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EXHIBIT 10.19
STOCK DISPOSITION AGREEMENT
THIS AGREEMENT ("Agreement") is effective as of the 22nd day of
January, 1998 and is by and among A.O.C. CORPORATION, a Texas corporation
("Pledgor"), LENNOX INTERNATIONAL INC., a Delaware corporation ("Lennox"), and
COMPASS BANK, a state bank chartered under the laws of the State of Texas, with
its principal office located in Dallas, Texas (the "Bank").
PRELIMINARY STATEMENTS:
WHEREAS, Pledgor is the owner of common shares of the capital stock of
Lennox and has pledged 30,000 of such shares to the Bank for the benefit of
Borrower (said 30,000 shares, together with any additional shares that may
hereafter be pledged by Pledgor to the Bank as collateral for the Loan [defined
below], are referred to herein collectively as the "Pledged Stock"); and
WHEREAS, it is the desire of the parties hereto that the Bank make a
loan to AOC Development II, L.L.C., a Delaware limited liability company (the
"Borrower") in the principal amount of $27,965,500.00 (the "Loan"), pursuant to
a Loan Agreement (the "Loan Agreement") dated of even date herewith by and
between Borrower and Lender, which Loan shall be evidenced by a promissory note
dated of even date herewith (together with any and all renewals, extensions,
modifications and replacements thereof, the "Note") and secured by, among other
things, the Pledged Stock pursuant to a Stock Pledge Agreement executed by
Pledgor and delivered to Bank and dated of even date herewith (the "Security
Agreement"); and
WHEREAS, Lennox has determined that it is in its best interests to
enter into this Agreement to make provision for the potential future
disposition of its stock; and
WHEREAS, the Pledged Stock is subject to certain restrictions,
including a right of first refusal in favor of Lennox under the terms of its
Certificate of Incorporation; and
WHEREAS, the Pledged Stock has value to the Bank as security only to
the extent that the Bank can be assured that, upon the occurrence of an Event
of Default under the Loan Agreement, there will be available a ready buyer or
market for the Pledged Stock.
NOW, THEREFORE, in consideration of the premises and covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
AGREEMENTS:
1. Conditions on the Ownership and Restrictions on the Transfer of the
Pledged Stock. The Pledgor's ownership and the rights of the Bank with respect
to the Pledged Stock are subject to the following:
(a) Pursuant to Article Sixteenth of the Lennox Restated
Certificate of Incorporation, "No sale, assignment, transfer or other
disposition . . . shall be effective unless and until there is
compliance with the . . . terms and conditions" set forth therein. The
Restated Certificate of Incorporation of Lennox is attached hereto and
incorporated herein as Exhibit A.
The parties hereto understand and agree that the Pledgor's rights in
and to the Pledged Stock and any rights of the Bank thereto created as a result
of the Loan and the Security Agreement are expressly conditioned upon the above
conditions set forth and referenced above in this Paragraph 1.
2. Disposition of Pledged Stock. At any time after the occurrence of
an Event of Default as defined in the Loan Agreement (a "Loan Agreement
Default"), the Bank shall have the right to demand and require Lennox to
perform one of the following: (a) within sixty (60) days of such demand,
procure a ready and willing buyer for the Pledged Stock at the Value (as
defined in
STOCK DISPOSITION AGREEMENT - Page 1
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the Loan Agreement) of such shares; (b) within thirty (30) days of such demand,
purchase from the Bank the Pledged Stock at the Value of such shares; or (c) if
at the time of a Loan Agreement Default, Lennox's common stock is listed for
trading on a stock exchange or other recognized securities market and has an
average daily trading volume of 25,000 shares, then as soon as is practicable,
but within one hundred twenty (120) days of such demand, register the Pledged
Stock pursuant to the Securities Act of 1933; provided that (i) Lennox shall
have the option to perform under clause (a), (b) or (c) above so long as
performance is completed within the number of days specified (during which time
interest shall continue to accrue on the Note at the Default Rate [as defined
in the Note]) and (ii) neither the buyer under clause (a) above nor Lennox
under clause (b) above shall be required to purchase Pledged Stock in excess of
the number of shares pledged to secure the Note and required to pay Bank an
amount equal to the aggregate amount of the then outstanding indebtedness
secured by the Pledged Stock. Notwithstanding anything else to the contrary
herein, Lennox shall not be required to take any action pursuant to this
Agreement that would cause Lennox to be in default under (i) the Revolving
Credit Agreement dated as of December 4, 1991, as the same may have heretofore
been amended or may hereafter be amended, among Lennox, the banks named on the
signature pages thereof, and The Northern Trust Company, as Agent, or (ii) any
note purchase agreements entered into in December 1991, December 1993, and July
1995, between Lennox and various note purchasers, as in effect on the date
hereof, where the outstanding amount of a long term note issued thereunder
exceeds Five Million Dollars ($5,000,000.00).
