EXHIBIT 10(iv)
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
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THIS SETTLEMENT AGREEMENT AND MUTUAL RELEASE ("Agreement") is made and
entered into as of February 14, 2002, by and among AIMRITE HOLDINGS CORPORATION,
a Nevada corporation ("AIMRITE"), XXXX XXXXX, acting as Chairperson of the
EXECUTIVE COMMITTEE OF SHAREHOLDERS OF AIMRITE, a Committee composed of Xxx
Xxxxxxxx, Xxx Xxxxxxxx, Xxx Xxxxxxx and Xxxx Xxxxx (collectively "RUTIZ"); XXXX
XXX XXXXXXXX ("XXXXXXXX"); KENMAR COMPANY TRUST, by XXXX XXX XXXXXXXX, TRUSTEE
("KMT"); and XXXXXXX FAMILY TRUST by XXXX XXX XXXXXXXX, TRUSTEE ("CFT") (
XXXXXXXX, KMT, and CFT jointly hereinafter sometimes called the "CLAIMANTS"),
with respect to the following:
RECITALS
A. AIMRITE was first incorporated under the name Q-Com Corp. on/or
about September 6, 1988. Thereafter, Q-Com Corp. changed its name to Drink
World, Inc., by amending its Articles of Incorporation on/or about April 10,
1995. On/or about July 21, 1995, AIMRITE doing business under the name "Drink
World, Inc." then changed its name to AIMRITE under the principal management of
Xxxxxxx X. Xxxxxxx.
B. Xxxxxxx X. Xxxxxxx passed away on or about January 3, 2000, and
XXXXXXXX, served as a member of the Board of Directors and Acting President of
AIMRITE thereafter until September 12, 2001.
C. Xxxxxxx Xxxxxxxx was appointed Chief Financial Officer and a member
of the Board of Directors in 1995 and continues in such position through the
present.
D. On/or about September 12, 2001, XXXXXXXX resigned her position as an
Officer and Director effectively immediately.
E. Disputes have arisen by and between KMT, CFT, XXXXXXXX, RUTIZ and
AIMRITE in that KMT, CFT and XXXXXXXX contend KMT, CFT and XXXXXXXX were issued
1,000,000 shares of Series A Convertible Preferred Stock in AIMRITE as Stock
Certificate 0001. KMT, CFT and XXXXXXXX further contend XXXXXXXX individually
was issued 200,000 shares of Series A Preferred Stock of AIMRITE in August 2001.
KMT, CFT and XXXXXXXX further contend these shares of Series A Preferred Stock
of AIMRITE were lawfully voted through an action by Majority Consent of
Shareholders in January of 2002. AIMRITE and RUTIZ dispute these contentions.
F. KMT is the holder of certain patents as patent numbers 4722548,
4634142, 5529152, 5735372, 6296091, patent application no. 09/439,109 filed on
11/11/99, patent application no. 09/439,106 filed on 11/11/99, and numerous
foreign filings pending on the above patents and applications (the "PATENTS")
and each registered in the U.S. Patent's Office. The PATENTS have been licensed
by KMT to AIMRITE pursuant to an International Licensing and Consulting
Agreement (the "LICENSE") dated February 25, 1997.
G. The CLAIMANTS contend that AIMRITE is liable to the CLAIMANTS on
account of sums due under the LICENSE plus amounts advanced or paid by the
CLAIMANTS to, for, or on behalf of AIMRITE (the amount due the CLAIMANTS by
AIMRITE hereinafter called the "CLAIM"). AIMRITE on the other hand contends
monies were transferred to AIMRITE by XXXXXXXX and her former spouse and CFT,
but that the source of such monies were derived from the improper transfer of
AIMRITE's assets. The CLAIMANTS dispute AIMRITE's contentions.
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X. XXXXXXXX and Xxxxxx X. Xxxxx Auto Center have entered into a lease
agreement dated 2/22/00 (the "YUKON LEASE") for the lease of a 2000 GMC Yukon
(the "YUKON")VIN 0XXXX00X0XX000000. AIMRITE has had the use and benefit of the
YUKON since inception of the YUKON LEASE.
