EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
by and among
EXCALIBUR STEEL, INC.,
an Oklahoma corporation,
XXXXXX XXXXX,
XXXXX XXXXX,
EXCALIBUR HOLDINGS, INC.,
a Texas corporation,
XXXXXXX X.X. XXXXXX,
XXXXXXX X. XXXXXXXX,
and
EXCALMERGE, INC.,
an Oklahoma corporation
DATED: November 27, 2001
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of
November 27, 2001 (the "Closing Date"), and is by and among Excalibur Steel,
Inc., an Oklahoma corporation ("Steel"), Xxxxxx Xxxxx, an individual residing in
Tulsa, Oklahoma and a shareholder of Steel ("Xxxxxx Xxxxx"), Xxxxx Xxxxx, an
individual residing in Tulsa, Oklahoma and a shareholder of Steel ("Xxxxx
Xxxxx"), Excalibur Holdings, Inc., a Texas corporation ("EHI"), Xxxxxxx X.X.
Xxxxxx, an individual residing in Houston, Texas and a shareholder, director,
and officer of EHI ("Stuart"), Xxxxxxx X. Xxxxxxxx, an individual residing in
Houston, Texas and a shareholder, director, and officer of EHI ("Xxxxxxxx"), and
Excalmerge, Inc., an Oklahoma corporation and wholly-owned subsidiary of EHI
("Sub"). Xxxxxx Xxxxx and Xxxxx Xxxxx are sometimes referred to collectively
herein as "Xxxxx". Steel, Xxxxxx Xxxxx, Xxxxx Xxxxx, EHI, and Sub are sometimes
individually referenced as a "Party" and are sometimes referred to collectively
herein as the "Parties."
Capitalized terms used in this Agreement shall have the meanings given
to them in Article 6 hereof, unless defined elsewhere in this Agreement.
W I T N E S S E T H:
WHEREAS EHI is interested in acquiring Steel through a merger of Steel
with and into Sub pursuant to which all of the issued and outstanding shares of
the common stock, par value $1.00 per share, of Steel ("Steel Common Stock")
would be converted into common stock, par value $.001 per share, of EHI ("EHI
Common Stock") on the terms and conditions set forth herein; and
WHEREAS Xxxxx owns all of the issued and outstanding Steel Common
Stock; and
WHEREAS the Parties hereto wish to set forth the representations,
warranties, agreements, and other items under which a merger (the "Merger") of
Steel with and into Sub will occur; and
WHEREAS the Boards of Directors of each of Steel and Sub have approved
and adopted this Agreement as a plan of reorganization within the provisions of
Section 368 of the Code; and
WHEREAS the shareholders of Steel and Sub have approved the Merger in
accordance with the Oklahoma General Corporation Act ("OGCA"); and
WHEREAS immediately following the Merger, Xxxxx will own 16.14% of the
total outstanding EHI Common Stock, as further detailed in Section 3.3(a) of
this Agreement;
NOW, THEREFORE, in consideration of the premises, the representations,
warranties and agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereto hereby agree as follows:
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ARTICLE 1
THE MERGER AND RELATED MATTERS
1.1 MERGER.
(a) Upon the terms and subject to the conditions of this
Agreement, Steel shall be merged with and into Sub in accordance with the OGCA.
Sub shall be the surviving corporation in the Merger (the "Surviving
Corporation") and the separate existence of Steel shall thereupon cease. The
Surviving Corporation shall at the Effective Time change its corporate name to
"Excalibur Steel, Inc.", continue its corporate existence under and be organized
under and be governed by the OGCA and possess all the rights and assets of Steel
and Sub and be subject to all of the liabilities and obligations of Steel and
Sub in accordance with the provisions of the OGCA.
(b) The Articles of Incorporation and the Bylaws of Sub, as in
effect immediately prior to the Effective Time, shall be the Articles of
Incorporation and Bylaws, respectively, of the Surviving Corporation, until
thereafter amended, except that such Articles of Incorporation shall be amended
as of the Effective Time to change the name of the Surviving Corporation to
"Excalibur Steel, Inc."
(c) At the Effective Time, the authorized capital stock of the
Surviving Corporation shall consist of 5,000 shares of common stock, $.01 par
value per share, with 1,000 shares outstanding.
(d) The directors of Sub immediately prior to the Effective
Time, shall be the directors of the Surviving Corporation and shall hold office
in accordance with the Articles of Incorporation and By-laws of the Surviving
Corporation from the Effective Time until the earlier of their resignation or
removal or until their respective successors are duly elected and qualified, as
the case may be. The officers of the Sub immediately prior to the Effective Time
shall be the officers of the Surviving Corporation and shall hold office in
accordance with the Articles of Incorporation and By-laws of the Surviving
Corporation from the Effective Time until the earlier of their resignation or
removal or until their respective successors are duly elected and qualified, as
the case may be. Notwithstanding the foregoing, Xxxxxx Xxxxx shall be elected to
as a director and officer of each of EHI and Sub as further contemplated by
Section 1.7(b) hereof.
(e) The Merger shall have the effects set forth in the OGCA.
If at any time after the Effective Time, the Surviving Corporation shall
consider or be advised that any further assignments or assurances in law or
otherwise are necessary or desirable to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation, all rights, title and interests in all
real estate and other property and all privileges, powers and franchises of
Steel and Sub, the Surviving Corporation and its proper officers and directors,
in the name and on behalf of Steel and Sub, shall execute and deliver all such
proper deeds, assignments and assurances in law and do all things necessary and
proper to vest, perfect or confirm title to such property or rights in the
Surviving Corporation and otherwise to carry out the purpose of this Agreement,
and the proper officers and directors of the Surviving Corporation are fully
authorized in the name and on behalf of Steel and Sub or otherwise to take any
and all such action.
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1.2 CLOSING AND EFFECTIVE TIME. The closing (the "Closing") of the
Merger shall take place at the offices of Xxxxxx and Xxxxx L.L.P., 0000
Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000, concurrently with the
execution of this Agreement. The Merger shall be effective at such time (the
"Effective Time") as a properly executed Articles of Merger in substantially the
form attached as EXHIBIT "A" (together with any other documents required by law
to effectuate the Merger) shall have been filed with the Secretary of State of
the State of Oklahoma in accordance with the provisions of the OGCA, which
filing shall be made simultaneously with or as soon as practical after the
Closing, and the Secretary of State of the State of Oklahoma shall have issued a
Certificate of Merger relating to the Merger.
1.3 CONVERSION OF STOCK.
(a) Except as provided in this Section 1.3 or in Section 1.5
hereof, at the Effective Time, by virtue of the Merger and without any action on
the part of any holder of any shares of Steel Common Stock, each share of Steel
Common Stock outstanding immediately prior to the Effective Time shall be
converted into the right to receive, upon the surrender, pursuant to Section 1.4
hereof, of the certificates formerly representing such share, (i) 3,000 shares
of EHI Common Stock (which will result in a total of 1,500,000 shares of EHI
Common Stock being issued to the holders of Steel Common Stock, and the Parties
have negotiated and agreed that, at Closing, the EHI Common Stock shall be worth
$1.00 per share), (ii) $75,000.00 payable by EHI to Xxxxx (evidenced by the two
[2] 90-Day Promissory Notes [hereafter defined]), (iii) $75,000.00 payable to
Xxxxx (evidenced by the two [2] 1-Year Notes [hereafter defined]), and (iv)
$500,000.00 payable by EHI to Xxxxx (evidenced by the two [2] 120-Day Promissory
Notes (the items in (i)-(iv) are sometimes referred to collectively as the
"Consideration"). The 90-Day Promissory Notes, the 120-Day Promissory Notes, and
the 1-Year Notes are sometimes collectively referred to as the "Purchase Notes."
(b) Each share of the common stock, par value $.01 per share
("Sub Common Stock"), of Sub outstanding immediately prior to the Effective Time
shall continue to be outstanding without change.
(c) As of and after the Effective Time, no holder of any
certificate that immediately prior to the Effective Time represented shares of
Steel Common Stock shall have any rights as a holder of Steel Common Stock other
than to receive the Consideration.
1.4 EXCHANGE; DELIVERY OF CONSIDERATION.
(a) At the Closing, each of Xxxxxx Xxxxx and Xxxxx Xxxxx shall
deliver to EHI the certificates representing all of his and her Steel Common
Stock, duly endorsed in blank or accompanied by duly executed blank stock
powers. Until so surrendered, certificates for shares of Steel Common Stock
shall represent, after the Effective Time, solely the right to receive the
Consideration. Share certificates representing the Steel Common Stock that are
surrendered shall be canceled.
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(b) At the Closing, EHI shall issue and deliver to Xxxxx the
following: (i) certificates issued to each of Xxxxxx Xxxxx and Xxxxx Xxxxx
representing the shares of EHI Common Stock to be delivered pursuant to Section
1.3(a) hereof, (ii) a promissory note in the principal amount of $250,000.00
payable to Xxxxxx Xxxxx within one hundred twenty (120) days and in the form
attached hereto as EXHIBIT "B", (iii) a promissory note in the principal amount
of $250,000.00 payable to Xxxxx Xxxxx within one hundred twenty (120) days and
in the form attached hereto as EXHIBIT "B", (iv) a promissory note in the
principal amount of $37,500.00 payable to Xxxxxx Xxxxx within ninety (90) days
and in the form attached hereto as EXHIBIT "C", (v) a promissory note in the
principal amount of $37,500.00 payable to Xxxxx Xxxxx within ninety (90) days
and in the form attached hereto as EXHIBIT "C", (vi) a promissory note in the
principal amount of $37,500.00 payable to Xxxxxx Xxxxx within one (1) year (with
payments made at the end of month six [6] and month twelve [12]) and in the form
attached hereto as EXHIBIT "D", and (vii) a promissory note in the principal
amount of $37,500.00 payable to Xxxxx Xxxxx within one (1) year (with payments
made at the end of month six [6] and month twelve [12]) and in the form attached
hereto as EXHIBIT "D". The promissory notes referenced in clauses (iv) and (v)
are referred to in this Agreement as the "90-Day Promissory Notes", the
promissory notes referenced in clauses (vi) and (vii) are referred to in this
Agreement as the "1-Year Notes", and the promissory notes referenced in clauses
(ii) and (iii) are referred to in this Agreement as the "120-Day Promissory
Notes".
1.5 CANCELLATION OF TREASURY STOCK. At the Effective Time, all shares
of Steel Common Stock that are owned directly or indirectly by Steel as treasury
stock shall be canceled without any consideration being payable therefor.
1.6 CLOSING OF STEEL TRANSFER BOOKS. At the Effective Time, the share
transfer books of Steel shall be closed and no transfers of shares of Steel
Common Stock shall thereafter be made.
1.7 SHAREHOLDERS AGREEMENT; ADDITIONAL CLOSING DELIVERIES.
(a) At the Closing, each of EHI, Lewis, Stuart, and Xxxxxxxx
shall enter into a Shareholders Agreement in the form attached hereto as Exhibit
"E" (the "Shareholders Agreement"), pursuant to which the parties will agree to
vote their EHI Common Stock in favor of Xxxxxx Xxxxx, Xxxxxx, and Xxxxxxxx as
directors.
(b) At the Closing, each of EHI and Sub shall deliver to Xxxxx
a certified copy of resolutions duly adopted by their respective shareholders
and directors (as applicable) electing Xxxxxx Xxxxx as a director and Vice
President and Chief Operating Officer of each of Services (hereafter defined),
AeroSpace (hereafter defined), and Sub effective as of the Closing, and
approving the Merger.
(c) At the Closing, Steel shall deliver to EHI a certified
copy of the resolutions adopted by its shareholders and directors approving the
Merger.
1.8 FUNDS PRIOR TO CLOSING. Prior to the Closing, Stuart and Xxxxxxxx
shall have caused EHI to obtain a loan in an amount of $600,000.00 to EHI (the
"Funding Loan").
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1.9 TAX CONSEQUENCES. It is intended by EHI, Steel and Sub that the
Merger shall constitute a tax-free reorganization for federal income tax
purposes with the meaning of Section 368(a) of the Code. EHI, Steel and Sub
adopt this Agreement as a "plan of reorganization" within the meaning of Section
1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations. None of
EHI, Sub or Steel will take any actions that disqualify the Merger for such
treatment.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF STEEL AND XXXXX
Steel and Xxxxx hereby jointly and severally represent and warrant to
and covenant and agree with EHI and Sub that the statements contained in this
Article 2 are correct as of the Closing Date:
2.1 CORPORATE ORGANIZATION.
(a) Steel is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Oklahoma and has all
requisite corporate power and authority to conduct its business as currently
conducted and to own, operate, and/or lease the Assets. SCHEDULE 2.1(a) lists
the current directors and officers of Steel. Steel does not transact business in
any State other than Oklahoma and is not required to be qualified or licensed to
do business in any jurisdiction other than Oklahoma, except where the failure to
so qualify or to be in good standing in such other jurisdictions would not have
a Material Adverse Effect on the Condition of Steel.
