recourse for Defaulted
Receivables. The Master Servicer further agrees to indemnify any agent (which is
not otherwise an Indemnified Party) of any of Wachovia, the Administrative
Agent, the Purchaser, the Liquidity Banks, and the Liquidity Agent forthwith on
demand, from and against any and all Indemnified Amounts awarded against or
incurred by any of them arising out of or caused by the gross negligence or
willful misconduct of the Master Servicer (unless otherwise expressly agreed to
in writing by the Master Servicer).
If for any reason the indemnification provided above in this SECTION
13.2 (and subject to the exceptions set forth therein) is unavailable to an
Indemnified Party or is insufficient to hold an Indemnified Party harmless, then
the Master Servicer shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative benefits received
by such Indemnified Party on the one hand and the Master Servicer on the other
hand but also the relative fault of such Indemnified Party as well as any other
relevant equitable considerations.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 AMENDMENTS, ETC.
No amendment or waiver of any provision of this Agreement nor
consent to any departure by any Seller Party therefrom shall in any event be
effective unless the same shall be in writing and signed by (a) each Seller
Party, the Administrative Agent and the Purchaser (with
47
respect to an amendment), or (b) the Administrative Agent and the Purchaser
(with respect to a waiver or consent by them) or any Seller Party (with respect
to a waiver or consent by it), as the case may be, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. The parties acknowledge that, before entering into such
an amendment or granting such a waiver or consent, the Purchaser may also be
required to obtain the approval of some or all of the Liquidity Banks or to
obtain confirmation from certain rating agencies that such amendment, waiver or
consent will not result in a withdrawal or reduction of the ratings of the
Commercial Paper Notes.
SECTION 14.2 NOTICES, ETC.
All notices and other communications provided for hereunder shall, unless
otherwise stated herein, be in writing (including facsimile communication) and
shall be personally delivered or sent by express mail or courier or by certified
mail, postage prepaid, or by facsimile, to the intended party at the address or
facsimile number of such party set forth on SCHEDULE 14.2 or at such other
address or facsimile number as shall be designated by such party in a written
notice to the other parties hereto. All such notices and communications shall be
effective, (a) if personally delivered or sent by express mail or courier or if
sent by certified mail, when received, and (b) if transmitted by facsimile, when
sent, receipt confirmed by telephone or electronic means; PROVIDED, HOWEVER,
that the financial statements required to be delivered by SECTIONS 7.2(a),
7.2(b), 7.2(c) and 7.2(d) shall be deemed delivered on the date such financial
statements are deposited in the United States mail with first class postage
prepaid, addressed to the intended party at the address as set forth on SCHEDULE
14.2 or at such other address as shall be designated by such party in a written
notice to the other parties hereto.
SECTION 14.3 NO WAIVER; REMEDIES.
No failure on the part of the Administrative Agent, any Affected Party, any
Indemnified Party, the Purchaser or any other holder of the Asset Interest (or
any portion thereof) to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law. Without limiting the
foregoing, each of Wachovia, individually, and as Administrative Agent and each
Liquidity Bank is hereby authorized by the Seller at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand provisional or final) at any time
held and other indebtedness at any time owing by Wachovia and such Liquidity
Bank to or for the credit or the account of the Seller, against any and all of
the obligations of the Seller now or hereafter existing under this Agreement, to
the Administrative Agent, any Affected Party, any Indemnified Party or
Purchaser, or their respective successors and assigns.
SECTION 14.4 BINDING EFFECT; SURVIVAL.
This Agreement shall be binding upon and inure to the benefit of each
Seller Party, the Administrative Agent, the Purchaser and their respective
successors and assigns, and the provisions of SECTION 4.2 and ARTICLE XIII shall
inure to the benefit of the Affected Parties and
48
the Indemnified Parties, respectively, and their respective successors and
assigns; PROVIDED, HOWEVER, nothing in the foregoing shall be deemed to
authorize any assignment not permitted by SECTION 12.1. This Agreement shall
create and constitute the continuing obligations of the parties hereto in
accordance with its terms, and shall remain in full force and effect until the
Final Payout Date. The rights and remedies with respect to any breach of any
representation and warranty made by the Seller pursuant to ARTICLE VI and the
indemnification and payment provisions of ARTICLE XIII and SECTIONS 4.2, 14.5,
14.6, 14.7 and 14.15 shall be continuing and shall survive any termination of
this Agreement.
SECTION 14.5 COSTS, EXPENSES AND TAXES.
In addition to its obligations under ARTICLE XIII, the Seller Parties
jointly and severally agree to pay on demand:
(a) all costs and expenses incurred by the Administrative Agent, any
Liquidity Bank, the Purchaser and their respective Affiliates in connection
with:
(i) the negotiation, preparation, execution and delivery of this
Agreement, the other Transaction Documents or the Liquidity Agreement
(except as otherwise provided in the Mandate Letter), any amendment of
or consent or waiver under any of the Transaction Documents which is
requested or proposed by any Seller Party (whether or not
consummated), or the enforcement by any of the foregoing Persons of,
or any actual or claimed breach of, this Agreement or any of the other
Transaction Documents, including, without limitation, the reasonable
fees and expenses of counsel to any of such Persons incurred in
connection with any of the foregoing or in advising such Persons as to
their respective rights and remedies under any of the Transaction
Documents in connection with any of the foregoing, and
(ii) the administration (including periodic auditing as provided
for herein) of this Agreement and the other Transaction Documents,
including, without limitation, all reasonable out-of-pocket expenses
(including reasonable fees and expenses of independent accountants),
incurred in connection with any review of any Seller Party's books and
records either prior to the execution and delivery hereof but subject
to the provisions of the Fee Letter or pursuant to SECTION 7.1(c),
subject to the limitations set forth in such SECTION 7.1(c); and
(b) all stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing and recording of
this Agreement or the other Transaction Documents (and the Seller Parties,
jointly and severally agree to indemnify each Indemnified Party against any
liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees).
SECTION 14.6 NO PROCEEDINGS.
The Master Servicer hereby agrees that it will not institute against the
Seller, or join any Person in instituting against the Seller, and each Seller
Party, the Master Servicer and Wachovia
49
(individually or as Administrative Agent) hereby agrees that it will not
institute against the Purchaser, or join any other Person in instituting against
the Purchaser, any insolvency proceeding (namely, any proceeding of the type
referred to in the definition of Event of Bankruptcy) so long as any Commercial
Paper Notes issued by the Purchaser shall be outstanding or there shall not have
elapsed one year plus one day since the last day on which any such Commercial
Paper Notes shall have been outstanding.
SECTION 14.7 CONFIDENTIALITY OF SELLER INFORMATION.
(a) CONFIDENTIAL SELLER INFORMATION. Each party hereto (other than Seller
Parties) acknowledges that certain of the information provided to such party by
or on behalf of the Seller Parties in connection with this Agreement and the
transactions contemplated hereby is or may be confidential, and each such party
severally agrees that, unless the Master Servicer shall otherwise agree in
writing, and except as provided in SUBSECTION (b), such party will not disclose
to any other person or entity:
(i) any information regarding, or copies of, any nonpublic financial
statements, reports, schedules and other information furnished by any
Seller Party to the Purchaser or the Administrative Agent (A) prior to the
date hereof in connection with such party's due diligence relating to the
Seller Parties and the transactions contemplated hereby, or (B) pursuant to
this Agreement, including without limitation, SECTION 3.1, 5.1, 6.1(i),
7.1(c) or 7.2, or
(ii) any other information regarding any Seller Party which is
designated by any Seller Party to such party in writing as confidential
(the information referred to in CLAUSES (i) and (ii) above, whether furnished by
any Seller Party or any attorney for or other representative thereof (each a
"SELLER INFORMATION PROVIDER"), is collectively referred to as the "SELLER
INFORMATION"); PROVIDED, HOWEVER, Seller Information shall not include any
information which is or becomes generally available to the general public or to
such party on a nonconfidential basis from a source other than any Seller
Information Provider, or which was known to such party on a nonconfidential
basis prior to its disclosure by any Seller Information Provider.
(b) DISCLOSURE. Notwithstanding SUBSECTION (a), each party may disclose any
Seller Information:
(i) to any of such party's independent attorneys, consultants and
auditors, and to any dealer or placement agent for the Purchaser's
commercial paper, who (A) in the good faith belief of such party, have a
need to know such Seller Information, and (B) are informed by such party of
the confidential nature of the Seller Information and the terms of this
SECTION 14.7 and has agreed, verbally or otherwise, to be bound by the
provisions of this SECTION 14.7,
(ii) to any Liquidity Bank, any actual or potential assignees of, or
participants in, any rights or obligations of the Purchaser, any Liquidity
Bank or the Administrative
50
Agent under or in connection with this Agreement who has agreed to be bound
by the provisions of this SECTION 14.7,
(iii) to any rating agency that maintains a rating for the Purchaser's
commercial paper or is considering the issuance of such a rating, for the
purposes of reviewing the credit of the Purchaser in connection with such
rating,
(iv) to any other party to this Agreement (and any independent
attorneys, consultants and auditors of such party), for the purposes
contemplated hereby,
(v) as may be required by any municipal, state, federal or other
regulatory body having or claiming to have jurisdiction over such party, in
order to comply with any law, order, regulation, regulatory request or
ruling applicable to such party,
(vi) subject to SUBSECTION (c), in the event such party is legally
compelled (by interrogatories, requests for information or copies,
subpoena, civil investigative demand or similar process) to disclose such
Seller Information, or
(vii) in connection with the enforcement of this Agreement or any
other Transaction Document.
In addition, the Purchaser and the Administrative Agent may disclose on a "no
name" basis to any actual or potential investor in Purchaser's Commercial Paper
Notes information regarding the nature of this Agreement, the basic terms hereof
(including without limitation the amount and nature of the Purchaser's
commitment and Invested Amount with respect to the Asset Interest and any other
credit enhancement provided by any Seller Party hereunder), the nature, amount
and status of the Pool Receivables, and the current and/or historical ratios of
losses to liquidations and/or outstandings with respect to the Receivables Pool.
(c) LEGAL COMPULSION. In the event that any party hereto (other than any
Seller Party) or any of its representatives is requested or becomes legally
compelled (by interrogatories, requests for information or documents, subpoena,
civil investigative demand or similar process) to disclose any of the Seller
Information, such party will (or will cause its representative to):
(i) provide the Master Servicer with prompt written notice so that (A)
the Master Servicer may seek a protective order or other appropriate
remedy, or (B) the Master Servicer may, if it so chooses, agree that such
party (or its representatives) may disclose such Seller Information
pursuant to such request or legal compulsion; and
(ii) unless the Master Servicer agrees that such Seller Information
may be disclosed, make a timely objection to the request or compulsion to
provide such Seller Information on the basis that such Seller Information
is confidential and subject to the agreements contained in this SECTION
14.7.
In the event such protective order or remedy is not obtained, or the Master
Servicer agrees that such Seller Information may be disclosed, such party will
furnish only that portion of the Seller
51
Information which (in such party's good faith judgment) is legally required to
be furnished and will exercise reasonable efforts to obtain reliable assurance
that confidential treatment will be afforded the Seller Information.
(d) This SECTION 14.7 shall survive termination of this Agreement.
SECTION 14.8 [RESERVED].
SECTION 14.9 CAPTIONS AND CROSS REFERENCES.
The various captions (including, without limitation, the table of contents)
in this Agreement are provided solely for convenience of reference and shall not
affect the meaning or interpretation of any provision of this Agreement. Unless
otherwise indicated, references in this Agreement to any SECTION, Appendix,
Schedule or Exhibit are to such SECTION of or Appendix, Schedule or Exhibit to
this Agreement, as the case may be, and references in any SECTION, subSECTION,
or CLAUSE to any subSECTION, CLAUSE or subCLAUSE are to such subSECTION, CLAUSE
or subCLAUSE of such SECTION, subSECTION or CLAUSE.
SECTION 14.10 INTEGRATION.
This Agreement and the other Transaction Documents contain a final and
complete integration of all prior expressions by the parties hereto with respect
to the subject matter hereof and shall constitute the entire understanding among
the parties hereto with respect to the subject matter hereof, superseding all
prior oral or written understandings.
SECTION 14.11 GOVERNING LAW.
THIS AGREEMENT, INCLUDING THE RIGHTS AND DUTIES OF THE PARTIES HERETO,
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK. WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW, EXCEPT
TO THE EXTENT THAT THE PERFECTION OF THE INTERESTS OF THE PURCHASER IN THE
RECEIVABLES OR RELATED PROPERTY IS GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK.