NOW, THEREFORE, the parties hereto in consideration of the mutual
promises exchanged herein agree as follows:
1. At the closing of this Agreement:
a) AIMRITE shall enter into a security agreement,
substantially in the form of Exhibit "A" attached hereto (the "Security
Agreement"), with the CLAIMANTS granting the Claimants a security interest in
substantially all the existing and future assets of AIMRITE,
b) AIMRITE shall deliver to Claimants (i) a certificate of
good standing from the Secretary of State of Nevada as of the date of this
Agreement, (ii) a certificate of qualification to do business in the State of
California as of the date of this Agreement, (iii) a certificate of incumbency
setting forth the current officers and directors of AIMRITE, (iv) certified
resolutions of the Board of Directors of AIMRITE authorizing the execution of
the this Agreement and the other agreements envisioned herein, and (v) a current
search of the records of the Secretary of State for the State of California
demonstrating no liens or security interests filed against the assets of
AIMRITE,
c) AIMRITE, the CLAIMANTS and Xxxx Xxxxx shall enter into an
agreement subordinating that certain security interest in assets of AIMRITE held
by Xxxx Xxxxx to the CLAIM and the security interest of the CLAIMANTS, and
d) KMT, CFT and XXXXXXXX hereby sell, transfer and assign all
of their right, title and interest in and to any and all shares of AIMRITE
Preferred Stock owned or held by them
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to AIMRITE and, at the closing of this Agreement, shall deliver the certificates
evidencing same, accompanied by appropriate, fully executed stock powers. In
addition to the representations and warranties contained below, KMT, CFT and
XXXXXXXX warrant and represent to AIMRITE that no interest in any Preferred
Shares of AIMRITE of whatever type and nature purportedly owned by the CLAIMANTS
has been transferred, sold, hypothecated, pledged or otherwise assigned to any
person or entity and that all Preferred Shares of AIMRITE purportedly owned by
the CLAIMANTS, are in the exclusive possession of KMT, CFT and XXXXXXXX, as
applicable.
2. To the extent that XXXXXXXX owns shares of AIMRITE Preferred Stock
and has voted those shares in favor of the election of any person as a member of
the Board of Directors of AIMRITE, including but not limited to, herself, Xxxxx
Xxxxxxx and Xxxx Xxx, XXXXXXXX, by execution of this Agreement, votes those
shares to remove any such person from the Board of Directors. At the closing of
this Agreement, CLAIMANTS shall cause XXXXXXXX, Xxxxx Xxxxxxx and Xxxxx Xxx to
execute and deliver to AIMRITE that certain form of Resignation, attached hereto
as Exhibit "B."
3. At the closing of this Agreement, AIMRITE shall execute and deliver
to CLAIMANTS a Promissory Note in the form of Exhibit "C" attached hereto and
incorporated herein by this reference (the "Note").
4. Not later than the fifth business day of every month that the Note
is outstanding and unpaid, AIMRITE shall cause to be delivered to the CLAIMANTS
an affidavit of an authorized officer or agent of AIMRITE stating the total
receipts of AIMRITE for the prior month and certifying that AIMRITE has paid to
the holder of the Note all amounts due to the holder pursuant to the Note and
this agreement.
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5. AIMRITE shall execute such documents as are needed to perfect the
security interest granted under the Security Agreement. Until such time as the
Promissory Note has been paid in full, AIMRITE shall not pledge or hypothecate
any of its assets to any third party without the express written consent of the
holder of the Note other than in the ordinary course of business or in
connection with a transaction which results in the payment in full of the Note.
KMT, CFT and XXXXXXXX agree not to assign the Note to any third party without
first obtaining the written consent of AIMRITE.
6. At the closing of this Agreement, CLAIMANTS shall execute the form
of Assignment Agreement attached hereto as Exhibit "D" conveying all of their
respective right, title and interest in and to the Patents, related technology
and know how and certain patent applications identified in the Assignment
Agreement to AIMRITE. Upon execution and delivery of the Assignment Agreement,
the LICENSE is hereby cancelled.