(b) Steel has previously delivered to EHI and Sub true and
correct copies of the Articles of Incorporation and By-laws of Steel as in
effect on the date hereof, and copies of the minute books of Steel. Steel is not
in default under or in violation of any provisions of its Articles of
Incorporation or Bylaws.
2.2 CAPITALIZATION. The authorized capital stock of Steel consists of
50,000 authorized shares of $1.00 per share par value common stock, 500 shares
of which are issued and outstanding. All of the outstanding shares of Steel
Common Stock have been duly authorized and validly issued and are fully paid and
non-assessable and were not issued in violation of any preemptive rights or
other preferential rights of subscription or purchase of any Person. Xxxxx owns
all of the Steel Common Stock, beneficially and of record, free and clear of all
Encumbrances and restrictive agreements and has full authority to vote all of
such shares as contemplated by this Agreement. Xxxxx has full authority to
transfer pursuant to the Merger all of the shares of Steel Common Stock. There
are no outstanding options, warrants, purchase rights, subscription rights,
conversion rights, preemptive rights, agreements, arrangements or understandings
of any character obligating Steel to issue or sell, or cause to be issued or
sold, additional shares of capital stock of Steel or any securities or
obligations convertible into or exchangeable for such shares. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Steel or the Steel Common
Stock. There are no voting trusts, shareholders' agreements, proxies, or other
agreements or understandings with respect to the Steel Common Stock.
2.3 AFFILIATES. There are no Persons in which Steel owns any direct or
indirect equity or other similar ownership interests.
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2.4 POWER AND AUTHORITY: EXECUTION AND DELIVERY; EFFECT OF AGREEMENT.
(a) Steel has all requisite corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement by Steel and the performance of its
obligations hereunder have been duly authorized by all necessary corporate
action on its part. This Agreement has been duly executed and delivered by Steel
and constitutes a legal, valid, and binding obligation of Steel, enforceable
against it in accordance with its terms, except to the extent that such
enforceability (a) may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally and (b)
is subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). The Board of
Directors of Steel has adopted a resolution directing that this Agreement and
the Merger be submitted to Xxxxx for their approval and unconditionally
recommending that this Agreement and the Merger be approved by Xxxxx, and Xxxxx
has approved this Agreement and the Merger as required under the OGCA.
(b) Xxxxx has the requisite legal capacity and full power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. Xxxxx has duly executed and delivered this Agreement. This
Agreement constitutes a legal, valid and binding obligation of Xxxxx,
enforceable against them in accordance with its terms, except to the extent that
such enforceability (a) may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
generally and (b) is subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
2.5 NO CONSENTS; NO VIOLATIONS; NO LOSS OF RIGHTS. Except for the
filing and recordation of Articles of Merger as required by the OGCA and as set
forth in SCHEDULE 2.5, the execution, delivery, and performance of this
Agreement by Steel and Xxxxx and the consummation by Steel and Xxxxx of the
transactions contemplated hereby: (i) do not require the consent, approval,
clearance, waiver, order or authorization of any Person or Government Entity,
(ii) do not conflict with or violate any permit, concession, grant, franchise,
statute, law, rule or regulation of any Governmental Entity or any order,
judgment, award or decree of any court or other Governmental Entity to which
Steel or Xxxxx is subject or any of its Assets is bound, and (iii) do not
conflict with, or result in any breach of, or default or loss of any right under
(or an event or circumstance that, with notice or the lapse of time, or both,
would result in a default), or the creation of an Encumbrance pursuant to, or
cause or permit the acceleration prior to maturity or "put" right with respect
to, any obligation under, any indenture, mortgage, deed of trust, lease, loan
agreement or other agreement or instrument to which Steel or Xxxxx is a party or
to which any of the Assets are subject. Except as set forth on SCHEDULE 2.5, the
execution, delivery, and performance of this Agreement by Steel or Xxxxx will
not result in the loss of any governmental license, franchise or permit
possessed by Steel or give a right of acceleration or termination to any Person
in respect of any agreement or other instrument to which Steel is a party or by
which any of the Assets are bound, or result in the loss of any right or benefit
under such agreement or instrument.
2.6 FINANCIAL STATEMENTS. True and correct copies of the audited
balance sheet of Steel as of December 31, 2000 (collectively, the "Historical
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Balance Sheet"), and for that portion of calendar year 2001 ending on October
31, 2001 (the "Current Balance Sheet"), and the audited statement of income for
each of the years ended December 31, 1999 and 2000 (collectively, the
"Historical Income Statements"), and for that portion of calendar year 2001
ending on October 31, 2001 (the "Current Income Statement") have been previously
delivered to EHI and Sub. The Historical Balance Sheet, the Current Balance
Sheet, the Historical Income Statements, and the Current Income Statement are
collectively referred to as the "Financial Statements". The Financial Statements
fairly present in all Material respects the financial position of Steel as of
the dates thereof and the results of operations for the periods covered thereby,
are correct and complete in all material respects, and are consistent with the
books and records of Steel. Except as set forth on SCHEDULE 2.6, as of October
31, 2001, Steel did not have any Material liability of any kind or manner,
either direct, accrued, absolute or otherwise, that is not reflected or
disclosed in the Current Balance Sheet. The accounts receivable of Steel: (i)
detailed in the Historical Balance Sheet and (ii) as of October 31, 2001, shown
on the Current Balance Sheet, all arose from valid transactions in the ordinary
course of business of Steel. The accounts receivable shown on the Current
Balance Sheet have been collected in full or are believed to be collectible at
their full aggregate amounts (net of allowance for doubtful accounts). Accounts
receivable created by Steel after October 31, 2001, and through the Effective
Time have arisen or will arise only from valid transactions in the ordinary
course of business of Steel.
2.7 ABSENCE OF MATERIAL ADVERSE CHANGES. To the best of Xxxxx'
knowledge, except as set forth on SCHEDULE 2.7, since December 31, 2000, there
has not been: (a) any Material adverse change in the Condition of Steel, (b) any
condition, event, or occurrence which, individually or in the aggregate, would
reasonably be expected to prevent, hinder or Materially delay the ability of
Steel to consummate the transactions contemplated by this Agreement, or (c) any
agreement, in writing or otherwise, or any corporate action with respect to the
foregoing. Except as set forth on SCHEDULE 2.7, Steel is not aware of any event
or condition that has occurred since December 31, 2000, or now exists that would
be likely to result in a Material adverse change in the Condition of Steel.
2.8 COMPENSATION AND BENEFIT PLANS.
(a) SCHEDULE 2.8 contains a complete and correct list of: (1)
all employee welfare benefit and employee pension benefit plans of Steel as
defined in sections 3(1) and 3(2) of ERISA, including plans that provide
retirement income or result in a deferral of income by employees for periods
extending to termination of employment or beyond, and plans that provide
medical, surgical, or hospital care benefits (including dependent care) or
benefits in the event of sickness, accident, disability, death, termination of
employment, executive compensation, or unemployment ("Plans") and (2) all other
Material employee benefit agreements or arrangements that are not Plans
("Benefit Arrangements") (Plans and Benefit Arrangements being individually
referred to as "Designated Plan" and collectively referred to as "Designated
Plans").
(b) Neither Steel nor any trade or business under common
control with Steel within the meaning of Section 414(b) or (c) of the Code prior
to the Effective Time maintains or has ever maintained, or became obligated to
contribute to, any employee benefit plan: (i) that is subject to Title IV of
ERISA, (ii) to which Section 412 of the Code applies, (iii) that is a
multiemployer plan (as defined in Section 3(37) of ERISA), or (iv) in connection
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with any trust described in Section 501(c)(9) of the Code. Steel has not within
the last five (5) years engaged in, and is not a successor corporation to an
entity that has engaged in, a transaction described in Section 4069 of ERISA.
(c) Each Designated Plan has been administered, maintained,
and operated in all material respects in accordance with the terms thereof and
in compliance with its governing documents and applicable law (including where
applicable, ERISA and the Code, and all applicable governmental reporting
requirements). Each Designated Plan intended to be qualified under section 401
of the Code: (i) satisfies in form the requirements of such section except to
the extent amendments are not required by law to be made until a date after the
Effective Time, (ii) has received a favorable determination letter from the
Internal Revenue Service regarding such qualified status, (iii) has not, since
receipt of the most recent favorable determination letter, been amended, and
(iv) has not been operated in a way that would adversely affect its qualified
status.
(d) No act, omission, or transaction has occurred which would
result in the imposition on Steel of a breach of fiduciary duty liability or
damages under Section 409 of ERISA, a civil penalty assessed pursuant to
Subsections (c), (i) or (1) of Section 502 of ERISA, or a tax imposed pursuant
to Chapter 43 of Subtitle D of the Code. Neither Steel nor any of its directors,
officers, or employees has engaged in any transaction with respect to a
Designated Plan that could subject Steel to a tax, penalty, or liability for a
prohibited transaction, as defined in Section 406 of ERISA or Section 4975 of
the Code, and none of the assets of any Designated Plan are invested in employer
securities or employer real property. Full payment has been made of all amounts
which Steel is or has been required to have paid as contributions to or benefits
due under any Designated Plan under applicable law or under the terms of any
such Designated Plan, and there are no accrued but unpaid contributions of
benefit obligations that are not reflected on the financial statements of Steel.
There is no proceeding or other dispute pending or, to the best of the knowledge
of Steel, threatened, and there is no administrative investigation, audit or
other administrative proceeding by the Department of Labor, the Pension Benefit
Guaranty Corporation, the Internal Revenue Service, or other governmental entity
pending, in progress or, to the best of the knowledge of Steel, threatened that
involves any Designated Plan.
(e) In connection with the consummation of the transactions
contemplated in this Agreement, no employee or former employee of Steel will
become entitled to any bonus, retirement, severance, job security, change in
control or other benefit or enhanced benefit (including acceleration of an
award, vesting or exercise of an incentive award) or any fee or payment of any
kind as a result of any of the transactions contemplated hereby either alone or
in conjunction with another event such as termination of employment.
(f) To the best of the knowledge of Steel, all group health
plans of Steel have at all times fully complied, in all material respects, with
all applicable notification and continuation coverage requirements of Section
4980B(f) of the Code and Section 601 of ERISA ("COBRA") and any similar state
law. Steel has no current or projected liability in respect of post-retirement
or post-employment welfare benefits for retired, current or former employees, or
for any stockholder or director who is not an employee, former employee or
beneficiary thereof, except to the extent otherwise required by the COBRA
continuation requirements of Section 4980B(f) of the Code and Section 601 of
ERISA.
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2.9 PROPERTIES, TITLE, AND RELATED MATTERS.
(a) Steel has good and marketable title to all of its
respective personal property free and clear of all Encumbrances, except for
Permitted Encumbrances and those Encumbrances set forth on SCHEDULE 2.9(a). The
Encumbrances set forth on SCHEDULE 2.9(a) relate solely to the indebtedness
listed on SCHEDULE 2.13(a).
(b) Steel has good title to all the leasehold estates pursuant
to which all of the personal property leased by it is leased, free and clear and
all Encumbrances, except for Permitted Encumbrances and those Encumbrances set
forth on SCHEDULE 2.9(a). Steel has not breached any provision of and is not in
default (and no event or circumstance exists that with notice, or the lapse of
time or both, would constitute a default by Steel) under the terms of any lease
or other agreement pursuant to which the personal property leased by Steel is
leased.
(c) Except as listed on SCHEDULE 2.9(c), Steel does not own
any real property and has never owned any real property. There is set forth on
SCHEDULE 2.9(c) a description of all real property leased by Steel. There are no
pending or threatened disputes with respect to any lease or other agreement
pursuant to which the real property set forth on SCHEDULE 2.9(c) is leased and,
to the best knowledge of Steel and Xxxxx, the lessor thereunder has not breached
any provision of and is not in default (and no event or circumstance exists that
with notice, or the lapse of time or both, would constitute a default by the
lessor) under the material terms of any such lease or other agreement.
2.10 LEGAL PROCEEDINGS. Except as set forth on SCHEDULE 2.10, there is
no legal, judicial, administrative, governmental, arbitration or other action or
proceeding or governmental investigation pending, or to the best of the
knowledge of Steel, threatened against Steel seeking relief or damages which, if
granted, would materially adversely affect the Assets or that would prevent,
hinder or delay the ability of Steel to consummate the transactions contemplated
by this Agreement (and Steel is not aware of any basis for any such action,
proceeding or investigation), nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against
Steel. Steel has fully accrued for any payments that it believes are reasonably
likely to be made in connection with such matters. Steel is not in violation of
or default under any laws, ordinances, regulations, judgments, injunctions,
orders, or decrees (including any immigration laws or regulations) of any court
or other Governmental Entity applicable to its business, which violation or
default, if determined adversely to the Company would materially adversely
affect the Assets. Except as set forth on SCHEDULE 2.10, there are no judgments,
orders, injunctions, or decrees of any Governmental Entity in which Steel or
Xxxxx is a named party or any of its Assets are identified and subject.
2.11 INSURANCE. SCHEDULE 2.11 sets forth a list and brief description
of the insurance policies of Steel (including policies providing property,
casualty, liability, and workers' compensation coverage and bond and surety
arrangements).