If a Loan Agreement Default shall occur, the Bank shall also have the
right, subject to the conditions set forth in Paragraph 1 hereof, to procure a
buyer for the Pledged Stock; provided that the Bank shall first offer the
shares of the Pledged Stock to Lennox, whether or not the aggregate Value of
the Pledged Stock shall be sufficient to pay in full all then outstanding
indebtedness secured by the Pledged Stock, and provided, further, that Bank's
obligation to make such offer shall terminate in the event Lennox fails to
exercise its right of first refusal by paying Bank the Value of the Pledged
Stock in cash within thirty (30) days of such offer.
3. Method of Demand. The right to demand performance by Lennox as
described in Paragraph 2 hereof shall be exercised by Bank giving written
notice to Lennox (at the address set forth in Paragraph 9(b) below) of the Loan
Agreement Default and the Bank's demand for such performance by Lennox. Any
delay by Bank in exercising such right after the occurrence of a Loan Agreement
Default shall not operate as a waiver of such right or any other right provided
for herein. Upon receipt of such demand, Lennox shall advise the Bank in
writing within ten (10) business days whether it intends to perform under
clause (a), (b) or (c) of Paragraph 2 hereof, whereupon Lennox shall promptly
commence said performance and shall diligently pursue completion of its
performance.
4. Method of Payment. The purchase price of the Pledged Stock (the
"Purchase Price") shall be its Value as provided in Paragraph 2 hereof, and the
full Purchase Price shall be paid to the Bank in cash on the Closing Date as
set forth in Paragraph 5 below.
5. Closing Date. Any purchase of the Pledged Stock by Lennox or a
buyer procured by Lennox pursuant to Paragraph 2 hereof shall occur in Dallas,
Texas at the principal office of Bank or such other address in Dallas, Texas as
Bank shall designate, on a date mutually agreed by Bank and Lennox, which date
shall be not later than the last date for performance by Lennox or such buyer
under Paragraph 2 hereof (the "Closing Date"). At the closing, Bank shall
deliver the certificates being purchased, duly endorsed or with duly completed
stock powers, and the buyer of the Pledged Stock shall deliver to Bank, the
Purchase Price required to be paid on the Closing Date pursuant to Paragraph 4
above, which shall be payable through a wire transfer or a cashier's check in
United States dollars from a bank acceptable to Bank.
6. Representations, Warranties and Covenants
(a) This Agreement has been duly authorized by all corporate
action necessary on the part of Pledgor and Lennox, respectively. This
Agreement constitutes a valid and binding agreement of Pledgor and
Lennox, and is enforceable against Pledgor and Lennox,
respectively, in accordance with its terms, except that such
enforceability may be affected by (i) general principles of equity
(regardless of whether relief is sought in an action at law or in
equity) and (ii) applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws from time to time in effect affecting
enforcement of creditors' rights generally.
(b) Pledgor hereby agrees that the disposition of the Pledged
Stock in the manner and on such terms as are provided in this
Agreement shall be deemed for all purposes as a "commercially
reasonable" sale as required by the Texas Business and Commerce Code,
regardless of whether the book, market or other value of the Pledged
Stock is equal to, above or below the Purchase Price.