SECTION 14.12 WAIVER OF JURY TRIAL.
EACH PARTY HERETO HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT,
ANY OTHER TRANSACTION DOCUMENT OR UNDER ANY AMENDMENT, INSTRUMENT OR DOCUMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
ARISING FROM ANY BANKING OR OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL NOT BE TRIED BEFORE A JURY.
52
SECTION 14.13 CONSENT TO JURISDICTION; WAIVER OF IMMUNITIES.
EACH PARTY HERETO HEREBY ACKNOWLEDGES AND AGREES THAT:
(a) IT IRREVOCABLY (i) SUBMITS TO THE JURISDICTION, FIRST, OF ANY UNITED
STATES FEDERAL COURT, AND SECOND, IF FEDERAL JURISDICTION IS NOT AVAILABLE, OF
ANY NEW YORK STATE COURT, AS APPROPRIATE, IN EITHER CASE SITTING IN NEW YORK
COUNTY, NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, (ii) AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING
MAY BE HEARD AND DETERMINED ONLY IN SUCH NEW YORK STATE OR FEDERAL COURT AND NOT
IN ANY OTHER COURT, AND (iii) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY
DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING.
(b) TO THE EXTENT THAT IT HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
THE JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE
OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID TO EXECUTION,
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, IT HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER OR IN
CONNECTION WITH THIS AGREEMENT.
SECTION 14.14 EXECUTION IN COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by the
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same Agreement. Delivery of an executed counterpart
of a signature page to this Agreement by telecopier shall be as effective as
delivery of a manually executed counterpart of a signature page of this
Agreement.
SECTION 14.15 NO RECOURSE AGAINST OTHER PARTIES.
The obligations of the Purchaser under this Agreement are solely the
corporate obligations of the Purchaser. No recourse shall be had for the payment
of any amount owing by the Purchaser under this Agreement or for the payment by
the Purchaser of any fee in respect hereof or any other obligation or claim of
or against the Purchaser arising out of or based upon this Agreement, against
Wachovia or against any employee, officer, director, incorporator or stockholder
of the Purchaser. For purposes of this SECTION 14.15, the term "Wachovia" shall
mean and include Wachovia Bank, N.A. and all affiliates thereof and any
employee, officer, director, incorporator, stockholder or beneficial owner of
any of them; PROVIDED, HOWEVER, that the Purchaser shall not be considered to be
an affiliate of Wachovia for purposes of this paragraph. Each of the Seller, the
Master Servicer and the Administrative Agent agree that the Purchaser shall be
liable for any claims that such party may have against the Purchaser only to the
extent the Purchaser has excess funds and to the extent such assets are
insufficient to satisfy
53
the obligations of the Purchaser hereunder, the Purchaser shall have no
liability with respect to any amount of such obligations remaining unpaid and
such unpaid amount shall not constitute a claim against the Purchaser. Any and
all claims against the Purchaser or the Administrative Agent shall be
subordinate to the claims of the holders of Commercial Paper and the Liquidity
Banks.
SECTION 14.16 SEVERABILITY OF PROVISIONS.
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction, shall as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability, without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provisions
in any other jurisdiction.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
54
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
LPAC CORP., as Seller
By: /s/ Scott E. Messel
-------------------------------------
Name: Scott E. Messel
-------------------------------------
Title: Vice President and Treasurer
-------------------------------------
LENNOX INDUSTRIES INC., as Master Servicer
By: /s/ Scott E. Messel
-------------------------------------
Name: Scott E. Messel
-------------------------------------
Title: Vice President and Treasurer
-------------------------------------
BLUE RIDGE ASSET FUNDING CORPORATION,
as Purchaser
By: Wachovia Bank, N.A. as Attorney-in-Fact
By: /s/ Brian M. Mellone
-------------------------------------
Name: Brian M. Mellone
-------------------------------------
Title: Vice President
-------------------------------------
WACHOVIA BANK, N.A., as Administrative Agent
By: /s/ Kenny Karpowicz
-------------------------------------
Name: Kenny Karpowicz
-------------------------------------
Title: Vice President
-------------------------------------
APPENDIX A
DEFINITIONS
This is APPENDIX A to the Amended and Restated Receivables Purchase
Agreement dated as of March 23, 2001 among LPAC Corp., as the Seller, Lennox
Industries, Inc., as the Master Servicer, Blue Ridge Asset Funding Corporation,
as the Purchaser, and Wachovia Bank, N.A., as the Administrative Agent (as
amended, supplemented or otherwise modified from time to time, this
"AGREEMENT"). Each reference in this APPENDIX A to any Section, Appendix or
Exhibit refers to such Section of or Appendix or Exhibit to this Agreement.
A. DEFINED TERMS. As used in this Agreement, unless the context requires
a different meaning, the following terms have the meanings indicated below:
ADJUSTED DILUTION RATIO: The 12-month rolling average of the Dilution Ratio.
ADMINISTRATIVE AGENT: As defined in the preamble.
AFFECTED PARTY: Each of the Purchaser, each Liquidity Bank, any assignee or
participant of the Purchaser or any Liquidity Bank, Wachovia, any successor to
Wachovia, as Administrative Agent, or any sub-agent of the Administrative Agent.
AFFILIATE: With respect to any other Person controlling, controlled by, or under
common control with, such Person.
AFFILIATED OBLIGOR: In relation to any Obligor, an Obligor that is an Affiliate
of such Obligor.
ALLOCATION LIMIT: As defined in SECTION 1.1.
ARMSTRONG: Armstrong Air Conditioning Inc., an Ohio corporation.
ARMSTRONG COMMENCEMENT DATE: March 23, 2001.
ASSET INTEREST: An undivided percentage ownership interest, determined from time
to time as provided in SECTION 1.4(b), in (i) all then outstanding Pool
Receivables and (ii) all Related Assets.
ASSET TRANCHE: At any time, a portion of the Asset Interest selected by the
Administrative Agent pursuant to SECTION 2.1.
ASSURANCE AGREEMENT: The Assurance Agreement dated as of June 19, 2000 made by
Lennox International, as the same may be amended, restated, supplemented or
modified from time to time.
A-1
BANK RATE: For any Yield Period with respect to any Asset Tranche:
(a) in the case of any Yield Period other than a Yield Period
described in CLAUSE (b) below, an interest rate PER ANNUM equal to the sum
of (i) the Bank Rate Spread PER ANNUM, plus (ii) Eurodollar Rate (Reserve
Adjusted) for such Yield Period;
(b) in the case of
(i) any Yield Period commencing on or prior to the first day of
which the Purchaser or any Liquidity Bank shall have notified the
Administrative Agent that (A) the introduction of or any change in or
in the interpretation of any law or regulation makes it unlawful, or
any central bank or other Governmental Authority asserts that it is
unlawful, for such Person to fund such Asset Tranche at the rate
described in CLAUSE (a) above, or (B) due to market conditions
affecting the interbank eurodollar market, funds are not reasonably
available to such Person in such market in order to enable it to fund
such Asset Tranche at the rate described in CLAUSE (a) above (and in
the case of SUBCLAUSE (A) or (B) above, such Person shall not have
subsequently notified the Administrative Agent that such circumstances
no longer exist), or
(ii) any Yield Period as to which the Administrative Agent does
not receive notice or determine, by no later than 12:00 noon (Atlanta,
Georgia time) on the third Business Day preceding the first day of
such Yield Period, that the related Asset Tranche will be funded by
Liquidity Fundings and not by the issuance of Commercial Paper Notes,
an interest rate PER ANNUM equal to the Base Rate in effect from time
to time during such Yield Period; it being understood that, in the
case of PARAGRAPH (b)(i) above, such rate shall only apply to the
Person affected by the circumstances described in such PARAGRAPH
(b)(i).
BANK RATE SPREAD: As defined in the Fee Letter.
BASE RATE: For any day, the rate per annum equal to the higher as of such day of
(a) the Prime Rate, or (b) one-half of one percent above the Federal Funds Rate.
For purposes of determining the Base Rate for any day, changes in the Prime Rate
or the Federal Funds Rate shall be effective on the date of each such change.
The Base Rate is not necessarily intended to be the lowest rate of interest
determined by Wachovia in connection with extensions of credit.
BROKEN FUNDING COSTS: For any Asset Tranche which: (i) has its Invested Amount
reduced without compliance by the Seller with the notice requirements hereunder
or (ii) does not become subject to a reduction following the delivery of any
notice pursuant to SECTION 3.2(b) or (iii) is assigned by the Purchaser to the
Liquidity Banks under the Liquidity Agreement or terminated prior to the date on
which it was originally scheduled to end; an amount equal to the excess, if any,
of (A) the CP Costs that would have accrued during the remainder of the tranche
periods for Commercial Paper Notes or (as applicable) Earned Discount that would
have accrued during the
A-2
remainder of the Yield Periods determined by the Administrative Agent to relate
to such Asset Tranche (as applicable) subsequent to the date of such reduction,
assignment or termination (or in respect of CLAUSE (ii) above, the date such
reduction was designated to occur pursuant to the notice) of the Invested Amount
of such Asset Tranche if such reduction, assignment or termination had not
occurred or such notice had not been delivered, over (B) the sum of (x) to the
extent all or a portion of such Invested Amount is allocated to another Asset
Tranche, the amount of CP Costs or Earned Discount actually accrued during the
remainder of such period on such Invested Amount for the new Asset Tranche, and
(y) to the extent such Invested Amount is not allocated to another Asset
Tranche, the income, if any, actually received during the remainder of such
period by the holder of such Asset Tranche from investing the portion of such
Invested Amount not so allocated. All Broken Funding Costs shall be due and
payable hereunder upon demand.
BUSINESS DAY: (i) with respect to any matters relating to the Eurodollar Rate, a
day on which banks are open for business in New York, New York, and in Atlanta,
Georgia and on which dealings in Dollars are carried on in the London interbank
market and (ii) for all other purposes, any day other than a Saturday, Sunday or
other day on which banking institutions or trust companies in New York, New
York, or Atlanta, Georgia are authorized or obligated by law, executive order or
governmental decree to be closed.
CAPITAL LEASE: At any time, a lease with respect to which the lessee is required
concurrently to recognize the acquisition of an asset and the incurrence of a
liability in accordance with GAAP.
CHANGE IN CONTROL:
(a) in relation to either of the Master Servicer or Lennox International,
the acquisition after the date hereof by any person or group of persons (within
the meaning of SECTION 13 or 14 of the Exchange Act), of beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the Securities and Exchange
Commission under the Exchange Act) of issued and outstanding shares of the
capital stock of such Person entitled (without regard to the occurrence of any
contingency) to vote for the election of members of the board of directors of
such Person and having a then present right to exercise 50% or more of the
voting power for the election of members of the board of directors of such
Person attached to all such outstanding shares of capital stock of such Person,
unless otherwise agreed in writing by the Administrative Agent; and
(b) in relation to the Seller, the failure of Lennox International to own
(directly or through wholly-owned Subsidiaries of Lennox International) 100% of
the issued and outstanding shares of the capital stock (including all warrants,
options, conversion rights, and other rights to purchase or convert into such
stock) of the Seller on a fully diluted basis.
CODE: The Internal Revenue Code of 1986, as the same may be amended from time to
time.
COLLECTION ACCOUNT: The segregated account that may be established and
maintained with Wachovia in the name of the Seller.
A-3
COLLECTION PERIOD:
(a) the period from the date of the initial Purchase to the last day
of the calendar month in which such date occurs; and
(b) thereafter, each period from the last day of the next preceding
Collection Period to the last day of the next following calendar month;
PROVIDED, HOWEVER, that the last Collection Period shall end on the Final Payout
Date.
COLLECTIONS: With respect to any Receivable, all funds which either (a) are
received by the Seller, the Originators or the Master Servicer from or on behalf
of the related Obligor in payment of any amounts owed (including, without
limitation, purchase prices, finance charges, interest and all other charges) in
respect of such Receivable, or applied to such amounts owed by such Obligor
(including, without limitation, insurance payments that the Seller, the
Originator or the Master Servicer applies in the ordinary course of its business
to amounts owed in respect of such Receivable and net proceeds of sale or other
disposition of repossessed goods or other collateral or property of the Obligor
or any other party directly or indirectly liable for payment of such Receivable
and available to be applied thereon), or (b) are Deemed Collections; provided
that, prior to such time as Lennox shall cease to be the Master Servicer, late
payment charges, collection fees, extension fees and any other similar fees or
expenses billed to and collected from an Obligor shall not be deemed to be
Collections.
COMMERCIAL PAPER NOTES: The commercial paper promissory notes issued by the
Purchaser in the commercial paper market.