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2.12 RECORDS. To the best of its knowledge, Steel has records that
accurately reflect its material transactions in all Material respects and has
accounting controls sufficient to insure that such transactions are in all
Material respects: (a) executed in accordance with its management's general and
specific authorization and (b) recorded in conformity with good business
practices.
2.13 MATERIAL CONTRACTS.
(a) Except as set forth in SCHEDULE 2.13(a) and except for
this Agreement, Steel is not a party to or is bound by: (1) any agreement,
indenture or other instrument which contains restrictions with respect to the
payment of dividends or any other distribution in respect of its capital stock
or the purchase, redemption or other acquisition of capital stock; (2) any
contract, agreement, indenture, note, or other instrument relating to the
borrowing of money by Steel or the granting of any Encumbrance; (3) any
agreement, contract, or commitment that Steel expects, or with the exercise of
reasonable business judgment would expect, to have a Material adverse effect on
the Condition of Steel; (4) any profit sharing, stock option, stock purchase,
stock appreciation, deferred compensation, severance or other plan or agreement
for the benefit of its current or former directors, officers and/or employees;
or (5) any other agreement or group of related agreements the performance of
which involves consideration greater than $10,000.00. SCHEDULE 2.13(a) sets
forth a list of each mortgage, security agreement, letter of credit, or guaranty
to which Steel is a party. Except as set forth in SCHEDULE 2.13(a), Steel is not
a party to or bound by a Material contract, lease, or agreement.
(b) Steel and, to the best knowledge of Steel and Xxxxx, the
other contracting parties thereto have not breached any material provision of or
are in material default (and no event or circumstance exists, to the best
knowledge of Steel and Xxxxx with respect to other Parties, that with notice, or
the lapse of time or both, would constitute a default) under the terms of any
agreement listed in SCHEDULE 2.13(a). To the best knowledge of Xxxxx and Steel,
all contracts, agreements, indentures, leases and other instruments listed in
SCHEDULE 2.13(a) are in full force and effect. There are no pending or, to the
best knowledge of Steel and Xxxxx, threatened disputes with respect to the
contracts, agreements, indentures, leases or instruments described in SCHEDULE
2.13(a), except as disclosed on SCHEDULE 2.10.
2.14 BROKERAGE. Except for Southbridge Business Resources, Xxx Xxxxxx
("Xxxxxx"), Xxxxxx Xxxxxxxx Realty ("Xxxxxx"), and Xxx Xxxxxxx ("Xxxxxxx"), no
investment banker, broker, or finder has acted directly or indirectly for Steel
or Xxxxx in connection with this Agreement or the transactions contemplated
hereby. Except for Southbridge Business Resources, Brewer, Keller, and Xxxxxxx,
no investment banker, broker, finder or other Person is entitled to any
brokerage or finder's fee or similar commission in respect thereof based in any
way on agreements, arrangements or understandings made by or on behalf of Steel
or Xxxxx. Except for the payment by EHI of the cash sum of $12,500.00 and the
issuance by EHI of 155,000 shares of EHI Common Stock as directed by Steel and
Xxxxx, Steel and Xxxxx are solely responsible for any fee or consideration
payable to Southbridge Business Resources, Brewer, Keller, and/or Xxxxxxx. Steel
and Xxxxx agree to cause any recipient of EHI Common Stock to execute a
Subscription Agreement.
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2.15 INTELLECTUAL PROPERTY. Steel owns or has the right to use pursuant
to license, sublicense, agreement, or permission all Intellectual Property
necessary or desirable for the operation of the business of Steel as presently
conducted. Except as set forth on SCHEDULE 2.15, each item of Intellectual
Property owned or used by Steel immediately prior to the Closing hereunder will
be owned or available for use by the Surviving Corporation on identical terms
and conditions immediately subsequent to the Closing hereunder. To the best of
the knowledge of Steel and Xxxxx, Steel will not interfere with, infringe upon,
misappropriate, or otherwise come into conflict with, any Intellectual Property
rights of third parties as a result of the continued operation of its business
as presently conducted.
2.16 ENVIRONMENTAL MATTERS.
(a) Each of Steel, Steel's predecessors in interest, Xxxxx or
their respective Affiliates has complied and is in compliance with all
Environmental Laws in the operation of the business of Steel. Without limiting
the generality of the foregoing, Steel has obtained and complied with, and is in
compliance with, all permits, licenses, and other authorizations that are
required pursuant to Environmental Laws for the occupation of its facilities and
the operation of its business; a list of all such permits, licenses and other
authorizations is set forth on SCHEDULE 2.16.
(b) None of Steel, Steel's predecessors in interest, Xxxxx or
their respective Affiliates has received any written or oral notice, report or
other information regarding any actual or alleged violation of Environmental
Laws, or any liabilities or potential liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise), including any investigatory, remedial or
corrective obligations, relating to any of them or its facilities arising under
Environmental Laws. Except as set forth on SCHEDULE 2.16, to the best of the
knowledge of Xxxxx, none of the following exists at any property or facility
owned or operated by Steel: (1) underground storage tanks, (2)
asbestos-containing material in any form or condition, (3) materials or
equipment containing polychlorinated biphenyls, or (4) landfills, surface
impoundments, or disposal areas.
(c) To the best of the knowledge of Steel, none of Steel,
Steel's predecessors in interest, Xxxxx or their respective Affiliates has
treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, or released any substance, including without limitation
any waste materials, hazardous substance, or owned or operated any property or
facility (and, to the best of the knowledge of Xxxxx, no such property or
facility is contaminated by any such substance) in a manner that has given or
would give rise to liabilities, including any liability for response costs,
corrective action costs, personal injury, property damage, natural resources
damages or attorney fees, pursuant to CERCLA, the Solid Waste Disposal Act, as
amended ("SWDA") or any other Environmental Laws. Except for the facility leased
from Sand Springs Home at 000 Xxxx Xxxxxx Xxxx, Xxxx Xxxxxxx, Xxxxxxxx, and its
former premises at 0000 Xxxx Xxxxx Xxxx, Xxxx Xxxxxxx, Xxxxxxxx, no portion of
the Assets or any other assets or properties currently or previously leased by
Steel is part of a Superfund site under CERCLA or any similar ranking or listing
under any similar state law. Neither this Agreement nor the consummation of the
transaction that is the subject of this Agreement will result in any obligations
for site investigation or cleanup, or notification to or consent of government
agencies or third parties, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer" Environmental Laws.
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2.17 GOVERNMENTAL LICENSES AND PERMITS. Steel has all material federal,
state, local, and foreign governmental licenses, concessions, franchises,
grants, and permits necessary to the conduct of its operations of business as
currently conducted, such licenses and permits are in full force and effect, no
violations are or have been recorded in respect of any thereof and no proceeding
is pending or, to the best knowledge of Steel and Xxxxx, threatened to revoke or
limit any thereof. SCHEDULE 2.17 contains a true, complete, and accurate list
of: (a) all such material governmental licenses, concessions, franchises,
grants, and permits, (b) all consents, orders, decrees and other compliance
agreements under which Steel is operating or bound, copies of all of which have
been furnished to EHI and Sub, and (c) all governmental licenses, concessions,
franchises, grants, and permits applied for but not yet received by Steel.
Except as set forth on SCHEDULE 2.17, all such governmental licenses,
concessions, franchises, grants, and permits shall transfer as operation of law
as a result of the Merger without any adverse effect to the Surviving
Corporation. Steel has not received and is unaware of any reports of inspections
under the United States Occupational Safety and Health Act, or under any other
applicable federal, state or local health and safety laws and regulations
relating to Steel, the Assets, or the operation of Steel's business. As of the
date hereof, to the best of its knowledge, there are no safety, health,
anti-competitive or discrimination claims that have been made or are pending
that are threatened relating to the business or employment practices of Steel.
2.18 TAXES AND TAX MATTERS. Except as set forth in SCHEDULE 2.18:
(a) all material returns (including income, franchise, sales
and use, unemployment compensation, excise, severance, property, gross receipts,
profits, payroll and withholding tax returns and information returns) and
reports (collectively, the "Tax Returns") of or relating to any foreign,
federal, state or local tax, assessment, levy, impost, duty, withholding,
estimated payment or other similar governmental charge (collectively, together
with any penalties, additions to tax, fines, interest and similar charges
thereon or related thereto, the "Taxes") that are required to be filed on or
before the Effective Date, subject to any allowable extension periods and
subject to any matters that are being contested in good faith by Steel, for, by,
on behalf of or with respect to Steel, including, but not limited to, those
relating to the income, business, operations, or property of Steel (whether on a
separate, consolidated, affiliated, combined, unitary or any other basis), have
been or will be timely filed with the appropriate foreign, federal, state and
local authorities, and all Taxes shown to be due and payable on such Tax Returns
or related to such Tax Returns have been or will be paid in full on or before
the Effective Date;
(b) all such Tax Returns and the information and data
contained therein have been or will be properly and accurately compiled and
completed in all material respects, fairly present or will fairly present the
information purported to be shown therein in all material respects, and reflect
or will reflect all liabilities for Taxes for the periods covered by such Tax
Returns in all material respects;
(c) none of such Tax Returns are under audit or, to the best
knowledge of Steel, are under examination and there are no agreements, waivers
or other arrangements providing for an extension of time with respect to the
assessment or collection of any Tax or deficiency of any nature against Steel
with respect to any such Tax Return;
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(d) all Taxes assessed and all material Taxes due and owing
from or against Steel on or before the Effective Date (including, but not
limited to, ad valorem Taxes relating to any property of Steel) have been or
will be timely paid in full on or before the Effective Date;
(e) all material withholding Tax, Tax deposit and estimated
Tax payment requirements imposed on Steel for any and all periods ending on or
before the Effective Date, or through and including the Effective Date for
periods that have not ended on or before the Effective Date, have been or will
be timely satisfied in full on or before the Effective Date or reserves adequate
for the payment of such withholding, deposit and estimated Taxes have been or
will be established in the financial statements of Steel on or before the
Effective Date;
(f) pursuant to the Merger, at least ninety percent (90%) of
the fair market value of the net assets and at least seventy percent (70%) of
the fair market value of the gross assets held by Steel immediately prior to the
Merger will continue to be held by the Surviving Corporation immediately
subsequent to the Merger;
(g) except for waivers or extensions which, by their terms,
have lapsed, Steel has not waived any statute of limitations in respect of taxes
or agreed to any extension of time with respect to a tax assessment or
deficiency and Steel has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial understatement of
federal income tax within the meaning of Code section 6662. Steel is not a party
to any tax allocation or sharing agreement;
(h) the liabilities of Steel assumed by Sub and the
liabilities to which the transferred assets of Steel are subject were incurred
by Steel in the ordinary course of business;
(i) Steel is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(a) of the Code; and
(j) at least fifty percent (50%) the fair market value of the
Consideration will be in EHI Common Stock.
2.19 LABOR MATTERS. Except as set forth on SCHEDULE 2.19, there are no
collective bargaining or other labor union agreements to which Steel is a party
or by which it is bound. There are currently no labor disputes to which Steel is
a party. Steel has not received notice from any union or employees setting forth
demands for representation, elections or for present or future changes in wages,
terms of employment or working conditions.
2.20 WARRANTIES AND PRODUCT LIABILITY. Except for warranties implied by
law or as set forth on SCHEDULE 2.20, Steel has not given or made any warranties
in connection with the sale or rental of goods or services, including warranties
covering the customer's consequential damages.
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2.21 NO UNTRUE STATEMENTS. To the best of their knowledge, this
Agreement, the schedules hereto and the information referred to herein, when
taken as a whole, do not include any untrue statement of a Material fact.
2.22 SECURITIES LAW MATTERS.
(a) Xxxxx recognizes and understands that the EHI Common Stock
to be issued to them pursuant to the Merger (the "Securities") will not be
registered under the Securities Act, or under the securities laws of any state
(the "Securities Laws"). The Securities are not being so registered in reliance
upon exemptions from the Securities Act and the Securities Laws which are
predicated, in part, on the representations, warranties and agreements of Xxxxx
contained herein. Xxxxx represents and warrants that (i) they have such
knowledge and experience in financial and business matters that they are capable
of evaluating the merits and risks of an investment in the EHI Common Stock and
the suitability thereof as an investment for them, (ii) Xxxxx is an "accredited
investor" within the meaning of Regulation D promulgated by the Commission
pursuant to the Securities Act, (iii) the EHI Common Stock to be acquired by
them in connection with the Merger will be acquired solely for investment and
not with a view toward resale or redistribution in violation of the Securities
Laws, (iv) their residence and domicile is in the State of Oklahoma, and (v) in
connection with the transactions contemplated hereby, no assurances have been
made concerning the future results of Steel or EHI or as to the value of the EHI
Common Stock. Except for the obligations set forth in Section 4.1 hereof, Xxxxx
understands that none of EHI, Sub or Steel is under any obligation to file a
registration statement or to take any other action under the securities laws
with respect to the Securities.
