Participation Agreement (2006)Full Document 

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PARTICIPATION AGREEMENT
Dated as of June 22, 2006
among
LENNOX PROCUREMENT COMPANY INC.,
as Lessee,
LENNOX INTERNATIONAL INC., as Guarantor,
BTMU CAPITAL CORPORATION, as Lessor,
MHCB (USA) LEASING AND FINANCE CORPORATION,
as initial holder of all of the Notes,
and
MHCB (USA) LEASING AND FINANCE CORPORATION,
Administrative Agent
 

 


 

TABLE OF CONTENTS
                 
            Page
SECTION I DEFINITIONS; INTERPRETATION     1  
 
               
SECTION II ACQUISITION AND LEASE; NATURE OF TRANSACTION     1  
 
 
  SECTION 2.1.   Agreement To Acquire And Lease     1  
 
  SECTION 2.2.   Funding Of Acquisition Costs     2  
 
  SECTION 2.3.   Equity Investment Yield, Interest Fees; Adjustment of Basic Rent     2  
 
  SECTION 2.4.   Characterization of the Lease     4  
 
  SECTION 2.5.   Amounts Due Under Lease     4  
 
               
SECTION III CONDITIONS PRECEDENT     5  
 
               
SECTION IV REPRESENTATIONS     10  
 
 
  SECTION 4.1.   Representations of Lessee     10  
 
  SECTION 4.2.   Representations Of Lessor     14  
 
  SECTION 4.3.   Representations of Guarantor     15  
 
  SECTION 4.4.   Representations of Administrative Agent     19  
 
  SECTION 4.5.   Representations of Lenders     20  
 
               
SECTION V COVENANTS     20  
 
 
  SECTION 5.1.   Covenants of Lessee     20  
 
  SECTION 5.2.   Covenants of Lessor     22  
 
  SECTION 5.3.   Covenants of Guarantor     26  
 
               
SECTION VI TRANSFERS BY LESSOR AND LENDERS     28  
 
 
  SECTION 6.1.   Transfers by Lessor or Lender     28  
 
               
SECTION VII INDEMNIFICATION     28  
 
 
  SECTION 7.1.   General Indemnification     28  
 
  SECTION 7.2.   Environmental Indemnity     30  
 
  SECTION 7.3.   Proceedings In Respect Of Claims     31  
 
  SECTION 7.4.   General Tax Indemnity     33  
 
  SECTION 7.5.   Increased Costs, Etc.     36  
 
               
SECTION VIII MISCELLANEOUS     39  
 
 
  SECTION 8.1.   Survival of Agreements     39  
 
  SECTION 8.2.   Notices     40  
 
  SECTION 8.3.   Counterparts     40  
 
  SECTION 8.4.   Amendments; Release     40  
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  SECTION 8.5.   Headings, etc     40  
 