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(c) BANK HAS MADE NO REPRESENTATION OR WARRANTY WHATSOEVER
CONCERNING THE INVESTMENT VALUE OF THE PLEDGED STOCK. THE PLEDGOR AND
LENNOX AGREE THAT THIS AGREEMENT CONTEMPLATES THAT NEITHER PLEDGOR NOR
LENNOX SHALL BE ENTITLED TO ASSERT ANY SUCH REPRESENTATION OR WARRANTY
BY BANK, AT ANY TIME. PLEDGOR AND LENNOX AGREE TO INDEMNIFY AND HOLD
BANK HARMLESS WITH RESPECT TO ANY CLAIM MADE BY ANY PARTY HERETO, OR
ANY SUCCESSOR OR ASSIGN, ASSERTING SUCH A REPRESENTATION OR WARRANTY
BY BANK.
(d) Each of the parties hereto agree to undertake such
additional agreements, execute such additional documents, and do such
other acts and things as may be reasonably required to effect the
purposes of this Agreement.
(e) To the extent that any provision of this Agreement is in
conflict with any provision in any prior agreement between Pledgor and
Lennox, this Agreement shall control.
(f) Lennox shall promptly give written notice to Bank of any
event of default under any loan or credit agreement or note purchase
agreement between Lennox and a lender where the amount of debt
outstanding under such agreement is at least Ten Million Dollars
($10,000,000).
(g) Pledgor shall reimburse Lennox for its reasonable
out-of-pocket expenses (not including any Purchase Price paid by
Lennox hereunder) in performing its obligations hereunder after an
Event of Default has occurred.
(h) Pledgor represents and warrants that the Pledged Stock
has not been pledged, assigned, hypothecated or transferred in any way
for the benefit of any other party, and is not the subject of any
security, pledge, hypothecation or similar agreement for the benefit
of any other party, with the sole exception of the Other Security
Agreement relating to the Existing Loan (as such terms are defined
below in Paragraph 9[h] of this Agreement).
7. Breach of Agreement. It is agreed that a breach by Lennox in the
performance of its obligations hereunder cannot be adequately measured or
compensated in money damages, and that any such breach would do irreparable
injury to Bank. It is therefore agreed that in the event of any breach or
threatened breach by Lennox of any of the terms and conditions set forth
herein, Bank shall be entitled, in addition to any and all rights and remedies
to which it may otherwise be entitled at law or in equity, to apply for and
obtain injunctive relief to restrain Lennox from committing such breach or
threatened breach and from continuing any activity constituting such breach,
and mandating that Lennox perform under this Agreement.
8. Parties Bound. All representations, warranties, covenants and
agreements made by or on behalf of Lennox and Pledgor shall bind Lennox and
Pledgor and the heirs, devisees, executors, administrators, personal
representatives, successors, trustees, receivers, and assigns of Pledgor and
Lennox and inure to the benefit of the successors and assigns of Bank.
9. Miscellaneous.
(a) This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
assigns; provided, however, that neither of Lennox nor Pledgor shall
be permitted to assign or delegate its rights, privileges or
obligations hereunder at any time, and shall be required to adhere to
and carry out its duties as set forth herein. Any attempted assignment
by Lennox or by Pledgor shall be null and void and shall not relieve
such party of any of its obligations, responsibilities,
representations and warranties contained in this Agreement.
(b) All notice and other communications provided for herein
shall be validly given, made or served, if in writing and delivered
personally or sent by certified mail, return receipt requested,
postage prepaid:
If to Bank: Compass Bank
X.X. Xxx 000000
Xxxxxx, Xxxxx 00000-0000
Attention: Xxxx Xxxxxxxxxxx
If to Lennox: Lennox International Inc.
X.X. Xxx 000000
Xxxxxx, Xxxxx 00000-0000
Attention: Chief Financial Officer
If to Pledgor: A.O.C. Corporation
0000 Xxxx Xxxx Xxxx.
Xxxxxxxxxx, Xxxxx 00000
Attention: President
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(c) This Agreement contains the entire agreement between the
parties hereto with respect to the disposition of stock contemplated
herein as the same relates to the Loan and supersedes all prior
agreements or understandings, if any, between the parties hereto
relating to the subject matter hereof in connection with the Loan, and
may not be modified except by written agreement signed by all of the
parties hereto.
(d) The captions of each paragraph hereof are entered as a
matter of convenience only and shall not be considered to be of any
effect in the construction of this Agreement.
