PURCHASE AGREEMENT
BY AND AMONG
ACR GROUP, INC.,
XXXXXXX X'XXXXX,
LIFETIME FILTER, INC.
AND
X'XXXXX FAMILY PARTNERSHIP, LTD.
TABLE OF CONTENTS
PAGE
I. TRANSFER OF STOCK; TRANSFER OF ASSETS;
ASSUMPTION OF CERTAIN LIABILITIES
1.1 Transfer of Stock; Transfer of Assets;
Assumption of Certain Liabilities .................... 1
1.2 Consideration for the Stock and the Assets............ 2
1.3 Payment of Stock Purchase Price....................... 3
1.4 Payment of Asset Purchase Price....................... 3
1.5 Disclaimer of Liability............................... 4
1.6 Adjustment to Asset Purchase Price.................... 4
1.7 Instruments of Transfer............................... 5
1.8 Further Assurances.................................... 6
1.9 Closing............................................... 6
II. REPRESENTATIONS AND WARRANTIES OF OFP, LFI AND X'XXXXX
2.1 Organization, Existence and Good Standing ............ 6
2.2 Capital Stock......................................... 6
2.3 Ownership of Stock of LFI............................. 6
2.4 Affiliates............................................ 7
2.5 Authority............................................. 7
2.6 Consents and Approvals; No Violation.................. 7
2.7 Financial Statements.................................. 8
2.8 Receivables........................................... 8
2.9 Inventories........................................... 8
2.10 Absence of Undisclosed Liabilities.................... 8
2.11 Absence of Changes.................................... 8
2.12 Agreements, Contracts and Commitments................. 9
2.13 Tax Matters .......................................... 9
2.14 Title to and Condition of Assets...................... 10
2.15 Real Property......................................... 10
2.16 Personal Property..................................... 10
2.17 Compensation and Benefit Plans........................ 10
2.18 Litigation............................................ 11
2.19 Patents, Trademarks and Similar Rights................ 11
2.20 Bank Accounts; Powers of Attorney..................... 11
2.21 Minute Books.......................................... 11
2.22 No Broker's or Finder's Fees.......................... 12
2.23 Environmental Matters................................. 12
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2.24 Illegal Payments...................................... 12
2.25 No Misleading Statements.............................. 13
2.26 Disclaimer of Additional and Implied Warranties....... 13
III. REPRESENTATIONS AND WARRANTIES OF ACRG
3.1 Organization, Existence and Good Standing............. 13
3.2 Authority............................................. 13
3.3 No Misleading Statements.............................. 13
3.4 Disclaimer of Additional and Implied Warranties....... 13
3.5 Financial Statements.................................. 13
3.6 ACRG Guaranty ........................................ 14
3.7 LFI Obligations....................................... 14
IV. OBLIGATIONS OF X'XXXXX, LFI AND OFP PENDING CLOSING
4.1 Conduct of Business................................... 14
4.2 Access and Information................................ 14
4.3 Existence and Good Standing .......................... 14
4.4 Condition of Assets................................... 14
4.5 Consents of Others.................................... 15
4.6 Approval of Governmental Agencies..................... 15
4.7 Covenant to Use Best Efforts ......................... 15
4.8 Obligation to Supplement Information.................. 15
4.9 Restricted Activities ................................ 15
V. CONDITIONS PRECEDENT
5.1 General Conditions ................................... 17
5.2 Conditions to Obligations of ACRG .................... 17
5.3 Conditions to Obligations of X'Xxxxx, LFI and OFP..... 20
5.4 Covenant of Good Faith................................ 21
VI. INDEMNIFICATION
6.1 Indemnification by OFP and X'Xxxxx ................... 21
6.2 Indemnification by ACRG............................... 22
6.3 Limitation on Indemnification ........................ 23
VII. TERMINATION
7.1 Termination .......................................... 23
7.2 Notice of Termination ................................ 23
7.3 Effect of Termination or Waiver....................... 23
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VIII. MISCELLANEOUS
8.1 Nature and Survival of Representations
and Warranties ....................................... 24
8.2 Amendment and Modification............................ 24
8.3 Waiver of Compliance; Consents ....................... 24
8.4 Notices............................................... 24
8.5 Assignment ........................................... 25
8.6 Governing Law ........................................ 26
8.7 Jurisdiction and Venue ............................... 26
8.8 Counterparts.......................................... 26
8.9 Interpretation........................................ 26
8.10 Entire Agreement ..................................... 26
8.11 Expenses ............................................. 26
8.12 Attorneys' Fees ...................................... 26
Exhibit A -- Assets
Exhibit B -- Assumed Liabilities
Exhibit C -- Form of Promissory Note
Exhibit D -- Guaranty
Exhibit E -- Subordination Agreement
Exhibit F -- Security Agreement
Exhibit G -- Deed of Trust
Exhibit H -- Sales and Marketing Efforts
Exhibit I -- Xxxxx Employment Agreement
Exhibit J -- X'Xxxxx Consulting Agreement
Schedule 2.12 -- Agreements, Contracts, and Commitments
Schedule 2.14 -- Title to and Condition of Assets
Schedule 2.18 -- Litigation
Schedule 2.19 -- Patents, Trademarks, and Similar Rights
Schedule 2.22 -- Broker's or Finder's Fees
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PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is entered into effective as
of January 1, 1997 by and among ACR GROUP, INC., a Texas corporation
("ACRG"), and XXXXXXX X'XXXXX ("X'Xxxxx"), the holder of all of the
outstanding capital stock of LIFETIME FILTER, INC., a Texas corporation
("LFI"), LFI and X'XXXXX FAMILY PARTNERSHIP, LTD., a Texas limited
partnership ("OFP").
ARTICLE I
TRANSFER OF STOCK; TRANSFER OF ASSETS;
ASSUMPTION OF CERTAIN LIABILITIES
1.1 TRANSFER OF STOCK; TRANSFER OF ASSETS; ASSUMPTION OF CERTAIN
LIABILITIES. The parties hereto acknowledge that, during the period from
January 1, 1993 through December 31, 1996, the business of manufacturing and
selling heating and air conditioning filters and related products was
conducted by Lifetime Filter Manufacturing, Ltd., a Texas limited liability
company ("LFM"), the members of which are currently X'Xxxxx and OFP, owning
1% and 99% of the membership interests of LFM, respectively. LFM conducted
this business pursuant to an agreement between LFM and LFI authorizing LFM to
manufacture and sell such products under the "LifeTime Filter" trademark. On
December 31, 1996, LFM assigned and transferred all of its assets to its
members and all of its liabilities were assumed by OFP. Promptly thereafter,
X'Xxxxx contributed his interest in such assets to OFP. On January 3, 1997,
X'Xxxxx ceased to be the general partner of OFP and RGO, Ltd. Co., a Texas
limited liability company, became the new general partner of OFP. Commencing
January 1, 1997, the business activities formerly conducted by LFM have been
conducted by OFP. Subject to the terms and conditions of this Agreement, (a)
X'Xxxxx will sell, transfer, assign and deliver to ACRG on the Closing Date
(hereafter defined) 1,000 shares of the common stock, $1.00 per share par
value, of LFI, constituting all of the issued and outstanding shares of the
capital stock of LFI (the "Stock"), and (b) OFP will sell, transfer, assign
and deliver to LFI on the Closing Date all of the assets and other tangible
and intangible personal property of OFP, including but not limited to those
described on EXHIBIT A hereto, excluding, however, those items specifically
excluded by reference on EXHIBIT A hereto (the "Assets"), free and clear of
all security interests, liens, claims and encumbrances, and LFI shall
purchase, accept and acquire the Assets from OFP, and LFI shall assume those
certain liabilities (and none other) of OFP listed on EXHIBIT B hereto (the
"Assumed Liabilities"). Any provision in this Agreement to the contrary
notwithstanding, it is understood and agreed that the Assets do not include
any assets (tangible or intangible) used in the development or manufacture of
a lawn sprinkler product in the form of a helicopter which has been developed
by X'Xxxxx. All assets related to the development and manufacture of the lawn
sprinkler product are the property of X'Xxxxx. The payment in full at the
Closing (hereafter defined) of the accounts receivable of OFP from X'Xxxxx in
the amount of $50,763 constitutes full and final payment by X'Xxxxx for the
assets related to the development and manufacture of such lawn sprinkler
product.
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1.2 CONSIDERATION FOR THE STOCK AND THE ASSETS. Subject to the terms
and conditions of this Agreement, and as full consideration for the Stock and
the Assets and the covenants, representations, warranties and indemnities
made in connection herewith by X'Xxxxx, LFI and OFP, ACRG shall pay to
X'Xxxxx the sum of $500,000.00 for the Stock (the "Stock Purchase Price"),
and ACRG shall cause LFI to pay to OFP an amount (the "Asset Purchase Price")
equal to (a) four (4) times the net income of LFM for the year ended December
31, 1996 ("1996 Income") as determined in accordance with generally accepted
accounting principles and as certified by an independent audit to be by
conducted Ernst & Young, LLP ("E & Y") (the "Audit"), less (b) the Stock
Purchase Price. The cost of the Audit shall be paid by ACRG. Upon completion
of the Audit, ACRG shall provide a copy of the audited 1996 income statement
to OFP, together with a calculation of any adjustment to the Asset Purchase
Price. OFP shall have full access to all documents, workpapers or other
materials produced or reviewed by E & Y in the conduct of the Audit. Should
OFP disagree with any such adjustment to the Asset Purchase Price, as to
which resolution thereof is not reached between ACRG and OFP within thirty
(30) days after delivery of a copy of the audited 1996 income statement to
OFP, any remaining disputed matters shall be submitted to a national
accounting firm selected by mutual agreement between ACRG and OFP, whose
decision with respect to any disputed item shall be final and binding on the
parties hereto. The expense of engaging such accounting firm to resolve such
disputed items arising in connection with the Audit shall be borne by OFP.
For purposes of determining 1996 Income, it is agreed that there shall be
deducted therefrom the aggregate amount of the accounts receivable of OFP
which remain unpaid as of the end of the calendar month preceding the Closing
Date and have an invoice date earlier than one hundred twenty (120) days
prior to the Closing Date ("Delinquent Receivables"). If LFI shall collect
any amounts of the Delinquent Receivables during the one-year period
following the Closing Date, such amounts collected (including amounts
collected after the end of such one-year period pursuant to an installment
payout arrangement with respect to any Delinquent Receivable which may have
been entered into with the approval of OFP during such one-year period (a
"Payout Agreement")), less the collection expense incurred by LFI in
connection therewith, shall be paid by LFI to OFP. Such payments, if any,
shall be deemed to be an increase in the Asset Purchase Price (but not an
increase in 1996 Income) and shall be paid in cash within thirty (30) days
after the end of each calendar quarter with respect to amounts collected
during the calendar quarter. OFP shall have the right from time to time to
review the books and records of LFI during such one-year period for the
purpose of verifying compliance by LFI with the provisions of the preceding
two sentences. LFI shall follow customary collection procedures used by
subsidiary corporations of ACRG to attempt to collect such Delinquent
Receivables; however, neither ACRG nor LFI shall be liable to OFP for any
Delinquent Receivables which are not collected. OFP shall have the right to
contact obligors on Delinquent Receivables in order to attempt to obtain
payment thereof. Any Delinquent Receivables that may be collected following
the expiration of one-year period after the Closing Date, other than amounts
collected pursuant to a Payout Agreement, shall be retained by LFI and shall
not be deemed to be an increase in the Purchase Price (or an increase in 1996
income). The sum of the Stock Purchase Price and the Asset Purchase Price is
hereinafter referred to as the "Total Purchase Price". The Asset Purchase
Price shall be allocated to the Assets by LFI in the manner determined by it
in the reasonable exercise of its business judgment and OFP shall cooperate
with LFI in the execution and filing of appropriate documents with the
internal Revenue Service to confirm such
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allocation.
1.3 PAYMENT OF STOCK PURCHASE PRICE. The Stock Purchase Price shall be
paid by ACRG in full at the Closing by certified check or wire transfer.
1.4 PAYMENT OF ASSET PURCHASE PRICE. A tentative Asset Purchase Price
(the "Tentative Asset Purchase Price") shall be determined in accordance with
the formula set forth in Section 1.2 of this Agreement, with net income of LFM
for such purpose being determined by the unaudited financial statements of LFM,
which shall have been prepared in accordance with generally accepted accounting
principles. The Tentative Asset Purchase Price shall be paid at the Closing as
follows:
(a) An amount equal to (i) fifty percent (50%) of the Total Purchase
Price less (ii) the Stock Purchase Price, shall be paid by LFI to
OFP at the Closing by certified check or wire transfer; and
(b) LFI shall issue its promissory note (the "Note") payable to OFP
in the original principal amount equal to fifty percent (50%) of
the Total Purchase Price. The Note shall be in the form attached
hereto as EXHIBIT C and shall be (i) guaranteed by ACRG pursuant
to a guaranty agreement (the "Guaranty") in the form attached
hereto as EXHIBIT D, (ii) subordinated to indebtedness of ACRG to
NationsBank of Texas, N.A. (or such successor lender thereto),
pursuant to applicable provisions relating thereto contained in
the Note and the subordination agreement (the "Subordination
Agreement") in the form attached hereto as EXHIBIT E, (iii)
secured by a lien on the Assets granted pursuant to a security
agreement (the "Security Agreement") in the form attached hereto
as EXHIBIT F, which lien shall be subordinated to the lien
thereon of NationsBank of Texas, N.A. (or such successor lender
thereto), and (iv) further secured by a deed of trust (the "Deed
of Trust") in the form attached hereto as EXHIBIT G covering the
land, buildings and improvements owned by LFI within which the
business activities of OFP have been conducted (the "Facility").
Upon completion of the Audit, and any dispute resolution procedure invoked by
OFP pursuant to Section 1.2 hereof, if any, the Asset Purchase Price shall be
determined and the difference between the Asset Purchase Price and the
Tentative Asset Purchase Price (the "Adjustment Amount") shall be paid
promptly as follows:
(y) If the Adjustment Amount is positive, LFI shall pay OFP fifty
percent (50%) of the Adjustment Amount by certified check or wire
transfer and the original principal amount of the Note shall be
increased by fifty percent (50%) of the Adjustment Amount and a
substitute Note shall be issued in exchange for the Note issued
at the Closing in order to reflect
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the inclusion of the Adjustment Amount therein and the
corresponding modification of the amount of the remaining
quarterly principal payments on the Note (after giving effect
to the principal payments theretofore made on the Note). Such
substitute Note shall be dated as of the Closing Date and shall
be effective from and after the Closing Date.
(z) If the Adjustment Amount is negative, the original principal
amount of the Note shall be decreased by the entire Adjustment
Amount and a substitute Note shall be issued in exchange for the
Note issued at the Closing in order to reflect the deduction of
the Adjustment Amount therefrom and the corresponding
modification of the amount of the remaining quarterly principal
payments on the Note (after giving effect to the principal
payments theretofore made on the Note). Such substitute Note
shall be dated as of the Closing Date and shall be effective from
and after the Closing Date.
No adjustment shall be made to the principal amount of the Note until such
time as the Audit, and any dispute resolution procedure invoked by OFP
pursuant to Section 1.2 hereof, if any, are finally concluded. All payments
due under the Note shall be made in accordance with the terms of the Note
notwithstanding the fact that payments may become due on the Note prior to
completion of the Audit, and any dispute resolution procedures invoked by OFP
pursuant to Section 1.2 hereof.
1.5 DISCLAIMER OF LIABILITY. Except for the Assumed Liabilities,
neither LFI nor ACRG shall assume or be responsible for any claims against or
liabilities, commitments, contracts, agreements or obligations whatsoever of
LFM or OFP, including without limitation any liability of LFM or OFP as an
employer or under any contract of employment, and OFP will at all times
indemnify and hold LFI and ACRG harmless from and against any claim therefor
or liability arising therefrom. Neither LFI nor ACRG shall have any liability
for any sales, use, income, franchise or other tax or charge, if any, which
may become payable in connection with the sale of the Assets by OFP pursuant
to this Agreement or any other taxes or charges arising out of the operation
of the business of LFM or OFP at any time prior to the Closing Date, and all
such taxes shall be duly and timely paid by OFP.
1.6 ADJUSTMENT TO ASSET PURCHASE PRICE. In the event that the dollar
sales volume of filters ("Filter Sales") made by both LFI (after the Closing
Date) and OFP (prior to the Closing Date) during the calendar year ended
December 31, 1997 ("1997 Filter Sales") is less than ninety-five percent
(95%) of the amount of Filter Sales made by OFP during the calendar year
ended December 31, 1996 ("1996 Filter Sales"), the Asset Purchase Price shall
be retroactively reduced by an amount equal to the Goodwill Adjustment,
determined as follows:
Goodwill Adjustment = Goodwill-[Goodwill x (1997 Filter Sales Divided By 0.95)]
------------------
1996 Filter Sales
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For purposes of this Section 1.6, "Goodwill" shall be the amount by which the
Asset Purchase Price exceeds the owner's equity of LFM, as determined by the
Audit. In the event that 1997 Filter Sales include sales by LFI to ACRG or any
of its subsidiaries or affiliates which are at prices below that charged by LFI
to parties other than ACRG, its subsidiaries and affiliates, for purposes of
determining the Goodwill Adjustment, 1997 Filter Sales shall be increased to the
amount that would have resulted if the sales prices charged to ACRG, its
subsidiaries and affiliates had been the same as those charged to such
unaffiliated parties.
If the amount of the Goodwill Adjustment is greater than $100,000, the then
outstanding principal amount of the Note shall be reduced by the amount of the
Goodwill Adjustment and a substitute note reflecting the new principal amount
shall be substituted for the Note, and the scheduled payments under the Note
shall be redetermined (after giving effect to the principal payments theretofore
made on the Note). If the amount of the Goodwill Adjustment is less than or
equal to $100,000, the then outstanding principal amount of the Note shall be
reduced and a substitute note reflecting the new principal amount thereof shall
be substituted for the Note; however, the scheduled payments under the new Note
shall be the same as those under the Note issued at the Closing, which would
result in the Note being paid in full at an earlier date.
The determination of the amount of the Goodwill Adjustment pursuant to this
Section 1.6 and the substitution of the Note shall be completed on or before
January 31, 1998.
In order to facilitate 1997 Filter Sales, LFI agrees to maintain a sales
and marketing effort for the sale of filters during calendar year 1997 at least
equivalent to the sales and marketing effort for the sale of filters during
calendar year 1996 made by LFM. Attached hereto as EXHIBIT H are the agreed
minimum elements of the sales and marketing efforts to be undertaken by LFI for
the sale of filters during calendar year 1997. If LFI performs at least the
minimum elements of the sales and marketing efforts so specified, it shall be
deemed to have fully complied with its obligations pursuant to this paragraph of
Section 1.6. In the event that LFI does not perform at least the minimum
elements of the sales and marketing efforts so specified, as the sole remedy to
OFP and X'Xxxxx, ACRG shall not be entitled to any retroactive adjustment to the
Asset Purchase Price, as provided in the first paragraph of this Section 1.6, as
a result of 1997 Filter Sales being less than 95% of 1996 Filter Sales.
1.7 INSTRUMENTS OF TRANSFER. OFP will deliver to LFI at the Closing (in
addition to the other documents provided for in this Agreement) such deeds,
bills of sale, endorsements, assignments and other good and sufficient
instruments of conveyance, transfer and assignment, in form and substance
satisfactory to counsel for ACRG, as shall be effective to vest in LFI good and
marketable title to the Assets. All certificates representing the Stock
delivered to ACRG pursuant to Section 1.1 shall be duly endorsed in blank, or
accompanied by duly executed stock powers in blank, and otherwise in proper form
for transfer. Upon the consummation of the purchase of the Stock by ACRG from
X'Xxxxx, the Stock shall be reissued in the name of ACRG.
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1.8 FURTHER ASSURANCES. From time to time after the Closing, at the
request of ACRG or LFI, but without further consideration, OFP and X'Xxxxx will
execute and deliver such other instruments of conveyance and transfer and take
such other action as ACRG or LFI reasonably may require more effectively to vest
title to the Assets in LFI and to the Stock in ACRG.
