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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) FEBRUARY 1, 1998
CROWN GROUP, INC.
(Exact name of registrant as specified in its charter)
TEXAS 0-14939 63-0851141
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
4040 NORTH MACARTHUR BOULEVARD, SUITE 100, IRVING, TEXAS 75038
(Address of principal executive offices)
Registrant's telephone number, including area code (972) 717-3423
_____________________________________________________________
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
PAACO
Effective February 1, 1998, pursuant to a definitive stock purchase agreement,
Crown Group, Inc. ("Crown") acquired 53% of the common stock of each of Paaco,
Inc. and Premium Auto Acceptance Corporation (collectively, "Paaco") for an
aggregate purchase price of approximately $9.1 million cash. The purchase
price was determined through arms-length negotiations between the parties.
Approximately $4.9 million of Paaco common stock was purchased directly from
Paaco, and the remaining $4.2 million of Paaco common stock was purchased from
Larry Lange, Daniel Chu and Ted Lange (collectively, the "Original
Shareholders"), who prior to this transaction were the sole shareholders of
Paaco. The purchase price was funded from cash on hand.
In connection with the Paaco transaction, Crown and the Original Shareholders
entered into a Shareholders' Agreement (the "Paaco Shareholders' Agreement")
which provides, among other things, that in the event either Crown or any
Original Shareholder desires to sell their interest in Paaco such shareholder
must first offer to sell such interest to Paaco and the other shareholders in
accordance with the provisions of the Paaco Shareholders' Agreement.
The Paaco Shareholders' Agreement also provides that Paaco's Board of Directors
will consist of two directors appointed by Crown and two directors appointed by
the Original Shareholders. Without the unanimous approval of Paaco's Board of
Directors, Paaco can not (i) amend its articles of incorporation or by-laws,
(ii) issue its stock, declare dividends, repurchase its stock, merge or
liquidate, or (iii) make any material acquisitions or dispositions.
Paaco is a vertically integrated used car sales and finance company which
operates seven used car dealerships in the Dallas-Ft. Worth area. Paaco sells,
underwrites and finances used cars and trucks with a focus on the Hispanic
market. For the year ended December 31, 1997 Paaco's revenues were
approximately $49 million.
PRECISION
On February 3, 1998, pursuant to a definitive stock purchase agreement, Crown
acquired 80% of the common stock of Precision IBC, Incorporated ("Precision")
for a purchase price of approximately $2.4 million cash. The purchase price
was determined through arms-length negotiations between the parties. The
shares of Precision common stock were purchased directly from Van P. Finger,
who prior to this transaction was the sole shareholder of Precision. The
purchase price was funded from cash on hand. In connection with this
transaction, Crown loaned Precision approximately $3.1 million, the proceeds of
which were used to pay off existing bank debt.
As part of the Precision transaction, Crown and Mr. Finger entered into a Right
of First Refusal and Put Agreement (the "First Refusal and Put Agreement")
which provides, among other things, that in the event Mr. Finger desires to
sell his interest in Precision, he must first offer to sell such interest to
Crown under the terms and conditions provided in the First Refusal and Put
Agreement. Pursuant to such agreement Mr. Finger has the right to make an
election during the months of June 2000 or June 2001 to cause Crown or
Precision to purchase all of his shares of Precision common stock based upon
the Fair Market Value of his stock, as such term is defined in the First
Refusal and Put Agreement.
Precision is in the business of renting and selling intermediate bulk
containers to industrial and manufacturing concerns. For the year ended
December 31, 1997 Precision's revenues were approximately $3.3 million.
2
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) and (b). The financial statements required to be filed with this report
are not presently available. Crown will file the required financial statements
under cover of Form 8-KA as soon as practicable but not later than 60 days
after the due date of the filing of this report.
(c) Exhibits.
The following exhibits are filed with this report:
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Exhibit Number Description of Exhibit
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2.2 Stock Purchase Agreement dated as of February 1, 1998 by and among Paaco, Inc., Premium Auto Acceptance
Corporation, Larry Lange, Daniel Chu, Ted Lange and Crown Group, Inc.
2.3 Stock Purchase Agreement dated February 3, 1998 by and among Van P. Finger and Crown Group, Inc.
10.11 Shareholders' Agreement dated as of February 1, 1998 by and among Larry Lange, Daniel Chu, Ted Lange
and Crown Group, Inc.
10.12 Right of First Refusal and Put Agreement dated February 3, 1998 by and among Van P. Finger and Crown
Group, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Crown Group, Inc.
By: \s\ Mark D. Slusser
-------------------------
Mark D. Slusser
Chief Financial Officer
Dated: February 13, 1998
4
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INDEX TO EXHIBITS
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Exhibit Number Description of Exhibit
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2.2 Stock Purchase Agreement dated as of February 1, 1998 by and among Paaco, Inc., Premium Auto Acceptance
Corporation, Larry Lange, Daniel Chu, Ted Lange and Crown Group, Inc.
2.3 Stock Purchase Agreement dated February 3, 1998 by and among Van P. Finger and Crown Group, Inc.
10.11 Shareholders' Agreement dated as of February 1, 1998 by and among Larry Lange, Daniel Chu, Ted Lange
and Crown Group, Inc.
10.12 Right of First Refusal and Put Agreement dated February 3, 1998 by and among Van P. Finger and Crown
Group, Inc.
</TABLE>
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EXHIBIT 2.2
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STOCK PURCHASE AGREEMENT
BY AND AMONG
PAACO, INC.,
PREMIUM AUTO ACCEPTANCE CORPORATION,
LARRY LANGE, DANIEL CHU AND TED LANGE
AND
CROWN GROUP, INC.
DATED ON OR AS OF FEBRUARY 1, 1998
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TABLE OF CONTENTS
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ARTICLE I - PURCHASE AND SALE OF SHARES........................................................................... 1
Section 1.1 Sale of the Shareholder Shares......................................................... 1
Section 1.2 Sale of Company Shares................................................................. 1
Section 1.3 Purchase Price......................................................................... 1
Section 1.4 Closing................................................................................ 2
Section 1.5 Delivery by the Shareholders and the Companies......................................... 2
Section 1.6 Delivery by the Buyer.................................................................. 2
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND THE COMPANIES................................. 2
Section 2.1 Ownership of the Shares; Equity Capital Structure...................................... 2
Section 2.2 Organization; Good Standing............................................................ 3
Section 2.3 Authorization.......................................................................... 3
Section 2.4 No Violation........................................................................... 3
Section 2.5 Subsidiaries........................................................................... 4
Section 2.6 Contracts and Other Commitments........................................................ 4
Section 2.7 Permits................................................................................ 4
Section 2.8 Compliance With Other Instruments...................................................... 4
Section 2.9 Litigation............................................................................. 5
Section 2.10 Title to Property and Assets; Leases................................................... 5
Section 2.11 Financial Statements................................................................... 5
Section 2.12 Changes................................................................................ 5
Section 2.13 Employees; Employee Compensation....................................................... 5
Section 2.14 Tax Returns, Payments, and Elections................................................... 6
Section 2.15 Environmental and Safety Laws.......................................................... 6
Section 2.16 No Liabilities Not Shown in Financial Statements....................................... 6
Section 2.17 Loans to Shareholders, Officers or Affiliates.......................................... 6
Section 2.18 Compliance With Laws................................................................... 6
Section 2.19 Insurance Coverage..................................................................... 7
Section 2.20 Employee Relations..................................................................... 7
Section 2.21 Trademarks and Licenses................................................................ 7
Section 2.22 Guarantees............................................................................. 7
Section 2.23 OSHA................................................................................... 7
Section 2.24 Books and Records...................................................................... 8
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE BUYER......................................................... 8
Section 3.1 Organization; Good Standing............................................................ 8
Section 3.2 Authorization.......................................................................... 8
Section 3.3 Valid and Binding Agreement............................................................ 8
Section 3.4 No Violation........................................................................... 8
Section 3.5 Purchase Entirely for Own Account...................................................... 8
Section 3.6 Independent Investigation.............................................................. 9
Section 3.7 Investment Experience.................................................................. 9
Section 3.8 Accredited Investor; U.S. Person....................................................... 9
Section 3.9 Restricted Securities.................................................................. 9
Section 3.10 Public Sale............................................................................ 9
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Section 3.11 Investment Company Act................................................................. 9
ARTICLE IV - ADDITIONAL AGREEMENTS............................................................................... 10
Section 4.1 Access to Information; Confidentiality................................................ 10
Section 4.2 Shareholders' Agreement............................................................... 10
