SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual Release ("Agreement")
is made by and between:
Kelar Controls, Inc. ("Kelar"), Xxxxx XxXxxxx ("XxXxxxx"), and
Xxxxx Xxxxxx ("Xxxxxx") (hereafter collectively referred to as
"Plaintiffs")
And
EIF Holdings, Inc. ("EIF"), Xxxxxxx Xxxxxx ("Austin") and Xxxxx
Xxxxxx ("Xxxxxx") (hereinafter collectively referred to as
"Defendants")
And
American Eco Corporation ("ECO").
The Plaintiffs, the Defendants and ECO are hereinafter
collectively referred to as "The Parties".
RECITALS
1. On or about December 30, 1994, EIF, Kelar, XxXxxxx and
Xxxxxx entered into a Stock Sale Agreement (the "Stock Sale
Agreement") whereby EIF sold XxXxxxx and Xxxxxx 200,000
shares of restricted common stock in EIF in exchange for
100% of the outstanding shares of stock in Kelar.
2. On or about December 29, 1995, Kelar, XxXxxxx and Xxxxxx
filed suit in the Federal District Court in the Northern
District of California. Case number C 95-20877 PVT (the
"Lawsuit"), against Defendants.
3. The Lawsuit seeks rescission of the December 30, 1994
agreement as well as damages from each of the defendants for
alleged violations of the securities laws of the United
States and the State of California as well as common law
fraud, breach of contract, breach of fiduciary duties.
4. Each party specifically denies that it is liable to any
other party for any damages arising out of any claims made
in the Lawsuit. The Parties desire, however, to fully
compromise their disputes.
NOW, THEREFORE, in consideration of the mutual promises made
in this Agreement, the Parties hereby agree as follows:
AGREEMENT
1. CONSIDERATION
-------------
a) ECO will transfer to XxXxxxx and Xxxxxx a total of
50,000 shares (25,000 shares each) of free trading ECO
common stock in exchange for the 200,000 shares of EIF
stock acquired by XxXxxxx and Xxxxxx pursuant to the
December 30, 1994 Stock Sale Agreement. This transfer
will take place no later than March 22, 1996.
b) EIF will transfer to XxXxxxx and Xxxxxx a total of
678,294 shares (339,147 shares each) of free trading
common stock in EIF. This transfer will take place no
later than June 30, 1996.
c) Upon transfer of the 678,294 shares of EIF common stock
to XxXxxxx and Xxxxxx as set forth in section 1.b)
above, the Earn Out provisions of Section 2.5.1 and
Schedule 2.5.1 of the Stock Sale Agreement shall be
void, rescinded and of no further force and effect.
d) No later than June 30, 1996, EIF will have registered
an employee stock option plan under S-8. Upon the
establishment of the registered employee stock option
plan. EIF will deliver to XxXxxxx and Xxxxxx options
for the purchase of free trading EIF common stock
registered under the S-8 registration as follows:
i) The amount of option shares delivered to XxXxxxx
shall be 2,500 shares multiplied by the number of
completed months since January 1, 1995. The
amount of option shares delivered to Xxxxxx shall
be 2,500 shares multiplied by the number of
completed months since January 1, 1995.
ii) The option price shall be equal to the average of
the monthly average purchase price of EIF stock as
reflected in NASDAQ records for the period 1/1/96
to 3/31/96. In computing the average, if there
were no sales reflected in the NASDAQ records for
any calendar month period then that calendar month
shall not be used in computing the average selling
price.
iii) If as S-8 registration is not in effect by June
30, 1996, then at the sole options of XxXxxxx
and/or Xxxxxx, XxXxxxx and/or Xxxxxx may each
independently elect to receive cash in lieu of the
stock options vested under their respective
employment contracts with Kelar as of June 30,
1996. If either XxXxxxx or Xxxxxx elects to
receive a cash payment, then EIF shall pay XxXxxxx
and/or Xxxxxx, as the case may be, in cash, the
difference between the option price, as computed
above, and the market price of free trading EIF
common stock as of February 16, 1996. XxXxxxx and
Xxxxxx must make such election no later than July
15, 1996 and if cash payment is elected, EIF shall
make its cash payment(s) no later than July 30,
1996.