1.9 CLOSING. The closing of the transactions provided for herein (the
"Closing") shall take place at 12:00 noon C.S.T. at the office of counsel to
ACRG, 000 Xxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx on January 24, 1997. The date of
the Closing is referred to in this Agreement as the Closing Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
OFP, LFI AND X'XXXXX
OFP, LFI and X'Xxxxx represent and warrant to ACRG as follows:
2.1 ORGANIZATION, EXISTENCE AND GOOD STANDING. LFI is a corporation and
OFP is a limited partnership each duly organized, validly existing and in good
standing under the laws of the State of Texas and each has all requisite power
and authority to own or lease and operate its properties and to carry on its
business as now being conducted. Each of LFI and OFP is duly qualified or
licensed and in good standing to do business in the State of Texas. Copies of
the Articles of Incorporation of LFI (certified by the Secretary of State of the
State of Texas) and the Bylaws of LFI (certified by the Secretary of LFI) and
the Articles of Limited Partnership and Certificate of Limited Partnership, as
amended, of OFP (certified by the general partner of OFP) delivered to ACRG
prior to the Closing, are true, correct and complete and reflect all amendments
thereto as of the date hereof.
2.2 CAPITAL STOCK. All of the Stock is validly issued, fully paid and
nonassessable. All distributions declared with respect to the Stock have been
paid or distributed. There are no existing subscriptions, rights, warrants,
calls, options, commitments or agreements of any character relating to the
capital stock of LFI which is authorized but unissued or held in the treasury.
2.3 OWNERSHIP OF STOCK OF LFI. X'Xxxxx owns the Stock. The Stock
constitutes all of the issued and outstanding securities of any kind of LFI.
No person other than X'Xxxxx has any record or beneficial ownership interest
whatsoever in the Stock or in any other securities of LFI. X'Xxxxx'x
ownership of the Stock consists of good, valid and indefeasible title to the
Stock, free and clear of all security interests, liens, encumbrances,
options, calls, pledges, trusts, voting trusts and other shareholders'
agreements, covenants, restrictions, reservations and other burdens of any
type whatsoever. The certificates representing the Stock to be delivered to
ACRG at the Closing, and the signatures on the endorsements thereof or the
stock powers
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delivered therewith, will be valid and genuine. The stock certificates,
endorsements, stock powers and other documents to be delivered to ACRG on the
Closing Date will transfer to and vest in ACRG good, valid, and indefeasible
title to the Stock, free and clear of all security interests, liens,
encumbrances, options, calls, pledges, trusts, voting trusts and other
shareholders' agreements, covenants, restrictions, reservations and other
burdens of any type whatsoever. No stock transfer taxes or other similar
taxes are required to be paid by ACRG or X'Xxxxx with respect to the transfer
of Stock as provided herein.
2.4 AFFILIATES. Neither LFI nor OFP owns or controls (directly or
indirectly) any capital stock, bonds or other securities of, or have any
proprietary interest in, any corporation, partnership, firm, association or
business organization, entity or enterprise. Neither LFI nor OFP controls
(directly or indirectly) the management or policies of any corporation,
partnership, firm, association or business organization, entity or enterprise.
2.5 AUTHORITY. X'Xxxxx, LFI and OFP each has full power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized and approved by the board of directors or general partner,
as the case may be, and its shareholders or partners, as the case may be, and
no proceedings on the part of either LFI or OFP are necessary to authorize
this Agreement or the consummation of the execution and delivery of this
Agreement by either of LFI or OFP and the consummation of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by each of X'Xxxxx, LFI and OFP, and this Agreement constitutes the
legal, valid and binding agreement of each of X'Xxxxx, LFI and OFP
enforceable in accordance with its terms.
2.6 CONSENTS AND APPROVALS; NO VIOLATION. No filing or registration with,
and no permit, authorization, consent or approval of, any public body or
authority is necessary for the consummation of the transactions contemplated by
this Agreement. Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, nor the compliance by any
of X'Xxxxx, LFI or OFP with any of the provisions hereof will, as of the Closing
Date, (a) conflict with or result in any breach of any provision of the Articles
of Incorporation of LFI or the Bylaws of LFI or the Articles of Limited
Partnership and Certificate of Limited Partnership, as amended, of OFP, (b)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, contract, agreement, commitment, bond, mortgage, indenture,
license, lease, pledge agreement or other instrument or obligation to which any
of X'Xxxxx, LFI or OFP is a party or by which any of X'Xxxxx, LFI or OFP or any
of their properties or assets may be bound, (c) give rise to any lien, charge or
other encumbrance on any of the Assets or the Stock, or (d) violate any law,
regulation, judgment, order, writ, injunction or decree applicable to any of
X'Xxxxx, LFI, LFM (as hereinafter defined) or OFP or any of the Assets or the
Stock.
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2.7 FINANCIAL STATEMENTS. X'Xxxxx, LFI and OFP have previously
furnished to ACRG the combined balance sheets of LFI and LFM as of December
31, 1994, December 31, 1995, and December 31, 1996 (the "1996 Balance Sheet
Date") (collectively, the "Balance Sheets" and, as to the Balance Sheet dated
December 31, 1996, the "1996 Balance Sheet"), and combined income statements
("Income Statements") for the two (2) years ended December 31, 1995 and
December 31, 1996 (the Balance Sheets and the Income Statements are
collectively referred to herein as the "Financial Statements"). The Balance
Sheets fairly present the combined financial position of LFI and LFM, as of
the date thereof and the Income Statements fairly present the combined
results of operations of LFI and LFM, for the periods set forth therein. The
Financial Statements have been prepared in accordance with generally accepted
accounting principles consistently applied by LFI and LFM during the periods
involved.
2.8 RECEIVABLES. Other than the Delinquent Receivables, the accounts
and notes receivable of LFI and LFM shown on the 1996 Balance Sheet have been
collected or are current and collectible in the aggregate recorded amounts,
less any reserve shown on the 1996 Balance Sheet.
2.9 INVENTORIES. The inventories of LFM shown on the 1996 Balance Sheet
consist of items of a quantity and a quality usable or salable in the normal
course of the business of LFM and the values at which such inventories are
carried reflect the normal inventory valuation policy of LFM stating the
inventories at the lower of cost or market on a first-in-first-out basis. The
fair market value of the inventories shown on the 1996 Balance Sheet is not
less than the values at which such inventories are carried on the 1996
Balance Sheet.
2.10 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent
reflected or reserved against in the 1996 Balance Sheet, as of the 1996
Balance Sheet Date, to the best current actual knowledge of OFP, LFI and
X'Xxxxx, neither of LFI or LFM had any liabilities or obligations of any
nature (whether absolute, accrued, contingent or otherwise), including,
without limitation, any liabilities resulting from failure to comply with any
law applicable to either of LFI or LFM or any tax liabilities due or to
become due and whether incurred in respect or measured by the income or sales
of either of LFI or LFM for any period prior to the close of business on the
1996 Balance Sheet Date, or arising out of any transaction entered into, or
any state of facts existing, prior thereto. To the best current actual
knowledge of OFP, LFI and X'Xxxxx, there is no basis for any assertion
against either of LFI or LFM, as of the 1996 Balance Sheet Date, of any
liabilities of any nature or in any amount not fully reflected or reserved
against in the 1996 Balance Sheet.
2.11 ABSENCE OF CHANGES. Except as described in the First six sentences
of Section 1.1 of this Agreement, since the 1996 Balance Sheet Date, there
has not been (a) any material adverse change in the financial condition,
business, prospects, operations, properties, assets or liabilities (whether
direct, indirect, accrued, absolute, contingent or otherwise) of any of LFI,
LFM or OFP other than changes in the ordinary course of business, none of
which have been materially adverse; (b) any damage, destruction or loss,
whether covered by insurance or not, materially and adversely affecting the
properties and business of any of LFI, LFM or OFP; (c)
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any sale, assignment, lease, transfer, license, abandonment or other
disposition by any of LFI, LFM or OFP of any interest in its properties,
excluding inventory sold in the ordinary course of business, and specifically
including but not limited to any machinery, equipment or other operating
property, any patent, trademark, service xxxx, trade name, brand name,
copyright (or pending application for any patent, trademark, service xxxx or
copyright), invention, process, know-how, formula, pattern, design, trade
secret or interest thereunder or other intangible asset; or (d) any dispute
or any other occurrence, event or condition of any character, which
reasonably could be anticipated to give rise to a legal or administrative
action or to a material adverse effect upon the condition (financial or
otherwise), business, prospects, operations, properties, assets or
liabilities (whether direct, indirect, accrued, absolute, contingent or
otherwise) of any of LFI, LFM or OFP (whether or not covered by insurance).
2.12 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth on
SCHEDULE 2.12, (a) none of LFI, LFM or OFP is a party to or bound by any
written or oral contract, agreement or commitment or instrument which relates
to any of the Assets or the Stock or any loan or credit agreement, security
agreement, guaranty, indenture, mortgage, pledge, conditional sale or title
retention agreement, equipment obligation, lease purchase agreement or other
instrument evidencing indebtedness; (b) each such contract and commitment
constitutes the legal and binding agreement of the parties thereto,
enforceable in accordance with its terms; (c) none of LFI, LFM or OFP has
breached any material provision of, or is in default in any material respect
under the terms of, any such contract, agreement or commitment, and no event
has occurred which, after notice or lapse of time or both, would constitute
such a material default under the terms of any such contract, agreement or
commitment; (d) no other party to any such contract, agreement or commitment
to which any of LFI, LFM or OFP is a party or by which any of LFI, LFM or OFP
is bound is in default thereunder or in breach of any term or provision
thereof; and (e) there exist no conditions or events which, after notice or
lapse of time or both, would constitute a default by any party to any such
contract, agreement or commitment.
2.13 TAX MATTERS. LFI, LFM and OFP have previously delivered to ACRG
true, correct and complete copies of all of their respective federal income
tax, and, if applicable, state franchise tax returns for each of the years
ended December 31, 1993, 1994, and 1995 and for any shorter periods therein
or thereafter. All federal, state, county and local tax returns and tax
reports required to be filed by either of LFI or LFM prior to the date hereof
are true, correct and complete and have been filed with the appropriate
governmental agencies in all jurisdictions in which such returns and reports
are required to be filed. All federal, state, county and local income and
other taxes, including interest and penalties thereon, due from either of LFI
or LFM have been fully paid or adequately provided for by either LFI or LFM.
The provision for taxes in the 1996 Balance Sheet is sufficient for the
payment of all unpaid federal, state, county and local taxes, including
interest and penalties thereon, whether or not disputed, accrued or
applicable, for the period then ended and for all years prior thereto. No
federal income tax return of either of LFI or LFM is being audited by the
Internal Revenue Service ("IRS"). There are no pending questions raised in
writing by the IRS or other taxing authority relating to, nor claims asserted
in writing by the IRS or other taxing authority for, taxes or assessments of
either
9
of LFI or LFM nor are there any outstanding agreements or waivers extending
the statutory period of limitation applicable to any tax return of either of
LFI or LFM for any period. No sales tax, use tax or other transfer tax of any
type whatsoever is required to be paid by ACRG or any of LFI, LFM or OFP with
respect to the transfer of the Stock or the Assets as provided herein.
2.14 TITLE TO AND CONDITION OF ASSETS. Except as described in SCHEDULE
2.14, OFP has good and marketable title to the Assets and none of the Assets
is subject to any lien, mortgage, pledge, security interest, lease, option,
call, charge, joint ownership, or other encumbrance or right of way,
building, use or zoning restriction, exception, variance. reservation,
limitation or burden of any nature whatsoever except for liens for taxes,
assessments or governmental charges or levies which are not delinquent. All
personal property material to the financial condition, operations, business
or prospects of each of LFI and OFP are in good operating condition and
repair.
2.15 REAL PROPERTY. LFI and OFP have previously provided ACRG with
true, correct and complete copies of all contracts, agreements, mortgages,
concessions, leases and commitments relating to or affecting real property or
any interests therein, to which any of LFI, LFM or OFP is a party or by which
any of LFI, LFM or OFP or any property of any of LFI, LFM or OFP is in any
way bound or affected, together with all amendments and supplements thereto
and modifications thereof. All such contracts, agreements, mortgages,
concessions, leases, commitments, amendments, supplements and modifications
are legally valid and binding and in full force and effect, and there are and
will be no defaults thereunder.
2.16 PERSONAL PROPERTY. LFI and OFP have previously provided ACRG with
true, correct and complete copies of all contracts, agreements, mortgages,
leases and commitments relating to or affecting any interest in tangible
personal property to which LFI, LFM or OFP is a party or by which LFI, LFM or
OFP or any property of LFI, LFM or OFP is in any way bound or affected,
together with all amendments and supplements thereto and modifications
thereof. All such contracts, agreements, mortgages, leases, commitments,
amendments, supplements and modifications are legally valid and binding and
in full force and effect, and there are no defaults thereunder. No leasehold
or other interest of LFI, LFM or OFP in tangible personal property is subject
or subordinate to any security interest, lien, encumbrance, pledge, defect in
title or other burden. None of the rights of LFI, LFM or OFP under any such
leasehold or other interest in tangible personal property will be impaired by
the consummation of the transactions contemplated by this Agreement, and all
of such rights will be enforceable by LFI after the Closing without the
consent or agreement of any other party.
2.17 COMPENSATION AND BENEFIT PLANS. OFP has disclosed to ACRG the names
and current compensation of all officers and employees of LFM or OFP (whether
employed directly by LFM or OFP or by a third party providing employee
leasing services to LFM or OFP), together with a statement of the full amount
paid to each such person, and in which capacity, during the twelve (12)
months ended December 31, 1996 and the basis thereof, including salaries,
bonuses or commissions, if any. OFP has also disclosed the identity of the
recipients,
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and the amounts, of any bonuses or other extraordinary or discretionary
compensation paid by LFM during calendar years 1994 and 1995. OFP has
delivered to ACRG true, correct and complete copies of the health, dental and
life insurance plans, bonus, pension profit-sharing and retirement plans and
all other benefit plans, payments or arrangements for employees of OFP (the
"Benefit Plans") and will provide ACRG with such additional information
regarding the Benefit Plans that ACRG may reasonable request.
2.18 LITIGATION. Except as described in SCHEDULE 2.18 attached hereto,
(a) there are no legal, administrative, arbitration, investigatory or other
proceedings, and no other controversies, pending or threatened, against any
of LFI, LFM or OFP or as to which any of LFI, LFM or OFP is or might become a
party, or challenging the validity or propriety of the transactions
contemplated by this Agreement, (b) there is no basis or ground for any suit,
action, claim, investigation, inquiry or legal, administrative, arbitration,
investigatory or other proceeding against any of LFI, LFM or OFP, and (c)
there is no outstanding order, writ, injunction or decree of any court,
administrative agency, governmental body or arbitration tribunal against or
affecting the transaction contemplated by this Agreement, any of LFI, LFM or
OFP, or any of the properties, assets, liabilities, business or prospects of
any of LFI, LFM or OFP.
2.19 PATENTS, TRADEMARKS AND SIMILAR RIGHTS. Set forth on SCHEDULE 2.19
attached hereto are all patents, trademarks, trade names, service marks,
copyrights, and licenses of any of LFI, LFM or OFP, whether or not registered
in the name of LFI, LFM or OFP, or for which applications for registration
are pending, under appeal, denied or contemplated, in which any of LFI, LFM
or OFP has any right, title or interest. The conduct by any of LFI, LFM or
OFP of its business does not infringe upon or violate the patents,
trademarks, trade names, service marks, trade secrets, copyrights, licenses
or rights of any other person, firm or corporation, and none of LFI, LFM or
OFP has received any notice of any claim of any such infringement or
violation. None of LFI, LFM or OFP has knowledge of any facts which would be
detrimental to the renewal of the registration of any of such patents,
trademarks, trade names, service marks, copyrights or licenses.
2.20 BANK ACCOUNTS; POWERS OF ATTORNEY. LFI and OFP have disclosed to
ACRG (a) the name of each bank, savings and loan or other financial
institution in which LFI, LFM or OFP has any account or safe deposit box, the
style and number of each such account or safe deposit box and the names of
all persons authorized to draw thereon or have access thereto, and (b) the
name of each person, corporation, firm, association or business entity or
enterprise holding a general or special power of attorney from LFI and a
summary of the terms thereof.
2.21 MINUTE BOOKS. The minute books of LFI, true, correct and complete
copies of which will be delivered to ACRG prior to the Closing, contain
complete and accurate records of any and all meetings of the shareholders and
directors of LFI and of any material action taken by such shareholders and
directors.
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2.22 NO BROKER'S OR FINDER'S FEES. Other than S A Capital Group, except
as set forth on SCHEDULE 2.22, no agent, broker, investment banker, person or
firm has acted directly or indirectly on behalf of any of LFI, LFM or OFP in
connection with this Agreement or the transactions contemplated herein, and
no such person or entity is or will be entitled to any broker's or finder's
fee or any other commission or similar fee or expense, directly or
indirectly, in connection with this Agreement or the transactions
contemplated herein.
2.23 ENVIRONMENTAL MATTERS. None of LFI, LFM or OFP, nor, to the best
current actual knowledge of X'Xxxxx, LFI and OFP, prior owners of the
locations or premises on which any of LFI, LFM or OFP has conducted or now
conducts its business ("premises") have generated, handled, used, stored or
disposed of any hazardous or toxic waste or substance, as defined pursuant to
the Environmental Laws (as defined below) on or off its premises (whether or
not owned by it). Each of LFI, LFM and OFP has complied and continues to
comply with all Environmental Laws applicable to the operation of its
property and business. None of LFI, LFM or OFP has any material contingent
liability with respect to non-compliance with Environmental Laws or the
generation, handling, use, storage or disposal of hazardous or toxic waste or
substances. None of LFI, LFM or OFP has received any summons, complaint,
order, or other similar notice, that any of LFI, LFM or OFP or any of its
property or operations is not in compliance with, or that any governmental
authority is investigating its compliance with, any Environmental Laws. As
used in this Section, the term "Environmental Laws" shall mean all federal,
state and local laws, rules, regulations, ordinances, programs, permits,
guidances, orders and consent decrees relating to health, safety, hazardous
substances, and environmental matters applicable to the business and
facilities (whether or not owned by it) of LFI, LFM or OFP. Such laws and
regulations include without limitation the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901 ET SEQ. as amended ("RCRA"); the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601 ET SEQ., as amended ("CERCLA"); the Toxic Substances
Control Act, 15 U.S.C. Section 2602 ET SEQ., as amended; the Clean Water Act,
33 U.S.C. Section 466 ET SEQ., as amended; the Clean Air Act, 42 U.S.C.
Section 7401 ET SEQ., as amended; state and federal superlien and
environmental cleanup programs; and U.S. Department of Transportation
regulations. The terms "hazardous substance" and "release" shall have the
meanings specified in CERCLA as subsequently modified or amended and the
terms "solid waste" and "disposed" shall have the meanings specified in RCRA,
as subsequently modified, supplemented or amended; provided, that to the
extent a parcel of real property is situated in a state or other jurisdiction
in which the applicable laws may establish a meaning for "hazardous
substance", "release", "solid waste", or "disposal" which is broader than
that specified in either CERCLA or RCRA, such broader meaning shall apply.
2.24 ILLEGAL PAYMENTS. None of LFI, LFM or OFP has made, and, to the
knowledge of X'Xxxxx, LFI and OFP, no employee, agent or representative of
LFI, LFM or OFP has made, any bribes, kickbacks, illegal payments, illegal
political contributions, payments not recorded on the books and records of
LFI, LFM or OFP, payments that were falsely recorded on the books and records
of LFI, LFM or OFP, payments to governmental officials for improper purposes
or illegal payments to obtain or retain business.
12
2.25 NO MISLEADING STATEMENTS. Neither this Agreement nor any schedule,
list or other document referred to herein and delivered by either of LFI or
OFP pursuant hereto contains any untrue statement of a material fact or omits
to state any material fact necessary in order to make the statements herein
or therein, in light of the circumstances under which they were made, not
misleading. All information previously provided, or to be provided, to ACRG
and all schedules contemplated hereby are, or shall be, as applicable, true,
accurate and complete in all material respects.