Section 4.3 Employment Agreement.................................................................. 10
Section 4.4 Shareholder Warrants.................................................................. 10
Section 4.5 Conduct of Business................................................................... 10
Section 4.6 Pay-off of Debenture.................................................................. 10
ARTICLE V - CONDITIONS OF THE BUYER'S OBLIGATIONS AT CLOSING..................................................... 11
Section 5.1 Representations and Warranties........................................................ 11
Section 5.2 Performance........................................................................... 11
Section 5.3 Compliance Certificate................................................................ 11
Section 5.4 Shareholders' Agreement............................................................... 11
Section 5.5 Employment Agreement.................................................................. 11
Section 5.6 Finova Credit Facility................................................................ 11
Section 5.7 Opinion of Counsel.................................................................... 11
Section 5.8 Buyer Warrants........................................................................ 12
Section 5.9 Consents Prior to Closing............................................................. 12
Section 5.10 No Material Adverse Changes........................................................... 12
Section 5.11 Absence of Litigation................................................................. 12
ARTICLE VI - CONDITIONS OF THE SHAREHOLDERS' OBLIGATIONS AT CLOSING.............................................. 12
Section 6.1 Representations and Warranties........................................................ 12
Section 6.2 Performance........................................................................... 12
Section 6.3 Compliance Certificate................................................................ 12
Section 6.4 Shareholders' Agreement............................................................... 12
Section 6.5 Employment Agreement.................................................................. 12
Section 6.6 Shareholder Warrants.................................................................. 12
Section 6.7 Opinion of Counsel.................................................................... 12
ARTICLE VII - SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION....................................................... 13
Section 7.1 Survival of Representations........................................................... 13
Section 7.2 Agreement to Indemnify................................................................ 13
Section 7.3 Limitation of Liability............................................................... 13
Section 7.4 Conditions of Indemnification......................................................... 14
Section 7.5 Remedies Cumulative................................................................... 15
ARTICLE VIII - TERMINATION; AMENDMENT AND WAIVER................................................................. 15
Section 8.1 Termination of Agreement.............................................................. 15
Section 8.2 Effect of Termination................................................................. 15
Section 8.3 Amendment, Extension and Waiver....................................................... 15
ARTICLE IX - MISCELLANEOUS....................................................................................... 15
Section 9.1 Entire Agreement...................................................................... 15
Section 9.2 Successors and Assigns................................................................ 15
Section 9.3 Governing Law and Venue............................................................... 16
Section 9.4 Counterparts.......................................................................... 16
Section 9.5 Titles and Subtitles.................................................................. 16
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Section 9.6 Notices............................................................................... 16
Section 9.7 Finder's Fees......................................................................... 16
Section 9.8 Amendments and Waivers................................................................ 16
Section 9.9 Severability.......................................................................... 16
Section 9.10. Future Actions........................................................................ 16
Section 9.11. Public Announcements.................................................................. 17
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), dated on or as of the 1st day
of February, 1998, by and among Larry Lange, Daniel Chu and Ted Lange
(collectively, the "Shareholders"), PAACO, Inc., a Texas corporation ("PAACO"),
Premium Auto Acceptance Corporation ("Premium" and, together with PAACO, the
"Companies"), and Crown Group, Inc., a Texas corporation (the "Buyer").
WHEREAS, the Shareholders own all of the issued and outstanding shares of
common stock, par value $.01 per share, of PAACO ("PAACO Common Stock") and all
of the issued and outstanding shares of common stock, no par value, of Premium
("Premium Common Stock" and, together with PAACO Common Stock, the "Common
Stock"); and
WHEREAS, the Shareholders desire to sell to the Buyer, and the Buyer
desires to purchase from the Shareholders, that number of shares of PAACO Common
Stock and Premium Common Stock set forth beside each Shareholder's name on Annex
A attached hereto (collectively, the "Shareholder Shares"); and
WHEREAS, PAACO and Premium desire to issue and sell to the Buyer, and the
Buyer desires to purchase from PAACO and Premium, 33,334 shares of PAACO Common
Stock and 334 shares of Premium Common Stock, respectively (collectively, the
"Company Shares" and, together with the Shareholder Shares, the "Shares");
WHEREAS, the Buyer has warrants (collectively, the "Buyer Warrants") to
purchase 8,511 shares of PAACO Common Stock and 85 shares of Premium Common
Stock and intends to exercise such warrants in connection with the acquisition
of the Shares;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions set forth
herein, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
SECTION 1.1 SALE OF THE SHAREHOLDER SHARES. Subject to the terms and
conditions of this Agreement, at the Closing, the Buyer agrees to purchase and
each Shareholder, severally and not jointly, agrees to sell to the Buyer the
Shareholder Shares at the purchase price set forth below.
SECTION 1.2 SALE OF COMPANY SHARES. Subject to the terms and conditions of
this Agreement, at the Closing, the Buyer agrees to purchase and each Company
agrees to sell to the Buyer the Company Shares at the purchase price set forth
below.
SECTION 1.3 PURCHASE PRICE.
(a) In consideration of the sale of the Shareholder Shares to the Buyer,
the Buyer shall pay to the Shareholders at the Closing an aggregate purchase
price (the "Shareholder Purchase Price") of $4,166,628.33 in cash. The allocable
portion of the Shareholder Purchase Price shall be allocated between the
Shareholders as set forth on Annex A.
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(b) In consideration of the sale of the Company Shares to the Buyer, the
Buyer shall pay to the Companies at the Closing an aggregate purchase price (the
"Company Purchase Price" and, together with the Shareholder Purchase Price, the
"Purchase Price") of $4,166,753.34 in cash. The allocable portion of the Company
Purchase Price shall be allocated among the Companies as set forth on Annex A.
SECTION 1.4 CLOSING. The purchase and sale of the Shares shall take place
at the offices of Thompson & Knight, P.C., 1700 Pacific Avenue, Dallas, Texas,
at 10:00 a.m., on February 1, 1998, or at such other time and place as the
Shareholders, the Companies and the Buyer shall mutually agree, either orally or
in writing (which time and place are designated as the "Closing").
SECTION 1.5 DELIVERY BY THE SHAREHOLDERS AND THE COMPANIES. At the Closing,
each Shareholder and Company shall deliver or cause to be delivered to the
Buyer:
(a) a stock certificate or certificates representing all of the Shares
being sold by such Shareholder or Company, accompanied by stock powers duly
executed in blank, and otherwise in form acceptable to the Buyer for transfer on
the books of the Companies; and
(b) all other documents, instruments or writings required to be delivered
by such Shareholder or Company at or prior to the Closing pursuant to this
Agreement or otherwise required to be delivered by such Shareholder or Company
at or prior to the Closing.
SECTION 1.6 DELIVERY BY THE BUYER. At the Closing, the Buyer shall deliver
or cause to be delivered to each of the Shareholders and Companies:
(a) a wire transfer to an account or accounts designated within three days
of Closing in an amount equal to the Purchase Price payable to such Shareholder
or Company in accordance with Annex A; and
(b) all other documents, instruments or writings required to be delivered
by the Buyer at or prior to the Closing pursuant to this Agreement or otherwise
required to be delivered by the Buyer at or prior to the Closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND THE COMPANIES
The Shareholders and the Companies jointly and severally represent and
warrant to, and agree with the Buyer that, except as set forth on the Schedule
of Exceptions furnished to the Buyer and attached hereto as Annex B,
specifically identifying the relevant subparagraph(s) hereof:
SECTION 2.1 OWNERSHIP OF THE SHARES; EQUITY CAPITAL STRUCTURE.
(a) Each Shareholder is the record and beneficial owner of, and upon
consummation of the transactions contemplated hereby the Buyer will acquire
good, valid and marketable title to, the Shares held by each such Shareholder,
free and clear of all liens, claims, options, pledges, security interests,
charges, encumbrances, agreements and restrictions.
(b) The Company Shares to be issued by the Company at the Closing have been
duly authorized for such issuance and, when issued and delivered by the Company
in accordance with the provisions of this
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Agreement, will be validly issued, fully paid and nonassessable. The issuance of
the Company Shares under this Agreement is not subject to any preemptive or
similar rights.
(c) The authorized capital stock of PAACO consists solely of 1,000,000
shares of common stock, par value $.01 per share, of which 100,000 shares are
issued and outstanding and which are owned beneficially and of record by the
Shareholders as set forth on Annex A. The authorized capital stock of Premium
consists solely of 100,000 shares of common stock, no par value, of which 1,000
shares are issued and outstanding and which are owned beneficially and of record
by the Shareholders as set forth on Annex A. All of the issued and outstanding
shares of Common Stock have been duly authorized and are validly issued and
outstanding, fully paid and nonassessable and are not subject to and were not
issued in violation of any preemptive rights.