7. CLAIMANTS, and each of them, hereby grant to AIMRITE a right of
first offer with respect to future sales by CLAIMANTS of all Equity Securities
(as hereinafter defined). This Right of First Offer shall not apply to (i) any
transfer of shares from the XXXXXXX FAMILY TRUST to any beneficiary thereof, or
(ii) any sale in which the amount of Equity Securities sold, together with all
sales of Equity Securities for the account of any CLAIMANT within the preceding
three months, does not exceed the greater of (i) one percent of the shares or
other units of the class outstanding as shown by the most recent report or
statement published by the issuer, or (ii) the average weekly reported volume of
trading in such securities on all national securities exchanges and/or reported
through the automated quotation system of a registered securities association
during the four calendar weeks preceding the filing of notice required by
paragraph (h), or if no such notice is required the date of receipt of the order
to execute the transaction by the broker or the date of
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execution of the transaction directly with a market maker, or (iii) the average
weekly volume of trading in such securities reported through the consolidated
transaction reporting system contemplated by Rule 11Aa3-1 under the Securities
Exchange Act of 1934 during the four-week period specified in subdivision (ii)
of this paragraph.
"Equity Securities" means (i) any interest in AIMRITE; (ii)
any security convertible, with or without consideration, into an interest in
AIMRITE (including any option to purchase such a convertible security), (iii)
any security carrying any warrant or right to subscribe to or purchase any
interest in the Partnership or (iv) any such warrant or right.
Except as otherwise provided herein, each time a CLAIMANT proposes to
offer for sale or transfer any Equity Securities, the CLAIMANT shall first make
an offer of such Equity Securities to AIMRITE in accordance with the following
provisions:
a) The CLAIMANT shall deliver a notice by certified mail
("Notice") to AIMRITE stating (i) its bona fide intention to offer such Equity
Securities, (ii) the number of such Equity Securities to be offered, and (iii)
the price and terms, if any, upon which it proposes to offer such Equity
Securities.
b) By written notification received by the CLAIMANT within 15
calendar days after receipt of the Notice, AIMRITE may elect to purchase or
obtain, at the price and on the terms specified in the Notice, any or all of the
Equity Securities specified in the Notice. Promptly following the completion of
the foregoing process, the CLAIMANT and AIMRITE shall consummate and close this
purchase sale of the Equity Securities so elected to be obtained.
c) If all Equity Securities which AIMRITE is entitled to
obtain pursuant to subsection 7(b) are not elected to be obtained as provided in
subsection 7(b), the CLAIMANT may, during the sixty (60) day period following
the expiration of the period provided in subsection 7(b) hereof, offer
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the remaining unsubscribed portion of such Equity Securities to any person or
persons at a price not less than, and upon terms no more favorable to the
offeree than those specified in the Notice. If the CLAIMANT does not enter into
an agreement for the sale of the Equity Securities within such period, or if
such agreement is not consummated within sixty (60) days of the execution
thereof, the right provided hereunder shall be deemed to be revived and such
Equity Securities shall not be offered unless first reoffered to AIMRITE in
accordance herewith.
8. In the event that any party authorized under Title 11 of the United
States Code seeks to avoid the grant of the security interest to the CLAIMANTS
pursuant to 11 U.S.C section 510, or 11 U.S.C. sections 541 to 553, inclusive,
then the transfer, conveyance and assignment of the PATENTS shall be deemed void
ab initio, provided, however, that the CLAIMANTS shall execute required consents
in favor of any licensee of AIMRITE to the ongoing use of the PATENTS on the
same terms and conditions granted by AIMRITE to such licensee.
9. AIMRITE shall assume all obligations and rights under the LEASE. The
current arrearage on the Lease is $1286.00. AIMRITE, upon execution of this
Agreement, shall immediately indemnify KMT, CFT and XXXXXXXX from any and all
further obligations under the LEASE and make all future payments which may
become due in the future.
10. XXXXXXXX hereby grants to Xxxxx Xxxxxx a proxy to vote any shares
of the Common Stock of AIMRITE held by her, other than shares owned by her as
Trustee of the Xxxxxxx Family Trust. The term of this proxy is twelve (12)
months, and it may be acted upon at any special or annual meeting of
shareholders or in connection with any action by written consent of
shareholders. The grant of this proxy is coupled with an interest and is
irrevocable.