  SECTION 8.6.   Parties in Interest     40  
 
  SECTION 8.7.   GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVERS     40  
 
  SECTION 8.8.   Expenses     42  
 
  SECTION 8.9.   Severability     42  
 
  SECTION 8.10.   Limited Liability of Lessor     42  
 
  SECTION 8.11.   Closing     43  
 
  SECTION 8.12.   Existing Lennox Leases     43  
 
               
APPENDIX A Definitions and Interpretation        
 
               
SCHEDULES        
SCHEDULE 8.2 Notice Information; Wire Information        
 
               
EXHIBITS        
EXHIBIT A Form of Mortgage        
EXHIBIT B Form of Assignment of Lease        
EXHIBIT C Form of Environmental Audit Reliance Letter        
EXHIBIT D Form of Lessor Confirmation        
EXHIBIT E Form of Subordination Agreement        
EXHIBIT F Form of Certification from Transferee of Lessor        
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PARTICIPATION AGREEMENT
     THIS AGREEMENT, dated as of June 22, 2006 (as it may be amended or modified from time to time in accordance with the provisions hereof, this “Agreement”), is among LENNOX PROCUREMENT COMPANY INC., a Delaware corporation (together with its successors and permitted assigns, “Lessee”), LENNOX INTERNATIONAL, INC., a Delaware corporation (together with its successors and permitted assigns, “Guarantor”), BTMU CAPITAL CORPORATION, a Delaware corporation, as Lessor (together with its successors and assigns, the “Lessor”), MHCB (USA) LEASING AND FINANCE CORPORATION, a New York corporation (“MHCB”), as initial holder of all of the Notes (together with its successors and assigns, “Lender”), and MHCB, as administrative agent (together with its successors and permitted assigns, “Administrative Agent”).
PRELIMINARY STATEMENT
     In accordance with the terms and provisions of this Agreement, the Lease, the Credit Agreement and the other Operative Documents, (i) Lessor contemplates acquiring the Property, and leasing the Property to Lessee, (ii) Lessor wishes to obtain, and each of the Lenders are willing to provide, financing of a portion of the funding of the acquisition of the Property, (iii) Lessee wishes to lease the Property from Lessor, and (iv) Guarantor is willing to provide its Guaranty to the beneficiaries named therein.
     In consideration of the mutual agreements contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
SECTION I
DEFINITIONS; INTERPRETATION
     Unless the context shall otherwise require, capitalized terms used and not defined herein shall have the meanings assigned thereto in Appendix A hereto for all purposes hereof; and the rules of interpretation set forth in Appendix A hereto shall apply to this Agreement.
SECTION II
ACQUISITION AND LEASE;
NATURE OF TRANSACTION
     SECTION 2.1. Agreement To Acquire And Lease. The Seller and the Buyer have entered into the Purchase Agreement, pursuant to which Seller has agreed to sell the Property to the Buyer and the Buyer has agreed to purchase the Property, subject, each case, to satisfaction of certain conditions precedent. Effective as of the effective date of this Agreement (also sometimes herein referred to as the Closing Date), subject to all conditions precedent in this Agreement, (i) Buyer is assigning its rights under the Purchase Agreement to Lessor, (ii) Lessor is advancing the purchase price required by the Purchase Agreement for the Property using the proceeds of the Loan and the Equity Investment, and thereby acquiring fee simple interest in the Property, subject to the Permitted Liens, (iii) Lessor is leasing the Property to Lessee pursuant to the Lease, and (iv) Lessee is leasing the Property from Lessor pursuant to the Lease. Also effective as of the Closing Date, the parties to this Agreement are joining with Seller in

 


 

executing the Escrow Agreement which will supplement the Purchase Agreement to establish the terms and conditions of (A) the release from escrow and delivery of (i) Seller’s deed, which will convey the Property to Lessor, and of the Operative Documents to Lessor, (B) the delivery of the purchase price for the Property required by the Purchase Agreement, and (C) the release (defeasance) of a lien against the Property, which was granted by Seller to secure financing previously obtained. As provided in the Escrow Agreement, the rights and obligations of the parties thereunder will not be subject to any conditions precedent set forth herein, nor will they be contingent upon any delivery or release from escrow of this Agreement or other Operative Documents. In connection with the Purchase Agreement (as modified and supplemented by the Escrow Agreement), Lessee will be acting and is hereby authorized to act as Lessor’s agent to perform on its behalf any obligations that may arise under such Agreement, including execution and delivery of the Purchase Agreement Documents, other than the acceptance of the conveyance of the Property and payment of the purchase price therefor.
SECTION 2.2. Funding Of Acquisition Costs
          (a) Funding and Payment of Purchase Price for Property on Closing Date. Subject to the terms and conditions of this Agreement and the other Operative Documents, on the Closing Date, the Lenders shall, make a term loan to Lessor in an amount equal to $32,962,395.40 (the “Loan”) and the Lessor, together with its own funds in the amount of $8,240,598.85 (such amount, less any Additional Payment made pursuant to the Lease, plus all Yield capitalized pursuant to Section 2.3(a), the “Equity Investment”), shall acquire the Property from the Seller and lease the Property to Lessee pursuant to the Lease. Guarantor shall guaranty the obligations of Lessee under the Lease and the other Operative Documents to which it is a party pursuant to the Guaranty.

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