(b) Xxxxx has consulted with their own counsel in regard to
the Securities Laws and each is fully aware: (i) of the circumstances under
which they are required to hold the Securities, (ii) of the limitations on the
transfer or disposition of the Securities, (iii) that the Securities must be
held indefinitely unless the transfer thereof is registered under the Securities
Laws or an exemption from registration is available, and (iv) that no exemption
from registration is likely to become available for at least one (1) year from
the date of acquisition of the Securities. Xxxxx has been advised by their
counsel as to the provisions of Rules 144 and 145 as promulgated by the
Commission under the Securities Act and has been advised of the applicable
limitations thereof. Xxxxx acknowledges that EHI, Sub and Steel are relying upon
the truth and accuracy of the representations and warranties made by Xxxxx in
this Section 2.22 in consummating the transactions contemplated by this
Agreement without registering the Securities under the Securities Laws.
(c) EHI and Sub have made available to Xxxxx the opportunity
to ask questions and receive answers concerning the terms and conditions of the
transactions contemplated by this Agreement and to obtain any additional
information which they possess or could reasonably acquire for the purpose of
verifying the accuracy of information furnished to Xxxxx as set forth herein or
for the purpose of considering the transactions contemplated hereby. Xxxxx
agrees that the certificates representing their EHI Common Stock to be acquired
pursuant to the Merger will be imprinted with the following legend, the terms of
which are specifically agreed to:
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THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR THE SECURITIES LAWS OF ANY STATE, IN RELIANCE UPON EXEMPTIONS
FROM REGISTRATION REQUIREMENTS. WITHOUT SUCH REGISTRATION, SUCH SHARES
MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, EXCEPT
UPON DELIVERY TO STEEL OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO STEEL THAT REGISTRATION IS NOT REQUIRED FOR SUCH SALE, PLEDGE,
HYPOTHECATION OR TRANSFER OR THE SUBMISSION TO STEEL OF SUCH OTHER
EVIDENCE AS MAY BE SATISFACTORY TO STEEL TO THE EFFECT THAT SUCH SALE,
PLEDGE, HYPOTHECATION OR TRANSFER SHALL NOT BE IN VIOLATION OF THE
SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS OR ANY RULE
OR REGULATION PROMULGATED THEREUNDER. ADDITIONALLY, THE ARTICLES OF
INCORPORATION, AS AMENDED, WHICH ARE ON FILE IN THE XXXXXX XX XXX
XXXXXXXXX XX XXXXX XX XXX XXXXX XX XXXXX AND A COPY OF WHICH THE
CORPORATION WILL FURNISH ANY SHAREHOLDER WITHOUT CHARGE UPON WRITTEN
REQUEST, DENY PRE-EMPTIVE RIGHTS OF SHAREHOLDERS AND THE RIGHT OF
SHAREHOLDERS TO CUMULATE VOTES IN THE ELECTION OF DIRECTORS, AND SET
FORTH THE DESIGNATIONS, PREFERENCES, LIMITATIONS, AND RELATIVE RIGHTS
OF EACH CLASS OF STOCK THE CORPORATION IS AUTHORIZED TO ISSUE. FURTHER,
NOTICE IS HEREBY GIVEN THAT THE SHARES EVIDENCED BY THIS CERTIFICATE
ARE SUBJECT TO RESTRICTIONS UNDER CERTAIN CIRCUMSTANCES AS PROVIDED BY
THE BYLAWS OF THE CORPORATION WHICH ARE ON FILE AT THE PRINCIPAL OFFICE
OF THE CORPORATION. A COPY OF THE BYLAWS WILL BE FURNISHED WITHOUT
CHARGE UPON REQUEST BY THE HOLDER OF THIS CERTIFICATE TO THE
CORPORATION AT ITS PRINCIPAL OFFICE OR REGISTERED OFFICE.
Xxxxx understands and agrees that appropriate stop transfer notations will be
placed in the records of EHI and with its transfer agents in respect of the
Securities which are to be issued to them in the Merger.
2.23 INDEBTEDNESS AND AGREEMENTS. Immediately subsequent to the
Effective Time, the Surviving Corporation will have no indebtedness outstanding
that is payable to Xxxxx or any of their Affiliates, except for benefits
pursuant to Designated Plans listed on the schedules hereto. Immediately
subsequent to the Effective Time, except for this Agreement, there will be no
agreements, contracts, leases, arrangements or other understandings (either
written or oral) between Xxxxx, on the one hand, and the Surviving Corporation,
on the other, except for benefits pursuant to Designated Plans listed on the
schedules hereto.
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2.24 UNDISCLOSED LIABILITIES. Steel does not have any liability
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due), including any liabilities for Taxes, except
for: (i) liabilities disclosed on the face of the Current Balance Sheet (rather
than in the notes thereto) and (ii) liabilities which have arisen after October
31, 2001, in the ordinary course of business (none of which results from, arises
out of, relates to, is in the nature of, or was caused by any breach of
contract, breach of warranty, tort, infringement, or violation of law).
2.25 TAX REORGANIZATION REPRESENTATION. Pursuant to the Merger, the
Surviving Corporation will acquire substantially all of the properties of Steel
within the meaning of Section 368(a)(2)(D) of the Code.
2.26 CASH BALANCE. At the Effective Time, Steel shall have Cash of at
least $100,000.00.
2.27 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of Steel and Xxxxx contained in this Article 2
shall survive the Closing hereunder and continue in full force and effect for
two (2) years thereafter; provided, however, that the representations and
warranties of Steel and Xxxxx contained in Sections 2.1, 2.2, 2.9, 2.16, and
2.18 above shall continue in full force and effect until the longer of: (A) the
expiration of thirty (30) days after the expiration of the applicable statute of
limitations or (B) ten (10) years.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF EHI, SUB, STUART AND XXXXXXXX
EHI, Sub, Stuart and Xxxxxxxx hereby jointly and severally represent
and warrant to and covenant and agree with Steel and Xxxxx that the statements
contained in this Article 3 are correct as of the Closing Date:
3.1 CORPORATE ORGANIZATION.
(a) EHI is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Texas and has all requisite
corporate power and authority to conduct its business as currently conducted and
to own, operate and/or lease its assets. Sub is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Oklahoma
and has all requisite corporate power and authority to conduct its business as
currently conducted and to own, operate and/or lease its assets. SCHEDULE 3.1(a)
lists the current directors and officers of EHI and Sub.
(b) Each of EHI and Sub have previously delivered to Steel and
Xxxxx true and correct copies of their respective Articles of Incorporation and
By-laws as in effect on the date hereof, and copies of the respective minute
books and stock records of EHI and Sub. Neither of EHI or Sub is in default
under or in violation of any provisions of their respective Articles of
Incorporation or Bylaws.
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3.2 DUE AUTHORIZATION, EXECUTION AND DELIVERY; EFFECT OF AGREEMENT.
(a) The execution, delivery, and performance by EHI and Sub of
this Agreement and the consummation by EHI and Sub of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of EHI and Sub. This Agreement has been duly and validly executed
and delivered by EHI and Sub and constitutes the legal, valid, and binding
obligation of EHI and Sub, enforceable against each of them in accordance with
its terms, except to the extent that such enforceability (a) may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditors' rights generally and (b) is subject to general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law). The Board of Directors of Sub has adopted a
resolution directing that this Agreement and the Merger be submitted to EHI, as
the sole shareholder of Sub, for its approval and unconditionally recommending
that this Agreement and the Merger be approved by EHI, and EHI has approved this
Agreement and the Merger as the sole shareholder of Sub as required by the OGCA.
(b) The consummation by EHI and Sub of the transactions
contemplated hereby will not violate any provision of, or constitute a default
under, any contract or other agreement to which EHI or Sub is a party or by
which either of them is bound, or conflict with its charter or by-laws, other
than violations, defaults or conflicts that would not have a Material Adverse
Effect on EHI or Sub or materially and adversely affect the ability of EHI or
Sub to consummate the transactions contemplated by this Agreement.
(c) Each of Stuart and Xxxxxxxx has the requisite legal
capacity and full power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. Each of Stuart and Xxxxxxxx has
duly executed and delivered this Agreement. This Agreement constitutes a legal,
valid and binding obligation of each of Stuart and Xxxxxxxx, enforceable against
them in accordance with its terms, except to the extent that such enforceability
(a) may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to creditors' rights generally and (b) is subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
3.3 CAPITALIZATION OF EHI AND SUB.
(a) The authorized capital stock of EHI consists of: (i)
50,000,000 authorized shares of $0.001 per share par value common stock,
7,790,000 shares of which are issued and outstanding prior to Closing; and (ii)
5,000,000 authorized shares of $0.001 per share par value preferred stock, none
of which are issued and outstanding. All of the outstanding shares of EHI Common
Stock have been duly authorized and validly issued and are fully paid and
non-assessable and were not issued in violation of any preemptive rights or
other preferential rights of subscription or purchase of any Person. Except for
any options under any agreement delivered at Closing, the Swift Warrant, options
to be issued to Xxxx Xxxxx and other employees of EHI, Sub, Services (hereafter
defined), and/or AeroSpace (hereafter defined), any shares of EHI Common Stock
purchased by A. Xxxx Xxxxx ("Swift") prior to the issuance of preferred stock by
EHI, the shares of EHI Common Stock described in Section 2.14, or otherwise
detailed on SCHEDULE 3.3(a), there are no outstanding options, warrants,
purchase rights, subscription rights, conversion rights, preemptive rights,
-17-
agreements, arrangements or understandings of any character obligating EHI to
issue or sell, or cause to be issued or sold, additional shares of capital stock
of EHI or any securities or obligations convertible into or exchangeable for
such shares. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or similar rights with respect to EHI or the EHI
Common Stock. Other than the Shareholders Agreement contemplated by this
Agreement, there are no voting trusts, shareholders' agreements, proxies, or
other agreements or understandings with respect to the EHI Common Stock.
Immediately following the Effective Time, Xxxxx will own 16.14% of the EHI
Common Stock (prior to giving effect to the issuance of EHI Common Stock
described in Section 2.14 and prior to giving effect to the other securities
described in this Subsection 3.3(a)), which is calculated by dividing 1,500,000
by 9,290,000. Attached as SCHEDULE 3.3(a) is a list of shareholders of EHI, the
number of shares of EHI Common Stock owned by such shareholder, and the
consideration paid by or on behalf of such shareholder.
(b) The authorized capital stock of Sub consists of 5,000
authorized shares of $0.01 per share par value common stock, 1,000 shares of
which are issued and outstanding. All of the outstanding shares of common stock
of Sub have been duly authorized and validly issued and are fully paid and
non-assessable and were not issued in violation of any preemptive rights or
other preferential rights of subscription or purchase of any Person. EHI owns
all of the outstanding common stock of the Sub, beneficially and of record, free
and clear of all Encumbrances and restrictive agreements. There are no
outstanding options, warrants, purchase rights, subscription rights, conversion
rights, preemptive rights, agreements, arrangements or understandings of any
character obligating Sub to issue or sell, or cause to be issued or sold,
additional shares of capital stock of Sub or any securities or obligations
convertible into or exchangeable for such shares. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or similar
rights with respect to Sub or the common stock of Sub. There are no voting
trusts, shareholders' agreements, proxies, or other agreements or understandings
with respect to the common stock of Sub.
3.4 ASSETS, LIABILITIES, AND PROPERTIES OF EHI AND SUB. SCHEDULE 3.4
sets forth an accurate and complete listing of all of the assets and liabilities
of each of EHI and Sub. Except as set forth on SCHEDULE 3.4, neither of EHI or
Sub has any liability of any kind or manner, whether direct or indirect,
accrued, absolute or otherwise. Except for Sub, Excalibur AeroSpace, Inc., an
Oklahoma corporation ("AeroSpace"), and Excalibur Services, Inc., an Oklahoma
corporation ("Services"), there are no Persons in which EHI owns any direct or
indirect equity or other similar ownership interests. Except as set forth on
SCHEDULE 3.4 and except for items purchased and/or assumed in connection with
the Aero Weld Transaction (hereafter defined) or the Redhawk Transaction
(hereafter defined), none of EHI, AeroSpace, Services, or Sub: (i) has any
Designated Plans, (ii) leases or owns any real estate, is a party to a legal
proceeding or action, or (iii) has any indebtedness for borrowed money. For
purposes of this Agreement, the "Aero Weld Transaction" shall mean the
transaction contemplated by that certain Asset Purchase Agreement, dated on or
about November 23, 2001, by and between AeroSpace and Aero Weld, Inc., an
Oklahoma corporation ("Aero Weld"). For purposes hereof, the "Redhawk
Transaction" shall mean the transaction contemplated by that certain Asset
Purchase Agreement, dated on or about November 20, 2001, by and between Services
and Redhawk Industries, L.L.C., an Oklahoma limited liability company
("Redhawk").