11. REPRESENTATIONS AND WARRANTIES.
(a) AIMRITE represents to the CLAIMANTS that:
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(i) AIMRITE is duly formed and in good standing the State
of Nevada and has the full and unrestricted legal right, power and authority to
enter into and perform this Agreement, without obtaining the consent or approval
of any person or governmental authority.
(ii) The execution of this Agreement and the consummation
of the transactions contemplated hereby will not constitute a default under any
provision of any agreement by which AIMRITE is bound.
(iii) There is no action, suit or proceeding at law or in
equity or by or before any governmental instrumentality or other agency, or any
arbitration board or tribunal, now pending to which AIMRITE is or would be a
party, and, but for the claims of the CLAIMANTS, to the knowledge of AIMRITE,
there is no action, suit or proceeding threatened, to which AIMRITE is or would
be a party.
(iv) The consummation of the transactions contemplated by
the Agreement will not render AIMRITE insolvent or unable to pay its debts as
they become due; AIMRITE is not contemplating either the filing of a petition
under any state or federal bankruptcy or insolvency laws; and AIMRITE has no
knowledge of any person or entity contemplating the filing of any such petition
against it.
(v) To its knowledge after diligent inquiry, other than
the security interests granted to the Claimants and Xxxx Xxxxx, there are no
consensual or non-consensual liens or security interests asserted by any party
against the assets of AIMRITE.
(vi) Upon the filing of the UCC form 1 with the Secretary
of State of California, the CLAIMANTS shall have a perfected security interest
in all of AIMRITE's assets and the proceeds thereof.
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12. RELEASE BY AIMRITE OF THE CLAIMANTS. Except for claims arising as a
consequence of a breach of this Agreement, and to the extent permitted by Nevada
law (and, if applicable, California law), AIMRITE does hereby fully and forever
release, acquit and discharge the CLAIMANTS in any and all capacities, together
with all of their respective officers, directors, employees, agents, attorneys,
executors, heirs, successors and assigns from any and all rights, claims,
damages, demands and causes of action, of every kind whatsoever, that AIMRITE
has or may have, or hereafter may have, directly or indirectly, whether known or
unknown, accrued or unaccrued. Without limiting the comprehensive scope of this
general release, AIMRITE acknowledges that the release specifically includes,
but is not limited to, any and all liabilities, claims, demands, and causes of
action of every conceivable character, whether asserted or unasserted, and which
happened prior to the signing of this agreement and/or arising out of any theory
of contract, tort, breach of duty, or under any law, rule or regulation, except
this release does not release the CLAIMANTS from any of the obligations
expressly undertaken pursuant to this Agreement.
13. RELEASE BY RUTIZ OF THE CLAIMANTS AND AIMRITE. Except for claims
arising as a consequence of a breach of this Agreement, and to the extent
permitted by Nevada law (and, if applicable, California law), each of RUTIZ does
hereby fully and forever release, acquit and discharge the CLAIMANTS and AIMRITE
in any and all capacities, together with all of their respective officers,
directors, employees, agents, attorneys, executors, heirs, successors and
assigns from any and all rights, claims, damages, demands and causes of action,
of every kind whatsoever, that the each of RUTIZ has or may have, or hereafter
may have, directly or indirectly, whether known or unknown, accrued or
unaccrued. Without limiting the comprehensive scope of this general release, the
each of RUTIZ acknowledges that the release specifically includes, but is not
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limited to, any and all liabilities, claims, demands, and causes of action of
every conceivable character, whether asserted or unasserted, and which happened
prior to the signing of this agreement and/or arising out of any theory of
contract, tort, breach of duty, or under any law, rule or regulation, except
this release does not release the CLAIMANTS or AIMRITE from any of the
obligations expressly undertaken herein pursuant to this Agreement.
