EXHIBIT 10.18
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT ("AGREEMENT") is made and entered into as of
July 8, 1998, among Xxxxxx X. Xxxxxxx ("XXXXXXX"), Century Airconditioning
Supply, Inc., a Texas corporation ("CENTURY AC"), Air Management Supply, Inc., a
Nebraska corporation ("AIR MANAGEMENT"), and Century Maintenance Supply, Inc., a
Delaware corporation (the "COMPANY").
RECITALS
A. Pursuant to that certain Agreement and Plan of Merger (the "MERGER
AGREEMENT") dated as of May 5, 1998, as amended, by and among the Company,
Century Acquisition Corporation, a Delaware corporation ("ACQUISITION CORP."),
and the shareholders of the Company ("SHAREHOLDERS"), Acquisition Corp. merged
with and into the Company, with the Company being the surviving corporation (the
"MERGER");
X. Xxxxxxx was Chief Executive Officer of the Company and the majority
and controlling shareholder of the Company prior to the Merger;
C. As a condition to the Merger, a portion of the Company's common stock
owned by Xxxxxxx and the other Shareholders was exchanged for cash and a change
of control occurred with respect to the Company as an unrelated third party (the
sole shareholder of Acquisition Corp.) became the Company's majority and
controlling shareholder;
D. The Company and Xxxxxxx have entered into an employment agreement
which outlines the terms of Xxxxxxx'x post-Merger employment by the Company (as
executed and as subsequently amended, the "EMPLOYMENT AGREEMENT");
X. Xxxxxxx is the sole shareholder of Century AC. Century AC owns 75% of
the common stock of Air Management;
F. Century AC does business outside South East Texas under the name of
"CORE DISTRIBUTING" ("CORE").
G. In certain sub-markets and in respect of certain products or target
customers, Century AC and Air Management compete with the Company and the
Company competes with Century AC and Air Management; and
X. Xxxxxxx, Century AC, Air Management, and the Company have reached an
agreement regarding the circumstances in which such competition may be permitted
or will be prohibited.
NOW, THEREFORE, in consideration of the proceeds paid to Xxxxxxx and
Century AC for that portion of their respective shares of the Company's common
stock exchanged for cash under the
terms of the Merger Agreement, and other good and valuable consideration, the
receipt and adequacy of such consideration being hereby acknowledged, the
parties hereto agree as follows:
1. DEFINITIONS. For purposes of this Agreement,
"AFFILIATE" means generally in respect of any Person, any other Person,
that, directly or indirectly, controls, is controlled by, or is under
common control with, the person in question. The term "CONTROL" means the
possession, directly or indirectly, of the power, whether or not exercised,
(a) to vote fifty-one percent (51%) or more of the securities or other
interests having voting power for the election of directors or managers of
such Person or (b) to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities or
other equity interest, by contract or otherwise, and the terms "CONTROLLED"
and "COMMON CONTROL" shall have correlative meanings.
"APARTMENT" means a multi-family housing building, any owner or manager of
such building, or any cooperative, buying group, agent or representative of
owners of multi-family buildings.
"APPLIANCE PARTS" means parts, tools, and accessories used in the
installation, repair and maintenance of stoves, refrigerators, dishwashers,
window air units, and other appliances.
"CHANGE-IN-CONTROL" of the Company shall be deemed to have occurred if (a)
the Company merges or consolidates with any other corporation (other than a
wholly-owned direct or indirect subsidiary of the Company) and is not the
surviving corporation (or survives as a subsidiary of another corporation)
and, after such merger or consolidation, the Company's shareholders
immediately prior to such merger or consolidation do not own Voting Stock
representing a majority of the outstanding shares of Voting Stock of the
surviving corporation or do not otherwise have the right to elect a
majority of the board of directors of the surviving corporation, (b) the
Company sells, or agrees to sell, all or substantially all of its assets to
any other person or entity, (c) the Company is dissolved, (d) any third
person or entity (other than the Company's shareholders on the Effective
Date, a trustee or committee of any qualified employee benefit plan of the
Company) together with its Affiliates shall become (by tender offer or
otherwise), directly or indirectly, the Beneficial Owner of at least 30% of
the Voting Stock of the Company (unless at such time FS Equity Partners IV,
L.P. ("FSEP IV"), Xxxxxxx and the other members of Company's management
collectively are, directly or indirectly, the Beneficial Owner of a greater
percentage of the outstanding Voting Stock of the Company than such person
or entity) or (e) the individuals who constitute the Board of Directors of
the Company as of the Effective Date (the "INCUMBENT BOARD") shall cease
for any reason to constitute at least a majority of the Board of Directors;
PROVIDED THAT any person becoming a director whose election or nomination
for election was approved by a majority of the members of the Incumbent
Board shall be considered, for the purposes of this Agreement, a member of
the Incumbent Board.