CONTRACT: A contract between the Seller or the Originator and any Person, or an
invoice sent or to be sent by the Seller or the Originator, pursuant to or under
which a Receivable shall arise or be created, or which evidences a Receivable. A
`related Contract' or similar reference means rights to payment, collection and
enforcement, and other rights under a Contract to the extent directly related to
a Receivable in the Receivables Pool, but not any other rights under such
Contract.
CP ACCRUAL PERIOD: Each Settlement Period during which any Asset Tranche is
funded with Commercial Paper Notes.
CP COSTS: For each day, the sum of (i) discount or interest accrued on Pooled
Commercial Paper on such day, plus (ii) any and all accrued commissions in
respect of placement agents and Commercial Paper Note dealers, and issuing and
paying agent fees incurred, in respect of such Pooled Commercial paper for such
day, plus (iii) other costs associated with funding small or odd-lot amounts
with respect to all receivable purchase or financing facilities which are funded
by Pooled Commercial Paper for such day, minus (iv) any accrual of income net of
expenses received on such day from investment of collections received under all
receivable purchase or financing facilities funded substantially with Pooled
Commercial Paper, minus (v) any payment
A-4
received on such day net of expenses in respect of Broken Funding Costs related
to the prepayment of any investment of Purchaser pursuant to the terms of any
receivable purchase or financing facilities funded substantially with Pooled
Commercial Paper. In addition to the foregoing costs, if Seller shall request
any Purchase during any period of time determined by the Agent in its sole
discretion to result in incrementally higher CP Costs applicable to such
Purchase, the principal associated with any such Purchase shall, during such
period, be deemed to be funded by Purchaser in a special pool (which may include
capital associated with other receivable purchase or financing facilities) for
purposes of determining such additional CP Costs applicable only to such special
pool and charged each day during such period against such principal.
Notwithstanding the foregoing, on any day when any Liquidation Event or
Unmatured Liquidation Event shall have occurred and be continuing, the CP Costs
for each Asset Tranche funded through the issuance of Commercial Paper Notes
shall equal the greater of (a) the amount determined for such day pursuant to
the preceding two sentences, and (b) interest on the Invested Amount associated
with such Asset Tranche a rate per annum equal to the Base Rate Plus 2% per
annum.
CP RATE: With respect to any CP Accrual period, the rate per annum equivalent to
the CP Costs accrued with respect to the Invested Amount allocated to any Asset
Tranche funded with Commercial Paper Notes.
CREDIT AGREEMENT: That certain 364 Day Revolving Credit Facility Agreement dated
as of January 25, 2000 by and among Lennox International as the borrower,
certain financial institutions, as the lenders, and Chase Bank of Texas,
National Association ("CHASE"), as administrative agent for the lenders, as such
agreement may be amended, restated, substituted or replaced from time to time.
CREDIT AND COLLECTION POLICY: Collectively, those credit and collection policies
and practices of the Originators and the Master Servicer relating to Contracts
and Receivables as in effect on the date of this Agreement in the forms of
EXHIBIT C-1 and C-2 hereto, as may hereafter be modified without violating
SECTION 7.3(c), but subject to compliance with applicable tariffs or state
regulations in effect from time to time.
CREDIT EVENT: The earliest of (i) an Event of Bankruptcy with respect to Lennox
International, (ii) an Event of Bankruptcy with respect to Lennox or (iii) any
event described in SUBSECTION (d) of SECTION 10.1 hereof.
CUT-OFF DATE: The last day of each Collection Period.
DAYS SALES OUTSTANDING or DSO: As of any day, an amount equal to the product of
(a) 91 and (b) a fraction the numerator of which is the aggregate Unpaid Balance
of Pool Receivables as of the most recent Cut-Off Date and the denominator of
which is the aggregate dollar amount of Receivables generated by the Originators
during the three Collection Periods including and immediately preceding such
Cut-Off Date.
DEEMED COLLECTIONS: As defined in SECTION 3.2(a).
A-5
DEFAULT HORIZON RATIO: As of any Cut-Off Date, the ratio (expressed as a
percentage) of (i) the aggregate sales of the Originators during the immediately
preceding six Collection Periods ending on such Cut-Off Date divided by (ii) the
Net Pool Balance on such Cut-Off Date.
DEFAULT RATIO: Means at any time, an amount (expressed as a percentage) equal to
a fraction the numerator of which is equal to the sum of Eligible Receivables
that became Defaulted Receivables during the immediately preceding Collection
Period, and the denominator of which is the amount of sales generated during the
Collection Period six months prior to the immediately preceding Collection
Period.
DEFAULTED RECEIVABLE: Means a Receivable: (a) as to which any payment, or part
thereof, remains unpaid for more than 120 days from the original due date for
such payment, (b) as to which an Event of Bankruptcy has occurred and remains
continuing with respect to the Obligor thereof.
DELINQUENCY RATIO: At any time, the ratio (expressed as a percentage) computed
as of the Cut-Off Date for the next preceding Collection Period by dividing (x)
the aggregate Unpaid Balance of all Pool Receivables that are Delinquent
Receivables on such Cut-Off Date by (y) the aggregate Unpaid Balance of Pool
Receivables on such Cut-Off Date.
DELINQUENT RECEIVABLE: A Pool Receivable (a) that is not a Defaulted Receivable
and (b) as to which any payment, or part thereof, remains unpaid for 91 days or
more from the original due date for such payment.
DILUTION: The amount of any reduction or cancellation of the Unpaid Balance of a
Pool Receivable as described in SECTION 3.2(a).
DILUTION HORIZON RATIO: As of any date, the percentage equivalent of a fraction,
the numerator of which is the aggregate dollar amount of all Receivables
generated by the Originators during the most recent Collection Period and the
denominator of which is the Net Pool Balance as of the most recent Cut-Off Date.
DILUTION RATIO: As of any Cut-Off Date, the percentage equivalent of a fraction,
the numerator of which is the aggregate dollar amount of Dilutions that occurred
during the Collection Period ending on such date and the denominator of which is
the aggregate dollar amount of all Receivables originated by the Originators
during such Collection Period.
DILUTION RESERVE: The product of (a) the sum of (i) the product of (A) 2 and (B)
the Adjusted Dilution Ratio and (ii) the Dilution Volatility Component and (b)
the Dilution Horizon Ratio.
DILUTION VOLATILITY COMPONENT: The product of (a) the positive excess, if any,
of (i) the highest three month rolling average Dilution Ratio over the past 12
months over (ii) the Adjusted Dilution Ratio and (b) a fraction, the numerator
of which is the highest three month rolling
A-6
average Dilution Ratio over the past 12 months and the denominator of which is
the Adjusted Dilution Ratio.
DOLLARS: Means dollars in lawful money of the United States of AmericA.
DOWNGRADED LIQUIDITY BANK: A Liquidity Bank with respect to which a Downgrading
Event shall have occurred.
DOWNGRADING EVENT: With respect to any Person means the lowering of the rating
with regard to the short-term securities of such Person to below (i) A-1 by
Standard & Poor's Ratings Group, or (ii) P-1 by Moody's.
EARNED DISCOUNT: For any Yield Period for any Asset Tranche funded with a
Liquidity Funding:
IA x ER x ED + LF
------------
360
where:
IA = the daily average (calculated at the close of business each
day) of the Invested Amount in such Asset Tranche during such
Yield Period,
ER = the Earned Discount Rate for such Yield Period,
ED = the actual number of days elapsed during such Yield Period, and
LF = the Liquidation Fee, if any, during such Yield Period.
EARNED DISCOUNT RATE: For any Yield Period for any Asset Tranche funded by a
Liquidity Funding, the Bank Rate for such Asset Tranche and such Yield Period.
PROVIDED, HOWEVER, that on any day when any Liquidation Event or an Unmatured
Liquidation Event shall have occurred and be continuing, the Earned Discount
Rate for each Asset Tranche (including without limitation, Asset Tranches funded
through the issuance of Commercial Paper Notes) shall mean a rate PER ANNUM
equal to the Base Rate plus 2% PER ANNUM.
ELIGIBLE RECEIVABLE: At any time, a Receivable:
(a) which is a Pool Receivable arising out of the sale by an Originator in
the ordinary course of its business that has been sold or contributed to the
Seller pursuant to the Sale Agreement in a "true sale" transaction;
(b) as to which the perfection of the Purchaser's undivided ownership
interest therein is governed by the laws of a jurisdiction where the Uniform
Commercial Code - Secured
A-7
Transactions is in force, and which constitutes an "account" as defined in the
Uniform Commercial Code as in effect in such jurisdiction;
(c) the Obligor of which is a resident of the United States, or any of its
possessions or territories and is not an Affiliate or employee of any Seller
Party;
(d) which is not a Defaulted Receivable;
(e) with regard to which the representations and warranties of the Seller
set forth in SECTION 6.1(l) are true and correct; --------------
(f) the sale of an undivided interest in which does not contravene or
conflict with any law;
(g) which is denominated and payable only in Dollars in the United States;
(h) which arises under a Contract that has been duly authorized and that,
together with such Receivable, is in full force and effect and constitutes the
legal, valid and binding obligation of the Obligor of such Receivable
enforceable against such Obligor in accordance with its terms and is not subject
to any dispute, offset, counterclaim or defense whatsoever, PROVIDED, HOWEVER,
that if such dispute, offset, counterclaim or defense affects only a portion of
the Unpaid Balance of such Receivable then such Receivable may be deemed an
Eligible Receivable to the extent of the portion of such Unpaid Balance which is
not so affected;
(i) which, together with the Contract related thereto, does not contravene
in any material respect any laws, rules or regulations applicable thereto
(including, without limitation, laws, rules and regulations relating to usury,
truth in lending, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy) and with respect to
which no party to the Contract related thereto is in violation of any such law,
rule or regulation in any material respect if such violation would impair the
collectibility of such Receivable;
(j) which satisfies in all material respects all applicable requirements
of the applicable Originator's Credit and Collection Policy;
(k) which, according to the Contract related thereto, is due and payable
within 120 days from the invoice date of such Receivable;
(l) not more than 35% of the aggregate Unpaid Balance of all Receivables of
the Obligor of which are Defaulted Receivables;
(m) the original term of which has not been extended and the Unpaid
Balance of which has not been adjusted more than one time;
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(n) the Obligor of which is not a Governmental Authority as to which the
assignment of receivables owing therefrom requires compliance with the Federal
Assignment of Claims Act or other similar Legislation (unless the Seller has
complied therewith); and
(o) which is not classified by the "Terms Description" of the related
Originator's Credit and Collection Policy or any other internal classification
procedures utilized by such Originator as (i) "Authorizer," (ii) "Cash
Application," (iii) "Check in Progress," (iv) "COD- Certified Check," (v)
"COD-Company Check," (vi) "Consignment Shipment," (vii) "Direct Pay," (viii)
"Due Immediately," (ix) "Gratis," (x) "Invoice to be Considered," (xi) "Paid in
Advance," (xii) "Payroll Deduction," (xiii) "Warrant Gratis," (xiv) "Warranty
Parts," or (xv) any other classification now existing or hereinafter created
that has the same or any similar definition as any of the foregoing;
ERISA: The U.S. Employee Retirement Income Security Act of 1974, as amended from
time to time.
ERISA AFFILIATE: Any trade or business (whether or not incorporated) that is a
member of a group of which the Master Servicer is a member and which is treated
as a single employer under SECTION 414 of the Code.
EURODOLLAR BUSINESS DAY: A day of the year as defined in CLAUSE (i) of the
definition of Business Day.
EURODOLLAR RATE: For any Yield Period, the rate per annum determined on the
basis of the offered rate for deposits in Dollars of amounts equal or comparable
to the principal amount of the related Liquidity Funding offered for a term
comparable to such Yield Period, which rates appear on the Telerate Page 3750
effective as of 11:00 A.M., London time, two Eurodollar Business Days prior to
the first day of such Yield Period, provided that if no such offered rates
appear on such page, the Eurodollar Rate for such Yield Period will be the
arithmetic average (rounded upwards, if necessary, to the next higher 1/100th of
1%) of rates quoted by not less than two major banks in New York City, selected
by the Administrative Agent, at approximately 10:00 A.M., New York City time,
two Eurodollar Business Days prior to the first day of such Yield Period, for
deposits in Dollars offered by leading European banks for a period comparable to
such Yield Period in an amount comparable to the principal amount of such
Liquidity Funding.