2.26 DISCLAIMER OF ADDITIONAL AND IMPLIED WARRANTIES. X'Xxxxx, LFI and
OFP are making no representations or warranties, express or implied, of any
nature whatsoever except as specifically set forth in Article II of this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF ACRG
ACRG represents and warrants to X'Xxxxx and OFP as follows:
3.1 ORGANIZATION, EXISTENCE AND GOOD STANDING. ACRG is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Texas.
3.2 AUTHORITY. ACRG has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized
and approved by the board of directors of ACRG and no other corporate
proceedings on the part of ACRG are necessary to authorize this Agreement or
the consummation of the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by ACRG and constitutes the
valid and binding agreement of ACRG.
3.3 NO MISLEADING STATEMENTS. The representations and warranties of
ACRG made in this Agreement do not contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements
herein, in light of the circumstances under which they were made, not
misleading.
3.4 DISCLAIMER OF ADDITIONAL AND IMPLIED WARRANTIES. ACRG is making
no representations or warranties, express or implied, of any nature
whatsoever except as specifically set forth in Article III of this Agreement.
3.5 FINANCIAL STATEMENTS. ACRG has previously furnished to X'Xxxxx,
LFI and OFP its audited financial statements contained in its annual report
to shareholders for its fiscal year ended February 28, 1996 and its unaudited
financial statements for the quarters ended May 31, 1996, August 31, 1996,
and November 30, 1996 (the "ACRG Financial Statements"). The
13
balance sheets set forth in the ACRG Financial Statements fairly present the
financial position of ACRG as of the dates thereof and the income statements
set forth in the ACRG Financial Statements fairly present the results of
operations of ACRG for the periods set forth therein. The ACRG Financial
Statements have been prepared in accordance with generally accepted
accounting principles consistently applied by ACRG during the periods
involved.
3.6 ACRG GUARANTY. The Guaranty is a valid and binding obligation of
ACRG and has been duly and validly authorized and approved by the Board of
Directors of ACRG.
3.7 LFI OBLIGATIONS. The Note, the Security Agreement and the Deed of
Trust shall be the valid and binding obligations of LFI and shall have been
duly authorized and approved by the Board of Directors of LFI elected
contemporaneously with the Closing.
ARTICLE IV
OBLIGATIONS OF X'XXXXX, LFI AND OFP PENDING CLOSING
During the period commencing on the date of this Agreement through the
Closing Date, each of X'Xxxxx, LFI and OFP hereby covenants and agrees as
follows:
4.1 CONDUCT OF BUSINESS. Each of LFI and OFP shall conduct the
operations of its business diligently and in the usual and ordinary course of
business and shall (without making any commitment on behalf of, or which
would be binding on, ACRG) use its best efforts to preserve its business
organization intact and its good relationships with its employees, customers,
and suppliers and others having business relationships with it.
4.2 ACCESS AND INFORMATION. Each of LFI and OFP shall afford ACRG and
its counsel, accountants and other representatives, full access, during
normal business hours, to all of the properties, books, contracts,
commitments and records of each of LFI, LFM and OFP and shall furnish ACRG
with all such information concerning the affairs of each of LFI, LFM and OFP
as ACRG may reasonably request, including without limitation such copies
and/or extracts of pertinent records and data as ACRG may reasonably request.
4.3 EXISTENCE AND GOOD STANDING. Each of LFI and OFP will maintain
its existence and good standing in the State of Texas and in each
jurisdiction in which it owns or leases property or conducts business.
Minutes of all meetings and proceedings of the directors and shareholders of
LFI held on or subsequent to the date hereof and prior to or on the Closing
Date will be delivered to ACRG within three (3) days after such meetings or
proceedings are held, but in no event later than the Closing Date.
4.4 CONDITION OF ASSETS. Each of LFI and OFP will maintain and keep
in good order, subject to ordinary wear and tear, all buildings,
improvements, inventory, machinery, equipment, fixtures and other property
used in connection with the businesses of LFI and OFP.
14
4.5 CONSENTS OF OTHERS. Each of LFI and OFP shall use its best efforts
to obtain the consents of all necessary persons to the assignment and
transfer of the Stock to ACRG and the Assets to LFI, provided that LFI and
OFP shall not be required to incur any expense in the exercise of such
efforts.
4.6 APPROVAL OF GOVERNMENTAL AGENCIES. Each of LFI and OFP shall
either complete, execute and verify or, if requested by ACRG, shall cooperate
in completing, executing and verifying such documents as may be required by
any federal, state, county or local governmental agency, and shall cooperate
with ACRG in furnishing information, testimony and other assistance before
any such agencies, in anticipation or as a result of the transactions
contemplated by this Agreement.
4.7 COVENANT TO USE BEST EFFORTS. Each of LFI and OFP shall use its
best efforts prior to the Closing to satisfy or cause to be satisfied all of
the conditions precedent to its obligations under this Agreement, including
without limitation, to the extent that its action or inaction can control or
influence the satisfaction of same, all requirements of any federal, state or
local regulatory agency.
4.8 OBLIGATION TO SUPPLEMENT INFORMATION. Each of LFI and OFP shall,
from time to time through the Closing Date, supplement the schedules, lists
and other documents referred to herein and delivered by either LFI or OFP
pursuant hereto to reflect material changes in the subject matter thereof
occurring through the Closing Date.
4.9 RESTRICTED ACTIVITIES. Neither of LFI or OFP shall, without the
prior written consent of ACRG:
(a) Enter into any employment agreement or increase the rate of
compensation payable or to become payable by either of LFI or OFP to
any of its directors, officers, employees or agents or increase the
benefits payable under any bonus, insurance, pension or other employee
benefit plan, payment or arrangement, except for increases required
pursuant to a contract in existence on the date hereof;
(b) Distribute any funds (whether as a dividend, loan, advance, bonus, or
other distribution or payment) to any of its shareholders or partners,
as the case may be, except for distributions not to exceed the actual
amount of federal income tax liability of such shareholders or
partners which is directly attributable to the 1996 income of any of
LFI, LFM or OFP which is allocated to such shareholders or partners,
the determination of the amount of which tax liability shall be
documented to ACRG for its approval.
(c) Make any change in any Benefit Plan;
15
(d) Make any commitment, whether directly or by way of guarantee or
otherwise, for capital expenditures in excess of 55,000 to any one
person or entity, or in excess of $10,000 in the aggregate, or issue
any approval with respect to pending construction, if any;
(e) Loan any funds to, or borrow or take down any funds from, any other
individual, corporation, financial institution or other entity,
whether under an existing agreement or not;
(f) Change its accounting practices or policies or its application
thereof, other than to conform to generally accepted accounting
principles;
(g) Except in the usual and ordinary course of business, enter into,
become a party to, waive any material right under or cancel any
contract or agreement or make or permit to be made any amendment or
termination of any contract or agreement;
(h) Dispose of or acquire any assets of either of LFI or OFP except for
any purchases and sales of inventory at fair value in the usual and
ordinary course of business;
(i) Enter into or assume any mortgage, pledge, conditional sale or other
title retention agreement or permit any lien, encumbrance or charge of
any kind to attach upon the Assets, whether now owned or hereafter
acquired;
(j) Participate in any discussion with, or furnish or cause to be
furnished any information (other than public information) concerning
its business or assets to, any person or entity other than ACRG in
connection with any merger or consolidation of either of LFI or OFP or
any sale of any stock or assets of either of LFI or OFP;
(k) Permit any insurance policy naming any of LFI, LFM or OFP as a
beneficiary, insured or loss payable payee to be canceled or
terminated or any of the coverage thereunder to lapse unless
simultaneously with such cancellation or termination replacement
policies providing substantially the same or greater coverage with
comparable insurance carriers are in full force and effect;
(l) Amend the Articles of Incorporation or Bylaws of LFI or the Articles
of Limited Partnership and Certificate of Limited Partnership, as
amended, of OFP;
(m) Dissolve, liquidate, merge, consolidate or otherwise make any change
in the structure or existence of either LFI or OFP; or
16
(n) Agree to do any of the things described in clauses (a) through (m) of
this Section 4.9.
ARTICLE V
CONDITIONS PRECEDENT
5.1 GENERAL CONDITIONS. The obligations of all the parties hereto to
consummate the transactions contemplated by this Agreement shall be subject
to the condition that no injunction or restraining order, issued by a court
of competent jurisdiction, which prohibits the consummation of the
transactions contemplated by this Agreement shall be in effect.
5.2 CONDITIONS TO OBLIGATIONS OF ACRG. The obligations of ACRG to
consummate the transactions contemplated by this Agreement shall be subject
to the additional following conditions (unless waived by ACRG in the manner
provided for herein):
(a) NO ERRORS. There shall be no errors, misstatements or omissions in
the representations and warranties made in Article II which alone, or
in the aggregate, have or could have a material adverse effect on the
Stock or the Assets.
(b) AFFIRMATION OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of X'Xxxxx, LFI and OFP contained in this Agreement
shall be true, correct and complete as of the Closing Date with the
same effect as though made at such time, and the schedules, lists and
other documents referred to herein and delivered by X'Xxxxx, LFI and
OFP pursuant hereto, as supplemented pursuant to this Agreement, shall
be true, accurate and complete in all material respects with respect
to the subject matter thereof as of the Closing Date.
(c) COMPLIANCE WITH AGREEMENT. X'Xxxxx, LFI and OFP shall have performed
all obligations and complied with all covenants and conditions
required by this Agreement to be performed or complied with by them on
or prior to the Closing Date.
(d) AUTHORIZATION. All action necessary to authorize the execution,
delivery and performance of this Agreement by X'Xxxxx, LFI and OFP and
the consummation by X'Xxxxx, LFI and OFP of the transactions
contemplated by this Agreement shall have been duly and validly taken
and ACRG shall have full right and power to acquire the Stock and OFP
shall have full right and power to transfer and deliver the Assets
upon the terms provided in this Agreement. All consents, approvals and
waivers from third parties and federal, state, county and local
government agencies and authorities required to be obtained to
17
consummate the transactions contemplated by this Agreement or, which,
either individually or in the aggregate, if not obtained would
materially and adversely affect the financial condition, operations,
business or prospects of LFI or OFP, shall have been obtained.
X'Xxxxx, LFI and OFP shall have delivered to ACRG a certificate dated
as of the Closing Date to that effect, signed by X'Xxxxx, LFI and OFP.
(e) OPINION OF COUNSEL TO X'XXXXX, LFI AND OFP. ACRG shall have received
the opinion of counsel to X'Xxxxx, LFI and OFP, dated as of the
Closing Date, in form and substance acceptable to counsel to ACRG, to
the effect that:
(i) LFI is a corporation and OFP is a limited partnership, each duly
organized, validly existing and in good standing under the laws
of the State of Texas and each has all requisite power and
authority to own or lease and operate its properties and to carry
on its business as now being conducted. Copies of the Articles
of Incorporation of LFI (certified by the Secretary of State of
the State of Texas) and the Bylaws of LFI (certified by the
Secretary of LFI) and the Articles of Limited Partnership and
Certificate of Limited Partnership, as amended, of OFP (certified
by the general partner of OFP) delivered to ACRG prior to the
Closing, are true, correct and complete and reflect all
amendments thereto as of the date hereof.
(ii) X'Xxxxx, LFI and OFP each has full power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized and approved by the
board of directors or general partner, as the case may be, and
the shareholders or partners, as the case may be, and no
proceedings on the part of either LFI or OFP are necessary to
authorize this Agreement or the consummation of the execution and
delivery of this Agreement by either of LFI or OFP and the
consummation of the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by
each of X'Xxxxx, LFI and OFP, and this Agreement constitutes the
legal, valid and binding agreement of each of X'Xxxxx, LFI and
OFP enforceable in accordance with its terms.
(iii) No filing or registration with, and no permit, authorization,
consent or approval of, any public body or authority is necessary
for the consummation of the transactions contemplated by this
Agreement. Neither the execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby, nor the
compliance by any of X'Xxxxx, LFI or OFP with any of the
provisions hereof will, as of the
18
Closing Date, (1) conflict with or result in any breach of any
provision of the Articles of Incorporation or the Bylaws of
LFI or the Articles of Limited Partnership and Certificate of
Limited Partnership, as amended, of OFP, (2) result in a
violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under,
any of the terms, conditions or provisions of any note,
contract, agreement, commitment, bond, mortgage, indenture,
license, lease, pledge agreement or other instrument or
obligation to which any of LFI, LFM or OFP is a party or by
which any of LFI, LFM or OFP or any of their properties or
assets may be bound, (3) give rise to any lien, charge or other
encumbrance on the Stock or any of the Assets, or (4) violate any
law, regulation, judgment, order, writ, injunction or decree
applicable to any LFI, LFM or OFP or the Stock or any of the
Assets.
(iv) The Stock has been duly authorized, validly issued and delivered
by LFI to X'Xxxxx, and the certificates representing the Stock
are in valid and sufficient form. No security holder of LFI has
any preemptive or similar right with respect to the Stock. When
the Stock is delivered to ACRG by X'Xxxxx at the Closing in
accordance with this Agreement, ACRG will thereupon become the
sole legal and beneficial owner of the Stock, subject to no
liens, encumbrances or other rights of X'Xxxxx or any third
party. The Stock constitutes all of the issued and outstanding
capital stock (of all classes) of LFI.
(f) DELIVERY OF THE STOCK. X'Xxxxx shall have assigned and delivered
to ACRG the Stock, duly endorsed in blank for transfer in form
and substance satisfactory to counsel for ACRG.
(g) RESIGNATION OF DIRECTORS AND OFFICERS OF LFI. On or before the
Closing Date, each director and officer of LFI shall have
delivered to LFI his or her resignation, effective on the Closing
Date, from all positions held by such person as a director or
officer of LFI.
(h) DELIVERY OF THE ASSETS. OFP shall have executed and delivered to
LFI proper instruments for the transfer of the Assets in form and
substance satisfactory to counsel for ACRG.
(i) NO MATERIAL ADVERSE CHANGE. Except as described in the first six
sentences of Section 1.1 of this Agreement, there shall have been
no material adverse change in the financial condition, business,
prospects, operations, properties, assets or liabilities (whether
direct, indirect, accrued, absolute, contingent or otherwise) of
any of LFI, LFM or OFP since September 30, 1996.
19
(j) LIEN RELEASES. OFP shall have obtained and shall deliver to ACRG
at the Closing all necessary releases of liens on the Assets in
form and substance satisfactory to ACRG and counsel to ACRG.
(k) EMPLOYMENT AGREEMENT. LFI shall have entered into an employment
agreement ("Employment Agreement") with Xxxxx Xxxxx in the form
attached hereto as EXHIBIT I, and the Employment Agreement shall
be in full force and effect on the Closing Date.
(l) CONSULTING AGREEMENT. LFI shall have entered into a one-year
consulting contract with X'Xxxxx ("Consulting Agreement") in the
form attached hereto as EXHIBIT J, and the Consulting Agreement
shall be in full force and effect on the Closing Date.
(m) SUBORDINATION AGREEMENT. OFP shall have executed and delivered
the Subordination Agreement to LFI.
(n) ENVIRONMENTAL REVIEW. ACRG shall have received the results of a
Phase I Environmental Site Assessment covering the Facility and
such results shall have been satisfactory to ACRG in its
reasonable business judgment. ACRG shall provide a copy of the
Phase I Environmental Site Assessment to X'Xxxxx.
5.3 CONDITIONS TO OBLIGATIONS OF X'XXXXX, LFI AND OFP. The obligations
of X'Xxxxx, LFI and OFP to consummate the transactions contemplated by this
Agreement shall be subject to the following additional conditions (unless
waived by X'Xxxxx, LFI and OFP in the manner provided for herein):
(a) NO ERRORS. There shall be no errors, misstatements or omissions
in the representations and warranties made in Article III by ACRG
which alone, or in the aggregate, have a materially adverse
effect on the ability of ACRG to consummate the transactions
contemplated by this Agreement.
(b) AFFIRMATION OF REPRESENTATIONS AND WARRANTIES OF ACRG. The
representations and warranties of ACRG contained in this
Agreement shall be true, correct and complete in all material
respects as of the Closing Date with the same effect as though
made at such time.
(c) COMPLIANCE WITH AGREEMENT. ACRG shall have performed all
obligations and complied with all covenants and conditions
required by this Agreement to be performed or complied with by it
on or prior to the Closing Date.
20
(d) AUTHORIZATION. All corporate action necessary to authorize the
execution, delivery and performance of this Agreement by ACRG and
the consummation by ACRG of the transactions contemplated hereby
shall have been duly and validly taken. All consents, approvals
and waivers from third parties and Federal, state, county and
local government agencies and authorities, required to be
obtained to consummate the transactions contemplated by this
Agreement, shall have been obtained. ACRG shall have delivered to
X'Xxxxx, LFI and OFP a certificate dated as of the Closing Date
to that effect, signed by ACRG.
(e) DELIVERY OF THE PURCHASE PRICE. ACRG shall have delivered to
X'Xxxxx the Stock Purchase Price and executed and delivered to
OFP the Guaranty, and shall have caused LFI to deliver to OFP the
Asset Purchase Price and to execute and deliver to OFP the Note,
the Subordination Agreement, the Security Agreement and the Deed
of Trust, in accordance with the terms of this Agreement.
(f) NOTIFICATION OF EMPLOYMENT OFFERS. ACRG shall have, not later
than two business days prior to the Closing Date, advised OFP of
the current employees of OFP to which ACRG will cause LFI to
extend offers of employment.
5.4 COVENANT OF GOOD FAITH. X'Xxxxx, LFI, OFP and ACRG agree to use
reasonable diligence and to exert their best, good faith efforts to satisfy the
conditions precedent set forth in this Article V.
ARTICLE VI
INDEMNIFICATION
6.1 INDEMNIFICATION BY OFP AND X'XXXXX. OFP and X'Xxxxx shall, jointly
and severally, indemnify and hold ACRG and LFI harmless from and against and
in respect of all Damages, as hereinafter defined. "Damages", as used in this
Section 6.1, shall include without limitation any claim, action, demand,
loss, cost, expense, liability, whether joint or several, penalty, and other
damage, including without limitation attorneys' fees and other costs and
expenses reasonably incurred in investigating, and attempting to avoid, or in
opposing the imposition thereof, resulting to ACRG or LFI, directly or
indirectly, from (a) any inaccurate representation or warranty by or on
behalf of OFP, LFI or X'Xxxxx in, or pursuant to the provisions of this
Agreement, (b) the breach or default in the performance by OFP, LFI or
X'Xxxxx of any of the obligations to be performed by or on behalf of OFP, LFI
or X'Xxxxx, as applicable hereunder (unless such breach or default in
performance occurred on or before the Closing Date and this Agreement was
terminated because of such breach or default in performance, in which case
ACRG and LFI shall be deemed to have waived any right under this Section 6.1
to indemnification for Damages caused by such breach or default in
performance), (c) from any liability of OFP which has not been assumed by LFI
hereunder, or (d) any breach or default in the performance of any obligation
to be performed by or on behalf of LFI, LFM,
21
OFP or X'Xxxxx before the Closing Date, which results in a claim being
asserted against ACRG or LFI. OFP and X'Xxxxx shall, in addition, reimburse
ACRG or LFI on demand for any payment made by ACRG or LFI at any time after
the Closing based upon the final judgment of any court of competent
jurisdiction or pursuant to a bona fide compromise or settlement of any such
claim, demand, or action, in respect of any Damages to which the foregoing
indemnity relates. If any third party shall assert any such claim against
ACRG or LFI which, if successful, might result in a breach or default by OFP
or X'Xxxxx, then ACRG or LFI shall give prompt written notice thereof to OFP
and X'Xxxxx and OFP and X'Xxxxx shall be entitled to elect, within ten (10)
days after the giving of such notice, to provide the defense thereof and to
be represented, at the sole expense of OFP and X'Xxxxx, by counsel selected
by OFP and X'Xxxxx. In the event OFP or X'Xxxxx make such election, ACRG or
LFI shall have the right to participate in such defense, at their sole
expense. Neither ACRG nor LFI shall compromise or settle any such claim
without giving OFP and X'Xxxxx ten (10) days written notice thereof if the
effect of any such compromise or settlement would require indemnification by
OFP and X'Xxxxx for all or any part of the amount of such compromise or
settlement and receipt of the express written consent of OFP or X'Xxxxx to
such compromise or settlement, which shall not be unreasonably delayed or
withheld. Any notice or reply thereto required under this Section 6.1 shall
be made in accordance with the provisions of Section 8.4 hereof.