(d) Except as set forth above or in Section 2.1 of the Schedule of
Exceptions, and except for the Buyer Warrants, there are not now, and at the
Closing, except for the Shareholder Warrants (as hereinafter defined) to be
issued by the Companies at the Closing, there will not be, any shares of capital
stock of the Companies issued or outstanding or any subscriptions, options,
warrants, calls, rights, convertible securities or other rights or other
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock or other securities of the Companies or the voting or
transfer of the capital stock of the Companies.
SECTION 2.2 ORGANIZATION; GOOD STANDING. Each Company 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 own and operate its
properties and assets and to carry on its business as currently conducted, to
execute and deliver this Agreement, the Shareholders' Agreement (as defined
below) and to carry out the provisions of this Agreement. The Shareholders have
delivered to the Buyer complete and correct copies of the Articles of
Incorporation (duly certified by the Secretary of State of Texas) and Bylaws
(certified by the Secretary of the Companies) as in effect on the date hereof.
SECTION 2.3 AUTHORIZATION.
(a) Each Company has duly authorized the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby. No
further corporate action on the part of the Companies is necessary to authorize
the execution of this Agreement or to consummate the transactions contemplated
hereby. Except as set forth in Section 2.3 of the Schedule of Exceptions, each
Shareholder now has and at the Closing will have full right, power and authority
to sell and transfer the Shares held by such Shareholder.
(b) This Agreement constitutes a valid and binding agreement of the
Shareholders and the Companies, enforceable against each such party in
accordance with its terms subject to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting creditors' rights generally
from time to time in effect and to general principles of equity.
SECTION 2.4 NO VIOLATION. Except as set forth in Section 2.4 of the
Schedule of Exceptions, neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will (i) violate
or conflict with any provision of the charter or bylaws of either Company, (ii)
constitute a violation of or a default or breach (or an event which, with notice
or lapse of time, or both, would constitute a default) under, or result in the
termination of, accelerate the performance required by or give rise to any right
of termination, acceleration, cancellation or amendment under, or result in the
creation of any mortgages, pledges, liens, security interests, encumbrances,
charges or claims of any kind (whether absolute, accrued, contingent or
otherwise) (collectively, "Liens") upon either of the Companies or any of their
respective assets
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or have any other adverse effect under, any term or provision of any contract,
commitment, understanding, arrangement, agreement or restriction of any kind or
character to which either of the Companies is a party or by which any of them or
any of their respective assets or property may be bound, or (iii) cause, or give
any person grounds to cause (with or without notice, the passage of time or
both), the maturity of any material debt, liability or obligation of either
Company to be accelerated or increase any such liability or obligation of either
Company except, in the case of (ii) or (iii), where such violations,
terminations, conflicts, accelerations, defaults, breaches or grounds and right
of termination, cancellation, acceleration and amendment would not have a
material adverse effect on either Company taken as a whole or prevent or delay
the consummation of the transactions contemplated hereby. Except as set forth in
Section 2.4 of the Schedule of Exceptions, no filing with, notification to, and
no permit, consent, approval, authorization or action by any federal, state,
local, foreign or other governmental agency, instrumentality, commission,
authority, board or body (collectively, a "governmental agency") is required in
connection with the execution, delivery and performance by the Shareholders or
the Companies of this Agreement, or the consummation by the Shareholders or the
Companies, as the case may be, of the transactions contemplated hereby, except
where the failure to make such filing, give notice or to obtain such permit,
consent, approval, authorization or action would not have a material adverse
effect on either Company taken as a whole or prevent or delay the consummation
of the transactions contemplated hereby.
SECTION 2.5 SUBSIDIARIES. Except as set forth in Section 2.5 of the
Schedule of Exceptions, neither Company owns or controls, directly or
indirectly, any interest in any other corporation, association or other business
entity.
SECTION 2.6 CONTRACTS AND OTHER COMMITMENTS. Except as set forth in Section
2.6 of the Schedule of Exceptions, neither Company has any contract, agreement,
lease, commitment or proposed transaction, written or oral, absolute or
contingent, other than (i) contracts that were entered into in the ordinary
course of business and (ii) contracts terminable at will by such Company on no
more than thirty (30) days' notice without cost or liability to such Company.
SECTION 2.7 PERMITS. To the best knowledge of the Shareholders and the
Companies, each Company has all franchises, permits and licenses necessary for
the conduct of its business as now being conducted by such Company, the lack of
which could materially and adversely affect the business, properties, prospects
or financial condition of such Company. To the best knowledge of the
Shareholders and the Companies, neither Company is in default in any material
respect under any of such franchises, permits, licenses or other similar
authority.
SECTION 2.8 COMPLIANCE WITH OTHER INSTRUMENTS. Neither Company is in
violation or default in any material respect of any provision of its charter or
bylaws or of any provision of any mortgage, indenture, agreement, instrument or
contract to which it is a party or by which it is bound or, to the best
knowledge of the Shareholders and the Companies, of any federal or state
judgment, order, writ or decree applicable to such Company, the violation of
which would materially and adversely affect the business, properties, prospects
or financial condition of such Company. The execution, delivery and performance
by each Company of this Agreement and the consummation of the transactions
contemplated hereby will not result in any such violation or be in material
conflict with or constitute, with or without the passage of time or giving of
notice, a material default under any such provisions.
SECTION 2.9 LITIGATION. There is no action, suit, proceeding or
investigation pending or, to the best knowledge of the Shareholders and the
Companies, threatened against either Company that questions the validity of this
Agreement or the right of either Company to enter into such agreement or to
consummate the transactions contemplated hereby, or, except as set forth in
Section 2.9 of the Schedule of Exceptions, against
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either Company that involve any claim not fully covered by insurance or provided
for by adequate reserves as set forth in the Financial Statements (as defined
below). Neither Company is a party to, or to the best knowledge of the
Shareholders and the Companies, named in any order, writ, injunction, judgment
or decree of any court, government agency or instrumentality.
SECTION 2.10 TITLE TO PROPERTY AND ASSETS; LEASES. Except (i) as reflected
in the Financial Statements (as defined in paragraph 2.11), (ii) for liens for
current taxes not yet delinquent, (iii) for liens imposed by law and incurred in
the ordinary course of business for obligations not past due to carriers,
warehousemen, laborers, materialmen and the like, (iv) for liens in respect of
pledges or deposits under workers' compensation laws or similar legislation or
(v) for defects in title that do not, individually or in the aggregate,
materially interfere with the use of such property, each Company owns its
property and assets free and clear of all liens, claims and encumbrances. With
respect to the property and assets it leases, each Company is in compliance in
all material respects with such leases and, to the best knowledge of the
Shareholders and the Companies, holds a valid leasehold interest free of any
liens, claims or encumbrances, subject to clauses (i)-(v) above.
SECTION 2.11 FINANCIAL STATEMENTS. Each Company has delivered to the Buyer
(i) its audited financial statements at December 31, 1996 and for the fiscal
year then ended and (ii) its unaudited financial statements at October 31, 1997
and for the ten months then ended (collectively, the "Financial Statements").
The Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated and with each other. To the best knowledge of the Shareholders
and the Companies, the Financial Statements fairly and accurately present the
financial condition and operating results of the Companies as of the date and
for the period indicated therein and all of its respective assets and
liabilities. Except to the extent reflected or reserved against in the Financial
Statements, and notes thereto, or in the Schedule of Exceptions, the Companies
are not obligated for, nor are any of their assets or properties subject to, any
liabilities (whether accrued, absolute, contingent or otherwise) or adverse
obligations whether or not such liabilities or obligations are normally shown or
reflected on a balance sheet, other than liabilities and obligations arising in
the ordinary course of business since the date of the Financial Statements, none
of which are material and adverse.
SECTION 2.12 CHANGES. To the best knowledge of the Shareholders and the
Companies, since October 31, 1997, there has not been any event or condition
that has materially and adversely affected the financial condition of either
Company, nor has either Company suffered any damage, destruction or loss,
whether or not covered by insurance, which materially and adversely affects the
assets or business of the Companies.
SECTION 2.13 EMPLOYEES; EMPLOYEE COMPENSATION. There is no strike, labor
dispute or union organization activity pending or, to the best knowledge of the
Shareholders and the Companies, threatened between it and its employees and none
of such Company's employees belongs to any union or collective bargaining unit.
To the best knowledge of the Shareholders and the Companies, each Company has
complied in all material respects with all applicable state and federal equal
opportunity and other laws related to employment. Except as set forth in Section
2.13 of the Schedule of Exceptions, neither Company is a party to or bound by
any currently effective employment contract.