EURODOLLAR RATE (RESERVE ADJUSTED): With respect to any Yield Period means a
rate per annum equal to the quotient obtained (rounded upwards, if necessary, to
the next higher 1/100th of 1%) by dividing (i) the applicable Eurodollar Rate
for such Yield Period by (ii) 1.0 minus the Eurodollar Reserve Percentage.
EURODOLLAR RESERVE PERCENTAGE: With respect to any Yield Period, the maximum
reserve percentage, if any, applicable to the Liquidity Bank under Regulation D
during such Yield Period (or if more than one percentage shall be applicable,
the daily average of such percentages for those days in such Yield Period during
which any such percentage shall be applicable) for determining the Liquidity
Bank's reserve requirement (including any marginal, supplemental or
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emergency reserves) with respect to liabilities or assets having a term
comparable to such Yield Period consisting or included in the computation of
"Eurocurrency Liabilities" pursuant to Regulation D. Without limiting the effect
of the foregoing, the Eurodollar Reserve Percentage shall reflect any other
reserves required to be maintained by the Liquidity Bank by reason of any
Regulatory Change against (a) any category of liabilities which includes
deposits by reference to which the "London Interbank Offered Rate" or "LIBOR" is
to be determined or (b) any category of extensions of credit or other assets
which include LIBOR-based credits or assets.
EVENT OF BANKRUPTCY: With respect to a Person if either:
(a) a case or other proceeding shall be commenced, without the application
or consent of such Person, in any court, seeking the liquidation,
reorganization, debt arrangement, dissolution, winding up, or composition or
readjustment of debts of such Person, the appointment of a trustee, receiver,
custodian, liquidator, assignee, sequestrator or the like for such Person or all
or substantially all of its assets, or any similar action with respect to such
Person under any law relating to bankruptcy, insolvency, reorganization, winding
up or composition or adjustment of debts, and such case or proceeding shall
continue undismissed, or unstayed and in effect, for a period of 60 consecutive
days; or an order for relief in respect of such Person shall be entered in an
involuntary case under the federal bankruptcy laws or other similar laws now or
hereafter in effect; or
(b) such Person shall commence a voluntary case or other proceeding under
any applicable bankruptcy, insolvency, reorganization, debt arrangement,
dissolution or other similar law now or hereafter in effect, or shall consent to
the appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) for, such Person or
for any substantial part of its property, or shall make any general assignment
for the benefit of creditors, or shall be adjudicated insolvent, or admit in
writing its inability to, pay its debts generally as they become due, or, if a
corporation or similar entity, its board of directors shall vote to implement
any of the foregoing.
EXCESS CONCENTRATION AMOUNT: As of any date, the sum of the amounts by which the
aggregate Unpaid Balance of Receivables of each Obligor exceeds the Obligor
Concentration Limit for such Obligor.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCESS WEIGHTED AVERAGE TERM AMOUNT: On any day on which the Weighted Average
Term shall exceed 60 days, the aggregate of the Unpaid Balances, on such day, of
such Eligible Receivables that, were the then Eligible Receivables with the
longest terms (beginning with the Eligible Receivable(s) with the longest term
and working backwards toward the Eligible Receivable(s) with the shortest term)
deemed to not be Eligible Receivables on such day, would cause the Weighted
Average Term not to exceed 60 days on such day.
EXISTING AGREEMENT: As defined in the PREAMBLE.
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FACE AMOUNT: With respect to any Commercial Paper Note, (i) the face amount
stated thereon in the case of any Commercial Paper Note issued on a discount
basis and (ii) the principal amount stated thereon plus the amount of all
interest scheduled to accrue on such Commercial Paper Note through its stated
maturity date in the case of any Commercial Paper Note issued on an interest
bearing basis.
FEDERAL FUNDS RATE: For any day, the rate per annum (rounded upwards, if
necessary, to the next higher 1/100th of 1%) equal to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided that (i) if the day for which such rate is to be determined is not
a Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (ii) if such rate is not so published for any day,
the Federal Funds Rate for such day shall be the average rate charged to the
Administrative Agent on such day on such transactions, as reasonably determined
by the Administrative Agent.
FEDERAL RESERVE BOARD: The Board of Governors of the Federal Reserve System, or
any successor thereto or to the functions thereof.
FEE LETTER: As defined in SECTION 4.1.
FINAL PAYOUT DATE: The date following the Termination Date on which the Invested
Amount shall have been reduced to zero and all other amounts payable by the
Seller under the Transaction Documents shall have been paid in full.
FUNDING TERMINATION DATE: The earliest of the following:
(a) 364 days following the date hereof, or such later date as may, from
time to time, be agreed to in writing by the Administrative Agent;
(b) the Administrative Agent declares a Funding Termination Date in a
notice to the Seller in accordance with SECTION 10.2(a); or
(c) in accordance with SECTION 10.2(b), the Funding Termination Date occurs
automatically.
GAAP: Generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such accounting
profession, which are applicable to the circumstances as of the date of
determination.
GOVERNMENTAL AUTHORITY: Any Federal, state, local or foreign court or
governmental agency, authority, instrumentality or regulatory body.
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GUARANTY: With respect to any Person, any obligation (except the endorsement in
the ordinary course of business of negotiable instruments for deposit or
collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such Indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of such
Indebtedness or obligation, or (ii) to maintain any working capital or other
balance sheet condition or any income statement condition of any other Person or
otherwise to advance or make available funds for the purchase of payment of such
Indebtedness or obligation;
(c) to lease properties or to purchase properties or services primarily for
the purpose of assuring the owner of such Indebtedness or obligation of the
ability of any other Person to make payment of the Indebtedness or obligation;
or
(d) otherwise to assure the owner of such Indebtedness or obligation
against loss in respect of thereof. In any computation of the Indebtedness or
other liabilities of the obligor under any Guaranty, the Indebtedness or other
obligations that are the subject of such Guaranty shall be assumed to be direct
obligations of such obligor.
HEATCRAFT: Heatcraft Inc., a Mississippi corporation.
HEATCRAFT TECHNOLOGIES: Heatcraft Technologies Inc., a Delaware corporation
INDEBTEDNESS: With respect to any Person shall mean, at any time, without
duplication:
(a) its liabilities for borrowed money and its redemption obligations in
respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of property acquired by
such Person (excluding accounts payable arising in the ordinary course of
business but including all liabilities created or arising under any conditional
sale or other title retention agreement with respect to any such property);
(c) all liabilities appearing on its balance sheet in accordance with GAAP
in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any Lien with respect to
any property owned by such Person (whether or not it has assumed or otherwise
become liable for such liabilities);
A-12
(e) all its liabilities in respect of letters of credit or instruments
serving a similar function issued or accepted for its account by banks and other
financial institutions (whether or not representing obligations for borrowed
money, but excluding in any event obligations in respect of (i) trade or
commercial letters of credit issued for the account of such Person in the
ordinary course of its business and (ii) stand-by letters of credit issued to
support obligations of such Person that are not of a type described in any of
CLAUSES (a), (b), (c), (d), (f) or (g);
(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities of a type
described in any of CLAUSES (a) through (f) hereof.
Indebtedness of any Person shall include all obligations of such Person of
the character described in CLAUSES (a) through (g) above to the extent such
Person remains legally liable in respect hereof notwithstanding that any such
obligation is deemed to be extinguished under GAAP.
INDEMNIFIED AMOUNTS: As defined in SECTION 13.1.
INDEMNIFIED PARTY: As defined in SECTION 13.1.
INDEPENDENT DIRECTOR: As defined in SECTION 7.4.
INFORMATION PACKAGE: As defined in SECTION 3.1(a).
INITIAL CUT-OFF DATE: May 31, 2000.
INITIAL DUE DILIGENCE AUDITOR: Such person designated by the Administrative
Agent as the initial due diligence auditor.
INITIAL SELLER NOTE: As defined in the Sale Agreement.
INVESTED AMOUNT: At any time with respect to the Asset Interest an amount equal
to (a) the aggregate of the amounts theretofore paid to Seller for Purchases
pursuant to SECTIONs 1.1 and 1.2, less (b) the aggregate amount of Collections
theretofore received and actually distributed to the Investors on account of
such Invested Amount pursuant to SECTION 1.3.
INVESTORS: The Purchaser and the Liquidity Banks.
LENNOX: As defined in the Preamble.
LENNOX INTERNATIONAL: Lennox International Inc., a Delaware corporation.
LIEN: With respect to any Person, any mortgage, lien, pledge, charge, security
interest, or other encumbrance, or any interest or title of any vendor, lessor,
lender or other secured party to or of
A-13
such Person under any conditional sale or other title retention agreement or
Capital Lease, upon or with respect to any property or asset of such Person
(including in the case of stock, stockholder agreements, voting trust agreements
and all similar arrangements).
LIQUIDATION EVENT: As defined in SECTION 10.1.
LIQUIDATION FEE: For each Asset Tranche (or portion thereof) funded through a
Liquidity Funding for each day in any Yield Period (computed without regard to
CLAUSE (iii) of the proviso of the definition of "Yield Period"), the amount, if
any, by which:
(a) the additional Earned Discount (calculated without taking into account
any Liquidation Fee) which would have accrued on the reductions of the
Purchaser's Tranche Investment with respect to such Asset Tranche during such
Yield Period (as so computed) if such reductions had not been made, exceeds
(b) the income, if any, received by the Purchaser from investing the
proceeds of such reductions of the Purchaser's Tranche Investment.
LIQUIDATION PERIOD: The period commencing on the date on which a Liquidation
Event has occurred or is continuing and the Administrative Agent shall have
notified Seller and the Master Servicer in writing that the Liquidation Period
has commenced, and ending on the Final Payout Date; PROVIDED, HEREUNDER, upon
the occurrence of a Liquidation Event described in SECTION 10.1(e), the
Liquidation Period shall commence automatically.
LIQUIDITY AGENT: Wachovia, as agent for the Liquidity Banks under the Liquidity
Agreement, or any successor to Wachovia in such capacity.
LIQUIDITY AGREEMENT: The Liquidity Asset Purchase Agreement dated as of the date
hereof among Purchaser, Wachovia, as Administrative Agent, Wachovia, as
Liquidity Agent, and Wachovia and/or one or more other banks or other financial
institutions, as Liquidity Banks, and any other agreement hereafter entered into
by the Purchaser providing for the making of loans, purchase of assets or other
extensions of credit to the Purchaser secured by a direct or indirect security
interest in the Asset Interest (or any portion thereof), to support all or part
of the Purchaser's payment obligations under the Commercial Paper Notes or to
provide an alternate means of funding Purchaser's investments in accounts
receivable or other financial assets, and under which the amount available from
such extensions of credit is limited to an amount calculated by reference to the
value or eligible unpaid balance of such accounts receivable or other financial
assets or any portion thereof or the level of deal-specific credit enhancement
available with respect thereto, as such Liquidity Agreement or other agreement
may be amended, supplemented or otherwise modified from time to time.
LIQUIDITY BANK: The commercial lending institutions that are at any time parties
to the Liquidity Agreement as liquidity providers thereunder.
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LIQUIDITY FUNDING: A purchase made by the Liquidity Bank (or simultaneous
purchases made by the Liquidity Banks) pursuant to the Liquidity Agreement.
LOCKBOX ACCOUNT: An account maintained for the purpose of receiving Collections
at a bank or other financial institution which has executed a Lockbox Account.
LOCKBOX AGREEMENT: A letter agreement, in substantially the form of EXHIBIT A-1,
among the Master Servicer, the Purchaser, the Administrative Agent, the Seller
and any Lockbox Bank.
LOCKBOX BANK: Any of the banks holding one or more lockboxes or Lockbox Accounts
receiving Collections from Pool Receivables.
LOSS RESERVE: At any time, means the product of (a) two and (b) the highest
rolling three month average Default Ratio during the immediately preceding
twelve (12) months and (b) the most recently calculated Default Horizon Ratio.
MANDATE LETTER: As defined in SECTION 4.1.
MASTER SERVICER: As defined in the preamble.
MATERIAL ADVERSE EFFECT: With respect to any event or circumstance, a material
adverse effect on:
(a) (i) the assets, operations, business or financial condition of the
Seller or (ii) the business, assets, operations or financial condition of Lennox
International and its Subsidiaries, taken as a whole, which could reasonably be
expected to have a material adverse effect on the creditworthiness of any
Originator;
(b) the ability of the Seller, the Master Servicer, any Originator or any
Affiliate thereof to perform in all material respects its obligations under this
Agreement or any other Transaction Document; or
(c) the validity or enforceability of this Agreement or any other
Transaction Document, or the validity, enforceability or collectibility of a
material portion of the Receivables Pool; or
(d) the status, existence, perfection, priority or enforceability of the
Secured Parties' and the Administrative Agent's interest in the Receivables
Pool.