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3.5 CONSENTS. Except for the filing and recordation of Articles of
Merger as required by the OGCA and those consents, approvals, authorizations,
exemptions and filings, the failure to obtain or make would not materially and
adversely affect the ability of EHI and Sub to consummate the transactions
contemplated by this Agreement, there is no consent, approval clearance, waiver,
order or authorization of, or exemption by, or filing with, any Governmental
Entity required in connection with the execution, delivery or performance by EHI
and Sub of this Agreement or the taking of any other action contemplated hereby
that has not heretofore been made and obtained. The consummation of the
transaction: (i) does not conflict with or violate any permit, concession,
grant, franchise, statute, law, rule or regulation of any Governmental Entity or
any order, judgment, award or decree of any court or other Governmental Entity
to which Sub is subject or any of its assets is bound and (ii) does not conflict
with, or result in any breach of, or default or loss of any right under (or an
event or circumstance that, with notice or the lapse of time, or both, would
result in a default), or the creation of an Encumbrance pursuant to, or cause or
permit the acceleration prior to maturity or "put" right with respect to, any
obligation under, any indenture, mortgage, deed of trust, lease, loan agreement
or other agreement or instrument to which Sub is a party or to which any of the
assets are subject.
3.6 AUTHORIZATION FOR EHI COMMON STOCK. EHI has taken all necessary
action to permit it to issue the number of shares of EHI Common Stock required
to be issued pursuant to the terms of this Agreement. The shares of EHI Common
Stock issued pursuant to the terms of this Agreement will, when issued, be
validly issued, fully paid and nonassessable and not subject to preemptive
rights.
3.7 BROKERAGE. No investment banker, broker, finder or other Person is
entitled to any brokerage or finder's fee or similar commission in respect of
this Agreement or the transactions contemplated hereby based in any way on
agreements, arrangements or understandings made by or on behalf of EHI or Sub or
any of their Affiliates.
3.8 SOPHISTICATION OF EHI. EHI and Sub acknowledge that: (i) they have
had the opportunity to visit with Xxxxx and Steel and meet with the respective
officers and other representatives of Steel to discuss the business and the
assets, liabilities, financial condition, cash flow and operations of Steel and
(ii) to the actual knowledge of EHI and Sub, all materials and information
requested by EHI and Sub have been provided to EHI and Sub to their reasonable
satisfaction. EHI and Sub acknowledge that they have made their own independent
examination, investigation, analysis, and evaluation of Steel, including their
own estimate of the value of Steel. Nothing in this Section nor any
investigation, examination, analysis or evaluation of Steel made by or on behalf
of EHI and Sub shall in any way modify any representation or warranty made by
Xxxxx and Steel in Article 2 hereof, or elsewhere in this Agreement or the
Schedules to this Agreement, or release or discharge Xxxxx and Steel from their
representations under the terms of this Agreement.
3.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of EHI, Sub, Stuart and Xxxxxxxx contained in
this Article 3 shall expire on the second anniversary of the Closing Date;
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provided, however, that the representations and warranties of EHI, Sub, Stuart
and Xxxxxxxx contained in Sections 3.1 and 3.3 above shall expire on the earlier
of: (A) the expiration of the applicable statute of limitations or (B) ten (10)
years.
ARTICLE 4
COVENANTS AND AGREEMENTS
The Parties covenant and agree as follows:
4.1 PUBLIC SHELL. Within one hundred fifty (150) days of the Closing
Date, the EHI Common Stock (as hereafter defined) shall be Publicly Traded
(hereafter defined). For the purposes of this Section 4.1, the term "EHI Common
Stock" shall mean the common stock, $.001 par value, of EHI, and any equity
securities (including, but not limited to, common or capital stock, convertible
notes, membership interests, or units) of any corporation, partnership, limited
liability company, trust, or other entity that is the successor of EHI by
merger, consolidation, or otherwise (EHI and such entity being collectively
referred to as the "Entity"). The term "Publicly Traded" shall mean that the
Entity has become subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended, with respect to the EHI
Common Stock. The remedies for a breach of this Section 4.1 are set forth in
that certain Post-Closing Agreement, of even date herewith, among EHI, Lewis,
Stuart, and Xxxxxxxx.
4.2 FURTHER ASSURANCES. If at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any further assignments
or assurances in law or otherwise are necessary or desirable to vest, perfect or
confirm, of record or otherwise, in the Surviving Corporation, all rights, title
and interests in all real estate and other property and all privileges, powers
and franchises of Steel and Sub, the Surviving Corporation and its proper
officers and directors, in the name and on behalf of Steel and Sub, shall
execute and deliver all such proper deeds, assignments and assurances in law and
do all things necessary and proper to vest, perfect or confirm title to such
property or rights in the Surviving Corporation and otherwise to carry out the
purpose of this Agreement, and the proper officers and directors of the
Surviving Corporation are fully authorized in the name of Steel or otherwise to
take any and all such action.
4.3 RELEASE.
(a) As of the Effective Time, Xxxxx does hereby for themselves
and their heirs, executors, administrators and legal representatives remise,
release, acquit and forever discharge Steel and its respective controlled
Affiliates, partners, officers, directors and employees, in their capacities as
such, and successors and assigns of and from any and all claims, demands,
liabilities, responsibilities, disputes, causes of action and obligations of
every nature whatsoever, liquidated or unliquidated, known or unknown, matured
or unmatured, fixed or contingent, which they now have, own, or hold or has at
any time previously had, owned or held against Steel, or such Person in such
capacity, including all liabilities created as a result of the negligence, gross
negligence and willful acts of Steel and its employees and agents, existing as
of the Effective Time or relating to any matter that occurred on or prior to the
Effective Time; provided, however, that any claims, liabilities, debts or causes
of action that may arise in connection with the failure of any of the Parties
hereto to perform any of their obligations hereunder or under any other
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agreement relating to the transactions contemplated hereby or from any breaches
by any of them of this Agreement or any other agreement shall not be released or
discharged pursuant to this Agreement.
(b) Xxxxx represents and warrants that they have not
previously assigned or transferred, or purported to assign or transfer, to any
Person or entity whatsoever all or any part of the claims, demands, liabilities,
responsibilities, disputes, causes of action or obligations released herein.
Xxxxx covenants and agrees that they will not assign or transfer to any Person
or entity whatsoever all or any part of the claims, demands, liabilities,
responsibilities, disputes, causes of action or obligations to be released
herein. Xxxxx represents and warrants that they have read and understands all of
the provisions of this Section 4.4 and that they have been represented by legal
counsel of their own choosing in connection with the negotiation, execution, and
delivery of this Agreement.
4.4 RELEASE FROM PERSONAL GUARANTIES AND INDEBTEDNESS. At Closing, EHI
shall deliver to Xxxxx a check in the amount of $402,631.80 which Xxxxx shall
use to fully pay and discharge: (i) that certain Small Business Administration
Loan dated April 5, 2000, in the original amount of $300,000.00 and with a
remaining principal amount of approximately $219,305.96; (ii) that certain
promissory note dated May 24, 2001, payable to the order of Community Bank and
Trust Company in the original amount of $144,362.43 and with a remaining
principal amount of approximately $132,805.84; and (iii) that certain promissory
note dated October 17, 2001, payable to the order of Community Bank and Trust
Company in the original amount of $50,520.00 and with a remaining principal
amount of approximately $50,927.67 and have Xxxxx released from any personal
guaranties of such indebtedness within fifteen (15) days of Closing Date. EHI
hereby agrees to indemnify and defend Xxxxx and hold Xxxxx harmless for any
amounts that Xxxxx is required to pay in connection with the enforcement of any
obligations under the loans described in (i)-(iii) above or such personal
guaranties after the Closing, including any reasonable attorneys' fees and
expenses incurred in connection therewith.
4.5 USE OF FUNDING LOAN. The Funding Loan shall be used by EHI (or has
been used by EHI) only for one or more of the following purposes: (i) the
discharge of the loans described in Section 4.4 and the release of Xxxxx from
personal guaranties of Steel's indebtedness pursuant to Section 4.4 hereof; (ii)
general working capital of EHI and Sub; (iii) the acquisition of the assets of
Redhawk, as contemplated by the Redhawk Transaction; (iv) the acquisition of the
assets of Aero Weld, as contemplated by the Aero Weld Transaction, and (v) other
business expenses of EHI and Sub.
4.6 120-DAY PROMISSORY NOTES. Until the 120-Day Promissory Notes are
paid in full, EHI shall not make any dividends to any shareholders and will not
retire any debt (other than Funding Loan, the payments required by EHI in the
Aero Weld Transaction, and the loans described in Section 4.4), but this
restriction shall not prohibit EHI from paying trade payables, other current
liabilities, and expenses in the ordinary course of business, and other expenses
contemplated by this Agreement.
4.7 ACCEPTABLE FINANCING. Stuart and Xxxxxxxx further agree to become
jointly and severally liable for any Acceptable Financing (as defined in that
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certain Tri-Party Agreement, of even date herewith, among EHI, Xxxxxx Xxxxx,
Xxxxx Xxxxx, and Swift); provided, however, neither Stuart, nor Xxxxxxxx, shall
be obligated to guarantee more than $ 7,000,000.00 of debt of EHI. Further, upon
procurement of such Acceptable Financing, EHI shall pay all amounts owing under
the 120-Day Promissory Notes, even if such Acceptable Financing is procured
prior to the maturity of the 120-Day Promissory Notes.
ARTICLE 5
INDEMNIFICATION AND REIMBURSEMENT
5.1 XXXXX INDEMNITIES. Subject to the terms and conditions set forth
herein, from and after the Effective Time, Xxxxx shall absolutely and
irrevocably indemnify, defend and hold harmless EHI and every Affiliate of EHI
(including Sub and Steel) and their respective directors, stockholders,
officers, employees, agents, consultants, representatives, successors,
transferees and assignees (collectively, the "Parties to be Indemnified by
Xxxxx") from, against and in respect of any and all Claims that arise or result
from or relate to the matters described in clauses (a) through (d) in this
Section 5.1 (herein collectively referred to as the "Liabilities to be
Indemnified by Xxxxx"); provided that Xxxxx shall not be obligated to indemnify
EHI or Sub for any liability that also constitutes a Liability to be Indemnified
by the EHI Parties to the extent that such liability is a Liability to be
Indemnified by the EHI Parties; and provided further, that Xxxxx shall not be
obligated to indemnify the Parties to be Indemnified by Xxxxx until the
Liabilities to be Indemnified by Xxxxx exceed on a cumulative basis $50,000.00
(the "Threshold Amount"), and then only to the extent of any such Liabilities to
be Indemnified by Xxxxx sustained by the Parties to be Indemnified by Xxxxx in
excess of such Threshold Amount; provided, further, that Xxxxx shall not be
obligated to pay in excess of an amount equal to $1,075,000.00 (the "Cap") for
all Liabilities to be Indemnified by Xxxxx (with each of Xxxxxx Xxxxx and Xxxxx
Xxxxx being jointly and severally responsible for the Cap); and provided further
that the indemnification obligations of Xxxxx hereunder to pay Cash for any
Liabilities to be Indemnified by Xxxxx is limited to the amount of cash payments
that they have received from EHI pursuant to the Consideration. Additionally, to
the extent that Xxxxx has not received Cash in an amount equal to the
Liabilities to be Indemnified by Xxxxx, EHI, on behalf of the Parties to be
Indemnified by Xxxxx, shall have the right, subject to Section 5.10, to offset
the amounts owing pursuant to the 90-Day Promissory Notes, the 120-Day
Promissory Notes, and the 1-Year Promissory Notes against any and all
Liabilities to be Indemnified by Xxxxx that are unpaid but that are properly
payable by Xxxxx in accordance with the terms, conditions, and procedures set
forth in this Article 5. All such amounts, subject to Section 5.10, to be so
offset shall be applied in the following order of priority: (i) first, to
amounts owing under the 90-Day Promissory Notes; (ii) next, to amounts owing
under the 120-Day Promissory Notes; and (iii) finally to amounts owing under the
1-Year Promissory Notes. In the event the Threshold Amount has been reached (in
accordance with the terms and provisions of this Article 5) and Xxxxx has not
otherwise satisfied such Liabilities to be Indemnified by Xxxxx, then such right
of offset shall be deemed matured. Further, after the exhaustion by the Parties
to be Indemnified by Xxxxx of all rights of offset against the Cash received and
the promissory notes as set forth in the immediately preceding sentence (e.g.,
if there are any Liabilities to be Indemnified by Xxxxx that remain unsatisfied
AFTER offsetting the amount of such Liabilities to be Indemnified by Xxxxx
against the Cash received and the outstanding amounts owing under the notes, in
the priority set forth above), then, subject to Section 5.10, EHI, in addition
to any and all other remedies available to it in this Article 5, EHI (on behalf
of the Parties to be Indemnified by Xxxxx) shall have the right and option to
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transfer, on the books of EHI, FROM the name of Xxxxx TO the name of EHI that
number of shares of EHI Common Stock owned by Xxxxx whose value, at the Agreed
Valuation (hereinafter defined), is equal to the amount of such Liabilities to
be Indemnified by Xxxxx that remain properly due and payable by Xxxxx in
accordance with this Article 5. For the purpose of the immediately preceding
sentence, it is agreed by the Parties that the "Agreed Valuation" of the EHI
Common Stock shall be $1.00 per Share; provided that if EHI shall effect a
subdivision or consolidation of the shares of its common stock or other capital
readjustment, the payment of a stock dividend, or other increase or reduction in
the number of shares of its common stock outstanding, then in such event, the
Agreed Valuation shall be proportionately increased or decreased, as the case
may be.