6.2 INDEMNIFICATION BY ACRG. ACRG shall indemnify and hold OFP and
X'Xxxxx harmless against and in respect of all Damages, as hereinafter
defined. "Damages", as used in this Section 6.2, shall include without
limitation any claim, action, demand, loss, cost, expense, liability, whether
joint or several, penalty, and other damage, including, without limitation,
attorneys' fees and other costs and expenses reasonably incurred in
investigating, and attempting to avoid, or in opposing the imposition
thereof, resulting to OFP or X'Xxxxx from (a) any inaccurate representation
by or on behalf of ACRG in or pursuant to the provisions of this Agreement,
(b) the breach or default in performance by ACRG of any of the obligations to
be performed by or on behalf of ACRG hereunder (unless such breach or default
in performance occurred on or before the Closing Date and this Agreement was
terminated because of such breach or default in performance, in which case
OFP and X'Xxxxx shall be deemed to have waived any rights under this Section
6.2 to indemnification for Damages caused by such breach or default in
performance) or (c) any breach or default by ACRG or LFI in the performance
of any obligation to be performed by or on behalf of ACRG or LFI after the
Closing Date, which results in a claim being asserted against OFP or X'Xxxxx.
ACRG shall, in addition, reimburse OFP and X'Xxxxx on demand for any payment
made by OFP and X'Xxxxx at any time after the Closing Date, based upon the
final judgment of any court of competent jurisdiction or pursuant to a bona
fide compromise or settlement of any such claim, demand, or action, in
respect of any Damages to which the foregoing indemnity relates. If any third
party shall assert any such claim against OFP and X'Xxxxx which, if
successful, might result in a breach or default by ACRG, then OFP and X'Xxxxx
shall give prompt written notice thereof to ACRG, and ACRG shall be entitled
to elect, within ten (10) days after the giving of such notice, to provide
the defense thereof and to be represented, at the sole expense of ACRG, by
counsel to be selected by ACRG. In the event ACRG makes such election, OFP
and X'Xxxxx shall have the right to participate in such defense, at their
sole expense. Neither OFP nor X'Xxxxx shall compromise
22
or settle any such claim without giving ACRG ten (10) days written notice
thereof if the effect of any such compromise or settlement would require
indemnification by ACRG for all or any part of the amount of such compromise
or settlement and receipt of the express written consent of ACRG and LFI to
such compromise or settlement, which shall not be unreasonably delayed or
withheld. Any notice or reply thereto required under this Section 6.2 shall
be made in accordance with the provisions of Section 8.4 hereof.
6.3 LIMITATION ON INDEMNIFICATION. The provisions of Sections 6.1 and
6.2 shall terminate and expire two (2) years after the Closing Date.
ARTICLE VII
TERMINATION
7.1 TERMINATION. Subject to the provisions of Section 7.3 hereof, this
Agreement may be terminated at any time prior to the Closing upon the
following terms and conditions and in no other manner:
(a) MUTUAL CONSENT. By mutual consent of X'Xxxxx, LFI, OFP and ACRG.
(b) BY THE COMPANY. By X'Xxxxx, LFI and OFP if any of the conditions
specified in Sections 5.1 and 5.3 of this Agreement have not been
satisfied and shall not have been waived by X'Xxxxx, LFI and OFP.
(c) BY ACRG. By ACRG if any of the conditions specified in Sections 5.1
and 5.2 of this Agreement have not been satisfied and shall not have
been waived by ACRG. Furthermore, ACRG shall have the right to
terminate this Agreement, without any liability to X'Xxxxx, LFI and
OFP, if ACRG shall determine that the transactions contemplated by
this Agreement have become inadvisable or impracticable by reason of
any litigation or proceeding instituted by any government or agency
thereof.
7.2 NOTICE OF TERMINATION. In the event that any party hereto
exercises its right to terminate this Agreement in accordance with the
provisions of Section 7.1 hereinabove, such election shall be effective only
when notice of such election is given to each of the other parties hereto, in
writing, in accordance with the provisions of Section 8.4 hereof.
7.3 EFFECT OF TERMINATION OR WAIVER. In the event that this Agreement
shall be terminated pursuant to the provisions of Section 7.1 hereof, this
Agreement shall become null and void and shall have no further effect, and
all further obligations of the parties hereto under this Agreement shall
terminate without further liability of any party to another, except as
otherwise provided in this Agreement.
23
ARTICLE VIII
MISCELLANEOUS
8.1 NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
statements of fact contained in any memorandum, certificate, instrument,
schedule, or other document delivered by or on behalf of X'Xxxxx, LFI and
OFP, on the one hand, or ACRG, on the other hand, for the information of, or
reliance by, the other party to this Agreement pursuant hereto, shall be
deemed to be representations and warranties by the party delivering same.
All representations, warranties and covenants, including covenants of
indemnification, made by the parties and contained in this Agreement shall
survive the Closing and all inspections, examinations, or audits on behalf of
the parties for a period of two (2) years after the Closing Date.
8.2 AMENDMENT AND MODIFICATION. Except as provided otherwise in this
Agreement, this Agreement may be amended, modified or supplemented only by
written agreement of the parties hereto.
8.3 WAIVER OF COMPLIANCE; CONSENTS. Any failure of ACRG on the one
hand, or X'Xxxxx, LFI and OFP, on the other hand, to comply with any
obligation, covenant, agreement or condition herein may be waived by X'Xxxxx,
LFI, OFP and ACRG, respectively, only by a written instrument signed by the
party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf
of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in
this Section 8.3.
8.4 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) to the other party at
the following addresses (or at such other address for a party as shall be
specified by like notice; provided that notices of a change of address shall
be effective only upon receipt thereof):
(a) if to X'Xxxxx, to:
Xx. Xxxxxxx X'Xxxxx
0000 Xxxxxx X
Xxxx, Xxxxx 00000
(b) if to LFI prior to the Closing, to:
Lifetime Filter, Inc.
0000 Xxxxxx X
Xxxx, Xxxxx 00000
24
(c) if to LFI after the Closing, to:
Lifetime Filter, Inc.
c/o ACR Group, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Mr. Xxxx Xxxxxxx, Jr.
(d) if to OFP, to:
X'Xxxxx Family Partnership, Ltd.
0000 Xxxxxx X
Xxxx, Xxxxx 00000
Attention: Xx. Xxxxxxx X'Xxxxx
with a copy to:
Xx. Xxxxxxx Xxxx
Weycer, Kaplan, Pulaski & Xxxxx, P.C.
0000 Xxxxxx Xxxxx
Xxxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000-0000
(e) if to ACRG, to:
ACR Group, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Mr. Xxxx Xxxxxxx, Jr.
with a copy to:
Xx. Xxxxxx X. Xxxx
000 Xxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
8.5 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of the other
parties; provided, however, that ACRG may, without the prior written consent
of X'Xxxxx, LFI or OFP, assign its rights, interests and obligations
hereunder to a corporation controlling or under common control with ACRG, but
ACRG shall not be relieved from liability hereunder. This Agreement is not
intended to and shall not confer upon any person other than the parties any
rights or remedies hereunder.
25
8.6 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Texas (regardless of the laws that might otherwise govern under
applicable Texas principles of conflicts of law) as to all matters, including
but not limited to matters of validity, construction, effect, performance and
remedies.
8.7 JURISDICTION AND VENUE. Any process against ACRG, X'Xxxxx LFI or
OFP in, or in connection with, any suit, action or proceeding arising out of
or relating to this Agreement or any of the transactions contemplated by this
Agreement may be served personally or by certified mail at the address set
forth in Section 8.4 with the same effect as though served on it or him
personally. ACRG and X'Xxxxx, LFI and OFP hereby irrevocably submit in any
suit, action or proceeding arising out of or relating to this Agreement or
any of the transactions contemplated by this Agreement to the jurisdiction
and venue of the United States District Court for the Southern District of
Texas and the jurisdiction and venue of any court of the State of Texas
located in Xxxxxx County and waive any and all objections to jurisdiction or
venue that any of them may have under the laws of Texas or the United States.
8.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.9 INTERPRETATION. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
8.10 ENTIRE AGREEMENT. This Agreement, including the exhibits hereto
and the documents, instruments and schedules referred to herein, and the
provisions of that certain letter agreement by and between S A Capital Group,
Inc. and ACRG dated September 11, 1996 (the "Letter Agreement"), embody the
entire agreement and understanding of the parties hereto in respect of the
subject matter contained herein and therein. There are no restrictions,
promises, representations, warranties, covenants, or undertakings, other than
those expressly set forth or referred to herein or in the Letter Agreement.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter other than the Letter Agreement.
8.11 EXPENSES. Except as otherwise provided in this Agreement, ACRG
shall pay all expenses incurred by ACRG in connection with entering into and
carrying out its obligations pursuant to this Agreement, including all its
attorneys' fees, and OFP shall pay all expenses incurred by X'Xxxxx, LFI and
OFP in connection with entering into and carrying out their obligations
pursuant to this Agreement, including all their attorneys' fees.
8.12 ATTORNEYS' FEES. In the event any party hereto institutes a
lawsuit against any other party hereto for a claim arising out of or to
specifically enforce this Agreement, the losing party shall pay the
reasonable attorneys' fees incurred by the prevailing party in connection
with such lawsuit.
26
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed on its behalf as of the date first above written.
ACR GROUP, INC.
By: /s/ Xxxx Xxxxxxx, Jr.
------------------------------
Xxxx Xxxxxxx, Jr., President
LIFETIME FILTER, INC.
By: /s/ Xxxxxxx X'Xxxxx
------------------------------
Xxxxxxx X'Xxxxx, President
X'XXXXX FAMILY PARTNERSHIP, LTD.
By: RGO, Ltd. Co., General Partner
By: /s/ Xxxxxxx X'Xxxxx
------------------------------
Xxxxxxx X'Xxxxx, President
/s/ Xxxxxxx X'Xxxxx
------------------------------
XXXXXXX X'XXXXX, Individually
27
EXHIBIT A
[ASSETS]
EXHIBIT A
ASSETS
All tangible and intangible assets of OFP used in the normal course of
operating the business of electrostatic filter manufacturing and marketing
(the "Assets"). The Assets to be transferred and delivered shall include
those owned by OFP, whether or not reflected in the partnership's balance
sheet as of the effective date with only changes therein as shall have
occurred in the usual and ordinary course of business between the effective
date and the Closing Date. Without limitation of the foregoing, the Assets
shall include, if any, all machinery, equipment, furniture, fixtures,
supplies, software, goodwill, inventory, materials, cash (as of the effective
date and received thereafter), accounts and notes receivable, contract rights
(to the extent such contracts are assumable) and copies of such contracts,
purchase orders, securities, trading accounts, licenses and applications
therefor, franchises, claims, deposits, prepaid items, all rights and
interests in, to and under any patents, patent applications, trademarks,
trademark registrations and applications therefor, copyrights, copyright
registrations and applications therefor, trade name and other trade rights,
trade secrets, ideas and other know-how, shop rights, permits and other
rights and privileges, copies of all books of account and records, all sales
data, customer lists and data, supplier lists and data, copies of personnel
files, copies of documents related to employee benefits plans, records
relating to the fixed assets of OFP, engineering drawings, cost reports for
pricing and inventory valuation, booking reports, backlog reports, customer
history records, production history and inventory history records, processes,
designs, sketches, drawings manufacturing methods, distribution methods,
materials handling and shipment methods, hedging methods, catalogs,
brochures, sales materials and copies of all documents relating to
environmental and safety requirements. The Assets shall exclude the
partnership books and records and the excluded assets as referred to in
Paragraph 1.1 of the Agreement.
EXHIBIT B
[ASSUMED LIABILITIES]
EXHIBIT B
ASSUMED LIABILITIES
1. Those liabilities enumerated on Schedule B-1 hereto, which are reflected on
the 1996 Balance Sheet, reduced to the extent that such liabilities have
been paid between December 31, 1996 and the Closing Date.
2. Other liabilities incurred in the ordinary course of business of LFM and
OFP between December 31, 1996 and the Closing Date, none of which
constitute a Restricted Activity pursuant to Paragraph 4.9 of this
Agreement.
SCHEDULE B-1
LIFETIME FILTER LIABILITIES AS 12-31-96
Current Liabilities:
Taxes Payable $ 0
Credit Line 0
Notes Payable 4,775.00
Current Portion - Long Term Debt 0
Accounts Payable 26,429.00
Compensation and benefits 10,000.00
Deferred Income 0
Other Accrued Expenses & Liabilities 25,728.00
----------
Total Current Liabilities $66,932.00
Long Term Debt $ 0
Other Liabilities 0
Deferred Income Taxes 0
EXHIBIT C
[FORM OF PROMISSORY NOTE]
$[50% of Total Purchase Price as
defined in Purchase Agreement] Houston, Texas January ___, 1997
FOR VALUE RECEIVED, Lifetime Filter, Inc., a Texas corporation, promises
to pay to the order of X'Xxxxx Family Partnership, Ltd., a Texas limited
partnership, at such place as the holder of this note may hereafter
designate, in immediately available funds and in lawful money of the United
States of America, the principal sum of _________________________ Dollars
($ ), together with interest (i) on the unpaid principal balance of
this note commencing on January 1, 1997 until maturity at the Stated Rate,
and (ii) on all past due amounts, both principal and accrued interest, from
the respective due dates thereof until paid at the Past Due Rate; PROVIDED,
that for the full term of this note the interest rate produced by the
aggregate of all sums paid or agreed to be paid to the holder of this note
for the use, forbearance or detention of the debt evidenced hereby shall not
exceed the Ceiling Rate.
1. DEFINITIONS. As used in this note, the following terms shall have the
respective meanings indicated:
"CEILING RATE" means, on any day, the maximum nonusurious rate of
interest permitted for that day by whichever of applicable federal or Texas
law permits the higher interest rate, stated as a rate per annum. On each
day, if any, that Chapter One establishes the Ceiling Rate, the Ceiling
Rate shall be the "indicated rate ceiling" (as defined in Chapter One) for
that day. Payee may from time to time implement any other ceiling under
Chapter One by notice to Maker, if and to the extent permitted by Chapter
One. Without notice to Maker or any other person or entity, the Ceiling
Rate shall automatically fluctuate upward and downward as and in the amount
by which such maximum nonusurious rate of interest permitted by applicable
law fluctuates.
"CHAPTER ONE" means Chapter One of Title 79, Texas Revised Civil
Statutes, as amended.
"CREDIT DOCUMENTS" means any and all papers now or hereafter
governing, evidencing, guaranteeing or securing or otherwise relating to
all or any part of the indebtedness evidenced by this note, including
without limitation the Security Agreement, the Deed of Trust and this note.
"DEBT" means the indebtedness evidenced by this note and indebtedness
to Payee incurred or evidenced by the Credit Documents.
"DEED OF TRUST" means the Deed of Trust dated concurrently herewith by
and between Maker and J. Xxxxxx Xxxxx, as trustee, for the benefit of
Maker, as the same may be amended, supplemented, restated or replaced from
time to time.
INITIALLED FOR
IDENTIFICATION: ___
Page 1 of 8
"MAKER" means Lifetime Filter, Inc., a Texas corporation.
"OBLIGOR" means any person or entity now or hereafter primarily or
secondarily obligated to pay all or any part of the Debt.
"PAYEE" means X'Xxxxx Family Partnership, Ltd.. a Texas limited
partnership, and any other holder or holders of this note from time to time
and, upon acquisition of this note by any holder or holders other than the
named payee, effective as of the time of such acquisition, the term "Payee"
shall mean all of the then holders of this note, to the exclusion of all
prior holders not then retaining or reserving an interest in this note, to
the end that all the rights, powers, remedies, liens, benefits and
privileges accruing and to accrue hereunder to Payee, as such term is used
herein, shall inure to the benefit of and be owned and held by the holder
or holders of this note from time to time, whether such holder acquires
this note through succession to or assignment from a prior Payee.
"PAST DUE RATE" means, on any day, a rate per annum equal to the
Ceiling Rate for that day.
"PRIME RATE" means, the prime rate on January 1, 1997, and as adjusted
thereafter on the first day of each calendar quarter, as announced from
time to time by NationsBank of Texas, N.A. Without notice to Maker or any
other person or entity, the Prime Rate shall automatically fluctuate upward
and downward on the first day of each calendar quarter thereafter
commencing April 1, 1997, as and in the amount by which said Prime Rate
fluctuates.
"SECURITY AGREEMENT" means the Security Agreement dated concurrently
herewith by and between Maker and Payee, as the same may be amended,
supplemented, restated or replaced from time to time.
"STATED RATE" means a rate per annum equal to the Prime Rate (which
shall be equal to 8.25% on January 1, 1997) plus one percent (1%), and
thereafter fluctuating as determined and adjusted on the first day of each
calendar quarter thereafter commencing April 1, 1997; PROVIDED, that, if on
the first day of such calendar quarter the Prime Rate on such day plus one
percent (1%) shall exceed the Ceiling Rate, the Stated Rate shall be fixed
at the Ceiling Rate. Without notice to Maker or any other person or entity,
the Stated Rate shall automatically fluctuate upward and downward in
accordance with the provisions of this subparagraph.
2. COMPUTATION OF INTEREST. Interest shall be computed for the actual
number of days elapsed in a year consisting of 365 or 366 days, as the case may
be.
3. MANDATORY PAYMENTS OF PRINCIPAL AND INTEREST. Subject to the
provisions of Section 7 hereof, payments of principal each equal to one-twelfth
(1/12th) of the original
INITIALLED FOR
IDENTIFICATION: ___
Page 2 of 8
principal amount of this note (or any substitute note there for, as adjusted
to give effect to payments of principal made on this note prior to issuance
of the substitute note), together with any accrued and unpaid interest on the
unpaid principal balance of this note, shall be due and payable in quarterly
installments commencing April 1, 1997 and continuing on the first day of each
successive calendar quarter thereafter until this note shall have been fully
paid and satisfied; PROVIDED, that on December 31, 1999, the maturity date of
this note, the entire unpaid principal balance of this note and all accrued
and unpaid interest on the unpaid principal balance of this note shall be due
and payable. Maker may at any time pay the full amount or any part of this
note without payment of any premium or fee. All prepayments shall be applied
first to accrued interest, the balance to principal.
4. SECURITY. Maker's obligations under this note are secured by the
Security Agreement of even date herewith made by and between Maker and Payee and
the Deed of Trust. This note is the note referenced in the Security Agreement
and the Deed of Trust. Reference is hereby made to the Security Agreement and
the Deed of Trust for all purposes. Payee is entitled to the benefits of and
security provided for in the Security Agreement and the Deed of Trust.