"COMPANY" means Century Maintenance Supply, Inc., a Delaware corporation,
and its Affiliates and their respective successors and assigns.
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"COMPETING BUSINESS" means the business of selling or distributing
wholesale Maintenance Supplies by Direct Sales to any Restricted Buyer.
"DIRECT SALE" (a) means a sale of Maintenance Supplies to a Restricted
Buyer (i) which is billed or invoiced directly (or, if the seller has
arranged with the Restricted Buyer to make the sale through an
intermediary, indirectly) to such Restricted Buyer, or (ii) in respect of
which Maintenance Supplies are paid for by or on behalf of the Restricted
Buyer, and, in each case, "Direct Sale" includes, without limitation, a
sale arising out of the preparation, distribution and marketing of
catalogs, and (b) excludes sales of HVAC or Refrigeration Parts (and for
purposes of SECTION 2(A)(a)(2), Appliance Parts) to HVAC contractors.
"HOSPITAL" means any hospital, hospice or any other institution providing
health, medical, mental or surgical care and treatment.
"HOTEL" means any hotel, motel, pension, inn, lodge, hostel, boarding
house, shelter or any other institution which provides public or private
lodging and accommodations.
"HVAC" means heating units, ventilation systems, air conditioning units,
air ducts, compressors, compressor bearing units and other compressor
related parts, breakers and other related electrical parts, materials,
tools, and accessories as may be used to install or repair HVAC equipment.
"MAINTENANCE SUPPLIES" means materials and supplies (a) listed as the
product categories in the Company's 1997 catalog (including plumbing,
hardware, janitorial, electrical, lighting fixtures and bulbs, but
excluding HVAC and Refrigeration Parts, and for purposes of SECTION
2(A)(a)(2), Appliance Parts) or (b) which are generally used in the
maintenance, remodeling, repair, operation or "make ready" of a Restricted
Buyer (including floor tile, carpet and other floor covering products,
window treatments, blinds and drapes).
"MILITARY INSTALLATION" means any military fort, camp, base, facility,
construction or other realty or personalty controlled by the military or
used for military activities.
"NURSING HOME" means any nursing home, hospital, hospice or other private
hospital for the care of the aged, elderly or chronically ill.
"PERSON" means any individual, entity, partnership, or association.
"PRISON"means any prison, penitentiary, jail or other institution for the
physical confinement of persons by order of any governmental authority.
"REFRIGERATION PARTS" means parts, tools, and accessories used in the
installation, repair, and maintenance of commercial refrigeration units.
"RESTRICTED BUYER" means any Apartment, Hotel, Prison, Nursing Home,
Hospital, Military Installation or School and University, and any
distributor or agent thereof.
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"RESTRICTED TERRITORY" means the continental United States, Canada and
Mexico.
"SCHOOLS AND UNIVERSITIES" means any school, trade school, professional
school, college, university or other educational institution, including any
facilities or buildings (e.g., libraries) associated therewith.
"SOUTH EAST TEXAS" means the area within a 125 mile radius from the
intersection of Louisiana Street and Xxxx Street in Houston, Texas, but in
any event excluding (a) the area within a 75 mile radius of San Antonio,
Texas, and (b) the area within a 75 mile radius of Austin, Texas.
"VOTING STOCK" means all outstanding shares of capital stock of the Company
entitled to vote generally in an election of directors; PROVIDED THAT,
if the Company has shares of Voting Stock entitled to more or less
than one vote per share, each reference to a proportion of the issued
and outstanding shares of Voting Stock shall be deemed to refer to the
proportion of the aggregate votes entitled to be cast by the issued
and outstanding shares of Voting Stock.
2. COVENANTS NOT TO COMPETE.
(A) During the term of, and subject to the terms and conditions of,
this Agreement,
(a) Xxxxxxx, Century AC, and Air Management will not, and Xxxxxxx
as the sole shareholder of Century AC will not permit Century AC
(including when doing business as Core) or Air Management to
(i) directly or indirectly sell Maintenance Supplies in
South East Texas after the Maintenance Supplies in its inventory
on the date of this Agreement have been sold or otherwise
disposed of, and
(ii) except as provided in (a)(i) above, make any Direct
Sales to a Restricted Buyer in the Restricted Territory,
PROVIDED THAT, (1) with respect to Air Management, this restriction
shall only apply if at the time of such sale, a facility owned or
operated by the Company, and which sells Maintenance Supplies, is
located within a 75 mile radius of any such Restricted Buyer and (2)
with respect to sales by Century AC in South East Texas, the term
"MAINTENANCE SUPPLIES"shall not include Appliance Parts and Century AC
may sell Refrigeration Parts, HVAC, and Appliance Parts to any party,
including a Restricted Buyer, in South East Texas.