(e) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS
OF THE UNITED STATES OF AMERICA. THIS AGREEMENT HAS BEEN ENTERED INTO
IN DALLAS COUNTY, TEXAS, SHALL BE PERFORMABLE FOR ALL PURPOSES IN
DALLAS COUNTY, TEXAS AND THE PLEDGOR, LENNOX AND THE BANK AGREE THAT
DALLAS COUNTY, TEXAS IS PROPER VENUE FOR ANY ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT AND THAT NO SUCH COURT IS AN INCONVENIENT
FORUM. PLEDGOR, LENNOX AND BANK AGREE THAT SERVICE OF PROCESS UPON ANY
OF THEM MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED, AT THEIR ADDRESSES SPECIFIED ABOVE OR DETERMINED IN
ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT. NOTHING HEREIN OR IN
ANY OF THE NOTE OR SECURITY AGREEMENT SHALL AFFECT THE RIGHT OF THE
BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
(f) All representations and warranties contained herein shall
survive the execution of this Agreement.
(g) This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
(h) It is understood and acknowledged that (i) the 30,000
shares of the Pledged Stock were previously pledged by Pledgor to Bank
pursuant to a Stock Pledge Agreement (the "Other Security Agreement")
dated June 2, 1997 by and between Pledgor and Bank in connection with
a $20,950,900.00 construction loan ("Existing Loan") made by Bank to
AOC Development, L.L.C., a Delaware limited liability company at that
time, (ii) this Agreement is not intended to supersede, replace,
amend, alter or otherwise affect in any way the Other Security
Agreement, Existing Loan or the Stock Disposition Agreement (the
"Other Stock Disposition Agreement") executed by Pledgor, the Bank and
Lennox in connection with the Existing Loan, (iii) the rights and
obligations of Pledgor and Lennox under this Agreement are unrelated
to and completely independent of their respective rights and
obligations under the Other Stock Disposition Agreement, and each of
Pledgor and Lennox shall honor and perform its obligations hereunder
without regard to the Other Stock Disposition Agreement, (iv) upon the
occurrence of a Loan Agreement Default, Bank shall be entitled to
exercise its rights and remedies hereunder and otherwise relating to
the Loan and the subject matter of this Agreement without regard to
the Other Stock Disposition Agreement, and (v) in the event that
default situations should exist simultaneously under or with respect
to both the Loan and the Existing Loan, Bank shall be entitled, at its
option and without limitation as to election of remedies or otherwise,
to pursue its rights and remedies as to the Pledged Stock under either
this Agreement or the Other Stock Disposition Agreement, or under both
of them, either simultaneously or independently of one another.
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(i) Except in the event that a Loan Agreement Default, or a
breach or threatened breach by Lennox in the performance of its
obligations hereunder, shall have occurred and remain uncured,
unperformed or otherwise unresolved at such time, this Agreement shall
be deemed automatically terminated and of no further force or effect
(except as otherwise expressly provided herein) on the date that (i)
the Pledged Stock becomes registered for resale under the Securities
Act of 1933, as amended, and the common stock of Lennox is listed on a
nationally recognized securities exchange or market (including the New
York Stock Exchange or NASDAQ) and (ii) the average daily trading
volume for such Lennox common stock has exceeded 25,000 shares
(adjusted for any stock split after the date hereof) for at least ten
(10) of the prior thirty (30) days.
THIS STOCK DISPOSITION AGREEMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AS TO THE SUBJECT MATTER HEREOF IN CONNECTION WITH THE LOAN
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
LENNOX: LENNOX INTERNATIONAL INC.
By: /s/ XXXXX XXXXX
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Xxxxx Xxxxx
Executive Vice President, Chief Financial
Officer and Treasurer
PLEDGOR: A.O.C. CORPORATION
By: /s/ XXXXX XXXXX
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Xxxxx Xxxxx
Vice President
BANK: COMPASS BANK
By: /s/ XXXX X. XXXXXXXXXXX
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Xxxx X. Xxxxxxxxxxx
Vice President
DA973350149
011998 v2
225:16621-8
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EXHIBIT A
Restated Certificate of Incorporation of Lennox
EXHIBIT A - Restated Certificate of Incorporation of Lennox