MATERIAL INDEBTEDNESS: Indebtedness, the aggregate principal amount of which is
greater than $25,000,000.
MOODY'S: Moody's Investors Service, Inc.
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NET POOL BALANCE: On any date, an amount equal to (i) the aggregate Unpaid
Balance of all Eligible Receivables in the Receivables Pool on such date, minus
(ii) the Excess Concentration Amount on such date, minus (iii) the Excess
Weighted Average Term Amount on such day.
NET WORTH: With respect to the Seller on any date, an amount equal to the
aggregate Unpaid Pool Balance of all Pool Receivables MINUS the sum of (i) the
Unpaid Balance of all Defaulted Receivables on such day, (ii) the aggregate
amount outstanding on the Initial Seller Notes on such day and (iii) an amount
equal to the Net Pool Balance TIMES the Asset Interest on such day.
OBLIGOR: A Person obligated to make payments with respect to a Receivable,
including any guarantor thereof.
OBLIGOR CONCENTRATION LIMIT: At any time, in relation to the aggregate Unpaid
Balance of Receivables owed by any single Obligor and its Affiliated obligors
(if any):
(a) for Obligors who have a short term unsecured debt rating currently
assigned to them by either S&P or Moody's, the applicable concentration limit
shall be determined according to the following table (and, if such Obligor is
rated by both S&P and Moody's and has a split rating, the applicable rating will
be the lower of the two):
Allowable % of
S&P Rating Moody's Rating Eligible Receivables
---------- -------------- --------------------
A-1+ P-1 10%
A-1 P-1 8%
A-2 P-2 6%
A-3 P-3 3%
If such Obligor is rated by only S&P, the applicable rating will be deemed to be
one ratings tier below the actual rating by S&P, and, if such Obligor is rated
by only Moody's, the applicable rating will be deemed to be one ratings tier
below the actual rating by Moody's, it being understood that if, for example,
Moody's has assigned a P-1 rating to such Obligor and S&P has not rated it, the
applicable rating will be deemed to be P-2.
(b) for Obligors who do not have a debt rating listed above or who are not
rated, 2% of the aggregate Unpaid Balance of Eligible Receivables at such time.
PROVIDED, HOWEVER that at the Originator's request and in the Administrative
Agent's sole discretion, the Administrative Agent may permit certain obligors to
have an Obligor Concentration Limit in excess of those described in CLAUSES (a)
and (b) above ("SPECIAL OBLIGOR"); PROVIDED that any such Special Obligor
designation shall not take effect without the confirmation of approval to the
Administrative Agent by each of Moody's and S&P of such designation.
ORIGINATOR: Each of Lennox, Heatcraft and Armstrong in their capacity as
originators under the Sale Agreement.
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OUTSTANDING BALANCE: With respect to any Receivable, the outstanding balance of
such Receivable in Dollars.
PERSON: An individual, partnership, corporation (including a business trust),
joint stock company, trust, unincorporated association, joint venture,
government or any agency or political subdivision thereof or any other entity.
PLAN: Any pension plan subject to the provisions of Title IV of ERISA or SECTION
412 of the Code which is maintained for employees of Lennox or any ERISA
Affiliate.
POOL RECEIVABLE: A Receivable in the Receivables Pool.
POOLED COMMERCIAL PAPER: Commercial Paper Notes of Purchaser subject to any
pooling arrangement by Purchaser, but excluding Commercial Paper Notes issued by
Purchaser for a tenor and in an amount specifically requested by any Person in
connection with any agreement effected by Purchaser.
PREFERRED STOCK: Any class of capital stock of a corporation that is preferred
over any other class of capital stock of such corporation as to the payment of
dividends or the payment of any amount upon liquidation or dissolution of such
corporation.
PRIME RATE: Refers to that interest rate so denominated and set by Wachovia from
time to time as an interest rate basis for borrowings. The Prime Rate is but one
of several interest rate bases used by Wachovia. Wachovia lends at interest
rates above and below the Prime Rate.
PROGRAM FEE: As defined in the Fee Letter.
PURCHASE: As defined in SECTION 1.1.
PURCHASE LIMIT: As defined in SECTION 1.1.
PURCHASER: As defined in the preamble.
PURCHASER'S SHARE: With respect to any amount, at any time, the lesser of (i)
the most recently calculated Asset Interest and (ii) 100%.
PURCHASER'S TRANCHE INVESTMENT: In relation to any Asset Tranche, the amount of
the Invested Amount allocated by the Administrative Agent to that Asset Tranche
pursuant to SECTION 2.1, provided, that at all times the aggregate amounts
allocated to all Asset Tranches shall equal the Invested Amount.
QUALIFYING LIQUIDITY BANK: A Liquidity Bank with a rating of its short-term
securities equal to or higher than (i) A-1 by Standard & Poor's and (ii) P-1 by
Moody's.
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RECEIVABLE: Any right to payment from a Person (other than an Affiliate),
whether constituting an account, chattel paper, instrument or general intangible
and includes the right to payment of any interest or finance charges and other
amounts with respect thereto.
RECEIVABLES POOL: At any time all then outstanding Receivables which have been
sold or contributed as capital, or purported to have been sold or contributed as
capital, by an Originator to the Seller, other than those reconveyed to an
Originator pursuant to SECTION 3.5 of the Sale Agreement.
REGULATION D: Regulation D of the Federal Reserve Board, as the same may be
amended or supplemented from time to time.
REGULATORY CHANGE: Any change after the date of this Agreement in United States
(federal, state or municipal) or foreign laws or regulations (including
Regulation D) or the adoption or making after such date of any interpretations,
directives or requests applying to a class of banks (including the Liquidity
Banks) of or under any United States (federal, state or municipal) or foreign,
laws, or regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
REINVESTMENT: As defined in SECTION 1.3(a)(iii).
RELATED ASSETS: (a) all rights to, but not any obligations under, all related
Contracts and other Related Security related to any Pool Receivables, (b) all
rights and interests of the Seller under the Sale Agreement in relation to any
Pool Receivables, (c) all books and records evidencing or otherwise relating to
any Pool Receivables, (d) all Lockbox Accounts and all cash and investments
therein, to the extent constituting or representing the items in the following
CLAUSE (e) and (e) all Collections in respect of, and other proceeds of, any
Pool Receivables or any other Related Assets.
RELATED SECURITY: With respect to any Pool Receivable, all of the Seller's (in
the case of usage in the Receivables Purchase Agreement) or the Originator's (in
the case of usage in the Sale Agreement) right, title and interest in and to:
(a) all Contracts that relate to such Pool Receivable; (b) all merchandise
(including returned merchandise), if any, relating to the sale which gave rise
to such Pool Receivable; (c) all security deposits and other security interests
or liens and property subject thereto from time to time purporting to secure
payment of such Pool Receivable, whether pursuant to the Contract related to
such Pool Receivable or otherwise; (d) all UCC financing statements covering any
collateral securing payment of such Pool Receivable (but only to the extent of
the interest of the Purchaser in the respective Pool Receivable); (e) all
guarantees and other agreements or arrangements of whatever character from time
to time supporting or securing payment of such Pool Receivable whether pursuant
to the Contract related to such Pool Receivable or otherwise; and (f) all
insurance policies, and all claims thereunder, related to such Pool Receivable,
in each case to the extent directly related to rights to payment, collection and
enforcement, and other rights with respect to such Pool Receivable. The interest
of the Purchaser in any Related Security is only to the extent of the
Purchaser's undivided percentage interest, as more fully described in the
definition of Asset Interest.
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REPORTABLE EVENT: Any reportable event as defined in SECTION 4043(b) of ERISA or
the regulations issued thereunder with respect to a Plan (other than a Plan
maintained by an ERISA Affiliate which is considered an ERISA Affiliate only
pursuant to subSECTION (m) or (o) of SECTION 414 of the Code).
REPORTING DATE: As defined in SECTION 3.1(a).
REQUIRED RESERVE: On any day during a Collection Period, an amount equal to the
product of (i) the Required Reserve Factor and (ii) the Net Pool Balance.
REQUIRED RESERVE FACTOR: On any day during a Collection Period, the greater of
(a) the Required Reserve Factor Floor and (b) the sum of (i) the Loss Reserve,
(ii) the Dilution Reserve, (iii) the Yield Reserve, and (iv) the Servicing
Reserve.
REQUIRED RESERVE FACTOR FLOOR: 13.0%.
REVOLVING PERIOD: Means the period beginning on June 19, 2000 and ending on the
earlier of (a) June 19, 2003 and (b) the Termination Date.
S&P: Standard & Poor's Ratings Service.
SALE AGREEMENT: The Purchase and Sale Agreement dated as of June 19, 2000 among
the Originators and the Seller as it may be amended, supplemented or otherwise
modified.
SEC: The Securities and Exchange Commission.
SECURED PARTIES: The Purchaser, the Administrative Agent, the Indemnified
Parties and the Affected Parties.
SELLER: As defined in the preamble.
SELLER INFORMATION: As defined in SECTION 14.7(a).
SELLER INFORMATION PROVIDER: As defined in SECTION 14.7(a).
SELLER PARTY: As defined in the preamble.
SELLER'S SHARE: With respect to any amount means 100% minus the lesser of (i)
the most recently calculated Asset Interest and (ii) 100%.
SERVICER DEFAULT: As defined in SECTION 8.4.
SERVICER TRANSFER EVENT: As defined in SECTION 8. 1(b).
A-19
SERVICING FEE: Accrued for any day in a Collection Period means: (a) an amount
equal to the product of (i) the Servicing Fee rate, (ii) the aggregate Unpaid
Balance of the Pool Receivables at the close of business on the first day of
such Collection Period, and (iii) 1/360; or (b) on and after the Master
Servicer's reasonable request made at any time when Lennox shall no longer be
Master Servicer, an alternative amount specified by Master Servicer not
exceeding (i) 110% of Master Servicer's costs and expenses of performing its
obligations under the Agreement during the Collection Period when such day
occurs divided by (ii) the number of days in such Collection Period.
SERVICING FEE RATE: 1.00% per annum.
SERVICING RESERVE: The product of (a) the Servicing Fee Rate and (b) a fraction,
the numerator of which is the Twelve Month DSO and the denominator of which is
360.
SETTLEMENT DATE: Two Business Days following each Reporting Date.
SPECIAL OBLIGOR: As defined in the definition of Obligor Concentration Limit.
STRUCTURING FEE: As defined in the Fee Letter.
SUBSIDIARY: With respect to any Person means (i) a corporation more than 50% of
whose stock of any class or classes having by the terms thereof ordinary voting
power to elect a majority of the directors of such corporation (irrespective of
whether or not at the time stock of any class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time owned or controlled by such Person, directly or
indirectly through Subsidiaries, and (ii) any partnership, association, joint
venture or other entity in which such Person, directly or indirectly through
Subsidiaries, has more than a 50% equity interest at the time.
SUCCESSOR NOTICE: As defined in SECTION 8.1(b).
SWAPS: With respect to any Person, payment obligations with respect to interest
rate swaps, currency swaps and similar obligations obligating such Person to
make payments, whether periodically or upon the happening of a contingency. For
the purpose of this Agreement, the amount of the obligation under any Swap shall
be an amount determined in respect thereof as of the end of the then most
recently ended fiscal quarter of such Person, based on the assumption that such
Swap had terminated at the end of such fiscal quarter, and in making such
determination, if any agreement relating to such Swap provides for the netting
of amounts payable by and to such Person thereunder or if any such agreement
provides for the simultaneous payment of amounts by and to such Person, then in
each such case, the amount of such obligation shall be the net amount so
determined.
TERMINATION DATE: The earliest of:
A-20
(a) the date of termination (whether by scheduled expiration, termination
on default or otherwise) of the Liquidity Banks' commitments under the Liquidity
Agreement (unless such commitments are renewed, extended or replaced on or
before such date);
(b) the Funding Termination Date;
(c) the date designated by the Seller as the "Termination Date" on not less
than thirty (30) days' notice to the Administrative Agent, provided that on such
date the Invested Amount has been reduced to zero, all accrued Earned Discount,
CP Costs, Broken Funding Costs and fees have been paid in full and all other
amounts due to the Purchaser and the Administrative Agent have been paid in
full; and
(d) the date on which any of the following shall occur:
(i) A Downgrading Event with respect to a Liquidity Bank shall have
occurred and been continuing for not less than 45 days, (x) the Downgraded
Liquidity Bank shall not have been replaced by a Qualifying Liquidity Bank
pursuant to a Liquidity Agreement in form and substance acceptable to the
Purchaser and the Administrative Agent, and (y) the commitment of such
Downgraded Liquidity Bank under the Liquidity Agreement shall not have been
funded or collateralized in such a manner that such Downgrading Event will
not result in a reduction or withdrawal of the credit rating applied to the
Commercial Paper Notes by any of the rating agencies then rating the
Commercial Paper Notes; or
(ii) Purchaser shall become an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
TERMINATION NOTICE: As defined in SECTION 8.4.
