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EXHIBIT 10.18
STOCK DISPOSITION AGREEMENT
THIS AGREEMENT ("Agreement") is effective as of the 2nd day of June,
1997 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, L.L.C., a Delaware limited liability company (the
"Borrower") in the principal amount of $20,950,900.00 (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
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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.
(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 Pledgor's 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
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If to Pledgor: A.O.C. Corporation
0000 Xxxx Xxxx Xxxx.
Xxxxxxxxxx, Xxxxx 00000
Attention: President
(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 Security Agreement (the "Other Security Agreement") dated
July 26, 1995 by and between Pledgor and Bank in connection with a term
loan ("Pledgor's Loan") made by Bank to Pledgor at that time, (ii) this
Agreement is not intended to supercede, replace, amend, alter or
otherwise affect in any way the Other Security Agreement, Pledgor's
Loan or the Stock Disposition Agreement (the "Other Stock Disposition
Agreement") executed by Pledgor, the Bank and Lennox in connection with
Pledgor's 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 Pledgor's
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
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Stock under either this Agreement or the Other Stock Disposition
Agreement, or under both of them, either simultaneously or
independently of one another.
(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)
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
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EXHIBIT A
Restated Certificate of Incorporation of Lennox
EXHIBIT A - Restated Certificate of Incorporation of Lennox