(b) the Company will not, directly or indirectly, sell HVAC in
South East Texas if such sale would cause the aggregate amount of HVAC
sales by the Company for the immediately preceding 12 months to exceed
12% of the Company's total sales in South East Texas during the same
period;
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(c) Xxxxxxx, Century AC (including when doing business as Core)
or Air Management, and their respective Affiliates will not, directly
or indirectly, (i) induce any customers of the Company to patronize
any Competing Business, (ii) canvass, solicit or accept any Competing
Business from any customer of the Company unless directed to do so by
the Company; or (iii) attempt to influence any employee of the
Company to terminate his or her employment or to hire any such
employee, whether or not so induced or influenced, within (a) if the
Company terminates such employee for any reason, two months after such
employee's employment with the Company has terminated, or (b) in any
other case four months after such employee's employment with the
Company has terminated;
(d) without the consent of the Company, neither Xxxxxxx nor
Century AC (including when doing business as Core) or Air Management
nor any of their respective Affiliates will disclose to any Person in
a Competing Business any of the customer lists, trade secrets,
confidential information, financial and accounting information,
pricing, advertising, expansion, operating or marketing plans,
methods, systems or other procedures used or owned by the Company;
PROVIDED, and notwithstanding the foregoing, that neither Xxxxxxx nor
Century AC (including when doing business as Core) nor Air Management
nor their respective Affiliates shall be prohibited from disclosing
information that is in the public domain or generally known in the
industry or subsequently enters the public domain or becomes generally
known in the industry through no fault of Xxxxxxx, Century AC
(including when doing business as Core) or Air Management, or their
respective Affiliates, or for which disclosure is required pursuant to
any applicable law, rule, regulation or order of a court of competent
jurisdiction (provided, that in such instance such party shall give
notice of such proceedings to the Company and provide the Company with
an opportunity to resolve such disclosure in a manner reasonably
acceptable to the Company).
(e) Other than with respect to Xxxxxxx'x ownership interest in
the Company and Century AC, or as specifically permitted by this
Agreement, none of Xxxxxxx, Century AC (including when doing business
as Core) or Air Management (either directly or indirectly or through
an affiliate formed or acquired after the date of this Agreement) will
(i) engage in, (ii) own or control any interest in (except as a
passive investor of less than 5% of the capital stock or publicly-
traded notes or debentures of a publicly-held company); (iii) act as a
director, officer, manager, employee, trustee, agent, consultant,
partner or joint venture of; (iv) lend credit or money for the purpose
of establishing or operating; (v) or allow such persons' or entities'
name or reputation to be used by, any firm, corporation, partnership,
trust or business enterprise (other than the Company) directly or
indirectly engaged in a Competing Business within the Restricted
Territory.
(B) Xxxxxxx hereby covenants and agrees that, upon a Change in Control
of the Company, he will amend this Agreement (or enter into another
non-competition agreement on substantially the same terms as this
Agreement) such that the term of Xxxxxxx'x covenant not to compete
will expire upon the later to occur of (a) the
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stated term of this Agreement, and (b) five years after the effective
date of such Change in Control.
3. TERM/CONSIDERATION. This Agreement shall commence on the date hereof
and shall continue until the earlier of the tenth anniversary of this Agreement
or the last day of the fifth year after the Employment Agreement expires or
terminates. Xxxxxxx, Air Management, Century AC, and the Company each
acknowledges that good and valuable consideration has been given for their
respective agreements and covenants set out in this Agreement, the receipt and
sufficiency of such consideration is acknowledged and accepted by Xxxxxxx, Air
Management, Century AC (including when doing business as Core), and the Company,
respectively. Notwithstanding anything in this Agreement to the contrary, if
Employee is terminated for "Cause" (as defined in the Employment Agreement) this
Agreement shall continue in effect until the tenth anniversary of such
termination.
4. EQUITABLE AND OTHER REMEDIES. If either party breaches or indicates
an intention to breach any term or provision of this Agreement, the other party
may be entitled to the right of both temporary and permanent injunctive relief.
The right of either party to such relief shall not be construed to prevent such
party from pursuing, either consecutively or concurrently, any and all other
legal or equitable remedies available to it for such breach or threatened
breach, specifically including, without limitation, the recovery of monetary
damages.