THRESHOLD AMOUNT: $3,900,000, or such other amount to which the Administrative
Agent may agree in writing from time to time.
TRANSACTION DOCUMENTS: This Agreement, the Lockbox Agreements, the Sale
Agreement, the Assurance Agreement, the Fee Letter, the Mandate Letter and the
other documents to be executed and delivered in connection herewith.
TRANSACTION FEES: Subject to the limitations set forth in the Fee Letter, all
reasonable expenses of the Administrative Agent incurred in connection with the
consummation of this Agreement and each other Transaction Document, including
but not limited to (i) the legal fees of Kilpatrick Stockton LLP, counsel to the
Administrative Agent, (ii) expenses incurred in connection with any due
diligence audit and (iii) out-of-pocket expenses of the Administrative Agent.
TWELVE MONTH DSO: For any day, the highest Days Sales Outstanding that occurred
during the twelve (12) month period ending on such date of calculation.
A-21
UCC: The Uniform Commercial Code, as from time to time in effect in the
applicable jurisdiction or jurisdictions.
UNMATURED LIQUIDATION EVENT: Any event which, with the giving of notice or lapse
of time, or both, would become a Liquidation Event.
UNPAID BALANCE: With respect to any Receivable means at any time the unpaid
amount thereof, but excluding all late payment charges, delinquency charges and
extension or collection fees.
UNUSED FEE: As defined in the Fee Letter.
WEIGHTED AVERAGE TERM: On any day, the weighted average of the stated terms of
all Eligible Receivables, weighted on the basis of the Unpaid Balance of each
such Receivable, as of such date of calculation.
YIELD PERIOD: With respect to any Asset Tranche funded by a Liquidity Funding,
(a) the period commencing on the date of the initial Purchase of the Asset
Interest, the making of such Liquidity Funding or the creation of such Asset
Tranche pursuant to SECTION 2.1 (whichever is latest) and ending such number of
days thereafter as the Administrative Agent shall select; and
(b) each period commencing on the last day of the immediately preceding
Yield Period for the related Asset Tranche and ending such number of days
thereafter as the Administrative Agent shall select;
PROVIDED, HOWEVER, that
(i) any such Yield Period (other than a Yield Period consisting of one
day) which would otherwise end on a day that is not a Business Day shall be
extended to the next succeeding Business Day (unless the related Asset
Tranche shall be accruing Earned Discount at a rate determined by reference
to Eurodollar Rate (Reserve Adjusted), in which case if such succeeding
Business Day is in a different calendar month, such Yield Period shall
instead be shortened to the next preceding Business Day);
(ii) in the case of Yield Periods of one day for any Asset Tranche,
(A) the initial Yield Period shall be the date such Yield Period commences
as described in CLAUSE (a) above; and (B) any subsequently occurring Yield
Period which is one day shall, if the immediately preceding Yield Period is
more than one day, be the last day of such immediately preceding Yield
Period, and if the immediately preceding Yield Period is one day, shall be
the next day following such immediately preceding Yield Period; and
(iii) in the case of any Yield Period for any Asset Tranche which
commences before the Termination Date and would otherwise end on a date
occurring after such Termination Date, such Yield Period shall end on such
Termination Date and the duration
A-22
of each such Yield Period which commences on or after the Termination Date
for such Asset Tranche shall be of such duration as shall be selected by
the Administrative Agent.
YIELD RESERVE: On any date of determination, the product of (a) 1.5, (b) the
Base Rate and c) a fraction the numerator of which is the Twelve Month DSO and
the denominator of which is 360.
B. OTHER TERMS. All accounting terms not specifically defined herein shall
be construed in accordance with GAAP. All terms used in ----------- Article 9 of
the UCC in the State of New York, and not specifically defined herein, are used
herein as defined in such Article 9.
C. COMPUTATION OF TIME PERIODS. Unless otherwise stated in this Agreement,
in the computation of a period of time from a specified date to a later
specified date, the word "from" means "from and including" and the words "to"
and "until" each mean "to but excluding".
A-23
SCHEDULE 6.1(i)
DESCRIPTIONS OF MATERIAL ADVERSE CHANGES
SELLER: None
ORIGINATORS:
LENNOX: None
HEATCRAFT: None
ARMSTRONG: None
SCHEDULE 6.1(n)
LIST OF OFFICES OF MASTER SERVICER AND SELLER WHERE RECORDS ARE KEPT
SELLER
LPAC Corp.
2140 Lake Park Blvd.
Richardson, TX 75080-2254
MASTER SERVICER
Lennox Industries Inc.
2100 Lake Park Blvd.
Richardson, TX 75080-2254
400 Norris Glen Road
Etobicoke, ON Canada M9C 1H5
Heatcraft Inc.
ADP Plant
1995 Air Industrial Park Road
Grenada, MS 38901
Heat Transfer Division
3984 Highway 51 South
Grenada, MS 38901
HRPD
2175 West Park Place Blvd.
Stone Mountain, GA 30087
Electrical Products Division
315 Murfreesboro Street
Murfreesboro, TN 37127
Armstrong Air Conditioning Inc.
421 Monroe Street
Bellevue, OH 44811
SCHEDULE 6.1(o)
LIST OF LOCKBOX BANKS
MAIN OFFICE ADDRESS & ACCOUNT NUMBER
Chase Bank of Texas, N.A.
P.O. Box 660197
Dallas, TX 75266-0197
Lennox Industries Inc.
Lockbox Account No. 07300186205
The Northern Trust Company
50 South LaSalle Street
Chicago, IL 60675
Lennox Industries Inc.
Lockbox Account No. 30996733
The Northern Trust Company
50 South LaSalle Street
Chicago, IL 60675
Heatcraft - Grenada
Lockbox Account No. 30184182
Wachovia Bank, N.A.
191 Peachtree Street, N.E.
Atlanta, GA 30303
Heatcraft - Stone Mountain, Danville, Tifton
Lockbox Account No. 1868075223
Wachovia Bank, N.A.
191 Peachtree Street, N.E.
Atlanta, GA 30303
Heatcraft - Grenadaockbox Account No. 1868019492
Bank One, NA
1717 Main Street, 3rd Floor
Dallas, TX 75201-7322
Armstrong Airconditioning Inc.
Lockbox Account No. 1065390
SCHEDULE 14.2
NOTICE ADDRESSES
Seller:
LPAC Corp.
Mail: P. O. Box 799900
Dallas, TX 75379-9900
Physical Address: 2140 Lake Park Blvd.
Richardson, TX 75080-2254
Attention: Scott Messel, Vice President and Treasurer
Phone No.: 972-497-6818
Facsimile No.: 972-497-6940
Servicers:
Lennox Industries Inc.
Mail: P. O. Box 799900
Dallas, TX 75379-9900
Physical Address: 2100 Lake Park Blvd.
Richardson, TX 75080-2254
Attention: Michael E. Kinney, Controller, North American Sales
Phone No.: 972-497-5363
Facsimile No.: 972-497-5254
Physical Address: 400 Norris Glen Road
Etobicoke, ON, Canada M9C 1H5
Heatcraft Inc.
Mail: P. O. Box 948
Grenada, MS 38902-0948
Physical Address: 3984 Highway 51 South
Grenada, MS 38901
Attention: Lowell Fry, Group Controller and
HTD Vice President - Administration
Phone No.: 601-229-2258
Facsimile No.: 601-229-2226
Armstrong Air Conditioning Inc.
Mail: 421 Monroe Street
Bellevue, OH 44811
Physical Address: 421 Monroe Street
Bellevue, OH 44811
Attention: David L. Inman, Controller
Phone No.: 419-483-4840, extension 2312
Facsimile No.: 419-483-4942
COPIES TO:
Carl E. Edwards, Jr., General Counsel
Lennox International Inc.
Mail: P. O. Box 799900
Dallas, TX 75379-9900
Physical Address: 2140 Lake Park Blvd.
Richardson, TX 75080-2254
Facsimile No.: 972-497-5268
Scott Messel, Vice President and Treasurer
Lennox International Inc.
Mail: P. O. Box 799900
Dallas, TX 75379-9900
Physical Address: 2140 Lake Park Blvd.
Richardson, TX 75080-2254
Facsimile No.: 972-497-6940
Purchaser:
Blue Ridge Asset Funding Corporation
c/o: Wachovia Bank, N.A., as Administrative Agent
100 North Main Street
Winston-Salem, NC 27150
Attention: John Dillon
Administrative Agent:
Wachovia Bank, N.A.
191 Peachtree Street, Suite 423
Atlanta, GA 30303
Attention: Elizabeth Wagner
Facsimile No.: 404-332-5152
Telephone No.: 404-332-1398
XHIBIT 1.2 (a)
FORM OF PURCHASE REQUEST
Wachovia Bank, N.A.
191 Peachtree Street, N.E., GA-423
Atlanta, Georgia 30303
Attention: Elizabeth Wagner
Ladies and Gentlemen:
Reference is made to the Amended and Restated Receivables Purchase Agreement
dated as of March 23, 2001 (as amended, supplemented or otherwise modified from
time to time, the "PURCHASE AGREEMENT") among LPAC Corp., as the Seller, Lennox
Industries Inc., as the Master Servicer (and together with Seller, collectively
referred to as the "SELLER PARTIES"), Blue Ridge Asset Funding Corporation, as
purchaser (the "PURCHASER") and Wachovia Bank N.A., as administrative agent for
Purchaser (the "ADMINISTRATIVE AGENT"). Capitalized terms defined in the
Purchase Agreement are used herein with the same meanings.
I. Each of the Seller Parties hereby certifies, represents and warrants to
the Purchaser and the Administrative Agent that on and as of the Purchase Date
(as hereinafter defined):
(a) all applicable conditions precedent set forth in Article V of the
Purchase Agreement have been satisfied;
(b) each of its respective representations and warranties contained in
SECTION 6.1 of the Purchase Agreement will be true and correct, in all material
respects, as if made on and as of the Purchase Date;
(c) no event will have occurred and is continuing, or would result from the
requested Purchase, that constitutes a Liquidation Event or Unmatured
Liquidation Event;
(d) after giving effect to the requested Purchase, the Invested Amount will
not exceed the available Purchase Limit, and the Asset Interest will not exceed
the Allocation Limit; and
(e) the Termination Date shall not have occurred.
II. The undersigned, as Seller hereby requests that the Purchaser make a
Purchase on ----------, ------- (the "PURCHASE DATE") as follows:
$ - Face value of maturing CP
$ - Principal paydown by Seller
$ - Discount to be paid by Seller
---------
$ - Minimum net proceeds needed from rolling CP to effect
Purchase in required amount
$ - Requested face value CP to mature on---------
$ - Requested face value CP to mature on ---------
---------
$ - aggregate requested face value CP to be issued on
Purchase Date
IN WITNESS WHEREOF, the Seller and the Master Servicer have caused this
Purchase Request to be executed and delivered as of this ----- day of
- -----------, -----.
LPAC Corp., as Seller
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
Lennox Industries Inc., as Master Servicer
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
EXHIBIT 3.1(a)
FORM OF INFORMATION PACKAGE
EXHIBIT A-1
FORM OF LOCKBOX AGREEMENT
[LETTERHEAD OF ORIGINATOR]
--------------, -------, 200-
[LOCKBOX BANK]
Ladies and Gentlemen:
Reference is made to our Lockbox account no. _____________ maintained with you
(the "ACCOUNT") pursuant to a Lockbox agreement between the undersigned and you,
the terms and conditions of which are incorporated herein by reference (the
"LOCKBOX AGREEMENT"). Pursuant to a Purchase and Sale Agreement, dated as of
June 19, 2000, as amended, supplemented or otherwise modified from time to time,
among the undersigned, as seller, and LPAC Corp., as purchaser, we have sold
and/or may hereafter sell to LPAC Corp. certain of the accounts, chattel paper,
instruments or general intangibles (collectively, "RECEIVABLES") with respect to
which payments are or may hereafter be made to the Account. Pursuant to a
Receivables Purchase Agreement, dated as of June 19, 2000 (as amended,
supplemented or otherwise modified from time to time, the "RECEIVABLES PURCHASE
AGREEMENT"), among LPAC Corp., as seller, Lennox Industries Inc., as master
servicer ("MASTER SERVICER") (LPAC Corp. and the Master Servicer being referred
to hereinafter collectively as the "SELLER PARTIES"), Blue Ridge Asset Funding
Corporation ("BLUE RIDGE"), as purchaser and Wachovia Bank, N.A., as
administrative agent (the "ADMINISTRATIVE AGENT"), LPAC Corp. has assigned
and/or may hereafter assign to Blue Ridge an undivided percentage interest in
the Receivables.