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SECTION 2.14 TAX RETURNS, PAYMENTS, AND ELECTIONS. Except as set forth in
Section 2.14 of the Schedule of Exceptions, each Company has filed all tax
returns and reports required by law, and these returns and reports are true and
correct in all material respects. The amounts recorded for taxes on the
Financial Statements are sufficient for the payment of all due but unpaid
federal, state, county, local or other taxes (including any interest or
penalties) of the Companies involved, accrued for or applicable to the period
ended on the dates thereof and for all years and periods prior thereto. To the
best knowledge of the Shareholders and the Companies, each Company has paid all
taxes and other assessments due, except those contested by it in good faith,
which are set forth in Section 2.14 of the Schedule of Exceptions. Neither
Company has had any tax deficiency proposed or assessed against it, nor has
either Company executed any waiver of any statute of limitations on the
assessment or collection of any tax or governmental charge. No examinations by
the Internal Revenue Service of the federal income tax returns of either Company
for any taxable year are pending. To the best knowledge of the Shareholders and
the Companies, each Company has withheld or collected from each payment made to
each of its employees, the amount of all taxes, including, but not limited to,
federal income taxes, Federal Insurance Contribution Act taxes and Federal
Unemployment Tax Act taxes required to be withheld or collected therefrom, and
has paid the same to the proper tax receiving officers or authorized
depositaries. True and complete copies of the federal income tax returns of the
Companies for the years ending December 31, 1995 and 1996 have been delivered to
the Buyer.
SECTION 2.15 ENVIRONMENTAL AND SAFETY LAWS. Except as set forth in Section
2.15 of the Schedule of Exceptions, to the best knowledge of the Shareholders
and the Companies, without any investigation, neither Company is in any material
respect in violation of, or subject to any existing, pending or, to the best
knowledge of the Shareholders and the Companies, threatened proceeding by any
governmental agency or authority relating to, or subject to any remedial
obligation under, any applicable statute, law or regulation relating to the
environment ("Applicable Environmental Law"), and to the best knowledge of the
Shareholders and the Companies, without any investigation, no material
expenditures are or will be required in order to comply with any such existing
Applicable Environmental Law, other than such violations, proceedings, remedial
obligations or expenditures that would not have a material adverse effect on
such Company's financial condition.
SECTION 2.16 NO LIABILITIES NOT SHOWN IN FINANCIAL STATEMENTS. Except as
disclosed in the Financial Statements, herein or as disclosed to the Buyer in
writing, neither of the Companies has any material liabilities, absolute or
contingent, whether or not asserted, that are not reflected therein. For the
purposes hereof, the term "material" shall mean in excess of $10,000.
SECTION 2.17 LOANS TO SHAREHOLDERS, OFFICERS OR AFFILIATES. There are no
loans or other obligations payable to or by shareholders, officers, directors or
employees of the Companies, except obligations incurred or accrued in the
ordinary course of business in respect of salaries, wages and reimbursements of
expenses, and except as disclosed in the Financial Statements or which shall be
paid off or extinguished at the Closing Date.
SECTION 2.18. COMPLIANCE WITH LAWS. To the best knowledge of the
Shareholders and the Companies, except as set forth in Section 2.18 of the
Schedule of Exceptions, the Companies have complied in all material respects
with all applicable federal, state, municipal and other political subdivision or
governmental agency statutes, ordinances and regulations in every applicable
jurisdiction, in respect of the ownership of their properties and the conduct of
their business, including any labor, minimum wage or employment regulations.
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SECTION 2.19. INSURANCE COVERAGE. Set forth in Section 2.19 of the Schedule
of Exceptions is a list of the policies of casualty, liability, use and
occupancy, and workers' compensation and other forms of insurance of each
Company that are now duly in force.
SECTION 2.20. EMPLOYEE RELATIONS. Section 2.20 of the Schedule of
Exceptions sets forth a list of all bonus, incentive, compensation, disability
pension, profit sharing, retirement, deferred compensation, group insurance or
employee welfare plans of any nature whatsoever (collectively, the "Plans").
(a) The Companies do not have in effect any pension, profit sharing or
other retirement plan, whether or not qualified. The Companies do not
contribute, or have any obligation to make any payments or contributions, to a
multi-employer plan, as that term is defined in Section 3(37) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and the Companies
do not have any actual or potential liability under Section 4201 of ERISA for
any complete or partial withdrawal from a multi-employer plan.
(b) The Plans comply in all material respects with the requirements of all
applicable laws. There are no actions, suits, claims or investigations pending
or, to the best knowledge of the Shareholders or the Companies, threatened with
respect to any Plan. There is no liability required to be accrued under the
Plans except to the extent reflected in the Financial Statements. The Companies
have made or set aside funds to make full payment of all amounts which the
Companies are required to pay prior to the date hereof under the terms of each
Plan, or under any governmental rule or regulation relating to employment
matters. The present value of the vested accrued benefits, if any, under each
Plan does not exceed the current value of the assets of each Plan. No
termination of any Plan by the Companies at or prior to the Closing Date has
resulted or will result in the imposition of any liabilities on the Companies.
(c) Each "Group Health Plan" (within the meaning of Section 162(i)(3) of
the Internal Revenue Code of 1986) maintained by the Companies has been
administered in good faith compliance with the reasonable interpretation of the
continuation coverage requirements contained in Title X of the Consolidated
Omnibus Budget Reconciliation Act of 1985 (COBRA).
SECTION 2.21. TRADEMARKS AND LICENSES. Section 2.21 of the Schedule of
Exceptions sets forth a complete and accurate list of all licenses, trademark
applications, trade names, trade name applications, copyrights and copyright
applications owned by or licensed to the Companies or in which the Companies
have any right or interest. To the best knowledge of the Shareholders and the
Companies, the conduct of the business of the Companies does not conflict with
or infringe upon any trademark, trade name, trade secret or copyright of others.
The Companies have received no notice of any claim of infringement or other
complaint that its operations conflict with or infringe upon the trade names,
trademarks, trade secrets or copyrights of others.
SECTION 2.22. GUARANTEES. Except for guarantees of obligations of the other
Company, neither Company has given any guarantee, indemnity, warranty or bond,
or incurred any other similar obligation or created any security for or in
respect of, liabilities, actual or contingent, of any other person or entity.
SECTION 2.23. OSHA. The Companies have not received notice of any violation
by the Companies, and to the best knowledge of the Shareholders and the
Companies, the Companies are not in violation of and have not been in violation
of the Occupational Safety and Health Act of 1970, including the rules and
regulations thereunder, or any other federal, state or local laws, including
rules and regulations thereunder, regulating or otherwise affecting employee
health and safety.
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SECTION 2.24. BOOKS AND RECORDS. The books and records of the Companies are
in all material respects complete and correct.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to, and agrees with the
Shareholders and the Companies that:
SECTION 3.1 ORGANIZATION; GOOD STANDING. The Buyer 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 own and operate its
properties and assets and to carry on its business as currently conducted, to
execute and deliver this Agreement, the Shareholder's Agreement and to carry out
the provisions of this Agreement.
SECTION 3.2 AUTHORIZATION. Buyer has duly authorized the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby. No further corporate actions on the part of the Buyer are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
SECTION 3.3 VALID AND BINDING AGREEMENT. This Agreement constitutes a valid
and binding agreement of the Buyer, enforceable against the Buyer in accordance
with its terms subject to applicable bankruptcy, reorganization, insolvency,
moratorium and similar laws affecting creditors' rights generally from time to
time in effect and the general principles of equity.
SECTION 3.4 NO VIOLATION. Neither the execution and delivery of this
Agreement nor the consummation by the Buyer of the transactions contemplated
hereby will (i) violate or conflict with any statute, law, ordinance, rule,
regulation, order, writ, injunction, judgment or decree applicable to the Buyer
or by which any of its properties may be bound or affected, (ii) violate or
conflict with any provisions of the Certificate of Incorporation or Bylaws of
the Buyer, (iii) constitute a violation of or default or breach (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
or result in the termination of, accelerate the performance required by, give
rise to any right of termination, cancellation, acceleration or amendment under,
or result in the creation of any Lien upon the Buyer or any of its assets or
have any other adverse affect under, any term or provision of any contract,
commitment, understanding, arrangement, agreement or restriction of any kind or
character to which the Buyer is a party or by which any of its assets or
properties may be bound, subject or affected, or (iv) cause, or give any person
grounds to cause (with or without notice, the passage of time or both), the
maturity of any material debt, liability or obligation of the Buyer to be
accelerated or increase any such liability or obligation of Buyer in any
material respect, except, in the case of (i), (iii) and (iv), where such
violations, terminations, conflicts, accelerations, defaults, breaches or
grounds and rights of termination, cancellation, acceleration and amendment
would not have a material adverse effect on either of the Companies taken as a
whole or prevent or delay the consummation of the transactions contemplated
hereby.