5. NO USURY INTENDED; SPREADING. Notwithstanding any provision to the
contrary contained in this note or any of the other Credit Documents, it is
expressly provided that in no case or event shall the aggregate of (i) all
interest on the unpaid balance of this note, accrued or paid from the date
hereof and (ii) the aggregate of any other amounts accrued or paid pursuant
to this note or any of the other Credit Documents, which under applicable
laws are or may be deemed to constitute interest upon the indebtedness
evidenced by this note from the date hereof, ever exceed the Ceiling Rate. In
this connection, Maker and Payee stipulate and agree that it is their common
and overriding intent to contract in strict compliance with applicable usury
laws. In furtherance thereof, none of the terms of this note or any of the
other Credit Documents shall ever be construed to create a contract to pay,
as consideration for the use, forbearance or detention of money, interest at a
rate in excess of the Ceiling Rate. Maker or other parties now or hereafter
becoming liable for payment of the indebtedness evidenced by this note shall
never be liable for interest in excess of the Ceiling Rate. If, for any
reason whatever, the interest paid or received on this note during its full
term produces a rate which exceeds the Ceiling Rate, the holder of this note
shall credit against the principal of this note (or, if such indebtedness
shall have been paid in full, shall refund to the payor of such interest)
such portion of said interest as shall be necessary to cause the interest
paid on this note to produce a rate equal to the Ceiling Rate. All sums paid
or agreed to be paid to the holder of this note for the use, forbearance or
detention of the indebtedness evidenced hereby shall, to the extent permitted
by applicable law, be amortized, prorated, allocated and spread in equal
parts throughout the full
INITIALLED FOR
IDENTIFICATION: ___
Page 3 of 8
term of this note, so that the interest rate is uniform throughout the full
term of this note. The provisions of this Section 5 shall control all
agreements, whether now or hereafter existing and whether written or oral,
between Maker and Payee.
6. DEFAULT. Subject to the provisions of Section 7 hereof, the
occurrence of any of the following events shall constitute default under this
note, whereupon the owner or holder hereof may, at its, his or her option,
exercise any or all rights, powers and remedies afforded under the Security
Agreement, the Deed of Trust or any of the Credit Documents and by law,
including the right to declare the unpaid balance of principal and accrued
interest on this note at once mature and payable:
(a) any part of the Debt is not paid when due, whether by lapse of time
or acceleration or otherwise, unless Payee declares the default fully
cured to Payee's satisfaction within ten (10) calendar days after such
due date.
(b) any Obligor fails to perform, observe or comply with, or defaults
under, any of the material terms, covenants, conditions or provisions
contained in this note or any other Credit Documents (other than any
such failure or default described in one of the other subsections of
this section) unless Payee declares the failure or default fully cured
to Payee's satisfaction within thirty (30) calendar days after Payee
has given Maker written notice thereof (such grace period to run
concurrently with, and not in addition to, any other grace periods
provided for in any other Credit Documents with respect to the same
default).
(c) any Obligor: (i) commences a voluntary case in bankruptcy or a
voluntary petition seeking reorganization or to effect a plan or other
arrangement with creditors; (ii) makes an assignment for the benefit
of creditors; (iii) applies for or consents to the appointment of any
receiver or trustee for any such party or for any substantial portion
of its property; or (iv) makes an assignment to an agent authorized to
liquidate any substantial part of its assets.
(d) in respect of any Obligor: (i) an involuntary case shall be commenced
with any court or other authority seeking liquidation, reorganization
or a creditor's arrangement of any such party, and such action shall
not have been dismissed within sixty (60) days after its filing; or
(ii) an order of any court or other authority shall be entered
appointing any receiver or trustee for any such party or for any
substantial portion of its property.
INITIALLED FOR
IDENTIFICATION: ___
Page 4 of 8
7. SUBORDINATION. Payee agrees that no payment other than regularly
scheduled payments of principal and interest due on this note shall be made
by Maker without the prior written consent of NationsBank of Texas, N.A..
secured lender (or such successor lender thereto) (the "Senior Lender") of
ACR Group, Inc., a Texas corporation and parent company of Maker ("ACRG") to
which ACRG may be indebted from time to time (the "Senior Indebtedness").
Payee further agrees that no payments whatsoever shall be received on this
note, and no action with respect to the collateral securing this note shall
be taken, during the period of ninety (90) consecutive days after the date on
which the Senior Indebtedness shall be declared by the Senior Lender to be in
default. Thereafter, Payee may take action in respect of a default on this
note or the collateral securing this note without regard to any declared
default by the Senior Lender on the Senior Indebtedness; PROVIDED, however,
that Payee shall take no such action so long as there is no default in the
payment of the Debt. Should such a default by ACRG on the Senior Indebtedness
be cured by ACRG or waived by the Senior Lender, the payment obligations of
Maker hereunder shall be reinstated, until the occurrence of a subsequent
default on the Senior Indebtedness, and Maker shall pay to Payee on the next
scheduled installment payment date hereunder all amounts regularly scheduled
to be due on such installment payment date along with all amounts that would
have been paid by Maker to Payee hereunder during the period of default on
the Senior Indebtedness had the subordination provisions of the preceding
sentence not been in effect. This note is subject to the terms of a
Subordination Agreement among the Senior Lender, ACRG and Payee.
8. NO WAIVER BY PAYEE. No delay or omission of Payee or any other
holder hereof to exercise any power, right or remedy accruing to Payee or any
other holder hereof shall impair any such power, right or remedy or shall be
construed to be a waiver of the right to exercise any such power, right or
remedy.
9. COSTS AND ATTORNEYS' FEES. If any holder of this note retains an
attorney in connection with any default or to collect, enforce or defend
this note or any of the Credit Documents in any lawsuit or in any probate,
reorganization, bankruptcy or other proceeding, or if Maker sues any holder
in connection with this note or any of the Credit Documents and does not
prevail, then Maker agrees to pay to each such holder, in addition to
principal and interest, all reasonable costs and expenses incurred by such
holder in trying to collect this note or in any such suit or proceeding,
including reasonable attorneys' fees. An amount equal to ten percent (10%) of
the unpaid principal and accrued interest owing on this note when and if this
note is placed in the hands of an attorney for collection after default is
stipulated to be reasonable attorneys' fees unless a holder or Maker timely
pleads otherwise to a court of competent jurisdiction.
INITIALLED FOR
IDENTIFICATION: ___
Page 5 of 8
10. WAIVER BY MAKER AND OTHERS. Except for any notices which are
specifically required by another provision of this note or any of the other
Credit Documents, Maker and any and all endorsers, guarantors and sureties
severally waive notice (including, but not limited to, notice of intent to
accelerate and notice of acceleration, notice of protest and notice of
dishonor), demand, presentment for payment, protest, diligence in collecting
and the filing of suit for the purpose of fixing liability and consent that
the time of payment hereof may be extended and reextended from time to time
without notice to any of them. Each such person agrees that his, her or its
liability on or with respect to this note shall not be affected by any
release of or change in any guaranty or security at any time existing or by
any failure to perfect or maintain perfection of any lien against or security
interest in any such security or the partial or complete unenforceability of
any guaranty or other surety obligation, in each case in whole or in part,
with or without notice and before or after maturity.
11. VENUE: CHOICE OF LAW. This note shall be governed by and construed
in accordance with the laws of the State of Texas and the United States of
America from time to time in effect. Xxxxxx County, Texas shall be a proper
place of venue for suit hereon. Maker and any and all co-makers, endorsers,
guarantors and sureties irrevocably agree that any legal proceedings in
respect of this note or any other Credit Document shall be brought in the
district courts of Xxxxxx County, Texas, or the United States District Court
for the Southern District of Texas, Houston Division. Maker hereby
irrevocably submits to the nonexclusive jurisdiction of the state and federal
courts of the State of Texas. Maker hereby irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to
the laying of venue of any suit, action or proceeding arising out of or
relating to this note or any of the Credit Documents brought in the district
courts of Xxxxxx County, Texas, or the United States District Court for the
Southern District of Texas, Houston Division.
12. BUSINESS PURPOSES. Maker warrants and represents to Payee and all
other holders of this note that the loan evidenced by this note is and will
be for business, commercial, investment or other similar purpose and not
primarily for personal, family, household or agricultural use, as such terms
are used in Chapter One of the Texas Credit Code.
13. SUCCESSORS AND ASSIGNS. This note and all the covenants and
agreements contained herein shall be binding upon, and shall inure to the
benefit of, the respective legal representatives, heirs, successors and
assigns of Maker and Payee.
14. SEVERABILITY. If any provision of this note is held to be illegal,
invalid or unenforceable under present or future laws, the legality, validity
and enforceability of the remaining provisions of this note shall not be
affected thereby, and this note shall be liberally
INITIALLED FOR
IDENTIFICATION: ___
Page 6 of 8
construed so as to carry out the intent of the parties to it.
15. NOTICES. Any notice, request or other communication required or
permitted to be given hereunder shall be given in writing by depositing it
with an overnight delivery service or by depositing it in a receptacle
maintained by the United States Postal Service, postage prepaid, registered
or certified mail, return receipt requested, addressed to the respective
parties as follows (and if so given, shall be deemed given when mailed):
If to Maker:
Lifetime Filter, Inc.
c/o ACR Group, Inc.
0000 Xxxxxxxx. Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Mr. Xxxx Xxxxxxx, Jr.
If to Payee:
X'Xxxxx Family Partnership, Ltd.
0000 Xxxxxx X
Xxxx, Xxxxx 00000
Attn: Xx. Xxxxxxx X'Xxxxx
Maker's address for notice may be changed at any time and from time to time,
but only after thirty (30) days' advance written notice to Payee and shall be
the most recent such address furnished in writing by Maker to Payee. Payee's
address for notice may be changed at any time and from time to time, but only
after ten (10) days' advance written notice to Maker and shall be the most
recent such address furnished in writing by Payee to Maker. Actual notice,
however and from whomever given or received, shall always be effective when
received.
16. ENTIRE AGREEMENT. This note and the other Credit Documents embody
the entire agreement and understanding between Payee and Maker and other
parties with respect to their subject matter and supersede all prior
conflicting or inconsistent agreements, consents and understandings relating
to such subject matter. Maker acknowledges and agrees that there is no oral
agreement between Maker and Payee which has not been incorporated in this
note or the other Credit Documents.
INITIALLED FOR
IDENTIFICATION: ___
Page 7 of 8
THIS NOTE AND ALL OF THE OTHER CREDIT DOCUMENTS EXECUTED BY ANY OF THE
PARTIES SUBSTANTIALLY CONCURRENTLY HEREWITH TOGETHER CONSTITUTE A WRITTEN
LOAN AGREEMENT WHICH 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.
MAKER: LIFETIME FILTER, INC.,
a Texas corporation
By:
-----------------------------
Xxxx Xxxxxxx, Jr., President
Page 8 of 8
EXHIBIT D
[GUARANTY]
GUARANTY
THIS GUARANTY (this "Guaranty") is executed and delivered effective as
of this ____ day of January, 1997, by ACR GROUP, INC., a Texas corporation
("Guarantor"), in favor of X'XXXXX FAMILY PARTNERSHIP, LTD., a Texas limited
partnership ("OFP").
WHEREAS, Guarantor desires to guarantee to OFP payment of certain
obligations, upon the terms and conditions set forth below.
NOW, THEREFORE, in consideration of ten dollars ($10.00) and other good
and valuable consideration, Guarantor hereby agrees as follows:
1. Guarantor hereby agrees to and does guarantee the full, prompt and
punctual payment of any and all payment obligations of LIFETIME FILTER, INC,
a Texas corporation and wholly owned subsidiary of Guarantor ("Debtor"), to
OFP which may arise as a result of the failure by Debtor to repay certain
indebtedness (the "Debt") owed by Debtor to OFP as evidenced by that certain
promissory note in the original principal amount of $___________ (The
"Note"), dated January 24, 1997, upon the terms and conditions contained in
the Note. This Guaranty shall be conditioned upon demand by OFP upon Debtor
for payment, which demand shall not have been satisfied within thirty (30)
days after such demand. Subject to the foregoing, this Guaranty is
irrevocable and absolute and if for any reason all or any portion of the Debt
shall not be paid when due, Guarantor will immediately pay the Debt to OFP.
2. Guarantor hereby agrees, upon request from time to time by OFP or
any subsequent holder of the Note, to provide to OFP or any subsequent holder
of the Note a copy of the loan agreement and all ancillary documents thereto
and any modifications thereof made by and between NationsBank of Texas, N.A.
(or such successor lender thereto) and Guarantor evidencing the indebtedness
of Guarantor to such lender (the "Senior Indebtedness"). Further, Guarantor
hereby agrees to notify OFP or any subsequent holder of the Note promptly in
the event of a declared default by Guarantor under the Senior Indebtedness
which prohibits any action by OFP or any subsequent holder of the Note in
collecting any amounts due under the Note. Additionally, Guarantor hereby
agrees to use its best efforts to cure any declared default on the Senior
Indebtedness.
3. Failure by Guarantor to pay any part of the Debt when due, subject
to the terms of this Guaranty, shall constitute default under this Guaranty.
4. Guarantor's agreements and obligations under this Guaranty shall in
no way be released, diminished, reduced, impaired or otherwise affected by
extension of time for payment of or any other alteration of the Debt, by
settlement or compromise of any or all of the Debt, or by occurrence of any
other event or circumstances which might otherwise constitute a defense
available to, or discharge of, Guarantor.
Page 1 of 2
5. This Guaranty shall be governed by the laws of the State of Texas
(without regard to any conflict-of-law provisions thereof).
6. This Guaranty shall not be changed orally but shall be changed only
be agreement in writing signed by Guarantor and OFP. Any consent with respect
to this Guaranty shall be effective only in the specific instance and for the
specific purpose of which given. No course of dealing between the parties, no
usage of trade and no parol or extrinsic evidence of any nature shall be used
to supplement or modify any of the terms or provisions of this Guaranty.
7. If any provision of this Guaranty is held to be illegal, invalid or
unenforceable under present or future laws, the legality, validity and
enforceability of the remaining provisions of this Guaranty shall not be
affected thereby, and this Guaranty shall be liberally construed so as to
carry out the intent of the parties hereto.
8. This Guaranty, together with any papers now or in the future
governing, evidencing, securing or otherwise relating to payment of all or
any part of the Debt, or any amendments, restatements, renewals, extensions,
rearrangements increases expansions, or replacements of them (the "Credit
Documents"), embodies the entire agreement and understanding between
Guarantor and OFP with respect to its agreements, consents and understandings
relating to such subject matter. Guarantor acknowledges and agrees that there
are no oral agreements between Guarantor and OFP which have not been
incorporated in this Guaranty or the other Credit Documents.
9. This Guaranty shall inure to the benefit of OFP and its successor
and assigns.
EXECUTED on the day and year first written above.
ACR GROUP, INC.
By:
-----------------------------
Xxxx Xxxxxxx, Jr., President
Page 2 of 2
EXHIBIT E
[SUBORDINATION AGREEMENT]
SUBORDINATION AGREEMENT
NATIONSBANK OF TEXAS, N.A.
000 Xxxxxxxxx
Xxxxxxx, Xxxxx 00000
Gentlemen:
You are hereby advised that LIFETIME FILTER. INC., a Texas corporation
("LFI"). a wholly-owned subsidiary of ACR GROUP, INC., a Texas corporation
("ACRG"), has executed that certain promissory note in the amount of
$1,280,662.00 payable to X'Xxxxx Family Partnership, Ltd., a Texas limited
partnership ("OFP"), a copy of which is attached hereto as EXHIBIT A (the
"Note") and which shall not be amended without your consent.
The undersigned acknowledges that you have agreed to provide financing
to ACRG and that you have indicated your concern regarding your status as a
holder of debt of ACRG if the debt of the undersigned is not subordinated to
your debt. as renewed, extended or increased from time to time (the "Loan").
You have indicated that the Note is satisfactory to you to subordinate the
debt of LFI to OFP to you.
Therefore, to induce you in your discretion to advance funds to ACRG, in
such manner, upon such terms and for such amounts as may be mutually
agreeable to you and ACRG the undersigned hereby agrees that the Note will
not be modified. other than as modified pursuant to Sections 1.4 and 1.6 of
that certain Purchase Agreement dated effective as of January 1, 1997, by and
among ACRG, Xxxxxxx X'Xxxxx, LFI and OFP (the "Purchase Agreement"), as such
Sections provide as of the date hereof, without your prior written consent
and agrees to comply with the terms of such Note, including without
limitation, the restrictions on prepayment and restrictions upon payment upon
the occurrence of a default with respect to the Loan.
Dated: January 24, 1997 Very truly yours,
X'XXXXX FAMILY PARTNERSHIP,
LTD.
By: RGO, Ltd. Co., general partner
By:
-----------------------------
Xxxxxxx X'Xxxxx', President
We hereby acknowledge receipt of a copy of the foregoing Subordination
Agreement and agree that we will not pay any indebtedness thereby
subordinated except in accordance with the Note. We further agree we will not
agree to amend the Note, other than as modified pursuant to the Purchase
Agreement, without your prior written consent.
LIFETIME FILTER, INC.
By:
-----------------------------
Xxxx Xxxxxxx, Jr., President
By execution below, we hereby agree to any substitution of the Note, as
provided in Sections 1.4 and 1.6 of the Purchase Agreement, subject to the
provisions of this Subordination Agreement.
NATIONSBANK OF TEXAS, N.A.
By:
-----------------------------
,
---------------- -----------
2
EXHIBIT A
[NOTE]
EXHIBIT F
[SECURITY AGREEMENT]
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is made effective the ____ day of
January, 1997, by and between Lifetime Filter, Inc., a Texas corporation (The
"Debtor"), and X'Xxxxx Family Partnership, Ltd., a Texas limited partnership
(the "Secured Party"). Debtor and Secured Party agree as follows:
Section 1. INDEBTEDNESS. The security interest granted pursuant to Section
2 hereof secures the prompt and unconditional payment of the indebtedness
evidenced by that certain promissory note executed by Debtor payable to Secured
Party dated January 24, 1997 in the original principal amount of $_____________
together with all renewals, extensions, rearrangements or substitutions thereof,
if any, whether evidenced by any note or other instrument or agreement,
modifications, and replacements thereof (in whole or in part) (the "Note"). The
indebtedness evidenced by the Note shall be referred to herein as the "Secured
Indebtedness".
Section 2. GRANT OF SECURITY INTEREST; COLLATERAL. In order to secure the
prompt and unconditional payment of the Secured Indebtedness and the performance
of the obligations, covenants, agreements and undertakings herein described,
Debtor hereby grants to Secured Party a security interest in and mortgages,
assigns, transfers, delivers, pledges, sets over and confirms to Secured Party
all of Debtor's remedies, powers, privileges, rights, titles and interests
(including all power of Debtor, if any, to pass greater title than it has
itself) of every kind and character now owned or hereafter acquired, created or
arising in and to the following:
Accounts
(i) all accounts, receivables, accounts receivable, general intangibles
regardless of form (including all choses or things in action, trade
names, trademarks, patents, patents pending, infringement claims,
service marks, licenses, copyrights, blueprints, drawings, plans,
diagrams, schematics, computer programs, computer tapes, computer
discs, reports, catalogs, customer lists, purchase orders, goodwill,
route lists, monies due or recoverable from pension funds, tax
refunds and all rights to any of the foregoing), book debts,
contracts rights and rights to payment no matter how evidenced;
(ii) all chattel paper, notes, drafts, acceptances, payments under leases
of equipment or sale of inventory, and other forms of obligations
received by or belonging to Debtor for goods sold or leased and/or
services rendered by Debtor;
(iii) all purchase orders, instruments and other documents (including all
documents of title) evidencing obligations to Debtor, including those
for or representing obligations for goods sold or leased and/or
services rendered by Debtor;
(iv) all monies due or to become due to Debtor under all contracts,
including those for the sale or lease of goods and/or performance of
services by Debtor no matter how evidenced and whether or not earned
by performance;
(v) all accounts, receivables, accounts receivable, contract rights, and
general intangibles arising as a result of Debtor's having paid
accounts payable (or having had goods sold to or leased to Debtor or
services performed for Debtor giving rise to accounts payable) which
accounts payable were paid for or were incurred by Debtor on behalf
of any third parties pursuant to an agreement or otherwise;
(vi) all goods, the sale and delivery of which give rise to any of the
foregoing, including any such goods which are returned to Debtor for
credit;
Inventory
all goods, merchandise, raw materials, work in process, finished goods, and
other tangible personal property of whatever nature now owned by Debtor or
hereafter from time to time existing or acquired, wherever located and held
for sale or lease, including those held for display or demonstration or out
on lease or consignment, or furnished or to be furnished under contracts of
service or used or usable or consumed or consumable in Debtor's business or
which are finished or unfinished goods and all accessions and appurtenances
thereto, together with all warehouse receipts and other documents
evidencing any of the same and all containers, packing, packaging, shipping
and similar materials;
Equipment
all goods, equipment, machinery, furnishings, fixtures, furniture,
appliances, accessories, leasehold improvements, chattels and other
articles of personal property of whatever nature (whether or not the same
constitute fixtures) now owned by Debtor or hereafter acquired, and all
component parts thereof and all appurtenances thereto;
all accessions, appurtenances and additions to and substitutes for any of
the foregoing and all products and proceeds of any of the foregoing,
together with all renewals and replacements of any of the foregoing, all
accounts, receivables, accounts receivables, instruments, notes, chattel
paper, documents (including all documents of title), books, records,
contract rights and general intangibles arising in connection with any of
the foregoing (including all insurance and claims for insurance affected or
held for the benefit of Debtor or Secured Party in respect of the
foregoing) and together with all general intangibles now owned by Debtor or
existing or hereafter acquired, created or arising (whether or not related
to any of the foregoing property).
