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EXHIBIT 10.20
STOCK DISPOSITION AGREEMENT
(this "Agreement")
THIS AGREEMENT is effective as of the 7th day of May, 1998, and is by
and among the NORTHERN TRUST BANK OF FLORIDA, N.A., TRUSTEE U/A/W XXXXXXX XXXXX
XXXXX TRUST ("Borrower"), LENNOX INTERNATIONAL INC., a Delaware corporation
("Lennox"), and the NORTHERN TRUST BANK OF FLORIDA, N.A., a national banking
association (the "Bank").
PRELIMINARY STATEMENTS:
WHEREAS, Borrower is the owner of 6,946 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 $2,800,000.00 maturing as of
MAY 7, 2000 (the "Loan") which shall be evidenced by a term note dated of even
date herewith (together with any and all renewals, extensions, modifications and
replacements thereof, the "Note") and secured by the Pledged Stock pursuant to a
Security Agreement-Pledge executed by Borrower and delivered to the Bank and
dated of even date herewith ("Security Agreement")(collectively referred to as
the "Loan Documents"); 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. Except as provided in Paragraph 2(b) hereof, the Borrower's
ownership and the rights of the Bank with respect to the Pledged Stock are
subject to the following:
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(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 Borrower's rights in and to the
Pledged Stock and any rights of the Bank thereto created as a result of the Loan
Documents are, except as provided in Paragraph 2(b) hereof, expressly
conditioned upon the above conditions set forth and referenced above in this
Paragraph 1, but Lennox hereby consents to the pledge of the Pledged Stock
pursuant to the Security Agreement.
2. Disposition of Pledged Stock.
(a) At any time after the occurrence of any event of default
under any of the Loan Documents (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 ninety (90) days of such demand, procure a ready and
willing buyer for the Pledged Stock at their Value as such term is defined
below; (b) within ninety (90 ) days of such demand, purchase from the Bank the
Pledged Stock at their Value ; or (c) with written consent of the Bank as to
this option, as soon as practicable, 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 time specified (during which time interest shall continue to accrue
on the Note at the default rate (as defined in the Loan Documents), 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 the Bank an amount equal to the aggregate
amount of the then outstanding indebtedness secured by the Pledged Stock, as at
the time of purchase. 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, July 1995
and April 1998, 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 $3,000,000; provided, however, that Lennox and Borrower agree that they
will provide the Bank with a letter from the Chief Executive Officer, Chief
Financial Officer or General Counsel as of the date of this Agreement and,
thereafter, on a quarterly basis, certifying that Lennox is not in default under
any of the documents referred to in this sentence and that there is no default
occurring therein relating to this Agreement as of the date of any such request
by the Bank and failure by Borrower and Lennox to provide such a letter shall be
an Event of Default under the Bank's Loan Documents and an Event of Default for
purposes of the defined term used herein.
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(b) 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 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 the
Bank's obligation to make such offer shall terminate in the event Lennox fails
to exercise its right of first refusal by paying the Bank the Value of the
Pledged Stock in cash within thirty (30) days of such offer.
(c) The "Value" of each share of the Pledged Stock shall be
determined depending on whether the Pledged Stock is traded on any security
exchange according to the following procedure:
(i) If the Pledged Stock is not traded on any public exchange,
then the Value shall mean the fair market value of a share of common
stock of Lennox as most recently fixed pursuant to the process for
determination of value set forth in Paragraph (d) of Article Sixteen,
which shall have been determined (prior to the date of the event giving
rise to the use and application of such term) by independent
consultants to Lennox selected and appointed by its Board of Directors
for the purpose of ascertaining the applicable market value
("Applicable Market Value"). Such independent consultants shall fix and
determine the fair market value of a share of common stock of Lennox on
a quarterly basis following the end of each calendar quarter. In
ascertaining such value (sometimes identified as the "non-marketable
minority" value), such consultants shall consider the latest available
financial statements and financial information of Lennox, projections
and internal information relating to Lennox prepared by its management
and furnished to such consultants for the purpose of their analysis,
publicly available information concerning other companies and the
trading markets for certain other companies' securities and all other
information such consultants believe relevant to their inquiry. The
value of a share of common stock shall be discounted to reflect, as and
to the extent deemed appropriate by the independent consultants, the
minority nature of any individual's shareholding and the lack of a
public market for the common stock and its consequent illiquidity.
(ii) If the Pledged Stock is traded on any public exchange,
the Value shall mean the price of a share of common stock as determined
by the normal and usual method used to value common stock on the
securities exchange on which the Lennox common stock may at the time be
listed.
3. Method of Demand. The right to demand performance by Lennox as
described in Paragraph 2 hereof shall be exercised by the Bank giving written
notice to Lennox (at the address set forth in Paragraph 6(c) below) of the Event
of Default and the Bank's demand for such performance by Lennox. The date of
such notice is herein referred to as the "Notice Date." Any delay by the 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 fifteen
(15) business days whether it intends to perform under clause (a), (b) or (c) of
Paragraph 2(a) hereof.
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4. Method of Payment. The purchase price of the Pledged Stock (the
"Purchase Price") shall be its Value as provided in Paragraph 2(c) 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 Lennox or such other address in Dallas, Texas as
Lennox shall designate, on a date mutually agreed by the 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, the 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 the
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 the Bank.
6. Miscellaneous.
(a) This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
assigns;
(b) 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;
(c) 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 the Bank: Northern Trust Bank of Florida, N.A.
0000 Xxxxxxxx Xxxx.
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx,
Senior Vice President
if to Lennox: Lennox International Inc.
P. O. Xxx 000000
Xxxxxx, Xxxxx 00000-0000
Attention: Chief Financial Officer
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if to Borrower: Northern Trust Bank of Florida/Sarasota, N.A.
Trustee U/A/W Xxxxxxx Xxxxx Xxxxx Trust
0000 Xxxxxxxx Xxxx.
Xxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx
(d) 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.
(e) 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.
(f) 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 THE 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 LOAN DOCUMENTS SHALL AFFECT THE RIGHT OF THE BANK TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
(g) All representations and warranties contained herein shall
survive the execution of this Agreement.
(h) 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.
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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: NORTHERN TRUST BANK OF FLORIDA, N.A.
TRUSTEE U/A/W XXXXXXX XXXXX XXXXX
TRUST
By: /s/ Xxxxxxx X. Gaan
Name: Xxxxxxx X. Gaan
Title: Vice President
BANK: NORTHERN TRUST BANK OF FLORIDA, N.A.
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: Senior Vice President
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