SECTION 3.5 PURCHASE ENTIRELY FOR OWN ACCOUNT. Subject to Section 9.2
hereof, the Buyer is purchasing the Shares for investment for such Buyer's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof. The Buyer has no present intention of selling,
granting any participation in or otherwise distributing the same. The Buyer
further represents that it does not have any
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contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Shares.
SECTION 3.6 INDEPENDENT INVESTIGATION. The Buyer acknowledges and affirms
to the Shareholders that in making the decision to enter into this Agreement and
to consummate the transactions contemplated hereby, the Buyer, except for the
express representations, warranties and covenants made in Article II hereof (all
of which shall be binding regardless of any investigation made by the Buyer),
has relied solely on the basis of its own independent investigation, analysis
and evaluation of the Companies and each of the Companies' properties, assets,
business, financial condition, operations and prospects.
SECTION 3.7 INVESTMENT EXPERIENCE. The Buyer represents that it is
experienced in evaluating and investing in securities of companies and
acknowledges that it can bear the economic risk of its investment and has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of the investment in the Shares. The Buyer also
represents it has not been organized for the purpose of acquiring the Shares.
SECTION 3.8 ACCREDITED INVESTOR; U.S. PERSON.
(a) The Buyer is an "Accredited Investor" as such term is defined in
Regulation D of the Securities Act of 1933, as amended.
(b) The Buyer is a citizen or resident of the United States or Canada, or
any state, territory or possession thereof (a "U.S. Person").
SECTION 3.9 RESTRICTED SECURITIES. The Buyer understands that the Shares
may not be sold, transferred or otherwise disposed of without complying with the
provisions of Article III of the Shareholders' Agreement, including registration
under the Securities Act or a written opinion of counsel or "no-action" letter
from the Securities and Exchange Commission relating to an exemption therefrom,
and that in the absence of an effective registration statement covering the
Shares or an available exemption from registration under the Securities Act, the
Shares must be held indefinitely. In particular, the Buyer is aware that the
Shares may not be sold pursuant to Rule 144 promulgated under the Securities Act
unless all of the conditions of that Rule are met. Among the conditions for use
of Rule 144 may be the availability of current information to the public about
either Company. Such information is not now available and neither Company has
any present plans to make such information available.
SECTION 3.10 PUBLIC SALE. The Buyer agrees not to make, without complying
with the provisions of Article III of the Shareholders' Agreement and the prior
written consent of each Company, any public offering or sale of the Shares,
although permitted to do so pursuant to Rule 144(k) promulgated under the
Securities Act, until the earlier of (i) the date on which the Companies effect
their initial registered public offering pursuant to the Securities Act or (ii)
the date on which they become a registered company pursuant to Section 12(g) of
the Securities Exchange Act of 1934, as amended.
SECTION 3.11 INVESTMENT COMPANY ACT. To the best knowledge of the Buyer,
the Buyer is not and, after giving effect to the purchase of the Shares, will
not be an "investment company" as defined in the Investment Company Act of 1940.
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ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.1 ACCESS TO INFORMATION; CONFIDENTIALITY. Between the date hereof
and the Closing, the Shareholders and the Companies (i) shall give the Buyer and
its authorized representatives reasonable access to all employees, offices and
other facilities, and all books and records, including work papers and other
materials prepared by the Companies' independent public accountants, of the
Companies, (ii) shall permit the Buyer and its authorized representatives to
make such inspections as they may reasonably require, and (iii) shall cause the
Companies' officers to furnish the Buyer and its authorized representatives with
such financial and operating data and other information with respect to the
Companies as the Buyer may from time to time reasonably request; provided,
however, that the Shareholders and the Companies shall have the right to have a
representative present at all times.
SECTION 4.2 SHAREHOLDERS' AGREEMENT. The Shareholders, the Companies and
the Buyer shall enter into a Shareholders' Agreement (the "Shareholders'
Agreement") at (and subject to the occurrence of) the Closing pursuant to which
the parties thereto shall agree to certain restrictions upon the sale and
transfer of shares of PAACO Common Stock and Premium Common Stock on the terms
set forth therein. The Shareholders' Agreement shall be in substantially the
form set forth as Annex D.
SECTION 4.3 EMPLOYMENT AGREEMENT. Each of the Shareholders and the
Companies shall enter into an Employment Agreement (the "Employment Agreement")
at (and subject to the occurrence of) the Closing pursuant to which the
Companies shall agree to employ each Shareholder for the period and on the terms
set forth therein and in which each Shareholder shall covenant not to compete
against the Companies on the terms set forth therein. The Employment Agreement
shall be in substantially the form set forth as Annex E.
SECTION 4.4 SHAREHOLDER WARRANTS. At, and subject to the occurrence of, the
Closing, the Companies shall issue to the Shareholders warrants (collectively,
the "Shareholder Warrants") to purchase up to an aggregate of 8,511 shares of
PAACO Common Stock and 85 shares of Premium Common Stock, subject to the terms
and provisions of such Shareholder Warrants. The Shareholder Warrants shall be
in substantially the form set forth as Annex F.
SECTION 4.5 CONDUCT OF BUSINESS. Except as otherwise contemplated by this
Agreement, from the date hereof until the Closing, the business of the Companies
will be conducted diligently and only in the ordinary course. For purposes of
this Section 4.5, the phrase "ordinary course" shall mean the conduct of the
business of the Companies in the manner which the Companies conducted their
business in the last fiscal year ended prior to the execution of this Agreement,
following their usual accounting practices, making ordinary accruals, incurring
ordinary liabilities or expenditures and making ordinary contracts and
commitments.
SECTION 4.6 PAY-OFF OF DEBENTURE. At, and subject to the occurrence of the
Closing, the 18% Debenture Due January 13, 2000 in the principal amount of
$3,000,000 from the Companies to the Buyer, dated January 13, 1998 (the
"Debenture"), shall be paid in full.
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ARTICLE V
CONDITIONS OF THE BUYER'S OBLIGATIONS AT CLOSING
The obligations of the Buyer under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against the Buyer unless it consents in
writing thereto:
SECTION 5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Shareholders and the Companies contained in Article II shall
be true in all material respects on and as of the Closing with the same effect
as though such representations and warranties had been made on and as of the
date of the Closing.
SECTION 5.2 PERFORMANCE. Each Company and each Shareholder shall have
performed and complied in all material respects with all agreements, obligations
and conditions contained in this Agreement that are required to be performed or
complied with by it or him on or before the Closing.
SECTION 5.3 COMPLIANCE CERTIFICATE. The President of each Company and each
Shareholder shall deliver to the Buyer at the Closing a certificate certifying
that the conditions specified in Sections 5.1 and 5.2 have been fulfilled.
SECTION 5.4 SHAREHOLDERS' AGREEMENT. The Shareholders shall have entered
into the Shareholders' Agreement.
SECTION 5.5 EMPLOYMENT AGREEMENT. Each of the Shareholders shall have
entered into the Employment Agreement.
SECTION 5.6 FINOVA CREDIT FACILITY. The Companies' senior lender ("Finova")
will have consented to the transactions contemplated herein.
SECTION 5.7 OPINION OF COUNSEL. The Buyer shall have received the opinion,
subject to customary assumptions, of Thompson & Knight, P.C., counsel for the
Shareholders and the Companies, dated the Closing Date, to the effect that:
(a) each of the Companies is a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas and has the corporate
power to carry on its business as it is now being conducted;
(b) this Agreement has been duly authorized, executed and delivered by the
Companies, and (assuming valid execution and delivery by the other parties
hereto) is, or will be upon such execution, the legal, valid and binding
obligation of each of the Companies, enforceable in accordance with its terms
(except as otherwise limited by bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights, and except that such
counsel need not express an opinion as to whether any covenant contained herein
is specifically enforceable);
(c) this Agreement has been duly executed and delivered by the
Shareholders, and (assuming legal competency of the Shareholders and delivery by
the other parties hereto) is, or will be upon such execution, the valid and
binding obligation of each of the Shareholders, enforceable in accordance with
its terms (except as otherwise limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting
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creditor's rights, and except that such counsel need not express an opinion as
to whether any covenant contained herein is specifically enforceable).
SECTION 5.8 BUYER WARRANTS. The Buyer shall have exercised the Buyer
Warrants.