(a) the breach of any representation or warranty made by Xxxxx
or Steel contained in this Agreement or in any certificate, exhibit, schedule,
or other document furnished or delivered to EHI and Sub by Xxxxx or Steel at the
Closing;
(b) Xxxxx' failure to perform any of their covenants or
agreements under or contained in this Agreement or in any certificate, exhibit,
schedule, or other document furnished or delivered to EHI and Sub by Xxxxx or
Steel at the Closing;
(c) to the extent not reserved on the Current Balance Sheet or
arising in the ordinary course of business after the date of the Current Balance
Sheet, any Claim for Taxes relating to a period ending on or before the
Effective Time or an event occurring on or before the Effective Time, including
for any additional Taxes assessed as a result of or arising from an audit or
examination of Tax Returns filed on or before the Effective Time or a
recharacterization of any revenues, deductions or expenses reported or claimed
thereon; and
(d) any liability regarding any violations of Environmental
Laws arising from any event, condition, activity, incident, action or omission
existing or occurring: (i) prior to the Effective Time relating in any way to
the Assets or Steel (including the ownership, operation or use of the Assets and
the conduct of Steel prior to the Effective Time) and (ii) prior to, on or after
the Effective Time relating in any way to the conduct of any business of Xxxxx
other than Steel.
5.2 STUART AND XXXXXXXX INDEMNITIES. From and after the Effective Time,
EHI, Sub, Stuart and Xxxxxxxx (collectively, the "EHI Parties") shall absolutely
and irrevocably indemnify, defend and hold harmless Xxxxx and every Affiliate of
Xxxxx (including the Surviving Corporation) and their respective directors,
stockholders, officers, employees, agents, consultants, representatives, heirs,
successors, transferees and assignees (collectively, the "Parties to be
Indemnified by the EHI Parties") from, against and in respect of any and all
Claims that arise or result from or relate to the matters described in clauses
(a) and (b) of this Section 5.2 (herein collectively referred to as the
"Liabilities to be Indemnified by the EHI Parties"); provided, that the EHI
Parties shall not be obligated to indemnify any of the Parties to be Indemnified
by the EHI Parties for any liability that also constitutes a Liability to be
Indemnified by Xxxxx to the extent that such liability is a Liability to be
Indemnified by Xxxxx; and provided, further, that the EHI Parties shall not be
obligated to indemnify the Parties to be Indemnified by the EHI Parties until
the Liabilities to be Indemnified by the EHI Parties exceed on a cumulative
basis the Threshold Amount, and then only to the extent of any such Liabilities
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to be Indemnified by the EHI Parties sustained by the Parties to by Indemnified
by EHI in excess of such Threshold Amount; and provided, further, that the EHI
Parties shall not be obligated to pay in excess of an amount equal to the Cap
for all Liabilities to be Indemnified by the EHI Parties hereunder;
(a) the breach of any representation or warranty made by EHI,
Sub, Stuart or Xxxxxxxx contained in this Agreement or in any certificate,
exhibit, schedule, or other document furnished or delivered to Xxxxx by EHI,
Sub, Stuart or Xxxxxxxx at the Closing; and
(b) The failure of EHI, Sub, Stuart or Xxxxxxxx to perform any
of their respective covenants or agreements under or contained in this Agreement
or in any certificate, exhibit, schedule, or other document furnished or
delivered to Xxxxx by EHI or Sub at the Closing.
5.3 NOTICE OF CLAIM.
(a) For purposes of this Article 5, the term "Indemnifying
Party" when used in connection with a particular Claim shall mean the Party
having an obligation to indemnify the other Person with respect to the Claim
pursuant to this Article 5, and the term "Indemnified Party" when used in
connection with a particular Claim shall mean the Person having the right to be
indemnified with respect to the Claim by a Party pursuant to this Article 5.
(b) Each Party (on behalf of himself, herself, or it and on
behalf of the Parties to be Indemnified by the EHI Parties, in the case of
Xxxxx, and on behalf of the Parties to be Indemnified by Xxxxx, in case of EHI,
Sub, Stuart, and Xxxxxxxx) agrees that promptly after it becomes aware of facts
giving rise to a Claim by it for indemnification pursuant to this Article 5,
such Party will provide notice thereof in writing to the other Party owing an
indemnification obligation (a "Claim Notice") specifying the nature and specific
basis for such Claim, and to the extent feasible the estimated amount of damages
attributable thereto, and a copy of all papers served with respect to the Claim
(if any). For purposes of this Section 5.3, receipt by a Party of written notice
of any demand, assertion, claim, action or proceeding (judicial, administrative
or otherwise) by or from any Person other than a Party to this Agreement that
gives rise to a Claim on behalf of the Party shall constitute the discovery of
facts giving rise to a Claim by it and shall require prompt notice of the
receipt of such matter. The failure of an Indemnified Party to send a Claim
Notice shall not relieve the Indemnifying Party from liability hereunder with
respect to the Claim except to the extent, and only to the extent, the failure
prejudiced the Indemnifying Party.
5.4 INDEMNIFICATION PROCEDURES. All claims for indemnification under
this Agreement shall be asserted and resolved as follows:
(a) FIRST PARTY CLAIMS. If any Indemnified Party should have a
Claim against any Indemnifying Party hereunder that does not involve a third
party claim asserted against an Indemnified Party that could give rise to a
right of indemnification under this Agreement ("Third Party Claim"), the
Indemnified Party shall transmit to the Indemnifying Party a Claim Notice with
respect to the Claim. If the Indemnifying Party does not notify the Indemnified
Party within thirty (30) days from its receipt of the Claim Notice (the
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"Election Period") that the Indemnifying Party disputes the Claim, the Claim
specified by the Indemnifying Party in the Claim Notice shall be deemed a
liability of the Indemnifying Party hereunder and shall be paid as provided in
Subsection 5.4(c). If the Indemnifying Party has timely disputed the Claim
within the Election Period, as provided above, such dispute shall be resolved by
arbitration as set forth in Section 7.12.
(b) THIRD PARTY CLAIMS. If an Indemnified Party shall have a
Third Party Claim asserted against it, the Indemnified Party shall transmit to
the Indemnifying Party a Claim Notice relating to the Third Party Claim. During
the Election Period, an Indemnifying Party shall notify an Indemnified Party (y)
whether the Indemnifying Party disputes its potential liability to the
Indemnified Party under this Article 5 with respect to the Third Party Claim and
(z) whether an Indemnifying Party desires, at the sole cost and expense of such
Indemnifying Party, to defend the Indemnified Party against the Third Party
Claim. If the Indemnifying Party does not notify the Indemnified Party within
the Election Period that the Indemnifying Party disputes its potential liability
Third Party Claim, the potential liability of the Third Party Claim specified by
the Indemnifying Party in the Claim Notice shall be deemed a liability of the
Indemnifying Party hereunder and shall be paid as provided in Subsection 5.4(c).
If the Indemnifying Party has timely disputed its potential liability under the
Third Party Claim within the Election Period, as provided above, such dispute
shall be resolved by arbitration as set forth in Section 7.12.
(i) If an Indemnifying Party notifies an Indemnified
Party within the Election Period that the Indemnifying Party does not dispute
its potential liability to the Indemnified Party under this Article 5 and that
the Indemnifying Party elects to assume the defense of the Third Party Claim,
then the Indemnifying Party shall have the right to defend, at its sole cost and
expense, the Third Party Claim by all appropriate proceedings, which proceedings
shall be prosecuted diligently by the Indemnifying Party to a final conclusion
or settled at the discretion of the Indemnifying Party in accordance with this
Section 5.4; provided that such settlement shall not impose any obligations upon
the Indemnified Party or deprive the Indemnified Party of any rights without its
consent. The Indemnifying Party shall have full control of such defense and
proceedings, including, subject to the preceding sentence, any compromise or
settlement thereof. The Indemnified Party is hereby authorized, (at the sole
cost and expense of the Indemnifying Party but only if the Indemnified Party is
actually entitled to indemnification hereunder or if the Indemnifying Party
assumes the defense with respect to the Third Party Claim), to file, during the
Election Period, any motion, answer or other pleadings that the Indemnified
Party shall deem necessary or appropriate to protect its interest or those of
the Indemnifying Party and not prejudicial to the Indemnifying Party (it being
understood and agreed that if an Indemnified Party takes any such action that is
prejudicial and conclusively causes a final adjudication adverse to the
Indemnifying Party, the Indemnifying Party shall be relieved of its obligations
hereunder with respect to the Third Party Claim to the extent so adjudicated).
If requested by the Indemnifying Party, the Indemnified Party agrees, at the
sole cost and expense of the Indemnifying Party, to cooperate with the
Indemnifying Party and its counsel in contesting any Third Party Claims,
including by making of any related counterclaim against the Person asserting the
Third Party Claim or any cross-complaint against any Person. The Indemnified
Party shall have the right to participate in, but not control, any defense or
settlement of any Third Party Claim controlled by the Indemnifying Party
pursuant to this Section 5.4, and shall bear its own costs and expenses with
respect to any such participation.
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(ii) If an Indemnifying Party timely disputes its
potential liability for the Third Party Claim within the Election Period, or if
the Indemnifying Party fails to notify an Indemnified Party within the Election
Period that the Indemnifying Party elects to defend the Indemnified Party
pursuant to Subsection 5.4(b) (or notifies the Indemnified Party that it elects
not to defend the Indemnified Party), or if the Indemnifying Party elects to
defend the Indemnified Party pursuant to Subsection 5.4(b) but fails to
diligently and promptly prosecute or settle the Third Party Claim, then the
Indemnified Party shall have the right but not the obligation to defend, at the
sole cost and expense of the Indemnifying Party (but only if the Indemnified
Party is actually entitled to indemnification hereunder or if the Indemnifying
Party assumes the defense with respect to the Third Party Claim), the Third
Party Claim by such proceedings deemed reasonably appropriate by the Indemnified
Party and its counsel. The Indemnified Party shall have full control of such
defense and proceedings, including any compromise or settlement of such Third
Party Claim; provided, that if the Indemnifying Party agrees to indemnify the
Indemnified Party under this Article 5, the Indemnified Party shall not enter
into any compromise or settlement of such Third Party Claim without the
Indemnifying Party's consent, which shall not be unreasonably withheld or
delayed. If requested by the Indemnified Party, the Indemnifying Party shall, at
the sole cost and expense of the Indemnifying Party, cooperate with the
Indemnified Party and its counsel in contesting any Third Party Claim that the
Indemnified Party is contesting, or, if appropriate and related to the Third
Party Claim in questions, in making any counterclaim against the Person
asserting the Third Party Claim or any cross-complaint against any Person.
Notwithstanding the foregoing in this Subsection 5.4(b), if the Indemnifying
Party has delivered a written notice to the Indemnified Party to the effect that
the Indemnifying Party disputes its potential liability to the Indemnified Party
under this Article 5 and if such dispute is resolved in favor of the
Indemnifying Party pursuant to Section 7.12, the Indemnifying Party shall not be
required to bear the costs and expenses of the Indemnified Party's defense
pursuant to this Article 5 or of the Indemnifying Party's participation therein
at the Indemnified Party's request, and the Indemnified Party shall reimburse
the Indemnifying Party in full for all reasonable costs and expenses of the
Indemnifying Party in connection with the Third Party Claims, excluding however
any litigation with respect to its indemnify obligation hereunder. The
Indemnifying Party shall have the right to participate in, but not control, any
defense or settlement controlled by the Indemnified Party pursuant to this
Section 5.4, and the Indemnifying Party shall bear its own costs and expenses
with respect to any such participation.
(c) PAYMENTS. Payments of all amounts owing by an Indemnifying
Party as a result of a Third Party Claim shall be made within five (5) Business
Days after the earlier of: (i) the settlement of the Third Party Claim and (ii)
the expiration of the period of appeal of a final adjudication of the Third
Party Claim. Payments of all amounts owing by an Indemnifying Party other than
as a result of a Third Party Claim shall be made within five (5) Business Days
after the later of (y) thirty (30) days after the expiration of the Election
Period or (z) if contested through dispute resolution proceedings, the
expiration of the period for appeal of a final adjudication of the Indemnifying
Party's liability to the Indemnified Party under this Agreement. Notwithstanding
the above, if the Indemnifying Party has not contested its indemnity obligations
hereunder and has not elected to assume the defense of a Third Party Claim, the
Indemnifying Party shall reimburse (promptly after the receipt of each invoice
therefor) the Indemnified Party for the reasonable costs and expenses incurred
by the Indemnified Party in contesting the Third Party Claim together with
reasonable support for such expenditures.
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5.5 SUBROGATION RIGHTS. If the Indemnified Party is one of the Parties
to be Indemnified by the EHI Parties and the Indemnified Party has a right
against a Person (other than one of the other Parties to be Indemnified by the
EHI Parties) with respect to any damages or other amounts paid to the
Indemnified Party by EHI, then EHI shall, to the extent of such payment, be
subrogated to the right of such Indemnified Party. If the Indemnified Party is
one of the Parties to be Indemnified by Xxxxx and the Indemnified Party has a
right against a Person (other than one of the other Parties to be Indemnified by
Xxxxx) with respect to any damages or other amounts paid to such Indemnified
Party by Xxxxx, then Xxxxx shall, to the extent of such payment, be subrogated
to the right of such Indemnified Party.
