1
EXHIBIT 10.22
STOCK DISPOSITION AGREEMENT
(this "Agreement")
THIS AGREEMENT is effective as of the 19th day of Nov., 1998 and is by
and among Xxxx X. Major ("Borrower"), LENNOX INTERNATIONAL INC., a Delaware
corporation ("Lennox"), and Xxxxx Trust & Savings Bank, a federal banking
association, with its principal office located in Chicago, IL (the "Bank").
PRELIMINARY STATEMENTS:
WHEREAS, Borrower is the owner of 65 shares of the capital stock of
Lennox (the "Pledged Stock"); and
WHEREAS, it is the desire of the parties hereto that the Bank make a
term loan to Borrower in the principal amount of $350,000 maturing on Demand
(the "Loan"), 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 Security Agreement executed by Borrower and
delivered to Bank and dated of even date herewith ("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 default of Borrower under
the Note, 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 Borrower'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.
2
The parties hereto understand and agree that the Borrower's rights in and to the
Pledged Stock and any rights of the Bank thereto created as a result of the Loan
and 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 between Borrower and the Bank
pursuant to which the Loan is being made (an "Event of Default"), the Bank shall
have the right to request and Lennox agrees to use its best efforts 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 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 an Event of Default, Lennox 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 practicable, but within one
hundred eighty (180) 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 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 $5,000,000.
If an Event of 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 Event of
Default and the Bank's demand for such performance by Lennox. Any delay by Bank
in exercising such right after the occurrence of an Event of 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. Lennox shall promptly commence said performance and shall
diligently pursue completion of its performance.
2
3
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 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 Illinois 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
or other actions necessary on the part of Borrower and Lennox,
respectively. This Agreement constitutes a valid and binding agreement
of Borrower and Lennox, and is enforceable against Borrower and Lennox,
respectively, in accordance with its terms, except that such
enforceability may be limited 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) Borrower 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.
(c) BANK HAS MADE NO REPRESENTATION OR WARRANTY WHATSOEVER
CONCERNING THE INVESTMENT VALUE OF THE PLEDGED STOCK. THE BORROWER AND
LENNOX AGREE THAT THIS AGREEMENT CONTEMPLATES THAT NEITHER BORROWER NOR
LENNOX SHALL BE ENTITLED TO ASSERT ANY SUCH REPRESENTATION OR WARRANTY
BY BANK, AT ANY TIME. BORROWER 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.
3
4
(e) To the extent that any provision of this Agreement is in
conflict with any provision in any prior agreement between Borrower and
Lennox, this Agreement shall control.
(f) Borrower 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.
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 the terms and conditions set forth herein, Bank
shall be entitled, in addition to any and all rights and remedies which it may
have in law or in equity, to apply for and obtain injunctive relief requiring
Lennox to be restrained from any such breach, threatened breach or to refrain
from a continuation of any actual 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 Borrower shall bind Lennox and
Borrower and the heirs, devisees, executors, administrators, personal
representatives, successors, trustees, receivers, and assigns of Borrower and
Lennox and inure to the benefit of the successors and assigns of the 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 Lennox may not assign its rights,
privileges or obligations hereunder at any time, and shall be required
to adhere to and carry out the duties as set forth herein. Any
attempted assignment by Lennox shall be null and void and shall not
relieve it 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:
4
5
if to Bank: Xxxxxx Trust & Savings Bank
000 X. Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx Zanden
Senior Vice President
if to Lennox: Lennox International Inc.
P. O. Xxx 000000
Xxxxxx, Xxxxx 00000-0000
Attention: Chief Financial Officer
if to Borrower: Xxxx X. Major
00000 Xxx Xxxxxxx
Xxxxxx Xxxxx Xx, XX 00000
Attention: _______________
_______________
(c) This Agreement contains the entire agreement between the
parties hereto with respect to the disposition of stock contemplated
herein and supersedes all prior agreements or understandings, if any,
between the parties hereto relating to the subject matter hereof, 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 BORROWER, 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. BORROWER, 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.
5
6
(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.
THIS STOCK DISPOSITION AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES 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
--------------------------------
Xxxxx Xxxxx
Executive Vice President, Chief
Financial Officer and Treasurer
BORROWER: Xxxx X. Major
By: /s/ Xxxx X. Major
--------------------------------
BANK: Xxxxxx Trust & Savings Bank
By: /s/ Xxxxxxx Xxxxxx Zanden
--------------------------------
Xxxxxxx Xxxxxx Zanden
Vice President