14. RELEASE BY CLAIMANTS OF RUTIZ AND AIMRITE. Except for claims
arising as a consequence of this Agreement or the Articles or Bylaws of AIMRITE,
and to the extent permitted by Nevada law (and, if applicable, California
law),CLAIMANTS and each of them hereby fully and forever release, acquit and
discharge RUTIZ and AIMRITE in any and all capacities, together with all of
their respective officers, directors, employees, agents, attorneys, executors,
heirs, successors and assigns from any and all rights, claims, damages, demands
and causes of action, of every kind whatsoever, that each of CLAIMANTS has or
may have, or hereafter may have, directly or indirectly, whether known or
unknown, accrued or unaccrued. Without limiting the comprehensive scope of this
general release, each of CLAIMANTS acknowledges that the release specifically
includes, but is not limited to, any and all liabilities, claims, demands, and
causes of action of every conceivable character, whether asserted or unasserted,
and which happened prior to the signing of this agreement and/or arising out of
any theory of contract, tort, breach of duty, or under any law, rule or
regulation, except this release does not release RUTIZ or AIMRITE from any of
the obligations expressly undertaken pursuant to this Agreement.
15. It is the intention of the parties hereto that any and all claims
any of the parties hereto may have against the other including controversies,
actions, causes of action, and obligations of whatever nature and type,
including known, suspected, or unsuspected, as herein above, other than the
obligations undertaken under this Agreement, shall be barred in furtherance of
this intention.
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In furtherance of this intention, the parties expressly waive any and all rights
and benefits conferred upon them by the provisions of section 1542 of the
California Civil Code which states as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH A
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
16. The parties hereto acknowledge that the forgoing waiver of the
provisions of Section1542 of the California Civil Code is separately bargained
for; and the parties expressly consent that this Release shall be given full
force and effect in accordance with each and all of its terms and provisions,
including those terms and provisions relating to unknown or unsuspected claims,
demands, actions, causes of action, if any, the same effect as those terms and
provisions relating to any other claims, demands, actions, or causes of action
herein above specified.
17. This Agreement and Mutual Release shall be governed and construed
in accordance with the laws of the State of Nevada. Any action brought to
enforce the terms of this Agreement may be brought in Las Vegas, Nevada or San
Diego County, California.
18. Each party hereto has had the opportunity to consult with legal
counsel of their choosing concerning their rights with respect to the form and
content of this Agreement and none of the parties hereto have relied upon any
statement made by the other and have independently investigated and consulted
their own appropriate representatives to determine whether it is or is not in
their best interest to execute this Agreement.
19. This Settlement Agreement and Mutual Release, and the Promissory
Note, Assignment Agreement, and Security Agreement attached as Exhibits hereto,
constitute the complete and final agreement between the parties hereto with
respect to the subject hereof and fully supersede any prior negotiations or
agreements between the parties regarding such subject matter.
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In the event of any conflict between the Settlement Agreement and Mutual Release
and any of the Promissory Note, the Assignment Agreement, and the Security
Agreement, the provisions of this Settlement Agreement and Mutual Release shall
govern.
20. Nothing herein shall be construed as an admission of wrongdoing or
liability on the part of any of the parties hereto regarding the subject matter
of this Agreement.
21. The parties agree to bear their own attorneys' fees and costs as it
relates to this Settlement Agreement and Mutual Release; however, the parties
agree that should it become necessary to enforce any of the provisions or
interpretation of this Settlement Agreement and Mutual Release the prevailing
party shall be entitled, in addition to such other awards of damages if any are
awarded, an amount equal to reasonable attorneys' fees and costs as determined
by a Court of competent jurisdiction.
22. If any term or provision of this Agreement shall, to any extent, be
held invalid or unenforceable, the remainder of this Agreement shall not be
affected.
23. This Settlement Agreement and Mutual Release Agreement shall be
binding upon and inure to the benefit of the successors, representatives,
trustees, heirs and assigns of each of the parties hereto. This Agreement is the
product of negotiation by each of the parties and no phrase, term or word, shall
be construed negatively against the other solely due and as a result of a party
physically typed the jointly negotiated form of this agreement. This Agreement
is the work product of each of the parties, after freely and fully consulting
counsel of choice.
24. All notices, requests, demands and other communications under this
Agreement shall be in writing and by courier, and shall be effective as of the
delivery date shown by such courier's documentation if sent postage prepaid, and
properly addressed to the following addresses:
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If to Assignor:
Xxxx Xxx Xxxxxxxx,
as Trustee of the Kenmar Company Trust, UDT April 15, 1994
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If to Assignee:
AimRite Holdings Corporation
000 Xxxxxxx Xxx.
Xxxxxx Xxxxx, XX 00000
Attention: President
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25. This Agreement may be executed in counter part and a facsimile
signature shall be deemed an original for all purposes.