5.6 INSURANCE PROCEEDS: INTEREST. In determining the amount of any
loss, liability or expense for which any Indemnified Party is entitled to
indemnification under this Article 5, the gross amount thereof: (a) will be
reduced by any insurance proceeds realized or to be realized by such Indemnified
Party and (b) will be increased by: (i) to the extent such payment is based on
amounts paid by the Indemnified Party, interest on such amount at the rate
quoted from time to time on London Interbank Market for thirty (30) day
borrowings, plus one and one-half percent (1-1/2%) from the date such payment is
made until payment is made as required hereunder and (ii) to the extent such
payment is based on losses incurred by the Indemnified Party, interest on such
amount at the rate quoted from time to time on London Interbank Market for
thirty (30) day borrowings, plus one and one-half percent (1-1/2%) from the date
of such loss until payment is made as required hereunder. Any payment for
indemnification by Xxxxx may be treated by Xxxxx as an adjustment to the
Consideration. No indemnity or other obligation hereunder in favor of Steel or
EHI or Sub, on the one hand, or Xxxxx on the other hand, shall be construed so
as to permit double recovery.
5.7 INDEPENDENT INDEMNITIES; EXCLUSIVE REMEDY. The Parties acknowledge
and agree that each of the indemnities under Section 5.1 and each of the
indemnities under Section 5.2 may be relied upon independently. The
indemnification provisions set forth in this Article 5 shall constitute the sole
and exclusive remedy of the Parties.
5.8 INVESTIGATION AND DUE DILIGENCE. No investigation, examination,
audit, inspection or other due diligence prior to the Closing shall affect a
Person's respective rights to indemnity pursuant to this Agreement; provided,
that the foregoing is not intended to affect the representations, warranties and
other agreements as modified by the Schedules to this Agreement.
5.9 NO IMPLIED REPRESENTATIONS OR WARRANTIES. The Parties hereto
acknowledge that no Party hereto has made any representation or warranty,
express or implied, to any other Party other than the express representations
and warranties set forth herein.
5.10 ADDITIONAL PROVISIONS APPLICABLE TO INDEMNIFICATION.
(a) If: (i) any one or more of the Parties to be Indemnified
by Xxxxx suffers any Claim (whether a First Party Claim or a Third Party Claim)
and (ii) after the Threshold Amount has been reached, such Claims are disputed
by Xxxxx in accordance with this Article 5, then Xxxxx shall immediately tender
and deliver to the registry of the district courts of Tulsa County, Oklahoma
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(the "Court") a Cash payment equal to the lesser of: (i) the amount of Cash
payments they have received from EHI pursuant to the Consideration or (ii) the
amount of the disputed Liabilities to be Indemnified by Xxxxx. Then, to the
extent that the amount of the disputed Liabilities to be Indemnified by Xxxxx
are in excess of any Cash payment tendered by Xxxxx to the Court, EHI, on behalf
of the Parties to be Indemnified by Xxxxx, in lieu of making payments under the
Purchase Notes directly to Xxxxx, may tender all amounts as and when due and
owing under the Purchase Notes to the Court until the dispute relating to the
Claim suffered by one or more of the Parties to be Indemnified by Xxxxx has been
resolved. To the extent that the amount of the disputed Liabilities to be
Indemnified by Xxxxx are in excess of any Cash payment tendered by Xxxxx to the
Court and any payments under the Purchase Notes, then Xxxxx shall tender EHI
Common Stock owned by them (valued at the Agreed Valuation) until an amount
equal to the disputed Liabilities to be Indemnified by Xxxxx has been tendered
to the Court.
(b) If: (i) any one or more of the Parties to be Indemnified
by the EHI Parties suffers any Claim (whether a First Party Claim or a Third
Party Claim) and (ii) after the Threshold Amount has been reached, such Claims
are disputed by the EHI Parties in accordance with this Article 5, then the EHI
Parties shall immediately tender and deliver to the Court a Cash payment equal
to the amount of the disputed Liabilities to be Indemnified by the EHI Parties.
(c) All amounts and EHI Common Stock tendered to the Court
shall remain with the Court until such time as the dispute is resolved in
accordance with this Agreement and a determination is made as to which Person(s)
such funds shall be released. Any interest on funds placed with the Court shall
be paid to the Person(s) to whom such funds are ultimately distributed.
ARTICLE 6
DEFINITIONS
Capitalized terms used in this Agreement shall have the meanings given
to them in this Article 6 unless defined elsewhere in this Agreement.
6.1 "AAA" shall have the meaning such term is given in Subsection
7.12(b).
6.2 "Affiliate" means, with respect to any Person, any Person that,
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the Person specified. With
respect to a natural person, the term "Affiliate" includes such person's
immediate family.
6.3 "Agreement" shall have the meaning such term is given in the
introductory paragraph to this Agreement.
6.4 "Assets" means all the assets and properties owned by Steel,
tangible and intangible, real, personal and mixed (e.g., including those listed
on the Current Balance Sheet).
6.5 "Business Day" means any day other than Saturday, Sunday, or other
day on which federally chartered commercial banks in Houston, Texas are
authorized or required by law to close.
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6.6 "Cash" means cash and cash equivalents (including marketable
securities and short term investments) calculated in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
6.7 "CERCLA" means the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980, as amended.
6.8 "Claim" means any and all judgments, claims, causes of action,
demands, lawsuits, suits, proceedings, governmental investigations or audits,
losses, assessments, Encumbrances, impositions, fines, penalties, administrative
orders, deficiencies, levies, duties, obligations, costs, expenses, liabilities,
actual damages (and, only with respect to Third Party Claims, consequential and
punitive damages), including in each case, interest, penalties, reasonable
attorneys' fees, disbursements and reasonable costs of investigations and
litigation, including a reasonable allocation of the time spent by management of
Steel or EHI in investigating the facts and circumstances relating to the Claim
or responding to an audit or investigation.
6.9 "Claim Notice" shall have the meaning such term is given in
Subsection 5.3(b).
6.10 "Closing" shall have the meaning such term is given in Section
1.2.
6.11 "Code" means the Internal Revenue Code of 1986, as amended.
6.12 "Commission" means the United States Securities and Exchange
Commission.
6.13 An event, matter or circumstance shall be deemed to affect the
"Condition of Steel" if it would materially affect the business, results of
operations, financial condition or Assets of Steel, taken as a whole.
6.14 "Consideration" shall have the meaning such term is given in
Subsection 1.3(a).
6.15 "Designated Plans" shall have the meaning such term is given in
Section 2.8.
6.16 "Effective Date" means the date on which the Effective Time
occurs.
6.17 "Effective Time" shall have the meaning such term is given in
Section 1.2.
6.18 "EHI" shall have the meaning such term is given in the
introductory paragraph to this Agreement.
6.19 "EHI Common Stock" shall have the meaning such term is given in
the recitals to this Agreement.
6.20 "Election Period" shall have the meaning such term is given in
Subsection 5.4(a).
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6.21 "Encumbrance" means any security interest, mortgage, pledge,
trust, claim, lien, charge, option, defect, restriction, encumbrance or other
right or interest of any third Person of any nature whatsoever.
6.22 "Environmental Laws" means any and all laws, statutes, ordinances,
rules, regulations, orders, or determinations of any Governmental Entity
pertaining to the environment heretofore or currently in effect in any and all
jurisdictions in which Steel is conducting or at any time has conducted
business, or where any of the Assets are located, or where any hazardous
substances generated by or disposed of by Steel are located. "Environmental
Laws" shall include, but not be limited to, the Clean Air Act, as amended,
CERCLA, the Federal Water Pollution Control Act, as amended, RCRA, the Safe
Drinking Water Act, as amended, the Toxic Substances Control Act, as amended,
and all other laws, statutes, ordinances, rules, regulations, orders and
determinations of any Governmental Entity relating to: (a) the control of any
potential pollutant or protection of the air, water or land, (b) solid, gaseous
or liquid waste generation, handling, treatment, storage, disposal or
transportation, and (c) exposure to hazardous, toxic or other harmful
substances. The terms "hazardous substance", "release" and "threatened release"
have the meanings specified in CERCLA, and the terms "solid waste" and
"disposal" (or "disposed") have the meanings specified in RCRA; provided,
however, that, to the extent the laws of the state in which any Assets are or
were located currently provide for 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.
6.23 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
6.24 "Financial Statements" shall have the meaning such term is given
in Section 2.6.
6.25 "Governmental Entity" means the United States of America, any
state, province, territory, county, city, municipality and any subdivision
thereof, any court, administrative or regulatory agency, commission, department
or body or other governmental authority or instrumentality or any entity or
Person exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
6.26 "Indemnified Party" shall have the meaning such term is given in
Subsection 5.3(a).
6.27 "Indemnifying Party" shall have the meaning such term is given in
Subsection 5.3(a).
6.28 "Intellectual Property" means patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service marks, service xxxx
rights, copyrights, technology, know how, trade secrets, designs, plans,
manuals, processes and other proprietary intellectual property rights and
computer programs, and all registrations for, and applications for registration
of, any of the foregoing.
6.29 "IRS" means the United States Internal Revenue Service.
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6.30 "Liabilities to be Indemnified by the EHI Parties" shall have the
meaning such term is given in Section 5.2.
6.31 "Liabilities to be Indemnified by Xxxxx" shall have the meaning
such term is given in Section 5.1.
6.32 A single event, occurrence, fact or matter will be deemed to be
"Material", to have a "Material" adverse effect, to cause a "Material" change or
to be "Materially" affected if such event, occurrence, fact or matter, together
with all other events, occurrences, facts or matters that would reasonably be
expected to result in a material loss to Steel, taken as a whole, would have, or
would reasonably be expected to have, a material adverse effect on the Condition
of Steel, or that would constitute a criminal violation of law involving a
felony.
6.33 "Merger" shall have the meaning such term is given in the recitals
to this Agreement.
6.34 "OGCA" means the Oklahoma General Corporation Act.
6.35 "Parties to be Indemnified by the EHI Parties" shall have the
meaning such term is given in Section 5.2.
6.36 "Parties to be Indemnified by Xxxxx" shall have the meaning such
term is given in Section 5.1.
6.37 "Permitted Encumbrances" means (a) Encumbrances for current taxes
and assessments not yet past due or which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves are
reflected in the Financial Statements, (b) mechanics and materialmen
Encumbrances for construction in progress to the extent not perfected by filing,
recording, giving of notice or other appropriate action in the relevant
jurisdiction, (c) workmen, repairmen, warehousemen, carriers, lessors and
operators Encumbrances arising in the ordinary course of business to the extent
not perfected by filing, recording, giving of notice or other appropriate action
in the relevant jurisdiction, (d) easements, including agreements and deeds of
easement, restrictions, set-back lines, mineral reservations and exceptions,
landlord's liens, and other minor imperfections of title, (e) Encumbrances for
which a reserve is reflected in the Financial Statements, and (f) other
imperfections of title or Encumbrances that do not, individually or in the
aggregate, impair the continued use and operation of the Assets.
6.38 "Person" means any individual, corporation, association,
partnership, joint venture, trust, estate or unincorporated organization or
Governmental Entity.
6.39 "Plans" shall have the meaning such term is given in Section 2.8.
6.40 "Purchase Notes" shall have the meaning such term is given in
Subsection 1.3(a).
6.41 "RCRA" means the Resource Conservation and Recovery Act of 1976,
as amended.
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6.42 "Securities Act" means the Securities Exchange Act of 1933.
6.43 "Shareholders Agreement" shall have the meaning such term is given
in Section 1.7(a).
6.44 "Steel" shall have the meaning such term is given in the
introductory paragraph to this Agreement.
6.45 "Steel Common Stock" shall have the meaning such term is given in
the recitals to this Agreement.
6.46 "Sub" shall have the meaning such term is given in the
introductory paragraph to this Agreement.
6.47 "Surviving Corporation" shall have the meaning such term is given
in Subsection 1.1(a).
6.48 "Swift Warrant" means that certain Warrant dated effective
November 7, 2001, executed by EHI regarding Swift's entitlement to purchase
600,000 shares of EHI Common Stock.
6.49 "Taxes" shall have the meaning such term is given in Section 2.18.
6.50 "Tax Returns" shall have the meaning such term is given in Section
2.18.
6.51 "Third Party Claim" shall have the meaning such term is given in
Subsection 5.4(a).
6.52 "Threshold Amount" shall have the meaning such term is given in
Section 5.1.
ARTICLE 7
MISCELLANEOUS
7.1 ENTIRE AGREEMENT. This Agreement constitutes the sole understanding
of the Parties with respect to the matters provided for herein and supersede any
previous agreements and understandings between the Parties with respect to the
subject matter hereof (including, without limitation, that certain letter of
intent dated August 14, 2001, by and between Steel Fab Holdings, Inc., a Texas
corporation, Excalibur Steel, Inc., and Xxxxxx Xxxxx, which is terminated and is
of no force and effect). No amendment, modification or alteration of the terms
or provisions of this Agreement shall be binding unless the same shall be in
writing and duly executed by the Parties hereto.