iv) In the event that such a cash payment is elected,
the cash payment shall be in lieu of the stock
options that had vested under paragraph 3. D) of
the employment contracts between Kelar and XxXxxxx
and/or Xxxxxx respectively. This Agreement has no
effect on stock options to be granted pursuant to
the respective employment contracts between Kelar
and XxXxxxx and between Kelar and Xxxxxx to the
extent those options have not vested as of June
30, 1996.
v) Except as specifically set forth in this
agreement, the employment contracts between Kelar
and XxXxxxx and between Kelar and Xxxxxx shall
remain in full force and effect.
e) The employment contracts between Kelar and XxXxxxx and
between Kelar and Xxxxxx are hereby extended so that
the terms of those agreements extends to a date that is
five (5) years from the effective date of this
settlement agreement.
f) The initial term of the lease agreement for the lease
of the building located at 000-X Xxxxxxxx Xxxx, Xxx
Xxxx, XX 00000-0000 is hereby extended to a date that
is five (5) years from the effective date of this
settlement agreement.
g) EIF provided Kelar with $80,000 cash. This cash
represents capital investment by EIF into Kelar and not
a loan.
h) Within 15 days of the effective date of this agreement,
EIF shall provide Kelar with the necessary funds to
bring the accounts payable of Kelar current to the
satisfaction of both XxXxxxx and Xxxxxx. The amount of
money needed to accomplish this is currently estimated
to be $127,000. The provision of these funds shall
constitute a capital investment by EIF into Kelar and
not a loan.
i) EIF will provide Kelar with the necessary working
capital in the future to enable Kelar to achieve its
objectives. The parties have estimated the working
capital needed in the next six (6) months period to be
approximately $250,000. Kelar, EIF, XxXxxxx and Xxxxxx
agree to communicate either in person or over the phone
at least once a week to discuss Kelar's continuing
objectives and working capital requirements and
coordinate the adequate and timely furnishing of those
requirements. All such provisions of working capital
shall constitute capital investments by EIF into Kelar
and not loans.
j) All money that EIF has advanced to Kelar since the
acquisition of Kelar by EIF in December 1994 represent
capital investments by EIF into Kelar and are not
loans.
2. RELEASE OF CLAIMS. Each party to this Agreement agrees that
------------------
the foregoing consideration represents settlement in full of
all outstanding obligations owed by the Parties to each
other. The Parties, on behalf of themselves, and their
respective heirs, executors, officers, directors, owners,
employees, investors, shareholders, administrators,
predecessors and successor companies/corporations, and
assigns, hereby fully and forever release each other and
their respective heirs, executors, officers, directors,
owners, employees, investors, shareholders, administrators,
predecessors and successor companies/corporations, and
assigns, of and from any claim, duty, obligation or cause of
action relating to the negotiation and consummation of the
Stock Sale Agreement and the actions of any of the Parties
since that time, insofar as those actions relate to the
businesses of EIF and/or Kelar, whether presently known or
unknown, suspected or unsuspected, that any of them may
possess arising from any omissions, acts or facts that have
occurred up until and including the Effective Date of this
Agreement, including, without limitation any and all claims
that were raised or could have been raised in The Lawsuit
either as affirmative claims, cross-claims or counter-
claims.
The Parties agree that the release set forth in this section
shall be and remain in effect in all respects as a complete
general release as to the matters released. This release
does not extend to any obligations incurred under this
Agreement.
3. DISMISSAL. Immediately upon execution of this Agreement,
---------
each party shall execute as stipulation and order for
dismissal with prejudice of the Lawsuit and shall cause
that dismissal with prejudice to be entered in the United
States District Court for the Northern District of California,
Case number C 95-20877 PVT.
4. CIVIL CODE SECTION 1542. The parties represent that they
-----------------------
are not aware of any claim by any of them other than the
claims that are released by this Agreement. The Parties
acknowledge that they have been advised by legal counsel and
are familiar with the provisions of California Civil Code
Section 1542, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO
CLAIMS WHICH THE CREDITOR DOES NOT KNOW
OR SUSPECT TO EXIST IN HIS FAVOR AT THE
TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM, MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
The Parties, being aware of said code section, agree to
expressly waive any rights they may have under said code
section, as well as under any other statute or common law
principles of similar effect.