5. ENFORCEABILITY. If any court determines that any provision of this
Agreement, or any part thereof, is invalid or unenforceable, the remainder of
this Agreement shall not thereby be affected and shall be given full effect,
without regard to the invalid portions. Except as otherwise provided herein, if
any court determines that any provision of this Agreement, or any part thereof,
is unenforceable because of the duration or geographic scope of such provision,
the parties agree that such court shall have the power to reduce the duration or
geographic scope of such provision, as the case may be, and the parties agree to
request the court to exercise such power to enforce this Agreement to the
greatest extent permitted under applicable law, and, in its amended form, such
provision shall then be enforceable and shall be enforced.
6. PARTIES IN INTEREST. This Agreement and all of its terms, covenants
and conditions shall inure to the benefit of and shall be binding upon the
undersigned parties and their respective successors and assigns (including
without limitation any purchaser of the capital stock or substantially all of
the assets of Century AC, Core or Air Management). However, each party
acknowledges that his or its covenants hereunder are personal in nature, and,
therefore, are not transferable.
7. PAYMENT OF LEGAL EXPENSES. In the event any litigation or other
proceeding is initiated by either party to enforce the terms and provisions
hereof, upon a final determination in any such litigation or proceeding, the
non-prevailing party agrees to pay all reasonable expenses, including reasonable
attorney's fees and expenses of the prevailing party.
8. NECESSITY AND REASONABLENESS. Xxxxxxx, Century AC, Air Management,
and the Company each acknowledges, agrees and represents that as a material
inducement for the other to enter into this Agreement and the Merger Agreement:
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(a) the covenants and agreements of each party in this Agreement are
necessary and essential to the protection of the business which each party will
conduct;
(b) each party will suffer great loss and irreparable harm if any other
party which is restricted by this Agreement violates any material provision of
this Agreement;
(c) the temporal and other restrictions contained in this Agreement are in
all respects reasonable and necessary to protect the business goodwill, trade
secrets, and other business interests of each party with respect to their
respective businesses;
(d) the enforcement of this Agreement will not work an undue or unfair
hardship on either party or otherwise be oppressive to such party, it being
specifically acknowledged and agreed by each party that such has other business
interests and opportunities which will provide such party adequate means of
support if this Agreement is enforced;
(e) the enforcement of this Agreement will neither deprive the public of
needed goods or services nor otherwise be injurious to the public; and
(f) good independent and valuable consideration exists for the agreement of
each party to be bound by this Agreement.
9. GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereto shall be governed, construed and enforced in accordance with the
laws of the State of Texas.
10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
11. HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning of this
Agreement.
12. AMENDMENT AND MODIFICATION. Subject to applicable law, this Agreement
may be amended, modified and supplemented only by written agreement of the
Company and the other party against whom enforcement of such amendment is
sought.
13. NOTICES. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and, if given by telegram, telecopy or telex, shall be deemed to have been
validly served, given or delivered when sent, if given by personal delivery,
shall be deemed to have been validly served, given or delivered upon actual
delivery and, if mailed, shall be deemed to have been validly served, given or
delivered three business days
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after deposits in the United States Mail, as registered or certified mail, with
proper postage prepaid and addressed to the party or parties to be notified, at
the following addresses:
Xxxxxx X. Xxxxxxx
0000 Xxxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxx 00000
Telephone No. (000) 000-0000
Fax No. (000) 000-0000
Century Maintenance Supply, Inc.
0000 Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attn: President
Telephone No. (000) 000-0000
Fax No. (000 ) 000-0000
with a copy to:
Xxxxxxx Xxxxxx & Co.
00000 Xxxxx Xxxxxx Xxxx.
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: J. Xxxxxxxxx Xxxxxxx
Telephone No. (000) 000-0000
Fax No. (000 ) 000-0000
Air Management Supply, Inc.
0000 Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxx
Telephone No. (000) 000-0000
Fax No. (000 ) 000-0000
Century Airconditioning Supply, Inc.
0000 Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxx
Telephone No. (000) 000-0000
Fax No. (000 ) 000-0000
or to such other names, addresses, telephone and fax numbers as Xxxxxxx, Century
AC, Air Management, or the Company as the case may be, shall designate by notice
to the other party hereto in the manner specified in this Section 13.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
CENTURY MAINTENANCE SUPPLY, INC.
By: /s/ Xxxxxxx X. Xxxxxx
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Name: Xxxxxxx X. Xxxxxx
--------------------------------------------
Title: Vice President
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CENTURY AIRCONDITIONING SUPPLY, INC.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------------
Name: Xxxxxxx X. Xxxxxx
--------------------------------------------
Title: Vice President
-------------------------------------------
AIR MANAGEMENT SUPPLY, INC.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------------
Name: Xxxxxxx X. Xxxxxx
--------------------------------------------
Title: Vice President
-------------------------------------------
/s/ Xxxxxx X. Xxxxxxx
--------------------------------------------------
Xxxxxx X. Xxxxxxx
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