SECTION 5.9 CONSENTS PRIOR TO CLOSING. The Shareholders and the Companies
shall have obtained all material approvals and consents which must be obtained
in order to effectuate the transactions contemplated hereby and to satisfy the
terms and provisions hereof.
SECTION 5.10 NO MATERIAL ADVERSE CHANGES. The Shareholders and the
Companies shall have delivered to the Buyer their certificate stating that there
has been no material adverse change in the business, operations, financial
condition or properties of the Companies since the date hereof.
SECTION 5.11 ABSENCE OF LITIGATION. No litigation, governmental action,
insolvency, receivership or other proceeding shall have been threatened,
asserted or commenced with respect to the transactions contemplated herein.
ARTICLE VI
CONDITIONS OF THE SHAREHOLDERS' OBLIGATIONS AT CLOSING
The obligations of the Shareholders to the Buyer under this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions by the Buyer:
SECTION 6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Buyer contained in Article III shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of the Closing.
SECTION 6.2 PERFORMANCE. The Buyer shall have performed and complied in all
material respects with all agreements, obligations and conditions contained in
this Agreement that are required to be performed or complied with by it on or
before the Closing.
SECTION 6.3 COMPLIANCE CERTIFICATE. The Buyer shall deliver to the
Shareholders at the Closing a certificate certifying that the conditions
specified in Section 6.1 have been fulfilled.
SECTION 6.4 SHAREHOLDERS' AGREEMENT. The Buyer shall have entered into the
Shareholders' Agreement.
SECTION 6.5 EMPLOYMENT AGREEMENT. The Companies shall have entered into the
Employment Agreements.
SECTION 6.6 SHAREHOLDER WARRANTS. The Companies shall have issued the
Shareholder Warrants.
SECTION 6.7 OPINION OF COUNSEL. The Shareholders and the Companies shall
have received the opinion, subject to customary assumptions, of T.J. Falgout,
III, executive vice president and general counsel for the Buyer, dated the
Closing Date, to the effect that:
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(a) the Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas and has the corporate power to
carry on its business as it is now being conducted;
(b) this Agreement has been duly authorized, executed and delivered by
Crown, and (assuming valid execution and delivery by the other parties hereto)
is, or will be upon such execution, the legal, valid and binding obligation of
the Buyer, enforceable in accordance with its terms (except as otherwise limited
by bankruptcy, insolvency, reorganization, moratorium and similar laws effecting
creditor's rights, and except that such counsel need not express an opinion as
to whether any covenant contained herein is specifically enforceable).
ARTICLE VII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
SECTION 7.1 SURVIVAL OF REPRESENTATIONS. Subject to Section 7.3 hereof, the
representations and warranties made by the Shareholders and each Company
contained in Article II of this Agreement and the representations and warranties
made by the Buyer contained in Article III of this Agreement shall survive the
Closing for a period of one year, except for representations made in Section
2.14, which representations shall survive the Closing until a date which is six
(6) months after the applicable statute of limitations has expired.
SECTION 7.2 AGREEMENT TO INDEMNIFY.
(a) Subject to the terms and conditions of this Article VII, each of the
Shareholders and the Companies hereby agrees jointly and severally to indemnify,
defend and hold harmless the Buyer and its successors and assigns (collectively,
the "Buyer Group") from and against all claims, actions or causes of action,
assessments, demands, losses, damages, judgments, settlements, liabilities,
costs and expenses, including, without limitation, interest, penalties and
reasonable attorneys' and accounting fees and expenses of any nature whatsoever,
whether actual or consequential (collectively, "Damages"), asserted against,
imposed upon or incurred directly by any member of the Buyer Group by reason of
or resulting from a breach of any representation or warranty, covenant,
agreement or undertaking by the Shareholders or the Companies contained herein.
(b) Subject to the terms and conditions of this Article VII, the Buyer
hereby agrees to indemnify, defend and hold harmless each Shareholder and the
Companies and their respective subsidiaries, and each officer and director of
the Companies or of any of their respective subsidiaries and each affiliate
thereof (collectively, the "Seller Group"), and their successors and assigns,
from and against all Damages, asserted against, resulting to, imposed upon or
incurred by any member of the Seller Group, directly or indirectly, by reason of
or resulting from a breach of any representation, warranty, covenant, agreement
or undertaking of the Buyer contained herein.
SECTION 7.3 LIMITATION OF LIABILITY. The obligations and liabilities of
each Shareholder with respect to Buyer Claims under Section 7.2 hereof to the
Buyer Group and the Buyer with respect to Seller Claims under Section 7.2 hereof
to the Seller Group shall be subject to the following limitations:
(a) No indemnification shall be required to be made by any Shareholder
under this Article VII with respect to any Buyer Claims which results from the
breach of any representation, except to the extent that the aggregate amount of
Damages with respect to all of such claims incurred by the Buyer Group exceeds
$25,000, in which case, the Shareholders shall be liable only for Damages in
excess of such amount.
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(b) The amount of Damages any party is required to pay to indemnify any
other party pursuant to Section 7.2 as a result of any Buyer Claim or Seller
Claim shall be reduced to the extent of any amounts actually received by the
party seeking indemnification after the Closing Date pursuant to the terms of
insurance policies (if any) covering such claim.
(c) The amount of Damages payable by a Shareholder pursuant to Section 7.2
as a result of any Buyer Claim (i) shall be reduced by the amount of any tax
benefit actually realized by any member of the Buyer Group as a result of such
Buyer Claim, and (ii) such reduced amount shall be increased by the amount of
any taxes actually payable by any member of the Buyer Group as a result of such
Shareholder's payment of Damages for such Buyer Claim.
(d) No indemnification shall be required to be made by any Shareholder
under this Article VII to the extent the aggregate amount of Damages incurred by
the Buyer Group and paid by such Shareholder exceeds the cash Purchase Price
received by such Shareholder pursuant to this Agreement.
SECTION 7.4 CONDITIONS OF INDEMNIFICATION. The obligations and liabilities
of the Shareholders and the Companies to indemnify the Buyer Group and the Buyer
to indemnify the Seller Group under Section 7.2 hereof with respect to Buyer
Claims and Seller Claims, respectively, resulting from the assertion of
liability by third parties shall be subject to the following terms and
conditions:
(a) The indemnified party will give the indemnifying party prompt notice of
any such claim, and the indemnifying party will undertake the defense thereof by
representatives of its own choosing reasonably satisfactory to the indemnified
party, provided that failure to provide such notice will not relieve the
indemnifying party of its obligations hereunder unless it is actually prejudiced
by such failure to receive such notice. If the indemnifying party, within ten
(10) days after notice of any such claim, fails to defend such claim, the
indemnified party will (upon further notice to the indemnifying party) have the
right to undertake the defense, compromise or settlement of such claim on behalf
of and for the account and risk of indemnifying party.
(b) Anything in this Section 7.4 to the contrary notwithstanding, (i) an
indemnified party shall have the right, at its own cost and expense, to defend,
compromise or settle or participate in the defense, compromise or settlement of
such claim, (ii) the indemnifying party shall not, without the written consent
of the indemnified party, settle or compromise any claim or consent to the entry
of any judgment (x) which does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to the indemnified party a release from
all liability in respect of such claim or (y) as a result of which injunctive or
other equitable relief would be imposed against the indemnified party, and (iii)
the indemnified party shall have the right to control the defense or settlement
of that portion of any claim which seeks an order, injunction or other equitable
relief against the indemnified party which, if successful, could materially
interfere with the business, operations, assets, financial condition or
prospects of the indemnified party; provided, however, that in connection with
the defense or settlement of the portion of such claim which seeks equitable
relief, the indemnified party shall cooperate with the indemnifying party and
use its reasonable best efforts to limit the liability of the indemnifying party
for the damages portion of such claim.
SECTION 7.5 REMEDIES CUMULATIVE. Except as otherwise provided herein, the
remedies provided herein shall be cumulative and shall not preclude the
assertion by either party hereto of any other rights or the seeking of any other
remedies against the other party hereto.
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ARTICLE VIII
TERMINATION; AMENDMENT AND WAIVER
SECTION 8.1 TERMINATION OF AGREEMENT. This Agreement may be terminated at
any time prior to the Closing:
(a) By mutual written agreement of the Buyer, each of the Shareholders and
the Companies;
(b) By either the Buyer or each of the Shareholders if the Closing shall
not have occurred on or before February 28, 1998, unless such failure to close
shall be due to a breach of this Agreement by the party seeking to terminate the
Agreement pursuant to this Section; or
(c) If a United States court of competent jurisdiction shall permanently
enjoin the consummation of the transactions contemplated hereby and such
injunction shall be final and nonappealable.