For purposes of this letter agreement, Wachovia Bank, N.A. is acting as
Administrative Agent for Blue Ridge. We hereby transfer exclusive ownership and
control of the Account to the Administrative Agent, for the benefit of Blue
Ridge, subject only to the condition subsequent that the Administrative Agent
shall have given you notice of its election to assume such ownership and
control, which notice shall be substantially in the form attached hereto as
ANNEX A.
We hereby irrevocably instruct you, at all times from and after the date of your
receipt of notice from the Administrative Agent of its assumption of control of
the Account as described above, (i) to make all payments to be made by you out
of or in connection with the Account directly to the Administrative Agent in
accordance with the instructions of the Administrative Agent, (ii) to hold all
moneys and instruments delivered to the Account or any Lockbox administered by
you for the order of the Administrative Agent (for the benefit of Blue Ridge),
(iii) to refrain from initiating any transfer from the Account to any Seller
Party and (iv) to change the name of the Account to "Wachovia Bank, N.A., as
Administrative Agent for Blue Ridge Asset Funding Corporation". The
Administrative Agent agrees to execute your standard wire transfer
documentation in effect from time to time, or other customary documentation
related to wire transfers, prior to the initiation of any wire transfers.
We also hereby notify you that, at all times from and after the date of your
receipt of notice from the Administrative Agent as described above, the
Administrative Agent shall be irrevocably entitled to exercise in our place and
stead any and all rights in respect of or in connection with the Account,
including, without limitation, (a) the right to specify when payments are to be
made out of or in connection with the Account and (b) the right to require
preparation of duplicate monthly bank statements on the Account for the
Administrative Agent's audit purposes and mailing of such statements directly to
the Administrative Agent at an address specified by the Administrative Agent.
Notices from the Administrative Agent and other notices or communications under
this letter agreement may be personally served or sent by facsimile or by
certified mail, return receipt requested, or by express mail or courier, to the
address or facsimile number set forth under the signature of the relevant party
to this letter agreement (or to such other address or facsimile number as the
relevant party shall have designated by written notice to the party giving the
aforesaid notice or other communication). Notwithstanding the foregoing, any
notice delivered by you may be delivered by regular mail. If notice is given by
facsimile, it will be deemed to have been received when the notice is sent and
receipt is confirmed by telephone or other electronic means. All other notices
will be deemed to have been received when actually received or, in the case of
personal delivery, delivered.
By executing this letter agreement, you acknowledge the existence of the
Administrative Agent's right to ownership and control of the Account and its
ownership (on behalf of Blue Ridge and LPAC Corp. as the parties having
interests in such amounts) of the amounts from time to time on deposit therein,
and agree that from the date hereof the Account shall be maintained by you for
the benefit of, and amounts from time to time therein held by you for, the
Administrative Agent (on behalf of Blue Ridge and LPAC Corp.) on the terms
provided herein. Except as otherwise provided in this letter agreement, payments
to the Account are to be processed in accordance with the standard procedures
currently in effect. All service charges and fees with respect to the Account
shall continue to be payable by us as under the arrangements currently in
effect.
By executing this letter agreement, you irrevocably waive and agree not to
assert, claim or endeavor to exercise, irrevocably bar and estop yourself from
asserting, claiming or exercising, and acknowledge that you have not heretofore
received a notice, writ, order or any form of legal process from any other party
asserting, claiming or exercising, any right of set-off, banker's lien or other
purported form of claim with respect to the Account or any funds from time to
time therein. Except for your right to payment of your service charges and fees
and your right to make deductions for returned items, you shall have no rights
in the Account or funds therein. To the extent you may ever have such rights,
you hereby expressly subordinate all such rights to all rights of the
Administrative Agent.
You may terminate this letter agreement by canceling the Account maintained with
you, which cancellation and termination shall become effective only upon 90
days' prior written notice
thereof from you to the Administrative Agent. Incoming mail addressed to the
Account received after such cancellation shall be forwarded in accordance with
the Administrative Agent's instructions. This letter agreement may also be
terminated upon written notice to you by the Administrative Agent stating that
the Receivables Purchase Agreement is no longer in effect. Except as otherwise
provided in this paragraph, this letter agreement may not be terminated or
amended without the prior written consent of the Administrative Agent.
Notwithstanding any other provision of this letter agreement, it is agreed by
the parties hereto that you shall not be liable to Blue Ridge or the
Administrative Agent for any action taken by you or any of your directors,
officers, agents or employees in accordance with this letter agreement at the
request of the Administrative Agent, except for your or such person's own gross
negligence or willful misconduct.
This letter agreement may be executed by the signatories hereto in several
counterparts, each of which shall be deemed to be an original and all of which
shall together constitute but one and the same letter agreement. This letter
agreement shall be governed by and interpreted under the laws of the State of
New York.
Please acknowledge your agreement to the terms set forth in this letter
agreement by signing the six copies of this letter agreement enclosed herewith
in the space provided below and returning each of such signed copies to the
Administrative Agent.
Very truly yours,
[NAME OF ORIGINATOR]
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Address for notice:
P.O. Box 799900
Dallas, Texas 75379-9900
Attention: Scott E. Messel
Facsimile No.: (972) 497-6940
Accepted and confirmed as of the date first written above:
BLUE RIDGE ASSET FUNDING CORPORATION,
as Purchaser
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Address for notice:
c/o Wachovia Bank, N.A., as Administrative Agent
100 North Main Street
Winston-Salem, North Carolina 27150
Attention: John Dillon
Facsimile No: (336) 732-5021
WACHOVIA BANK, N.A.,
as Administrative Agent
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Address for notice:
191 Peachtree Street, N.E., GA-423
Atlanta, Georgia 30303
Attention: Elizabeth Wagner
Facsimile: (404) 332-5152
Acknowledged and agreed to as of
the date first written above:
LPAC CORP.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Address for notice:
2140 Lake Park Blvd.
Richardson, Texas 75080
Attention: Treasurer
Facsimile No:
---------------------
[LOCKBOX BANK]
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Address for notice:
- ------------------------------------
Attention:
--------------------------
Facsimile No:
---------------------
ANNEX A to
Lockbox Agreement
[FORM OF NOTICE OF ASSUMPTION OF CONTROL OF ACCOUNT]
[LETTERHEAD OF WACHOVIA BANK, N.A.]
__________________, 200_
[NAME OF LOCKBOX BANK]
[ADDRESS OF LOCKBOX BANK]
------------------------
- -------------------------
Re: [Name of Originator]
Lockbox Account No
Ladies and Gentlemen:
Reference is made to the letter agreement dated ---------, 200--(as amended,
supplemented or otherwise modified from time to time, the "LETTER AGREEMENT")
among LPAC Corp., Lennox Industries Inc., Blue Ridge Asset Funding Corporation
(the "PURCHASER"), Wachovia Bank, N.A., as Administrative Agent for the
Purchaser, and you, concerning the above-described Lockbox account (the
"ACCOUNT").
We hereby give you notice of our assumption of ownership and control of the
Account as provided in the Letter Agreement.
We hereby instruct you to make all payments to be made by you out of or in
connection with the Account [directly to the undersigned, at [OUR ADDRESS SET
FORTH ABOVE], FOR THE ACCOUNT OF [BLUE RIDGE ASSET FUNDING CORPORATION] (ACCOUNT
NO.------------
[OTHER INSTRUCTIONS]
Very truly yours,
WACHOVIA BANK N.A.,
as Administrative Agent
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
EXHIBIT B
[NAME OF COMPANY]
FORM OF CERTIFICATE OF FINANCIAL OFFICER
This Certificate is made pursuant to the provisions of the Amended and Restated
Receivables Purchase Agreement dated as of March 23, 2001 (the "AGREEMENT")
- --------- among LPAC Corp., as Seller, Lennox Industries Inc., as Master
Servicer, Blue Ridge Asset Funding Corporation, as Purchaser, and Wachovia Bank,
N.A., as Administrative Agent. The capitalized terms used, but not defined,
herein have the meanings assigned to them in the Agreement.
The undersigned [CHIEF FINANCIAL OFFICER/TREASURER] of [NAME OF COMPANY] (the
"COMPANY") hereby certifies that the financial statements being delivered
concurrently herewith fairly present the financial condition and results of
operations of the Company in accordance with generally accepted accounting
principles consistently applied, subject to normal year-end audit adjustments.
[NAME OF COMPANY]
Name:
-------------------------------------
Title:
-------------------------------------
Dated:
-------------------------------------
EXHIBIT C-1
LENNOX INDUSTRIES INC.
CREDIT AND COLLECTION POLICY
LENNOX INDUSTRIES INC.
SUMMARY OF
CREDIT AND COLLECTION POLICIES
I. CREDIT DEPARTMENT
Credit administration at Lennox Industries Inc. ("Lennox") is performed by
the Customer Financial Services Department ("CFS"). CFS functions under the
supervision of its managers, whose performance is directed and evaluated by the
Controller for North American Sales.
INTERACTION WITH SALES AREAS. CFS Administrators should meet with all new
Territory Managers to advise them of the procedures relating to the
establishment and maintenance of favorable credit-sales relationships with
Lennox customers. CFS Administrators should supply each new Territory Manager
with copies of all applicable credit and collection policies, procedures and
forms.
ACCOUNT STATUS INFORMATION. CFS personnel should keep each Territory
Manager informed as to the account status of the customers in his or her
territory. CFS will regularly send or make available electronically for each
Territory Manager, a summarized aging on all accounts in his/her territory to
keep the Territory Manager apprised of the exact status of each account in his
or her territory. The detailed information supporting the summarized aging may
be obtained from CFS upon request and can be accessed from the Customer Master
SAP Screen in the field. The Territory Manager should have adequate information
at all times on each account in his or her territory and the status of each such
account.
CUSTOMER CORRESPONDENCE. CFS personnel should also, where possible,
routinely copy the Territory Managers on customer correspondence, including
collection letters, and copy the District Managers on all relevant important
matters. Copies of all debit memos regarding accounts should be provided to the
applicable Territory Manager so that he or she may promptly dispose of them.
CUSTOMER CHANGES. CFS personnel will frequently review all customer
accounts including the purchasing and payment patterns of each account. CFS will
alert the Territory Manager to any significant changes in these patterns so that
he/she can investigate the changes and inform CFS as to the reasons for the
changes. Each Territory Manager should endeavor to keep CFS informed of any
change in any customer's status or any matter that would otherwise affect the
collectibility of any account. To the extent CFS personnel deem reasonably
necessary, CFS personnel should make customer visits to inquire about any
significant changes in a customer's purchasing and payment patterns.
II. CREDIT POLICY AND PROCEDURES
DETERMINATION OF CREDIT LIMITS. Credit lines are used to cover well-rated
accounts and small accounts whose normal pattern of purchases is not likely to
create any unreasonable credit exposure. The credit limit should be sufficient
to cover each customer's needs to the extent of its ability to pay.
All credit limits will usually be established by CFS on the basis of two
major factors: the customer's purchase requirement of Lennox products and its
past and projected future paying ability. A financial statement is requested in
connection with all new dealer credit applications. CFS Administrators may, in
their discretion, but are not required to require financial statements for other
customer classifications.
CFS should also consider the following in establishing customer credit
limits:
1. Profitability--a track record of profit and sound growth.
2. Capability--technical and business management ability.
3. Character and reputation of the customer.
4. The proper maintenance of accounting records to produce a financial
statement on a regular basis.
5. Banking relationships--borrowing capacity.
Once CFS has established the credit line, it should be assigned for a
specific period of time. CFS will regularly review the adequacy of the terms or
changes in the customer's requirements or financial position. The timing between
reviews should not exceed 12 months. CFS personnel will note in the customer's
file the date of the last review and who performed such review.
APPROVAL OF ORDERS. Order approval is the responsibility of CFS. Each order
is noted as to its source of credit approval, whether this is through the
automatic approval system or from personal contact with CFS. When an order is
not approved, the cause of the delay should be immediately communicated to the
customer and the appropriate sales person.