Dated: February 14, 2002 AIMRITE HOLDINGS CORPORATION
By: /s/ Xxxxx Xxxxxx
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XXXXX XXXXXX, PRESIDENT
Dated: February 14, 2002 XXXXXXX XXXXX, INDIVIDUALLY AND AS
CHAIRPERSON OF THE EXECUTIVE
COMMITTEE OF SHAREHOLDERS OF
AIMRITE AND ATTORNEY-IN-FACT FOR
XXX XXXXXXXX, XXX XXXXXXXX AND XXX
XXXXXXX
/s/ Xxxxxxx Xxxxx
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Dated: February 14, 2002 XXXX XXX XXXXXXXX, an individual
/s/ Xxxx Xxx Xxxxxxxx
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Dated: February 14, 2002 XXXX XXX XXXXXXXX, as Trustee of the
XXXXXXX FAMILY TRUST
/s/ Xxxx Xxx Xxxxxxxx
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Dated: February 14, 2002 XXXX XXX XXXXXXXX, as Trustee of the
KENMAR COMPANY TRUST
/s/ Xxxx Xxx Xxxxxxxx
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APPROVED AS TO FORM:
Dated: February 14, 2002 LAW OFFICES OF XXXXXX X. XXXXXXXX
Attorney at Law
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------
Xx. Xxxxxx X. Xxxxxxxx, Esq.
Attorney for KMT, CFT & XXXXXXXX
Dated: February 14, 2002 XXXX, FORWARD, XXXXXXXX & SCRIPPS LLP
Attorneys at Law
By: /s/ Xxxx X. Xxxxxxxx
--------------------------------
Xxxx X. Xxxxxxxx, Esq.
Attorneys for AIMRITE
Dated: February 14, 2002 XXXXXXXXX, XXXX & XXXXXX, APLC
Attorneys at Law
By: /s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------
Xx. Xxxxxxx X. Xxxxxxxxx, Esq.
Attorneys for RUTIZ
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ADDENDUM
As additional consideration for the promises and covenants set forth in
that certain Settlement Agreement and Mutual Release dated February 14, 2002,
between and among Aimrite Holdings Corporation ("AIMRITE") and Xxxx Xxx
Xxxxxxxx, individually and in her capacity as Trustee of the Xxxxxxx Family
Trust and the Kenmar Company Trust (jointly "Xxxxxxxx"), Xxxxxxxx xxxxx agrees
that she will not commence, or participate in the commencement of, any
Involuntary Petition in Bankruptcy against AIMRITE under the United States Code,
provided further that Xxxxxxxx shall be relieved of this covenant if any
unwaived payment default on the Note exceeds thirty (30) days.
AIMRITE shall have the right to contest an involuntary case, and the
mere filing of an Involuntary Petition shall not in and of itself cause the
acceleration of all sums due under the Promissory Note of even date herewith
made by AIMRITE and given to Xxxxxxxx. Instead, the acceleration provision under
the Promissory Note may only be invoked in the instance of an involuntary
Petition which has not been dismissed within thirty (30) days.
Xxxxxxxx further acknowledges that Xxxx Xxxxx holds a security interest
in certain assets of AIMRITE and has filed a UCC-1 statement in the offices of
the Secretary of State of Nevada, and she further acknowledges receipt of a
written UCC lien search report provided to her by AIMRITE, notwithstanding the
representations to the contrary, as more fully set forth within paragraph 4.02
of that certain Security Agreement of even date by and among AIMRITE and
Xxxxxxxx.
/s/ Xxxx Xxx Xxxxxxxx
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Xxxx Xxx Xxxxxxxx
/s/ Xxxx Xxx Xxxxxxxx
------------------------------------
Xxxx Xxx Xxxxxxxx, as Trustee of the
Xxxxxxx Family Trust
/s/ Xxxx Xxx Xxxxxxxx
------------------------------------
Xxxx Xxx Xxxxxxxx, as Trustee of the
Kenmar Company Trust
AIMRITE HOLDINGS CORPORATION
By: /s/ Xxxxx Xxxxxx
---------------------------------
Xxxxx Xxxxxx, President