7.2 SUCCESSORS AND ASSIGNS. This Agreement will inure to the benefit of
and be binding upon EHI, Sub, Steel and Xxxxx and their respective heirs,
successors and permitted assigns. Neither this Agreement nor any of the rights,
interest or obligations hereunder shall be assigned by any of the Parties hereto
without the prior written consent of the other Parties hereto.
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7.3 EXPENSES. EHI shall pay the fees and expenses of counsel,
accountants, and other experts of each Party, and all other expenses incurred by
the Parties incident to the negotiation, preparation, and execution of this
Agreement and the consummation of the Merger.
7.4 INVALIDITY. If any term or other provision of this Agreement is
invalid, illegal, or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic and legal substance of
the transactions contemplated hereby is not affected in any manner Materially
adverse to any Party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the Parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
7.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
7.6 HEADINGS. The headings of the Sections and paragraphs of this
Agreement and of the Schedules hereto are included for convenience only and
shall not be deemed to constitute part of this Agreement or to affect the
construction or interpretation hereof or thereof.
7.7 CONSTRUCTION AND REFERENCES. Words used in this Agreement,
regardless of the number or gender specifically used, shall be deemed and
construed to include any other number, singular or plural, and any other gender,
masculine, feminine or neuter, as the context shall require. Unless otherwise
specified, all references in this Agreement to Sections, paragraphs or clauses
are deemed references to the corresponding Sections, paragraphs or clauses in
this Agreement, and all references in this Agreement to Schedules or Exhibits
are references to the corresponding Schedules and Exhibits attached to this
Agreement. Unless otherwise specified, the words "including" and "include", and
similar words, as used in this Agreement are not to be construed as limiting.
7.8 JOINT AND SEVERAL LIABILITY. Except as otherwise expressly provided
in this Agreement, in all instances in this Agreement in which the term "Xxxxx"
is used, such defined term refers to both Xxxxxx Xxxxx and Xxxxx Xxxxx. All
Persons composing Xxxxx shall be jointly and severally liable with all other
Persons composing Xxxxx to perform the obligations stated in each instance in
which the term "Xxxxx" is used herein.
7.9 MODIFICATION AND WAIVER. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the Party which is entitled to
the benefits thereof. No waiver of any of the provisions of this Agreement shall
be deemed to or shall constitute a waiver of any other provisions hereof
(whether or not similar).
7.10 NOTICES. Any notice, request, instruction, or other document to be
given hereunder by any Party hereto to any other party shall be in writing and
delivered personally, by facsimile (with receipt confirmed) or by registered or
certified mail, postage prepaid:
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If to Steel: Excalibur Steel, Inc.
000 Xxxx Xxxxxx Xxxx
Xxxx Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxx
Confirm: (000) 000-0000
Facsimile: (000) 000-0000
With a copy (which Xxxxx & Page, L.L.P.
shall not constitute notice) 0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000
to: Xxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx X. Page
Confirm: (000) 000-0000
Facsimile: (000) 000-0000
If to Xxxxxx Xxxxx Xxxxxx Xxxxx
and/or Xxxxx Xxxxx: Xxxxx Xxxxx
000 Xxxx Xxxxxx Xxxx
Xxxx Xxxxxxx, Xxxxxxxx 00000
Confirm: (000) 000-0000
Facsimile: (000) 000-0000
With a copy (which Xxxxx & Page, L.L.P.
shall not constitute notice) 0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000
to: Xxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx X. Page
Confirm: (000) 000-0000
Facsimile: (000) 000-0000
If to EHI and/or Sub: Excalibur Holdings, Inc.
Excalmerge, Inc.
00000 Xxxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Confirm: (000) 000-0000
Facsimile: (000) 000-0000
With a copy (which Xxxxxx and Xxxxx, L.L.P.
shall not constitute notice) 0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
to: Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. XxXxxxxxx
Confirm: (000) 000-0000
Facsimile: (000) 000-0000
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If to Stuart: Xxxxxxx X.X. Xxxxxx
0000 Xxxxxxxxxx
Xxxxxxx, Xxxxx 00000
Confirm: (000) 000-0000
Facsimile: (000) 000-0000
With a copy (which Xxxxxxxxxxx, Xxxxx & Xxxxxxxx, L.L.P.
shall not constitute notice) 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
to: Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxx
Confirm: (000) 000-0000
Facsimile: (000) 000-0000
If to Xxxxxxxx: Xxxxxxx X. Xxxxxxxx
00000 Xxxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Confirm: (000) 000-0000
Facsimile: (000) 000-0000
With a copy (which Xxxxxxxxxxx, Xxxxx & Xxxxxxxx, L.L.P.
shall not constitute notice) 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
to: Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxx
Confirm: (000) 000-0000
Facsimile: (000) 000-0000
or at such other address for a Party as shall be specified by like notice. Any
notice which is delivered personally in the manner provided herein shall be
deemed to have been duly given to the Party to whom it is directed upon actual
receipt by such Party (or its agent for notices hereunder). Any notice which is
addressed and mailed in the manner herein provided shall be conclusively
presumed to have been duly given to the Party to which it is addressed at the
close of business, local time of the recipient, on the third (3rd) day after the
day it is so placed in the mail. Any notice which is sent by facsimile shall be
deemed to have been duly given to the Party to which it is addressed upon
telephonic confirmation of the same as provided herein. A copy of any notices
delivered by facsimile shall promptly be mailed in the manner herein provided to
the Party to which such notice was given.
7.11 GOVERNING LAW: INTERPRETATION. This Agreement shall be construed
in accordance with and governed by the laws of the State of Oklahoma, without
regard to the conflicts or choice of law rules of the State of Oklahoma.
7.12 RESOLUTION OF DISPUTES.
(a) NEGOTIATION. The Parties shall attempt in good faith to
resolve any dispute arising out of or relating to this Agreement promptly by
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negotiations between executives or other persons who have authority to settle
the controversy. Any Party may give the other disputing Party written notice of
any dispute not resolved in the normal course of business. Within five (5) days
after the effective date of that notice, executives of the disputing Parties
shall agree upon a mutually acceptable time and place to meet and shall meet at
that time and place, and thereafter as often as they reasonably deem necessary,
to exchange relevant information and to attempt to resolve the dispute. The
first of those meetings shall take place within thirty (30) days of the
effective date of the disputing Party's notice. If the matter has not been
resolved within sixty (60) days of the disputing Party's notice, or if the
Parties fail to agree on a time and place for an initial meeting within five (5)
days of that notice, any Party may initiate arbitration of the controversy or
claim as provided hereinafter. If a negotiator intends to be accompanied at a
meeting by an attorney, the other negotiators shall be given at least three (3)
Business Days' notice of that intention and may also be accompanied by an
attorney. All negotiations pursuant to this Section 7.12 shall be treated as
compromise and settlement negotiations for the purposes of applicable rules of
evidence and procedure.
(b) ARBITRATION. Any dispute arising out of, relating to or in
any way touching upon this Agreement or the breach, termination or validity
hereof, that has not been resolved by non-binding procedures as provided in
Subsection 7.12(a) within sixty (60) days of the initiation of that procedure,
shall be finally settled by arbitration conducted expeditiously in accordance
with the American Arbitration Association ("AAA") arbitration rules for
commercial disputes, as in effect on the date hereof (the "Rules"); provided
that if one (1) Party has requested the other to participate in a non-binding
procedure and the other has failed to participate, the requesting Party may
initiate arbitration before the expiration of the period. With respect to an
arbitral proceeding, the Parties agree as follows:
(i) The arbitration shall be conducted by three
independent and impartial arbitrators, none of whom shall be an officer,
director or employee of any Party hereto or its Affiliates. Steel and EHI shall
each choose one arbitrator. The two chosen arbitrators shall choose the third
arbitrator.
(ii) The Parties acknowledge that this Agreement
affects interstate commerce; thus the arbitration shall be governed by the
United States Arbitration Act and any judgment upon the award decided upon by
the arbitrators may be entered by any court having jurisdiction thereof.
(iii) Damages recoverable by any Party are limited to
compensatory damages. Each Party hereby irrevocably waives for the purposes of
this Agreement any damages in excess of compensatory damages, including
punitive, exemplary, consequential and special damages and lost profits. The
arbitrators shall be empowered to award only compensatory damages.
(iv) Any arbitration conducted pursuant to this
Subsection 7.12(b) shall be held at a mutually acceptable location in the City
of Tulsa, the State of Oklahoma.
(v) Unless the Parties subject to the arbitration
otherwise agree, no dispute among them shall be included in the arbitration
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unless it arises out of, relates to, or in any way touches upon, this Agreement
or the breach, termination or validity hereof. This agreement to arbitrate,
however, includes each Party's willingness and desire to arbitrate matters that
arise out of, relate to, or in any way touch upon this Agreement or the breach,
termination or validity hereof, including claims or actions sounding or cast in
terms of tort law or tortious conduct.
(vi) The arbitrators may make interim awards and may
award equitable and declaratory relief.
(vii) The costs and expenses of the arbitration shall
be allocated equally between the Parties, provided, that each Party's own
attorney's fees shall be borne by the Party incurring the same.
(viii) In resolving any dispute, the arbitrators
shall apply the provisions of this Agreement, without varying therefrom in any
respect. The arbitrators shall not have the power to add to, modify, change or
terminate this Agreement.
(ix) It shall not be inconsistent with this Section
7.12 for any Party to seek from any court of competent jurisdiction interim
relief in aid of arbitration or to protect the rights of either Party pending
the establishment of the arbitral tribunal. If any suit, action or proceeding is
brought to enforce or interpret this Agreement, venue for such suit, action or
proceeding shall be in the courts in Tulsa County, Oklahoma, and each Party
submits to the jurisdiction of such courts for the purposes of any such suit,
action or proceeding. Each Party irrevocably waives any objections 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 Agreement brought in the courts located in
Tulsa County, Oklahoma, and hereby waives any claim that such suit, action or
proceeding brought in any such courts has been brought in an inconvenient forum.
7.13 INTERPRETATION. The Parties acknowledge and confirm that each of
their respective attorneys have participated jointly in the review and revision
of this Agreement and that it has not been written solely by counsel for one (1)
Party. The Parties hereto therefore stipulate and agree that the rule of
construction to the effect that ambiguities are to or may be resolved against
the drafting Party shall not be employed in the interpretation of this Agreement
to favor either Party against the other.
7.14 NO THIRD PARTY BENEFICIARIES. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any Person not a
Party to this Agreement (other than successors and assigns, to the extent
provided herein and the Parties to be Indemnified by the EHI Parties and the
Parties to be Indemnified by Xxxxx) and does not release, and shall not be
construed as releasing, any rights enforceable against any Person or entity not
a Party to this Agreement.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, each of the Parties hereto have caused this
Agreement to be executed on its behalf as of the date first above written.
EXCALIBUR STEEL, INC., an Oklahoma corporation
By:
-------------------------------------------
Xxxxxx Xxxxx, President
----------------------------------------------
Xxxxxx Xxxxx, Individually
----------------------------------------------
Xxxxx Xxxxx, Individually
EXCALIBUR HOLDINGS, INC., a Texas corporation
By:
-------------------------------------------
Xxxxxxx X.X. Xxxxxx, CEO
----------------------------------------------
Xxxxxxx X.X. Xxxxxx, Individually
----------------------------------------------
Xxxxxxx X. Xxxxxxxx, Individually
EXCALMERGE, INC., an Oklahoma corporation
By:
-------------------------------------------
Xxxxxxx X.X. Xxxxxx, CEO
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LIST OF EXHIBITS AND SCHEDULES TO AGREEMENT
-------------------------------------------
Exhibits
--------
Exhibit "A" - Articles of Merger
Exhibit "B" - Form of 120-Day Promissory Notes
Exhibit "C" - Form of 90-Day Promissory Notes
Exhibit "D" - Form of 1-Year Promissory Notes
Exhibit "E" - Shareholders Agreement
Schedules
---------
Schedule 2.1(a) - Current Directors and Officers of Steel
Schedule 2.5 - Consents
Schedule 2.6 - Liabilities Not Disclosed on Current Balance Sheet
Schedule 2.7 - Material Adverse Changes
Schedule 2.8 - Employee Benefit Plans
Schedule 2.9(a) - Encumbrances
Schedule 2.9(c) - Description of Owned and Leased Real Property
Schedule 2.10 - Legal Proceedings
Schedule 2.11 - Insurance
Schedule 2.13(a) - Material Contracts
Schedule 2.15 - Non-Transferable Intellectual Property
Schedule 2.16 - Environmental Matters
Schedule 2.17 - Permits
Schedule 2.18 - Tax Matters
Schedule 2.19 - Collective Bargaining Agreements
Schedule 2.20 - Product Warranties
Schedule 3.1(a) - Current Directors and Officers of EHI and Sub
Schedule 3.3(a) - Capitalization Chart of EHI
Schedule 3.4 - Assets, Liabilities, and Properties of EHI and Sub
(i)