If CFS is asked to approve orders weeks or months in advance of the
shipping date, CFS may approve the order in advance, but shall re-review the
order prior to shipment. CFS may also authorize partial release of an order,
pending receipt of additional information.
DEVIATIONS AND ORDERS EXCEEDING CREDIT LIMITS. All personnel are to adhere
to the customer credit limits as established and administered by CFS. Any
deviations or exceptions may be approved only by CFS.
CFS may approve orders exceeding a customer's credit limit after reviewing
the account and determining that extending additional credit to such customer is
merited. In connection with the review of the account, CFS may determine whether
the liabilities of the customer are in
balance with its assets and whether or not other trade payments have been made
promptly. CFS may also review the credit worthiness of those responsible for
paying our customer, or require bonding information, or pre-lien jobs or
projects. CFS will consider the request in connection with existing conditions
in the economy, changes in the customer's paying habits and any deterioration in
the customer's financial position. If CFS cannot obtain satisfactory information
to support the extension of additional credit, such extension will not be made
unless some form of collateral security can be obtained or other special
arrangements to reduce the risk can be established. The decision to accept
collateral security or such other special arrangements shall be made by CFS on a
case by case basis.
USE OF SECURITY INTERESTS OR PERSONAL GUARANTEES. In the event CFS
determines that credit may be extended if collateral security or a personal
guaranty is obtained, CFS should obtain legal assistance from its in-house or
outside legal counsel to assist it with the preparation of the documentation.
PROCEDURES WITH RESPECT TO NEW ACCOUNTS. Prior to establishing any open
account for a new customer, CFS will evaluate the risk associated with a
prospective customer and expedite the approval of the first order or advise the
Territory Manager that the customer does not meet open account requirements. If
an order is received from a customer for which an account has not been
established, it will not be processed and the Territory Manager will be promptly
notified of such fact.
STEPS FOR SETTING UP NEW ACCOUNTS. CFS shall take the following steps
in connection with establishing new accounts:
1. Each new customer shall complete a Customer Application. All
customer applications must be completely filled out and signed by the
customer, Territory Manager and District Manager.
2. Upon receipt of the Customer Application, CFS should immediately
make inquiries with the trade references listed on the application by
the customer and the customer's bank. The CFS Administrator
responsible for the account will determine, in his or her discretion,
whether to require financial statements, Dun & Bradstreet and/or
credit association reports. A financial statement is requested with
all new dealer applications.
3. A copy of the application will be sent to the Customer Maintenance
Department for setting up a customer number, a default terms code,
purchase order requirements, tax status and the like.
4. Customer Applications will be placed in a suspense file pending
receipt of the requested information.
5. Upon receipt of all necessary information, the CFS Administrator
responsible for the account will determine the appropriate terms, risk
category and credit line to be extended to the customer.
6. CFS will then establish a file for the new customer containing any
financial statements, credit agency reports, answers to credit and
reference inquiries and other confidential financial information.
7. CFS will notify the customer and the Territory Manager by letter of
the terms and credit guideline assigned to the new account. The terms
of the account will provide a limit for the account to operate within
without obtaining the approval of CFS with respect to each individual
order the customer places.
III. COLLECTIONS POLICIES AND PROCEDURES
CFS handles all collection correspondence. The procedures CFS utilizes in
its collection activities should take into consideration the applicable customer
and the relevant circumstances and should be appropriate to maximizing
collections.
DELINQUENT ACCOUNT COLLECTION PROCEDURES.
Lennox utilizes a computer software program to send reminder statements and
demand letters in connection with its collection procedures.
CFS should also maintain records of all telephone conversations and
commitments with each customer in the "Notes" SECTION of the customer's account
in the SAP and/or GetPAID computer system. CFS may also send confirmation of
commitments by letter, fax, or e-mail.
PROMISSORY NOTES. Acceptance of a promissory note in payment of a
customer's past due account is generally to be avoided. However, there are
certain occasions when CFS may determine that delayed payment of a receivable is
the only realistic method of obtaining payment and may be acceptable. The
following guidelines should be observed:
1. Any note arrangement must be reviewed and approved by the appropriate
CFS manager or other management as appropriate, prior to acceptance.
2. Notes should be guaranteed by the principals to insure personal
liability.
3. Notes should bear interest at a rate above the then prevailing prime
rate and accrued interest should be included in the payment.
4. Payments should be no less frequent than monthly and the note should
preferably mature in less than one year.
5. Collateral should be obtained with a value
exceeding the principal amount of the note.
PROCEDURES WITH RESPECT TO BAD ACCOUNTS. In the event an account becomes
seriously past due and CFS collection efforts are not productive, CFS will
determine the method it deems best to collect the account. CFS may elect, in its
discretion, to use an attorney or place it with a collection agency. CFS will
endeavor to recognize bad accounts as early as possible and place them for
collection quickly in order to maximize recovery.
WRITE-OFF POLICIES AND PROCEDURES. CFS will follow-up with the
appropriate attorney or collection agency on accounts placed for collection. CFS
should maintain written documentation as to the status of each such account at
all times. CFS will review the status of these accounts every 60-90 days and
those that are deemed reasonably uncollectable by the agency or attorney will be
written off to bad debts. If, however, in the opinion of the counsel or the
agency, the account can be collected in full in a reasonable period of time, the
account should not be written off.
PAYMENT TERMS
Lennox standard terms of sale are 1% cash discount within 10 days of
statement date, net due 15 days after statement date (1% 10-Net 15/stmt).
From time to time sales are made with terms other than standard for various
marketing promotions or other reasons.
Lennox also offers extended terms not to exceed 90 days from the date of
invoice for non-promotional business purposes.
PROTECTING THE CREDIT SALE. Alternatives to sale on open account
may be considered by CFS and implemented.
1. Time Drafts. A time draft may constitute a draw on an existing or
future credit line that the customer has with a bank and therefore must be
pre-arranged. The CFS obtains customer's bank's approval on the bank's
letterhead of the date to present the time draft. The maturity specifies as a
certain number (usually 60) of days after shipment as previously agreed with the
customer.
2. Domestic Letters of Credit. Letters of credit may be used for either
specific shipments or on a standby basis for a continuing relationship. Issued
by the customer's bank, on the customer's behalf, the terms and duration are
negotiated to mutual satisfaction and set forth in a bank letter of credit. Care
must be taken to be sure that these instruments are drafted in a manner most
beneficial to Lennox.
3. Joint Payment Agreements. Joint payment agreements may be arranged
with a general contractor/owner in conjunction with a sale to our customer who
is a subcontractor. Before the Territory Manager suggests or obtains such a
joint payment agreement, approval must
be obtained from CFS with respect to the credit risk associated with the general
contractor/owner.
4. C.O.D. C.O.D. shipment is to be made when the customer does not want a
credit line and other alternatives are not available. One time sales are often
handled in this manner. Caution must be taken prior to accepting the customer's
check in connection with a C.O.D. shipment. If any doubt exists as to the
sufficiency of the customer's check, a cashier's or certified check should be
requested.
5. Paid in Advance. Check must be in hand prior to release.
6. Credit Card. Each order must have a credit card approval number prior
to release.
PROCEDURES RELATING TO DISPUTED RECEIVABLES.
Any disputed item is referred to the dispute management team who contacts
the appropriate internal departments, Territory Managers, or District Managers
to resolve the dispute as quickly as possible.
EXHIBIT C-2
HEATCRAFT INC.
CREDIT AND COLLECTION POLICY
HEATCRAFT CREDIT POLICY
ROLE OF CREDIT DEPARTMENT
The Heatcraft Credit Department is responsible for assessing the credit
worthiness of potential new Heatcraft customers and administering credit to
existing customers in a fair and consistent manner to both Heatcraft and the
customer. The Heatcraft Credit Department is also responsible for the timely
collection of the accounts receivable balances due Heatcraft and to ensure that
the cash collected is applied correctly to the account balance as directed by
the customer. If a customer or potential customer is deemed to be a credit risk
or unworthy of additional credit the appropriate Heatcraft sales representative
will be made aware of this situation and future credit sales will be denied to
the customer until the credit department is satisfied that the customer's credit
worthiness has improved. In situations where it is questionable if Heatcraft
should do business with the customer the Division senior management will decide
if the risk is warranted. The senior management includes the Division General
Manager, Division Controller and the Sales Manager. There may be situations
where the credit departments decision is overridden concerning the extension of
credit to a customer but if this happens it will only be done based on the joint
decision of the Division senior management team.
PROCEDURES USED TO CARRY OUT CREDIT POLICY
For potential new customers the credit department will request that the customer
supply pertinent general and financial information regarding the business. The
credit department will try to get current copies of income statements and
balance sheets but often the customers will refuse to provide this information.
In addition the credit department may run a Dunn & Bradstreet check on the
customer as well as request the sales representative to provide whatever
information he may have on the customer. This information will be used to
determine if the customer is credit worthy for Heatcraft to do business with the
customer.
For existing customers the credit department will monitor the on going sales
order and payment activity of the customer and establish credit limits based on
historical activity with the customer. Sales orders from customers who are
current with Heatcraft will automatically be entered into the Heatcraft sales
order system as long as the current account balance plus the value of the orders
in question are below their credit limit. Once the credit limit is reached the
Credit Department will decide whether or not to release the order for production
and shipment.
The Credit Department is responsible for following up on past due account
balances and collecting them in a timely manner through dunning letters and
personal telephone calls to the customer. The sales representative will also be
contacted and asked to help in the
collection activity if the Credit Representative is unable to make any progress
in collecting the account. After a period of time (usually 120 days) if the
account is still uncollected and there is not a satisfactory reason for
withholding payment a collection agency or the LII legal department will be used
to assist in the collection process.
Accounts that are deemed uncollectable due to the customer filing bankruptcy or
going out of business will be written off as a bad debt by the accounting
department. The Division Controller is responsible for approving all accounts
that are written off to bad debts and for insuring that the bad debt reserve is
adequate to cover potential accounts that may become uncollectable.
EXHIBIT C-3
ARMSTRONG AIRCONDITIONING INC.
CREDIT AND COLLECTION POLICY
Armstrong Air Conditioning Inc.
Credit and Collection Policy
ROLE OF CREDIT DEPARTMENT
The Armstrong Credit Department is responsible for assessing the credit
worthiness of potential new Armstrong customers and administering credit to
existing customers in a fair and consistent manner to both Armstrong and the
customer. The Armstrong Credit Department is also responsible for the timely
collection of the accounts receivable balances due Armstrong and to ensure that
the cash collected is applied correctly to the account balance as directed by
the customer. If a customer or potential customer is deemed to be a credit risk
or unworthy of additional credit, the appropriate Armstrong sales representative
will be made aware of this situation and future credit sales will be denied to
the customer until the Credit Department is satisfied that the customer's credit
worthiness has improved. In situations where it is questionable if Armstrong
should do business with the customer, the senior management will decide if the
risk is warranted. The senior management includes the Group Controller and the
Vice President - Sales. There may be situations where the Credit Department's
decision is overridden concerning the extension of credit to a customer, but if
this happens it will only be done based on the joint decision of the senior
management team.
PROCEDURES USED TO CARRY OUT CREDIT POLICY
For potential new customers the Credit Department will request that the customer
supply pertinent general and financial information regarding the business. The
Credit Department will try to get current copies of income statements and
balance sheets but often the customers will refuse to provide this information.
In addition the Credit Department may run a Dunn & Bradstreet check on the
customer as well as request the sales representative to provide whatever
information he or she may have on the customer. This information will be used to
determine if the customer is credit worthy for Armstrong to do business with the
customer.
For existing customers the Credit Department will monitor the ongoing sales
order and payment activity of the customer and establish credit criteria based
on historical activity with the customer. Sales orders from customers who are
current with Armstrong will automatically be entered into the Armstrong sales
order system as long as the current account balance plus the value of the orders
in question are within the established credit criteria. Once the credit criteria
is reached the Credit Department will decide whether or not to release the order
for production and shipment.
The Credit Department is responsible for following up on past due account
balances and collecting them in a timely manner through dunning letters and
personal telephone calls to the customer. The sales representative may also be
contacted and asked to help in the collection activity if the Credit
Representative is unable to make any progress in collecting the account. After a
period of time (usually 120 days), if the account is still uncollected and there
is not a
satisfactory reason for withholding payment, a collection agency will be used to
assist in the collection process.
Accounts that are deemed uncollectable due to the customer filing bankruptcy or
going out of business will be written off as a bad debt by the accounting
department. The Group Controller is responsible for approving all accounts that
are written off to bad debts and for insuring that the bad debt reserve is
adequate to cover potential accounts that may become uncollectable.