2
Other
The balance of every deposit account (general, special, timed, provisional
or final) now or hereafter existing, of Debtor and Debtor with third
parties, and all letters of credit, certificates of deposit and any other
accounts (in whatever character same may appear) and upon all interest and
earnings which may at any time be on deposit with, or held by, or due from
or at any time credited by or due from third parties in the name of Debtor,
and all money, credits, proceeds, income and profits arising, directly or
indirectly, in connection with any and all of the foregoing.
All of the properties and interest described above are herein collectively
called the "Collateral". The inclusion of proceeds does not authorize Debtor to
sell, dispose of or otherwise use the Collateral in any manner not authorized
herein.
Section 3. SUBORDINATION. Notwithstanding any other provision contained
in this Agreement, Secured Party acknowledges and agrees that the security
interest granted pursuant to this Agreement is subordinate and inferior to the
security interest in the Collateral in favor of NationsBank of Texas, N.A. (the
"Lender"), as further provided in the Note.
Section 4. PAYMENT OF SECURED INDEBTEDNESS.
4.1 DIRECT OBLIGATIONS. Debtor shall pay to Secured Party any sum or sums
due or which may become due to Secured Party and which is secured hereby.
4.2. EXPENSES. Debtor shall pay to Secured Party on demand all expenses
and expenditures, including reasonable attorneys' fees and other legal expenses
incurred or paid by any Lender or Secured Party in exercising or protecting the
interests, rights and remedies of Secured Party under this Agreement.
Section 5. EVENTS OF DEFAULT. Debtor shall be in default under this
Agreement upon the happening of any of the following events or conditions
("Event of Default"):
(a) any part of the Secured Indebtedness is not paid when due, whether by
lapse of time or acceleration or otherwise, unless Secured Party
declares the default fully cured to Secured Party's satisfaction
within ten (10) calendar days after such due date.
(b) the Debtor or any obligor under the Note fails to perform, observe or
comply with, or defaults under, any of the material terms, covenants,
conditions or provisions contained in the Note, this Agreement, the
Deed of Trust dated concurrently herewith by and between Debtor and
J. Xxxxxx Xxxxx, as trustee, for the benefit of Secured Party, as the
same may be amended, supplemented, restated or replaced from time to
time or any other documents related thereto
3
(collectively, the "Credit Documents") (other than such failure
or default described in one of the other subsections of this
Section 5) unless the Secured Party declares the failure or
default fully cured to the Secured Party's satisfaction within
thirty (30) calendar days after Secured Party has given Debtor
written notice thereof (such grace period to run concurrently
with, and not in addition to, any other grace periods provided
for in any other Credit Documents with respect to the same
default).
(c) any Obligor: (i) commences a voluntary case in bankruptcy or a
voluntary petition seeking reorganization or to effect a plan or
other arrangement with creditors; (ii) makes an assignment for the
benefit of creditors; (iii) applies for or consents to the
appointment of any receiver or trustee for any such party or for any
substantial portion of its property; or (iv) makes an assignment to
an agent authorized to liquidate any substantial part of its assets.
(d) in respect of any Obligor: (i) an involuntary case shall be commenced
with any court or other authority seeking liquidation, reorganization
or a creditor's arrangement of any such party, and such action shall
not have been dismissed within sixty (60) days after its filing; or
(ii) an order of any court or other authority shall be entered
appointing any receiver or trustee for any such party or for any
substantial portion of its property.
Section 6. SECURED PARTY'S RIGHTS AND REMEDIES.
6.1 RIGHTS IN EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default, and at any time
thereafter, Secured Party may declare the Secured Indebtedness immediately due
and payable and shall have the rights and remedies of a secured party under the
Texas Business and Commerce Code, as amended, and under other applicable laws of
each state having jurisdiction over the Collateral or any part thereof,
including without limitation thereto, the right to sell, lease or otherwise
dispose of any or all of the Collateral and the right to take possession of the
Collateral, and for that purpose Secured Party may enter upon any premises on
which the Collateral or any part thereof may be situated and remove the
Collateral or books and records evidencing same, or may require Debtor to
assemble the Collateral and make it available to Secured Party at a place to be
designated by Secured Party which is reasonably convenient to both parties.
Unless the Collateral is perishable or threatens to decline speedily in value or
is of a type customarily sold on a recognized market, Secured Party will send
Debtor reasonable notice of the time and place of any public sale thereof or of
the time after which any private sale or other disposition thereof is to be
made. The requirement of sending reasonable notice shall be met if such notice
is mailed, postage prepaid, to Debtor at the address designated in this
Agreement at least ten (10) days before the time of the sale of disposition.
Expenses of retaking, holding, preparing for sale, selling or the like shall
include Secured Party's reasonable attorneys' fees and legal expenses, plus
interest thereon at the maximum non-usurious rate permitted by applicable law
4
with respect to Debtor, Debtor shall remain liable for any deficiency.
Any amounts held, realized or received by Secured Party' from any sale or
other disposition of the Collateral or any part thereof, and all amounts
received by Secured Party pursuant to collection of accounts shall be applied by
Secured Party in the following order to:
(1) All costs, expenses and liabilities of Secured Party (including
attorneys' fees and expenses) incurred in connection with the
exercise of Secured Party's rights under this Agreement or
protecting its interest in the Collateral; and then
(2) the payment of all Secured Indebtedness.
(b) Secured Party may remedy any default and may waive any default
without waiving the default remedied or without waiving any other prior or
subsequent default.
(c) The remedies of Secured Party hereunder are cumulative, and the
exercise of any one or more of the remedies provided for herein shall not be
construed as a waiver of any of the other remedies of Secured Party.
(d) NOTHING IN THIS AGREEMENT IS INTENDED TO PREVENT DEBTOR OR SECURED
PARTY FROM RESORTING TO JUDICIAL PROCESS AT EITHER PARTY'S OPTION.
(e) Debtor agrees that, in performing any act under this Agreement, time
shall be of the essence and that Secured Party's acceptance of a partial or
delinquent payment or payments, or the failure of Secured Party to exercise any
right or remedy shall not be a waiver of any obligation of Debtor hereunder or
any right of Secured Party or constitute a waiver of any other similar default
subsequently occurring.
Section 7. REPRESENTATIONS AND WARRANTIES.
7.1 CAPACITY. The execution, delivery and performance of this Agreement
are within Debtor's powers, have been duly authorized by all necessary and
appropriate action, and are not in contravention of any law or the terms of
Debtor's Articles of Organization or any amendment thereto, or of any indenture,
agreement, undertaking or other document to which Debtor is a party or by which
Debtor or any of Debtor's property is bound or affected.
7.2 TITLE TO COLLATERAL. Debtor is the owner of the Collateral, free of
all security interests, mortgages, liens and other encumbrances except for the
security interest granted to Secured Party under this Agreement and the security
interest granted to Lender as described in Section 3 of this Agreement, and
Debtor has the unconditional authority to grant the security interest to Secured
Party pursuant to this Agreement, subject to the provisions of Section 3 hereof.
5
7.3 VALIDITY OF THE AGREEMENT. This Agreement constitutes the legal,
valid and binding obligation of Debtor enforceable in accordance with the terms
hereof, except as enforceability may be limited by applicable bankruptcy and
insolvency laws and laws affecting creditor's rights generally.
Section 8. ADDITIONAL AGREEMENTS.
8.1 FURTHER ACTIONS BY DEBTOR. Debtor shall, on request by Secured Party,
execute, acknowledge, deliver and record or file such further instruments and to
do such further acts as may be necessary, desirable or proper to carry out more
effectively the purposes of this Agreement, including specifically any renewals,
extensions, rearrangements or substitutions of the Note.
8.2 INSURANCE. Debtor shall maintain insurance on the Collateral in
responsible companies in such amounts and against such risks as is usually
carried by owners of similar businesses and properties in the same general areas
in which Debtor operates. Upon the request of Secured Party, Debtor shall
furnish Secured Party a schedule setting forth in reasonable detail the
insurance coverage maintained by Debtor on the Collateral. All such insurance
policies shall contain endorsements showing Secured Party as an additional
insured, as its interests may appear.
8.3 PARTIES. "Secured Party" and "Debtor" as used in this Agreement
include successors, representatives, receivers, trustees and assigns of those
parties.
8.4 SECTION HEADINGS. The section headings appearing in this Agreement
have been inserted for convenience only and shall be given no substantive
meaning or significance whatever in construing the terms and provisions of this
Agreement.
8.5 DEFINED TERMS. Terms used in this Agreement which are defined in the
Texas Business and Commerce Code, as amended, are used with the meanings as
therein defined.
8.6 APPLICABLE LAW: PLACE OF PAYMENT. The law governing this Agreement
shall be that of The State of Texas in force at the date of this Agreement, and
all payments and obligations shall be made and performed in Houston, Xxxxxx
County, Texas, unless otherwise agreed.
8.7 SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable, such provision shall be fully severable, and
the remaining provisions of this Agreement shall be in full force and effect.
6
DATED January ___, 1997.
DEBTOR: LIFETIME FILTER. INC.
------ a Texas corporation
By:
-------------------------------
Xxxx Xxxxxxx, Jr., President
SECURED PARTY: X'XXXXX FAMILY PARTNERSHIP, LTD.,
------------- a Texas limited partnership
By: RGO, Ltd. Co., a Texas limited liability
company, General Partner
By:
-------------------------------
Xxxxxxx X'Xxxxx, President
7
EXHIBIT G
[DEED OF TRUST]
DEED OF TRUST
Date: January ____, 1997
Grantor: Lifetime Filter, Inc., a Texas corporation
Grantor's Mailing Address (including county):
c/o ACR Group, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxx Xxxxxx, Xxxxx 00000
Trustee: J. Xxxxxx Xxxxx
Trustee's Mailing Address (including county):
c/o Weycer, Kaplan, Pulaski & Xxxxx, P.C.
0000 Xxxxxx Xxxxx
Xxxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxx Xxxxxx, Xxxxx 00000-0000
Beneficiary: X'Xxxxx Family Partnership, Ltd., a Texas limited partnership
Beneficiary's Mailing Address (including county):
0000 Xxxxxx X
Xxxx, Xxxxx 00000
Note:
Date: January ____, 1997
Amount:
---------------------------------
Maker: Lifetime Filter, Inc.
Payee: X'Xxxxx Family Partnership, Ltd.
Final Maturity Date: December 31, 1999
1
Property (including any improvements):
A tract of land containing 1.798 acres, more or less, located in and
being a part of the HT & C Railroad Co. Survey, AKA The X.X.
McCutcheson Survey, Abstract No. 1348, Xxxxxx County, Texas and being
more particularly described by metes and bounds on EXHIBIT A attached
hereto and made a part hereof.
Prior Lien(s) (including recording information):
None
Other Exceptions to Conveyance and Warranty:
None
For value received and to secure payment of the note, Grantor conveys the
property to Trustee in trust. Grantor warrants and agrees to defend the title
to the property. If Grantor performs all the covenants and pays the note
according to its terms, this deed of trust shall have no further effect, and
Beneficiary shall release it at Grantor's expense.
GRANTOR'S OBLIGATIONS
Grantor agrees to:
1. keep the property in good repair and condition;
2. pay all taxes and assessments on the property when due;
3. preserve the lien's priority as it is established in this deed of
trust;
4. maintain, in a form acceptable to Beneficiary, an insurance
policy that:
a. covers all improvements for their full insurable value as
determined when the policy is issued and renewed, unless
Beneficiary approves a smaller amount in writing;
b. provides fire and extended coverage, including windstorm
coverage;
c. protects Beneficiary with a standard mortgage clause;
d. provides flood insurance at any time the property is in a
flood hazard area; and
5. upon request by the Beneficiary, deliver the insurance policy to
Beneficiary and deliver renewals to Beneficiary at least ten days
before expiration;
6. keep any buildings occupied as required by the insurance policy;
and
7. if this is not a first lien, pay all prior lien notes that
Grantor is personally liable to pay and abide by all prior lien
instruments.
BENEFICIARY'S RIGHTS
1. Beneficiary may appoint in writing a substitute or successor
trustee, succeeding to all rights and responsibilities of
Trustee.
2
2. If the proceeds of the note are used to pay any debt secured by
prior liens, Beneficiary is subrogated to all of the rights and
liens of the holders of any debt so paid.
3. Beneficiary may apply any proceeds received under the insurance
policy either to reduce the note or to repair or replace damaged
or destroyed improvements covered by the policy.
4. If Grantor fails to perform any of Grantor' obligations,
Beneficiary may perform those obligations and be reimbursed by
Grantor on demand at the place where the note is payable for any
sums so paid, including attorney's fees, plus interest on those
sums from the dates of payment at the rate stated in the note for
matured, unpaid amounts. The sum to be reimbursed shall be
secured by this deed of trust.
5. If Grantor defaults on the note or fails to perform any of
Grantor's obligations or if default occurs on a prior lien, note
or other instruments, and the default continues after Beneficiary
gives Grantor notice of default and the time within which it must
be cured, as may be required by law or by written agreement, then
Beneficiary may:
a. declare the unpaid principal balance and earned interest in
the note immediately due;
b. request Trustee to foreclose this lien, in which case
Beneficiary or Beneficiary's agent shall give notice of the
foreclosure sale as provided by the Texas Property Code as
then amended; and
c. purchase the property at any foreclosure sale by offering
the highest bid and then have the bid credited on the note.
TRUSTEE'S DUTIES
If requested by Beneficiary to foreclose this lien, Trustee shall:
1. either personally or by agent give notice of the foreclosure sale
as required by The Texas Property Code as then amended;
2. sell and convey all or part of the property to the highest bidder
for cash with a general warranty binding Grantor, subject to
prior liens and to other exceptions to conveyance and warranty;
and
3. from the proceeds of the sale, pay, in this order:
a. expenses of foreclosure, including a commission to Trustee
of 5% of the bid;
b. to Beneficiary, the full amount of principal, interest,
attorney's fees and other charges due and unpaid;
c. any amounts required by law to be paid before payment to
Grantor; and
d. to Grantor, any balance.
GENERAL PROVISIONS
1. If any of the property is sold under this deed of trust, Grantor
shall immediately surrender possession to the purchaser. If
Grantor fails to do so, Grantor shall
3
become a tenant at sufferance of the purchaser, subject to an
action for forcible detainer.
2. Recitals in any Trustee's deed conveying the property will be
presumed to be true.
3. Proceeding under this deed of trust, filing suit for foreclosure,
or pursuing any other remedy will not constitute an election of
remedies.
4. This lien shall remain superior to liens later created even if
the time of payment of all or part of the note is extended or
part of the property is released.
5. If any portion of the note cannot be lawfully secured by this
deed of trust, payments shall be applied first to discharge that
portion.
6. Grantor assigns to Beneficiary all sums payable to or received by
Grantor from condemnation of all or part of the property, from
private sale in lieu of condemnation, and from damages caused by
public works or construction on or near the property. After
deducting any expenses incurred, including attorney's fees,
Beneficiary may release any remaining sums to Grantor or apply
such sums to reduce the note. Beneficiary shall not be liable
for failure to collect or to exercise diligence in collecting any
such sums.
7. Grantor assigns to Beneficiary absolutely, not only as
collateral, all present and future rent and other income and
receipts from the property. Leases are not assigned. Grantor
warrants the validly and enforceability of the assignment.
Grantor may as Beneficiary's licensee collect rent and other
income and receipts so long as Grantor is not in default under
the note or this deed of trust. Grantor will apply all rent and
other income and receipts to payments of the note and performance
of this deed of trust, but if the rent and other income and
receipts exceed the amount due under the note and the deed of
trust, Grantor may retain the excess. If Grantor defaults in
payment of the note or performance of this deed of trust,
Beneficiary may terminate Grantor's license to collect and then
as Grantor's agent may rent the property if it is vacant and
collect all rent and other income and receipts. Beneficiary
neither has nor assumes any obligations as lessor or landlord
with respect to any occupant of the property. Beneficiary may
exercise Beneficiary's rights and remedies under this paragraph
without taking possession of the property. Beneficiary shall
apply all rent and other income and receipts collected under this
paragraph first to expenses incurred in exercising Beneficiary's
rights and remedies and then to Grantor's obligations under the
note and this deed of trust in the order determined by
Beneficiary. Beneficiary is not required to act under this
paragraph, and acting under this paragraph does not waive any of
Beneficiary's other rights or remedies. If Grantor becomes a
voluntary or involuntary bankrupt, Beneficiary's filing a proof
of claim in bankruptcy will be tantamount to the appointment of a
receiver under Texas law.
8. Interest on the debt secured by this deed of trust shall not
exceed the maximum amount of nonusurious interest that may be
contracted for, taken, reserved, charged, or received under law;
any interest in excess of that maximum amount shall be credited
on the principal of the debt or, if that has been paid, refunded.
On any acceleration or required or permitted prepayment, any such
excess shall
4
be canceled automatically as of the acceleration or prepayment
or, if already paid, credited on the principal of the debt or,
if the principal of the debt has been paid, refunded. This
provision overrides other provisions in this and all other
instruments concerning the debt.
9. When the context requires, singular nouns and pronouns include
the plural.
10. The term NOTE includes all sums secured by this deed of trust.
11. This deed of trust shall bind, inure to the benefit of, and be
exercised by successors in interest of all parties.
12. If Grantor and Maker are not the same person, the term Grantor
shall include Maker.
EXECUTED on the day and year first set forth above.
Lifetime Filter, Inc.
By:
-----------------------------------
Xxxx Xxxxxxx, Jr., President
5
STATE OF TEXAS )
)
COUNTY OF XXXXXX )
This instrument was acknowledged before me on the _____ day of January,
1997, by Xxxx Xxxxxxx, Jr., president of Lifetime Filter Inc., a Texas
corporation. on behalf of said corporation.
----------------------------------
Notary Public, State of Texas
Notary's name (printed):
Notary's commission expires:
AFTER RECORDING RETURN TO:
Mr. J. Xxxxxx Xxxxx
Weycer, Kaplan, Pulaski & Xxxxx, P.C.
0000 Xxxxxx Xxxxx
Xxxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000-0000
6
EXHIBIT "A"
METES AND BOUNDS
DESCRIPTION
BEING A 1.798 ACRE TRACT OF LAND OUT OF TRACT 1, A CALLED 418 FOOT BY 209
FOOT TRACT OF LAND RECORDED IN THE XXXXXX COUNTY, TEXAS CLERK'S FILE L 014680
AND BEING LOCATED IN THE H. & T. C. RAILROAD COMPANY SURVEY, SECTION 44, BLOCK
ONE (1) (ALSO CALLED THE X.X. XXXXXXXXXX SURVEY), ABSTRACT 1348, CITY OF
KATY, XXXXXX COUNTY, TEXAS AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
BEGINNING at a 1/2 inch iron rod at the intersection of the West Right-Of-Way
line of Katyland Drive with the North Right-Of-Way line of the M. K. & T.
Railroad;
THENCE: North 80 degrees 03' 41" West 387.42 feet along the North
Right-Of-Way line of said Railroad to a 1 inch iron pipe found for the
Southwest corner of said Tract 1;
THENCE: North 1 degree 09' 59" East 202.17 feet along the West line of said
tract 1 to a 1/2 inch iron rod set;
THENCE: South 89 degrees 03' 41" East 387.42 feet to a 1/2 inch iron rod set
in the West Right-Of-Way line of said Katyland Drive;
THENCE: South 1 degree 09' 59" West 202.17 feet along said West
Right-Of-Way line to the POINT OF BEGINNING, containing an area of 1.798
acres of land.