SECTION 8.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become void and
there shall be no liability on the part of any party hereto (or any of their
respective officers or directors). Nothing contained in this Section 8.2 shall
relieve any party from liability for any breach of this Agreement.
SECTION 8.3 AMENDMENT, EXTENSION AND WAIVER. The Buyer, the Companies and
the Shareholders may amend this Agreement at any time by an instrument in
writing signed on behalf of each of the parties hereto. Any agreement on the
part of a party hereto to any waiver of compliance with any of the agreements or
conditions contained herein shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or therein.
SECTION 9.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
permitted transferees of any shares of Common Stock sold hereunder). Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
SECTION 9.3 GOVERNING LAW AND VENUE. This Agreement shall be governed by
and construed under the laws of the State of Texas and venue for any dispute
arising hereunder shall be in Dallas County, Texas, and the parties hereto
irrevocably submit to the jurisdiction of the federal and state courts located
in Dallas County, Texas.
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SECTION 9.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 9.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
SECTION 9.6 NOTICES. Unless otherwise provided, all notices and other
communications required or permitted under this Agreement shall be in writing
and shall be mailed by United States first-class mail, postage prepaid, sent by
facsimile or delivered personally by hand or by a nationally recognized courier
addressed to the party to be notified at the address or facsimile number
indicated for such person on the signature page hereof, or at such other address
or facsimile number as such party may designate by ten (10) days' advance
written notice to the other parties hereto. All such notices and other written
communications shall be effective on the date of mailing, facsimile transfer or
delivery.
SECTION 9.7 FINDER'S FEES. The Buyer agrees to indemnify and to hold
harmless each of the Shareholders and each Company from any liability for any
commission or compensation in the nature of a finder's fee (and the cost and
expenses of defending against such liability or asserted liability) for which
the Buyer or any of its officers, partners, employees, agents or representatives
is responsible. Each of the Shareholders and each Company agrees to indemnify
and hold harmless the Buyer from any liability for any commission or
compensation in the nature of a finder's fee (and the costs and expenses of
defending against such liability or asserted liability) for which any of the
Shareholders or either of the Companies or any of either's officers, employees,
agents or representatives is responsible. The Shareholders and the Companies
hereby acknowledge that the Buyer has paid to John A. Drossos and JAD Capital,
Inc. a finder's fee in the aggregate amount of $200,000, and the Companies
hereby agree to reimburse the Buyer for such fee at the Closing.
SECTION 9.8 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the unanimous written consent of the parties hereto.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any securities purchased under this Agreement at the
time outstanding (including securities into which such securities have been
converted), each future holder of all such securities, and each Company.
SECTION 9.9 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision or provisions
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms; provided, however, that if any such provision or
provisions may be made enforceable by limitation thereof, then such provision
shall be deemed to be so limited and shall be enforceable to the maximum extent
permitted by law.
SECTION 9.10. FUTURE ACTIONS. The Companies, the Shareholders and the Buyer
shall execute and deliver all such future instruments and take such other and
further action as may be reasonably necessary or appropriate to carry out the
provisions of this Agreement and the intention of the parties as expressed
herein.
SECTION 9.11. PUBLIC ANNOUNCEMENTS. No publication and/or press release of
any nature shall be issued pertaining to this Agreement or the transaction
contemplated hereby without the prior written approval of the Buyer and the
Shareholders, except as may be required by law.
-16-
<PAGE> 21
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
SPOUSES: SHAREHOLDERS: ADDRESSES:
- ------------------- -----------------------
Larry Lange PAACO, Inc.
605 S. Loop 12
Irving, Texas 75060
- ------------------- -----------------------
Daniel Chu PAACO, Inc.
605 S. Loop 12
Irving, Texas 75060
-----------------------
Ted Lange PAACO, Inc.
605 S. Loop 12
Irving, Texas 75060
PAACO, INC.
By:
--------------------
Daniel Chu PAACO, Inc.
President 605 S. Loop 12
Irving, Texas 75060
PREMIUM AUTO ACCEPTANCE CORPORATION
By:
--------------------
Daniel Chu PAACO, Inc.
President 605 S. Loop 12
Irving, Texas 75060
BUYER:
CROWN GROUP, INC.
By:
--------------------
Edward R. McMurphy Crown Group, Inc.
President 4040 N. MacArthur Blvd.
Suite 100
Irving, Texas 75038
-17-
<PAGE> 1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT dated on February 3, 1998, by and among
CROWN GROUP, INC., a Texas corporation (the "Purchaser"), PRECISION IBC,
INCORPORATED, an Alabama corporation (the "Company"), and VAN P. FINGER, a
resident of Baldwin County, Alabama, being the sole shareholder (the
"Shareholder"), of the Company.
W I T N E S S E T H:
WHEREAS, the Shareholder is the owner of one hundred (100%) percent of
the issued and outstanding shares of capital stock of the Company, such shares
being of the class and par value hereinafter set forth, and the Shareholder
desires to sell eighty (80%) percent of such shares to the Purchaser (all of
such shares of capital stock to be sold hereunder herein collectively referred
to as the "Shares"), and the Purchaser desires to purchase the Shares, all upon
the terms and conditions set forth herein; and
WHEREAS, this Agreement sets forth the terms and conditions to which the
parties have agreed and further contemplates the execution and delivery of
certain collateral agreements and the consummation of certain related
transactions hereinafter described;
NOW, THEREFORE, in consideration of the mutual promises and covenants of
the parties, and subject to the terms and conditions set forth herein, the
parties agree as follows:
1. Sale and Purchase of the Shares. The Shareholder agrees, subject
to the conditions to the Shareholder's obligations herein set forth, to sell,
assign and convey to the Purchaser on the Closing Date (as hereinafter
defined), free and clear of all security interests, pledges, liens, charges and
encumbrances, the Shares, and to transfer and deliver to the Purchaser the
certificates evidencing such Shares, duly endorsed in blank or accompanied by
stock powers duly executed in blank. The
<PAGE> 2
Purchaser agrees, subject to the conditions to its obligations herein set
forth, to purchase and accept the Shares for the consideration set forth in
Section 2(a) hereof.
2. Purchase and Payment; Payment of Shareholder Loans.
(a) Purchase Price. The total purchase price (the "Purchase
Price") for the Shares shall be TWO MILLION THREE HUNDRED EIGHTY-TWO
THOUSAND THREE HUNDRED EIGHTY-NINE ($2,382,389) DOLLARS, payable at
Closing (as hereinafter defined) by certified or cashier's checks or
wire transfer funds.
(b) Shareholder Loans. The loans from the Shareholder to the
Company in the aggregate principal amount of $292,894.31 shall be paid
in full by the Company at Closing.
(c) Further Assurances. The Shareholder hereby agrees to
execute and deliver from time to time at the request of the Purchaser
and without further consideration, such additional instruments of
conveyance and transfer and to take such other action as the Purchaser
may reasonably require more effectively to convey, assign, transfer and
deliver the Shares to the Purchaser.
3. Representations and Warranties of the Shareholder and the
Company. The Shareholder and the Company represent and warrant to and agree
with the Purchaser that:
(a) Organization and Standing of the Company. The Company is
a corporation duly organized, validly existing and in good standing
under the laws of the State of Alabama. The Company has full corporate
power and authority to conduct its business as it is now being conducted
and is not qualified to do business as a foreign corporation in any
other jurisdiction. The Shareholder has delivered to the Purchaser
complete and correct copies of the Articles of Incorporation (duly
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<PAGE> 3
certified by the Secretary of State of the State of Alabama) and By-Laws
(certified by the Secretary of the Company) of the Company as in effect
on the date hereof.
(b) Subsidiaries. The Company has no subsidiaries. Further,
the Company does not (i) own, directly or indirectly, any of the
outstanding capital stock or securities convertible into capital stock
of any other corporation, or (ii) own, directly or indirectly, any
participating interest in any partnership, joint venture or other
business enterprise.
(c) Capital Stock. The authorized capital stock of the
Company consists of 2,000 shares of common stock, $1.00 par value, of
which, on the date hereof, 1,000 shares are validly issued and
outstanding, fully paid and nonassessable and one hundred (100%) percent
of which are owned by the Shareholder. The Company does not have any
treasury shares, outstanding subscriptions, options or other agreements
or commitments obligating it to issue shares of capital stock. Between
the date hereof and the Closing Date, the Shareholder will not, and will
not permit the Company to issue or enter into any subscriptions,
options, agreements or other commitments in respect of the issuance,
transfer, sale, repurchase or encumbrance of any shares of capital
stock.