5. DISPARAGEMENT. Each party agrees to refrain from any
-------------
disparagement, criticism, defamation, slander of the other,
or tortious interference with the contracts and
relationships of the other.
6. NO ADMISSION OF LIABILITY. The Parties understand and
-------------------------
acknowledge that this Agreement constitutes a compromise and
settlement of disputed claims. No action taken by the
Parties hereto, or any of them, either previously or in
connection with the Agreement shall be deemed or construed
to by (a) an admission of the truth or falsity of any claims
heretofore made or (b) an acknowledgment or admission by any
party of any fault or liability whatsoever to any other
party or to any third party.
7. COSTS. The Parties shall each bear their own costs, expert
-----
fees, attorneys' fees and other fees incurred in connection
with this Agreement and the Lawsuit. However, should it be
necessary for a Party to this Agreement to employ attorneys
to obtain performance of the other Party's obligations under
this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fee, costs and experts' fees incurred.
8. AUTHORITY. Each Party represents and warrants that the
---------
respective undersigned persons have the authority to act on
behalf of each of the respective Parties and to bind the
respective Parties and all who may claim through it to the
terms and conditions of this Agreement. Each Party warrants
and represents that there are no liens or claims of lien or
assignments in law or equity or otherwise of or against any
of the claims or causes of action released herein.
9. NO REPRESENTATIONS. Each Party represents that it has had
------------------
the opportunity to consult with an attorney, and has carefully
read and understands the scope and effect of this Agreement.
No party has relied upon any representations or statements
made by any other party hereto which are not specifically
set forth in this Agreement.
10. SEVERABILITY. In the event that any provision hereof becomes
------------
or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall
continue in full force and effect without said provision.
11. ENTIRE AGREEMENT. This Agreement represents the entire
----------------
agreement and understanding between and among the Parties
concerning the matters discussed in the recitals, and
supersedes and replaces any and all prior agreements and
understandings concerning the same subject matter between
and among the Parties.
12. NO ORAL MODIFICATION. This Agreement may only be amended in
--------------------
writing signed by both of the Parties.
13. GOVERNING LAW. This Agreement shall be governed by the laws
-------------
of the State of California, and may be enforced by action in
the courts located in the County of Santa Clara, California.
14. EFFECTIVE DATE. This Agreement is effective as of February
--------------
16, 1996.
15. COUNTERPARTS. This Agreement may be executed in
counterparts,
------------
and each counterpart shall have the same force and effect as
an original and shall constitute an effective, binding
agreement on the part of each of the undersigned.
16. VOLUNTARY EXECUTION OF AGREEMENT. This Agreement is executed
--------------------------------
voluntarily and without duress or undue influence on the
part or behalf of the Parties hereto, with the full intent
of releasing all claims. The Parties acknowledge that:
a) They have read this Agreement;
b) They have been represented in the preparation,
negotiation, and execution of this Agreement by legal
counsel of their own choice or that they have
voluntarily declined to seek such counsel;
c) They understand the terms and consequences of this
Agreement and of the releases it contains;
d) They are fully aware of the legal and binding effect of
this Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement
on the respective dates set forth below.
EIF Holdings, Inc.
Dated: April 4, 1996 By: /s/ Xxxx XxXxxxxx
------- -------------------------------------
Xxxx XxXxxxxx
Its: President and CEO
Kelar Controls, Inc.
Dated: April 4, 1996 By: /s/ Xxxxx XxXxxxx
------- -------------------------------------
Xxxxx XxXxxxx
Its: President
American Eco Corporation
Dated: April 4, 1996 By: /s/ Xxxx XxXxxxxx
------- -------------------------------------
Xxxx XxXxxxxx
Its: President and CEO
Xxxxx XxXxxxx
Dated: April 4, 1996 By: /s/ Xxxxx XxXxxxx
------- -------------------------------------
Xxxxx Xxxxxx
Dated: April 4, 1996 By: /s/ Xxxxx Xxxxxx
------- -------------------------------------
Xxxxxxx Xxxxxx
Dated: April 4, 1996 By: /s/ Xxxxxxx Xxxxxx
------- -------------------------------------
Xxxxx Xxxxxx
Dated: April 4, 1996 By: /s/ Xxxxx Xxxxxx
------- -------------------------------------