/s/ Xxxxx Xxxxxxxxxxx
-----------------------------
For Clay & Xxxxxxxxxxx, Inc.
Xxxxx Xxxxxxxxxxx, R.P.L.S. [SEAL]
Texas Registration No. 2085
November 20, 1991
EXHIBIT H
[SALES AND MARKETING EFFORTS]
SALES AND MARKETING EFFORTS
LFI agrees to maintain the following policies, procedures and processes at
Lifetime Filter, which were in place at LFM as of December 31, 1996, for a
period of at least one year beginning January 1, 1997, and further agrees
that any changes to such policies and procedures must be approved by Xxxxxxx
X. X'Xxxxx, whose approval will not be unreasonably withheld.
1. The name "Lifetime Filter" for the electrostatic filter sold by LFI.
2. The material components, the manufacturing process, the product labeling
and packaging of the electrostatic filter.
3. The practice of mailing marketing postcards to both prospective and
existing customers, pursuant to which LFI agrees to mail at least 16,000
postcards per month.
4. The form and quality of the sample Dealer Kit which is furnished free of
charge to prospective customers.
5. The credit policy for new customers which includes an immediate credit line
for approved prospects of at least $250.00, and payment terms of net 30
days.
6. The quality and timeliness of product shipments to customers, such that (a)
orders for standard filters will be shipped via either Federal Express of
United Parcel Service, the following business day from receipt of order,
and (b) orders for custom filters will be shipped no later than two
business days from receipt of order.
7. The performance claims for the electrostatic filters and the lifetime
product warranty.
8. The incoming toll-free 800 phone number, the "Message-on-Hold recording,
the 24-hour answering service, and, during regular working hours, live
persons to answer incoming phone calls, take orders and refer phone calls
to appropriate employees.
9. The monthly mail-out marketing piece to existing customers, which may be
mailed separately or inserted in the customer billing statements.
LFI agrees to provide X'Xxxxx with adequate information, including a monthly
report on mailings, to determine compliance. X'Xxxxx agrees to provide ACRG
with a monthly compliance report within ten (10) business days after the end
of each month.
EXHIBIT I
[XXXXX EMPLOYMENT AGREEMENT]
EMPLOYMENT AND NONCOMPETITION AGREEMENT
THIS EMPLOYMENT AND NONCOMPETITION AGREEMENT (the "Agreement") is entered
into by and between Lifetime Filter, Inc., a Texas corporation having its
principal place of business at 0000 Xxxxxxxx Xxxxx, Xxxx, Xxxxx 00000 (the
"Company"), and Xxxxx Xxxxx ("Employee"), who resides at 00000 Xxxxxxxxxx,
Xxxxxxx, Xxxxx 00000. Employee acknowledges and agrees that the Company has
required that Employee enter into this Agreement and agree to the terms and
provisions hereof, including in particular Articles III and IV hereof, as a
condition to the Company's employment of Employee.
ARTICLE I
Employee agrees to be employed by the Company, and the Company agrees to
employ Employee, as President of the Company for the purpose of performance by
and on behalf of the Company of such services commensurate with that position as
may be requested from time to time by the board of directors of the Company. At
all times while employed by the Company, Employee shall perform his employment
duties, and exclusively serve and promote the business interests of the Company,
in good faith, with fidelity and loyalty, with his full, best and dedicated
efforts, in compliance with all rules, policies, practices, directives and
procedures of the Company.
ARTICLE II
The initial term of this Agreement shall begin on the date hereof and
terminate on December 31, 2001, provided that a party seeking to terminate this
Agreement shall have given the other party not less than sixty (60) days' notice
of such termination. Absent such notice of termination, at the end of the
initial term of this Agreement, this Agreement shall be automatically renewed
for additional one-year terms each successive year until such year as one party
gives notice of termination to the other party not less than sixty (60) days
prior to expiration of that one-year term.
During Employee's employment hereunder, the Company shall pay to Employee
the compensation and benefits set forth on Exhibit A, attached hereto and
incorporated herein for all purposes. Employee is not entitled to severance
compensation benefits upon the termination of his employment with the Company
(whether voluntary or involuntary).
The employment, compensation and benefit arrangements hereunder shall be
terminated upon the occurrence of the first to occur of any of the following
events:
(1) The expiration of the term of this Agreement; or
(2) Employee's death, or such physical or mental disability or
incapacity of Employee which, in the reasonable opinion of the Company,
causes Employee to be unable to effectively perform his duties hereunder
for a continuous period of one hundred eighty (180) days, in either of
which events all unaccrued compensation and benefits payable pursuant to
the terms hereof shall cease; or
(3) Written notice of dismissal with Cause (as hereinafter defined)
by the Company, given to Employee at any time and effective as stated in
such notice, in which event all unaccrued compensation and benefits payable
pursuant to the terms hereof shall cease upon such dismissal; or
(4) Upon mutual agreement of the parties hereto in writing.
Termination for "Cause" is defined as termination for any of the following
reasons:
(a) If Employee has performed any of his duties under this Agreement
in a grossly negligent manner, breached any material provision of this
Agreement, or violated any statutory or common law duty of loyalty to the
Company;
(b) If Employee has engaged in malfeasance, theft from the Company,
embezzlement or is convicted of a felony;
(c) If Employee has engaged in dishonesty, fraud or willful
disloyalty with respect to the assets or business of the Company or matters
affecting the employment relationship;
(d) If the Company shall fall to attain at least seventy percent
(70%) of the aggregate Forecast Income (as defined in Exhibit A) for any
period of two consecutive fiscal years during the term of this Agreement.
On any voluntary termination of this Agreement by Employee, or pursuant to
the preceding paragraphs 2, 3 and 4 hereinabove, other than as of the end of the
Company's fiscal year, Employee shall not be entitled to any bonus for such
partial fiscal year. In addition, the Company is excused from performing its
compensation obligations to Employee for so long as, and to the extent that,
Employee is receiving disability benefits under a disability insurance policy
maintained by the Company. Upon a voluntary termination of this Agreement by
Employee or a termination of Employee's employment for Cause by the Company, all
future compensation to which Employee would otherwise be entitled and all future
benefits for which Employee would otherwise be eligible shall cease and
terminate as of the date of termination.
In the event that the employment of Employee hereunder is terminated by the
Company other than for Cause, Employee shall be entitled to receive payments of
Base Salary (as provided
2
in EXHIBIT A hereto) ONLY, payable on a periodic basis consistent with the
payroll practices of the Company through the remainder of the term of this
Agreement (it being understood and agreed that such termination of employment
shall also constitute notice of termination to Employee, as hereinabove
provided, to be effective at the end of the term of employment then in
effect). The Company shall be entitled to reduce the amount of compensation
to be paid to Employee pursuant to the provisions of the preceding sentence
by an amount equal to the compensation paid to Employee pursuant to any
subsequent employment which may be entered into by Employee. Employee's
rights pursuant to the provisions of the second preceding sentence shall be
Employee's sole and exclusive rights against the Company or its affiliates,
and the Company's and its affiliates' sole and exclusive liability to
Employee under this Agreement, in contract, tort, or otherwise, for any
termination of Employee's employment hereunder other than for Cause.
ARTICLE III
Employee recognizes and agrees that the business of the Company and its
business interests require a confidential relationship between it and its
employees and the fullest practical protection and confidential treatment of its
trade secrets, trade practices, prospects, transactions, customers and other
knowledge of the business or financial affairs of the Company that will be or
have been conceived, developed or learned by Employee during Employee's course
of employment with the Company. Accordingly, Employee agrees that during
Employee's term of employment with the Company and during the applicable period
of the noncompetition provision described in Article IV hereof, Employee will:
(1) Keep secret and confidential all such information, trade secrets,
trade practices, prospects, transactions, customer lists, and business
practices of the Company (written or unwritten), and Employee shall not
divulge, disclose or reveal for any reason or in any manner to any person
who is not an officer, director or employee of either the Company, ACR
Group, Inc., or any other direct or indirect subsidiary of ACR Group, Inc.
(collectively the "Consolidated Group") any of the foregoing information,
including the following: (a) information identifying or tending to identify
any of the customers, suppliers or employees of the Company or any member
of the Consolidated Group; (b) information concerning the intellectual
property of the Company or any other member of the Consolidated Group,
including all patents, trademarks, trade names, service marks and
copyrighted materials; and all ideas, designs, methods, concepts,
advertising and promotional materials, and computer programs, software and
source codes, whether or not protected under any law; and (c) information
pertaining to the plans, products, services, processes, prospects,
procedures, techniques, and financial statements, forecasts and projections
of the Company or any other member of the Consolidated Group; but excluding
information that (i) has been disclosed by the Company or any other member
of the Consolidated Group to the public or as may have been required by
law, or by a court of competent jurisdiction, or to respond to a valid
inquiry by a governmental authority, or (ii) has been received by Employee
from a third party without breaching
3
an obligation owed to the Company, or (iii) has been disclosed to a third
party by the Company without similar restriction; and
(2) Not use or aid others in using, directly or indirectly, the same
in competition with the Company, unless required by a valid order of a
court or other governmental authority of competent jurisdiction; and
(3) Other than on behalf of the Company's interests, Employee shall
not (a) offer, induce, solicit, influence, or attempt to influence any
employee of the Company or any other member of the Consolidated Group to
terminate his or her employment for the purpose of working for a competitor
of the Company or any other member of the Consolidated Group; (b) influence
or attempt to influence any agent, customer or supplier who has a business
relationship with the Company or any other member of the Consolidated Group
to cease or adversely alter that business relationship; or (c) contact,
solicit or do business with any person who is, or has been at any time
during the two years preceding the effective date of Employee's termination
of employment with the Company, a customer of the Company or any other
member of the Consolidated Group, for the purpose of diverting, soliciting
or accepting any business in competition with the Company or any other
member of the Consolidated Group.
In addition, after ceasing for any reason to be employed by the Company,
Employee shall not retain or remove, without the Company's advance written
consent, any list, data, book, record, manual, drawing, document, schedule,
source code, specification, computer tape, program, diskette or software, or
other written or recorded information pertaining to the business and financial
affairs of the Company or any other member of the Consolidated Group, except for
items that are strictly personal (such as tax forms, payroll slips, and
Employee's copy of this Agreement).
Employee further agrees that all inventions, ideas, plans, prospects or
processes or other results of the efforts of Employee's employment by the
Company which are conceived, invented or developed, in whole or in part, by or
with the assistance of Employee during Employee's employment with the Company,
shall be the sole and exclusive property of the Company, and Employee shall,
upon request from the Company at any time, execute such confirmatory assignments
of the same or similar documents in favor of the Company.
ARTICLE IV
In consideration of the compensation payable to Employee hereunder, during
the term of this Agreement and for a period of one (1) year after termination of
this Agreement by either Employee or the Company, the Employee will not,
directly or indirectly, engage in the business of manufacturing air filters and
marketing and distributing same to dealers or contractors located anywhere in
the United States and Canada through means of direct mail advertising and sale,
4
as such activities were conducted by the Company prior to and during the term of
this Agreement (the "Business"), or become affiliated as an agent, advisor,
partner, officer, director, employee, proprietor, consultant, stockholder or
independent contractor with any person or entity directly or indirectly engaged
in the Business. The provisions of the preceding sentence shall not be
applicable if Employee's employment hereunder is terminated by the Company
without Cause. This restriction applies to any passive investment in securities
of any corporation or other business organization, unless the Employee's equity
ownership is less than 1%. Employee further agrees that during his term of
employment hereunder, he will devote full business time and best efforts to the
business and affairs of the Company.
Employee makes the preceding covenants in consideration for, and as a
necessary condition of, his employment by the Company. Employee's obligations to
the Company under this section are independent of any obligation of the Company
or any other member of the Consolidated Group to Employee (including any
obligation under this Agreement or any other agreement between Employee and the
Company or any obligation that otherwise derives arises from any aspect of the
employment relationship) and are not subject to any set-off, defense, deduction
or counterclaim based on any claim that Employee may have against the Company or
any other member of the Consolidated Group. The restrictive covenants of
Employee set forth in this section will survive the termination of this
Agreement for the periods specified above and are assignable by the Company to
any assignee or successor in interest to its business.
Employee expressly acknowledges that the Company conducts business
throughout the United States and Canada, and he stipulates that the time and
area restrictions of the foregoing obligations do not unduly oppress the
Employee's future employment opportunities. In addition, Employee acknowledges
that the restrictions set forth in Articles III and IV are reasonable
limitations necessary to protect the legitimate business interests of the
Company and the Consolidated Group in guarding the trade secrets, preserving the
goodwill of its customers and business, preventing solicitation of its existing
customers, obtaining the benefit of unique employee training and education, and
preventing unauthorized use of its proprietary or confidential business lists,
records and information.
The duration of every obligation set forth above will be extended by any
period of time during which Employee is in breach of the obligation. To the
extent that the duration, geographical area, or scope of activity of any of the
preceding restrictions would cause them to be unenforceable in a particular
jurisdiction, the restrictions automatically will be reformed for purposes of
enforcement in that jurisdiction to a duration, geographical area, or scope of
activity that is valid and enforceable in that jurisdiction. Reformation of a
restriction to validate its enforcement in any particular jurisdiction, however,
will not affect the enforcement of the restriction as stated in any other
jurisdiction in which it is enforceable as stated. Also, the invalidity of a
restriction in a particular jurisdiction will not affect the validity or
enforcement of the restriction in another jurisdiction where it is otherwise
valid.
5
ARTICLE V
If Employee becomes indebted to the Company for any reason during the
term of his employment, the Company may (but is not obligated to) setoff and
collect any amount due the Company from Employee out of any compensation or
expense reimbursement that it owes to Employee.
Employee stipulates that a breach by him of any of the restrictive
covenants set forth in Articles III and IV of this Agreement will diminish
the value of the Company and the Consolidated Group and will cause
irreparable and continuing injury to the Company and the Consolidated Group
for which an adequate legal remedy will not exist. Accordingly, Employee
stipulates that if he breaches any restrictive covenant set forth in Article
III or IV of this Agreement, the Company will not be obligated to pay to
Employee any remaining compensation specified in this Agreement and, without
limiting or excluding any other available remedy, the Company and every other
member of the Consolidated Group which is affected by the breach will be
entitled to the following remedies: (a) the entry by a court having
jurisdiction of an order granting specific performance or temporary
injunctive relief, upon the posting of a bond of $1,500 and the filing with
the court of an appropriate pleading and affidavit specifying each obligation
breached by Employee, but without proof of actual monetary damage; (b) if a
court having jurisdiction determines for any reason that the Company or other
member of the Consolidated Group is not entitled to an injunction or specific
performance, the recovery from Employee of all consequential damages
attributable to his breach of the restrictive covenant and all profit,
remuneration, or other consideration that Employee gains from breaching the
restrictive covenant; and (c) reimbursement from Employee of all costs
incurred by the Company and every other member of the Consolidated Group in
enforcing the restrictive covenant or otherwise defending or prosecuting any
legal proceeding arising out of the restrictive covenant. The Company may
exercise any of the foregoing remedies concurrently, independently, or
successively.
In the event any provisions hereof shall be modified or held ineffective
by any Court in any respect, such adjudication shall not invalidate or render
ineffective the balance of the provisions hereof, and the provisions hereof
shall be enforced to the maximum extent allowed by law. This Agreement shall
be governed by the laws of the State of Texas and shall be enforceable in
Xxxxxx County, Texas. The Company may assign this Agreement (including the
restrictive covenants set forth in Articles III and IV) to anyone who
succeeds to the Company's business pursuant to a merger of purchase of all or
substantially all of the Company's assets. The members of the Consolidated
Group are third-party beneficiaries of Employee's obligations under Articles
III and IV, and those obligations are enforceable by them to the same extent
as if they were parties to this Agreement.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors, assigns, heirs and personal
representatives. The parties hereto have read the terms and conditions of
this Agreement before signing the same, and hereby agree that no statement,
agreement or understanding, whether oral or written, not contained herein
will be
6
recognized or enforced. This Agreement may not be amended except by a written
agreement executed by the Company and Employee which makes specific reference
to this Agreement.
Any notice required or desired to be given under this Agreement shall be
in writing and shall be deemed given only if and when (i) personally
delivered, or (ii) sent by certified mail, addressed in each case as follows:
IF TO THE COMPANY: Lifetime Filter, Inc.
c/o ACR Group, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxxx, Jr.
IF TO THE EMPLOYEE: Xxxxx Xxxxx
00000 Xxxxxxxxxx
Xxxxxxx, Xxxxx 00000
The Employee may change the address for notice set forth above by giving
notice in writing, stating the new address, to the Company. The Company may
change the address for notice set forth above by giving similar notice to the
Employee.
EMPLOYEE ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS AGREEMENT, THAT HE
HAS BEEN GIVEN SUFFICIENT OPPORTUNITY TO CONSULT A LAWYER OF HIS OWN CHOOSING
AND TO ASK QUESTIONS AND RECEIVE SATISFACTORY ANSWERS REGARDING THIS
AGREEMENT, THAT HE UNDERSTANDS HIS RIGHTS AND OBLIGATIONS UNDER IT, AND THAT
HE HAS SIGNED IT OF HIS OWN FREE WILL AND VOLITION.
IN WITNESS WHEREOF, the undersigned have set their hands effective as of
January 27, 1997.
LIFETIME FILTER, INC.
By:
-----------------------------
Xxxx Xxxxxxx, Jr., Chairman
"Company"
--------------------------------
Xxxxx Xxxxx ("Employee")
7
EXHIBIT A
1. As used in this Exhibit A, the following terms shall have the following
meanings:
"Net Income" shall mean net income of the Company for a fiscal year
determined in accordance with generally accepted accounting principles,
PLUS (i) amortization of intangible costs, (ii) amounts charged by ACR
Group, Inc. (parent of the Company) ("ACRG") to the Company for interest
and management fees, and (iii) state and federal income taxes. In
addition, in determining Net Income, all accounts receivable that are
unpaid more than one hundred and twenty (120) days after the invoice date
will be reserved as uncollectible, unless, pursuant to a written agreement
or court order, the debtor on such account receivable is paying the Company
a stated amount on a regular basis and such debtor is in compliance with
the terms of such agreement or order.
"Forecast Income" shall mean the Net Income of the Company forecast for a
fiscal year as approved by the Company's Board of Directors.
"Excess Income" shall mean the excess of Net Income over Forecast Income
for a full fiscal year.
"Excess Income Percentage" shall mean Excess Income divided by Forecast
Income for the same fiscal year.
2. The Company shall pay to Employee a salary ("Base Salary") of at least
$50,000.00 per annum payable in accordance with the Company's regular
payroll practices. The Board of Directors of the Company may increase, but
not decrease, Base Salary from time to time.
3. The Company shall pay to Employee for each fiscal year during the term of
this Agreement a bonus ("Bonus") calculated according to the following
formula:
Amount of Bonus
Excess Income Percentage as a Percentage of Excess Income
------------------------ --------------------------------
Increment from 0% to 15% 10.00%
Increment from 15% to 25% 15.00%
Increment from 25% to 50% 20.00%
Increment above 50% 25.00%
4. (a) Within ninety (90) days after the end of the fiscal year in respect
of which a Bonus is earned, the Company shall advise Employee of the
amount of such Bonus in order for Employee to exercise the election
described in subparagraph (b) below.
(continued)
EXHIBIT A (CONTINUED)
(b) Employee may elect to apply up to twenty-five percent (25%) of any
Bonus to purchase up to 10,000 shares of common stock of ACRG
("Stock"), at a price equal to ninety percent (90%) of average of the
last trading price for the Stock for the ten (10) consecutive trading
days prior to and including the last day of the fiscal year in
respect of which such Bonus is earned, as reported by NASDAQ. Should
Employee elect to apply a portion of a Bonus to the purchase of Stock
as provided herein, he shall so notify the Company in writing on or
before fifteen (15) days after the date of the notice from the
Company to him as to the amount of the Bonus, which written notice
shall specify the portion of the Bonus to be so applied. If Employee
fails to so notify the Company, it shall be deemed that Employee has
elected not to purchase any Stock pursuant to this subparagraph (b).
(c) Within fifteen (15) days after the end of the fifteen (15) day period
described in subparagraph (b), the Company shall pay Employee the
cash amount of the Bonus and deliver the Stock, if any, purchased
pursuant to subparagraph (b) to Employee.
(d) Employee acknowledges that any Stock purchased by him hereunder will
be deemed to be "restricted securities" within the meaning of Rule
144 of the Securities Act of 1933 (the "Act"). Certificates
evidencing the Stock so purchased will be issued to Employee bearing
appropriate legends to that effect. Employee acknowledges that as a
holder of the Stock purchased hereunder, he may not sell, assign or
transfer the shares of the Stock unless he obtains or provides to
ACRG an opinion of counsel acceptable demonstrating that such sale,
assignment or transfer (i) is in compliance with all applicable state
securities laws and (ii) has been registered in accordance with
registration provisions of the Act or is exempt from such
registration provisions under Rule 144 or another applicable
exemption under the Act.
5. The Company shall provide to Employee a pickup truck for use in connection
with the business of the Company. The Company shall provide all insurance
coverage and repairs and maintenance for such vehicle and shall reimburse
Employee for all operating costs of the vehicle. Employee acknowledges
that the Company may report all or a portion of the cost of the use of,
insurance for and operating costs of, the vehicle as taxable income to
Employee in accordance with applicable regulations of the Internal Revenue
Service.
6. The Company shall reimburse Employee for all authorized expenses incurred
or paid by the Employee in connection with the performance of Employee's
services under this Agreement upon presentation of expense statements or
vouchers and such other supporting information as the Company may from time
to time require or request.
(continued)
EXHIBIT A (CONTINUED)
7. Employee shall be included in the group of employees of ACRG and its
subsidiaries which is recommended by ACRG management to the Stock Option
Committee to receive options to purchase ACRG common stock pursuant to the
1996 Stock Option Plan of ACR Group, Inc.
8. The Company shall provide to Employee all other benefits which are
generally available to other employees of the Company, which may include
medical and dental insurance, disability insurance, life insurance, and
401(k) contributions. In the event that the Company, at some future time,
has no group medical insurance coverage, the Company will reimburse
Employee for the cost of insurance coverage for Employee comparable to the
insurance coverage now maintained by the Company.
EXHIBIT J
[X'XXXXX CONSULTING AGREEMENT]
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") is entered into effective as
of the 1st day of January, 1997, by and between LIFETIME FILTER, INC., a Texas
corporation (the "Company"), and XXXXXXX X'XXXXX ("X'Xxxxx").
W I T N E S S E T H:
WHEREAS, the Company and X'Xxxxx are parties, along with certain other
entities, to that certain Purchase Agreement dated effective as of January 1,
1997, pursuant to which X'Xxxxx received, directly or indirectly, substantial
consideration for the sale of all of his shares of common stock of the Company
and the sale of substantially all of the assets of X'Xxxxx Family Partnership,
Ltd. (the "Sale");
WHEREAS, the Company and X'Xxxxx both desire, subject to the terms,
conditions, and provisions hereof, that the Company hire X'Xxxxx as a consultant
and independent contractor, in connection with the operation of the Company's
business.
NOW, THEREFORE, in consideration of the premises and in consideration of
the Sale and of the mutual covenants and agreements contained herein, and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and X'Xxxxx do hereby covenant and agree as follows:
SECTION I
ENGAGEMENT PROVISIONS
The Company hereby engages and retains X'Xxxxx as a consultant and
independent contractor to the Company for a period of one (1) year from the date
hereof. In such capacity, X'Xxxxx shall make available to the Company his
services on a consulting basis during normal business hours, Monday through
Friday, at such specific times as the parties shall agree not to exceed ten (10)
hours per month unless otherwise agreed by the Company and X'Xxxxx. X'Xxxxx
hereby accepts and agrees to such engagement, subject to the general supervision
and pursuant to the orders, advice and direction of proper officers of the
Company.
SECTION II
BEST EFFORTS
X'Xxxxx covenants and agrees that he will faithfully, industriously, and to
the best of his ability, experience, and talents, perform all of the duties that
may be required of and from him pursuant to the express terms hereof. Without
limiting the generality of the preceding sentence,
X'Xxxxx will be responsible for working with the Company to develop sales and
marketing ideas to increase the customer base of the Company.
SECTION III
COMPENSATION
A. The Company shall pay X'Xxxxx an amount equal to Two Thousand Dollars
($2,000.00) per month which shall be payable on the first day of each month
commencing January 1, 1997.
B. Additionally, the Company shall reimburse X'Xxxxx for all reasonably
necessary expenses, if any, incurred by X'Xxxxx while performing services
pursuant to the terms and provisions hereof. Major expenses such as travel must
be authorized in advance by the Company. Payments shall be made within ten (10)
days of receipt by the Company of vouchers and receipts to support the expenses.
SECTION IV
CONFIDENTIALITY
X'Xxxxx recognizes and agrees that the business of the Company and its
business interests require a confidential relationship between it and its
consultants and the fullest practical protection and confidential treatment of
its trade secrets, trade practices, prospects, transactions, customers and other
knowledge of the business or financial affairs of the Company that will be or
have been conceived, developed or learned by X'Xxxxx prior to or during the term
of this Agreement. X'Xxxxx further recognizes and agrees that he will acquire
special knowledge from the Company which would otherwise not be available to or
acquired by X'Xxxxx. Accordingly, X'Xxxxx agrees that during the term of this
Agreement and at all times thereafter he will:
(1) Keep secret and confidential all such information, trade secrets,
trade practices, prospects, transactions, customer lists and business
practices of the Company (written or unwritten), and X'Xxxxx shall not
divulge, disclose or reveal for any reason or in any manner to any person
who is not an officer, director or employee of either the Company, ACR
Group, Inc., or any other direct or indirect subsidiary of ACR Group, Inc.
(collectively the "Consolidated Group") any of the foregoing information,
including, without limitation, the following: (a) information identifying
or tending to identify any of the customers, suppliers or employees of the
Company or any member of the Consolidated Group; (b) information concerning
the intellectual property of the Company or any other member of the
Consolidated Group, including all patents, trademarks, trade names, service
marks and copyrighted materials; and all ideas, designs, methods, concepts,
advertising and promotional materials, and computer programs, software and
2
source codes, whether or not protected under any law; and (c) information
pertaining to the plans, products, services, processes, prospects,
procedures, techniques, and financial statements, forecasts and projections
of the Company or any other member of the Consolidated Group; but excluding
information (i) that has been disclosed by the Company or any other member
of the Consolidated Group to the public or as may have been required by law
or by a court of competent jurisdiction, or to respond to a valid Inquiry
by a governmental authority, (ii) that has been received by X'Xxxxx from a
third party without breaching an obligation owed to the Company or (iii)
that has been disclosed to a third party by the Company without similar
restriction; and
(2) Not use or aid others in using, directly or indirectly, the same
in competition with the Company, unless required by a valid order of a
court or other governmental authority of competent jurisdiction; and
(3) Other than on behalf of the Company's interests, X'Xxxxx shall
not (a) offer, induce, solicit, influence, or attempt to influence any
employee of the Company or any other member of the Consolidated Group to
terminate his or her employment for the purpose of working for a competitor
of the Company or any other member of the Consolidated Group; (b) influence
or attempt to influence any agent, customer or supplier who has a business
relationship with the Company or any other member of the Consolidated Group
to cease or adversely alter that business relationship; or (c) contact,
solicit or do business with any person who is, or has been at any time
during the two years preceding the termination of this Agreement, a
customer of the Company or any other member of the Consolidated Group, for
the purpose of diverting, soliciting or accepting any business in
competition with the Company or any other member of the Consolidated Group.
In addition, upon termination of this Agreement for any reason, X'Xxxxx
shall not retain or remove, without the Company's advance written consent, any
list, data, book, record, manual, drawing, document, schedule, source code,
specification, computer tape, program, diskette or software, or other written or
recorded information pertaining to the business and financial affairs of the
Company or any other member of the Consolidated Group, except for items that are
strictly personal (such as tax forms or compensation records, and X'Xxxxx'x copy
of this Agreement). Notwithstanding any contrary provision in this Agreement,
X'Xxxxx shall be permitted access to such books and records of the Company as
may be necessary for him to prepare his personal income tax returns.
X'Xxxxx further agrees that all inventions, ideas, plans, prospects or
processes or other results of the efforts of X'Xxxxx on behalf of the Company
which are conceived, invented or developed, in whole or in part, by or with the
assistance of X'Xxxxx during the term of this Agreement, shall be the sole and
exclusive property of the Company, and X'Xxxxx shall, upon request from the
Company at any time, execute such confirmatory assignments of the same or
similar documents in favor of the Company.
3
SECTION V
NONCOMPETITION
In consideration of the compensation payable to X'Xxxxx hereunder, during
the term of this Agreement and for a period of three (3) years after termination
of this Agreement by either X'Xxxxx or the Company, X'Xxxxx will not, directly
or indirectly, engage in the business of manufacturing air filters and marketing
and distributing same to dealers or contractors located anywhere in the United
States and Canada through means of direct mail advertising and sale, as such
activities were conducted by the Company prior to and during the term of this
Agreement (the "Business"), or become affiliated as an agent, advisor, partner,
officer, director, employee, proprietor, consultant, stockholder or independent
contractor with any person or entity directly or indirectly engaged in the
Business. The provisions of the preceding sentence shall not be applicable if
X'Xxxxx'x services hereunder are terminated by the Company without Cause. This
restriction applies to any passive investment in securities of any corporation
or other business organization, unless equity ownership is less than 1%.
X'Xxxxx makes the preceding covenants in consideration for, and as a
necessary condition of, his engagement by the Company. X'Xxxxx'x obligations to
the Company under this section are independent of any obligation of the Company
or any other member of the Consolidated Group to X'Xxxxx (including any
obligation under this Agreement or any other agreement between X'Xxxxx and the
Company or any obligation that otherwise arises from any aspect of the
consulting relationship) and are not subject to any set-off, defense, deduction
or counterclaim based on any claim that X'Xxxxx may have against the Company or
any other member of the Consolidated Group. The restrictive covenants of X'Xxxxx
set forth in this section will survive the termination of this Agreement for the
periods specified above and are assignable by the Company to any assignee or
successor in interest to its business.
X'Xxxxx expressly acknowledges that the Company conducts business
throughout the United States and Canada and he stipulates that the time and area
restrictions of the foregoing obligations do not unduly oppress X'Xxxxx'x future
employment or consulting opportunities. In addition, X'Xxxxx acknowledges that
the restrictions set forth in Sections IV and V are reasonable limitations
necessary to protect the legitimate business interests of the Company and the
Consolidated Group in guarding the trade secrets, preserving the goodwill of its
customers and business, preventing solicitation of its existing customers,
obtaining the benefit of unique employee training and education, and preventing
unauthorized use if its proprietary or confidential business lists, records and
information.
The duration of every obligation set forth above will be extended by any
period of time during which X'Xxxxx is in breach of the obligation. To the
extent that the duration, geographical area, or scope of activity of any of the
preceding restrictions would cause them to be unenforceable in a particular
jurisdiction, the restrictions automatically will be reformed for purposes of
enforcement in that jurisdiction to a duration, geographical area, or scope of
activity that is valid and enforceable in that jurisdiction. Reformation of a
restriction to validate its
4
enforcement in any particular jurisdiction, however, will not affect the
enforcement of the restriction as stated in any other jurisdiction in which
it is enforceable as stated. Also, the invalidity of a restriction in a
particular jurisdiction will not affect the validity or enforcement of the
restriction in another jurisdiction where it is otherwise valid.
The provisions of this Section V shall become void and of no further force
and effect in the event of a payment default under that certain promissory note
executed by the Company and payable to the order of X'Xxxxx Family Partnership,
Ltd. (the "Note"), which default is not cured by the Company within ninety (90)
days after its occurrence; PROVIDED, however, that in the event the Company
subsequently cures the payment default under the Note and X'Xxxxx has not yet
commenced business in competition with the Company, then the provisions of this
Section V shall be reinstated in full.
SECTION VI
REMEDIES FOR BREACH
If X'Xxxxx becomes indebted to the Company for any reason during the term
of this Agreement, the Company may (but is not obligated to) setoff and collect
any amount due the Company from X'Xxxxx out of any compensation or expense
reimbursement that it owes to X'Xxxxx.
X'Xxxxx stipulates that a breach by him of any of the restrictive covenants
set forth in Sections IV and V of this Agreement will diminish the value of the
Company and the Consolidated Group and will cause irreparable and continuing
injury to the Company and the Consolidated Group for which an adequate legal
remedy will not exist. Accordingly, X'Xxxxx stipulates that if he breaches any
restrictive covenant set forth in Section IV or V of this Agreement, the Company
will not be obligated to pay to X'Xxxxx any remaining compensation specified in
this Agreement and, without limiting or excluding any other available remedy,
the Company and every other member of the Consolidated Group which is affected
by the breach will be entitled to the following remedies: (a) the entry by a
court having jurisdiction of an order granting specific performance or temporary
injunctive relief, upon the posting of a bond of $1,500 and the filing with the
court of an appropriate pleading and affidavit specifying each obligation
breached by X'Xxxxx, but without proof of actual monetary damage; (b) if a court
having jurisdiction determines for any reason that the Company or other member
of the Consolidated Group is not entitled to an injunction or specific
performance, the recovery from X'Xxxxx of all consequential damages attributable
to his breach of the restrictive covenant and all profit, remuneration, or other
consideration that X'Xxxxx gains from breaching the restrictive covenant; and
(c) reimbursement from X'Xxxxx of all costs incurred by the Company and every
other member of the Consolidated Group in enforcing the restrictive covenant or
otherwise defending or prosecuting any legal proceeding arising out of the
restrictive covenant. The Company may exercise any of the foregoing remedies
concurrently, independently, or successively.
5
In the event any provisions hereof shall be modified or held ineffective by
any Court in any respect, such adjudication shall not invalidate or render
ineffective the balance of the provisions hereof, and the provisions hereof
shall be enforced to the maximum extent allowed by law. This Agreement shall be
governed by the laws of the State of Texas and shall be enforceable in Xxxxxx
County, Texas. The Company may assign this Agreement (including the restrictive
covenants set forth in Sections IV and V) to anyone who succeeds to the
Company's business pursuant to a merger or purchase of all or substantially all
of the Company's assets. The members of the Consolidated Group are third-party
beneficiaries of X'Xxxxx'x obligations under Sections IV and V, and those
obligations are enforceable by them to the same extent as if they were parties
to this Agreement.
SECTION VII
TERMINATION
The consulting arrangement hereunder shall be terminated upon the
occurrence of the first to occur of any of the following events: (1) the
expiration of the term of this Agreement; or (2) X'Xxxxx'x death, or such
physical or mental disability or incapacity of X'Xxxxx which in the reasonable
opinion of the Company causes X'Xxxxx to be unable to effectively perform his
duties under this Agreement for a continuous period of ninety (90) days, in
either of which events all unaccrued compensation due X'Xxxxx by the Company
shall cease; or (3) written notice of termination of this Agreement with Cause
(as hereinafter defined) by the Company, given to X'Xxxxx at any time and
effective as stated in such notice, in which event all unaccrued compensation
payable pursuant to the terms hereof shall cease upon such termination; or (4)
upon mutual agreement of parties hereto in writing.
Termination for "Cause" is defined as termination for any of following
reasons: (1) if X'Xxxxx has performed any of his duties under this Agreement in
a grossly negligent manner, breached any material provision of this Agreement,
or violated any statutory or common law duty of loyalty to the Company; (2) if
X'Xxxxx has engaged in malfeasance, theft from the Company, embezzlement or is
convicted of a felony; or (3) if X'Xxxxx has engaged in dishonesty, fraud or
willful disloyalty with respect to the assets or business of the Company or
matters affecting the consulting relationship established under this Agreement.
Upon termination of this Agreement by the Company or a termination of X'Xxxxx'x
consulting services for Cause by the Company, all future compensation to which
X'Xxxxx would otherwise be entitled shall cease and terminate as of the date of
termination.
6
SECTION VIII
MISCELLANEOUS
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors, assigns, heirs and personal
representatives. The parties hereto have read the terms and conditions of
this Agreement before signing the same, and hereby agree that no statement,
agreement or understanding, whether oral or written, not contained herein
will be recognized or enforced. This Agreement may not be amended except by a
written agreement executed by the Company and X'Xxxxx which makes specific
reference to this Agreement.
Any notice required or desired to be given under this Agreement shall be
in writing and shall be deemed given only if and when (i) personally
delivered, or (ii) sent by certified mail, addressed in each case as follows:
IF TO THE COMPANY: Lifetime Filter, Inc.
c/o ACR Group, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxxx, Jr.
IF TO X'XXXXX: Xxxxxxx X'Xxxxx
0000 Xxxxxx X
Xxxx, Xxxxx 00000
Any notice so mailed shall be deemed to be received two (2) business
days after the day when so mailed, and any notice personally delivered shall
be deemed to be received when receipted on behalf of the receiving party by
an authorized officer of such receiving party, or actually received by the
receiving party, as the case may be.
X'Xxxxx may change the address for notice set forth above by giving
notice in writing, stating the new address, to the Company. The Company may
change the address for notice set forth above by giving similar notice to
X'Xxxxx.
This Agreement may be executed and delivered in any number of
counterparts, and by different parties hereto on separate counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which counterparts taken together shall constitute one and the same
instrument.
7
X'XXXXX ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS AGREEMENT, THAT HE
HAS BEEN GIVEN SUFFICIENT OPPORTUNITY TO CONSULT A LAWYER OF HIS OWN CHOOSING
AND TO ASK QUESTIONS AND RECEIVE SATISFACTORY ANSWERS REGARDING THIS
AGREEMENT, THAT HE UNDERSTANDS HIS RIGHTS AND OBLIGATIONS UNDER IT, AND THAT
HE HAS SIGNED IT OF HIS OWN FREE WILL AND VOLITION.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year mentioned above.
LIFETIME FILTER, INC.
By:
----------------------------
Xxxx Xxxxxxx, Jr., President
-------------------------------
XXXXXXX X'XXXXX
8
SCHEDULE 2.12
AGREEMENTS, CONTRACTS, AND COMMITMENTS
The following agreements, contracts, or commitments will be merged into LFI
upon the Closing of this transaction.
1. Agreement between LFI and OFP (originally with LFM, whose assets have been
distributed to OFP) for the use of the trademarks, LifeTime Filter and
Filter Clean, and the manufacturing technology associated with production
of such filter products.
2. Lease agreement between LFI and OFP (originally with LFM, whose assets have
been distributed to OFP) for the assets owned by LFI.
3. LFI maintains a line of credit with Sterling Bank, 0000 XX 0000X, Xxxxxxx,
Xxxxx 00000. UCC-1 Financing Statement 00-0000000 is filed of record
securing such line of credit.
4. Client Service Agreement by and between Administaff Companies, Inc. and
Lifetime Filter, Inc. dated 11/23/96.
SCHEDULE 2.14
TITLE TO AND CONDITION OF ASSETS
None
SCHEDULE 2.18
LITIGATION
None
SCHEDULE 2.19
PATENTS, TRADEMARKS, AND SIMILAR RIGHTS
1. United States Patent and Trademark Office Registration No. 1,848,922 dated
August 9, 1994 for the trademark, LifeTime Filter, registered to Lifetime
Filter, Inc., X.X. Xxx 000000, Xxxxxxx, Xxxxx 00000-0000
2. United States Patent and Trademark Office Registration No. 1,848,921 dated
August 9, 1994 for the trademark, Filter Clean, registered to Lifetime
Filter, Inc., X.X. Xxx 000000, Xxxxxxx, Xxxxx 00000-0000
SCHEDULE 2.22
BROKER'S OR FINDERS FEES
None