(d) Financial Statements. The Shareholder has delivered to
the Purchaser (i) the compiled balance sheet of the Company at its
December 31, 1995 and its December 31, 1996 fiscal year ends and the
related compiled statement of earnings for the Company, as certified by
the President of the Company; and (ii) the compiled balance sheet of the
Company at December 31, 1997 and the related compiled statement of
earnings of the Company for the twelve month period then ended, as
3
<PAGE> 4
certified by the President of the Company (hereinafter referred to as
the "Company's Financial Statements"). All of the Company's Financial
Statements (x) are in accordance with the books of account and records
of the Company and fairly present the financial position and results of
operations of the Company as of the date and for the periods indicated,
(y) contain and reflect adequate reserves for all known material
liabilities and (z) were prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior
accounting periods ("GAAP"). Except to the extent reflected or reserved
against in the Company's Financial Statements, or any Schedule provided
for in this Section 3, the Company is not obligated for, nor are any of
its assets or properties subject to, any liabilities (whether accrued,
absolute, contingent or otherwise) or adverse obligations, whether or
not such liabilities or obligations are normally shown or reflected on a
balance sheet, other than liabilities and obligations arising in the
ordinary course of business since the date of the Company's Financial
Statements, none of which are material and adverse. The Company's
Financial Statements correctly reflect the liabilities of the Company at
December 31, 1997.
(e) Absence of Certain Changes or Events. Except as set forth
in any Schedule delivered to the Purchaser pursuant to this Section 3 or
except as contemplated by this Agreement, since December 31, 1997, the
Company has not:
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<PAGE> 5
(i) issued, delivered or agreed to issue or deliver any
stock, bonds or other corporate securities (whether authorized
and unissued or held in the treasury) or granted or agreed to
grant any options, warrants or other rights calling for the
issuance thereof;
(ii) borrowed or agreed to borrow any funds or incurred,
or become subject to, any obligation or liability (absolute or
contingent) except in the ordinary course of business in
customary amounts;
(iii) paid any obligation or liability (absolute or
contingent) except in the ordinary course of business in
customary amounts;
(iv) paid any obligation or liability (absolute or
contingent) other than current liabilities reflected in or shown
on the Company's Financial Statements (or the notes thereto) and
obligations or liabilities incurred since the date thereof and
permitted to be so incurred by the foregoing clause (ii) of this
Section (e);
(v) except as otherwise permitted herein, declared or
made, or agreed to declare or make, any payment of dividends or
distribution of any assets of any kind whatsoever to the
Shareholder, or purchased or redeemed any shares of its capital
stock;
(vi) except as otherwise permitted herein, sold or
transferred, or agreed to sell or transfer, any of its assets,
properties or rights (except sales in the ordinary course of
business) or cancelled or agreed to cancel, any debts or claims;
5
<PAGE> 6
(vii) entered or agreed to enter into any agreement or
arrangement granting any preferential rights to purchase
substantially all of the assets, properties or rights of the
Company (including management and control thereof), or requiring
the consent of any party to the transfer and assignment of such
assets, properties or rights (or changes in management or control
thereof), or providing for the merger or consolidation of the
Company with or into another corporation;
(viii) to the best of the Shareholder's knowledge,
suffered any material losses or waived any rights of material
value;
(ix) to the best of the Shareholder's knowledge, except
in the ordinary course of business, made or permitted any
amendment or termination of any contract, agreement or license to
which it is a party;
(x) made any accrual or arrangement for the payment of
bonuses or special compensation of any kind or any severance or
termination pay to any present or former officer or employee;
(xi) increased the rate of compensation payable or to
become payable by it to any of its officers or key employees
compensated at a rate in excess of $20,000 per annum; or made any
increase in any profit sharing, bonus, incentive, deferred
compensation, insurance, pension, retirement or other employee
benefit plan, payment or arrangement made to, for or with any
such officers or key employees;
6
<PAGE> 7
(xii) committed to purchase inventories, parts, supplies
or other items in excess of its normal, ordinary and usual
requirements or at excessive prices, all computed based on
historical practices of the Company;
(xiii) experienced any significant labor trouble; or
(xiv) to the best of the Shareholder's knowledge, suffered
any damage, destruction or loss, whether or not covered by
insurance, which materially and adversely affects its assets or
business, or had any material adverse change in the business,
operations, financial condition or prospects of the Company.
Between the date hereof and the Closing Date, the Company shall not do
any of the things listed in Clauses (i) through (xii) of this Section (e)
without the prior written consent of the Purchaser, except as otherwise
permitted by this Agreement.
(f) Tax Matters.
(i) Except as provided in Section 3(f)(ii) hereof, (A) all
United States, state, county and local and other taxes, including
without limitation, income taxes, payroll taxes, corporate
franchise taxes, sales, excise and use taxes and ad valorem
taxes, due and payable by the Company for the periods ended prior
to the date hereof, have been paid or accrued and there is no
further liability (whether or not disclosed on its returns) for
any taxes relating to such periods, and no interest or penalties
have accrued or are accruing with respect thereto; (B) the
Company has timely filed in correct form all tax returns and
7
<PAGE> 8
reports required to be filed by it on or before the date of this
Agreement with all such taxing authorities; and (C) the
liability for Federal, state and local taxes reflected on the
Company's Financial Statements, if any, represents at the date
thereof, reasonable and adequate provision for the payment of all
accrued and unpaid Federal, state and local taxes of the Company.
No assessments of deficiencies have been made against the
Company, and no extensions of time are in effect for the filing
of any returns or the assessment of deficiencies. No
examinations by the Internal Revenue Service of the Federal
income tax returns of the Company for any taxable year are
presently pending. The Shareholder has delivered to the
Purchaser true and complete copies of all of the Company's
Federal and state Income Tax Returns and payroll tax returns of
the Company for each of its fiscal years from 1993 through 1996.
The Company is, and has been since its incorporation, on "S"
corporation for Federal income tax purposes.
(ii) The Company has not (A) qualified to do business (B)
filed tax returns of any kind or (C) paid any state taxes in any
state other than Alabama and, therefore, the Shareholder and the
Company make no representation or warranty that the Company (D)
has filed all required tax returns in any state except Alabama or
(E) paid all state taxes payable by the Company with respect to
the conduct of its operations in any state other than Alabama.
Notwithstanding the foregoing, if any such taxes are assessed to
the Company after the
8
<PAGE> 9
Closing Date, which taxes relate to periods prior to the Closing
Date, the Shareholder shall reimburse the Company for all such
taxes (and any interest and penalties due thereon) up to the
maximum amount of $50,000 in the aggregate, promptly upon receipt
of written notice that the Company has paid any such taxes,
interest and penalties. The Shareholder shall have the right to
contest in good faith the assessment of such taxes so long as the
contest thereof does not materially adversely affect the
Company's ability to do business in the jurisdiction in which the
taxes are being contested.
(g) Contracts and Container Leases. (i) Schedule 3(g)(i)
hereto is a complete and accurate listing of all mortgages, liens,
licenses, leases, sales representation agreements, purchase orders (with
unexpired terms of more than thirty (30) days) and all other executory
contracts, undertakings, commitments and agreements of the Company,
except Container Leases (as hereinafter defined), to which or by which
it is bound, whether written or oral, (x) entered into in the ordinary
course of business involving the payment by or to the Company of more
than $50,000 in the aggregate with respect to any such contract,
undertaking, commitment or agreement, (y) entered into other than in the
ordinary course of business, or (z) with any of Shareholders' Affiliates
(the "Contracts"). For the purposes of this Agreement, the term
"Shareholders" Affiliates" shall include all "affiliates" of the
Shareholders as such terms are defined in the rules and regulations
promulgated by the Securities and Exchange Commission under the
Securities Act of 1933, as amended. (ii) Schedule 3(g)(ii) lists (A)
all of the Company's bulk containers and related parts and
9
<PAGE> 10
accessories (collectively, the "Containers") which are leased to third
parties and (B) the respective names of such lessees (collectively, the
"Container Leases"). The total number of Containers subject to
Container Leases is, and will be at Closing, not less than 2,800.
Except as set forth on Schedule 3(g)(i), each and all of the Contracts
have been duly executed by, or assigned to, the Company, are currently
in effect, are valid and binding upon the parties thereto and are
enforceable in all material respects in accordance with their terms.
Neither the Company nor the Shareholder is aware of any facts that would
prevent the performance of any of the Contracts or the Container Leases.
Neither the Company nor to the best of the Shareholder's knowledge, any
other party is in default under any one or more of the Contracts or the
Container Leases, nor has any claim of default been asserted by the
Company or any such other party. The Company has committed no act and,
to the best of the Shareholder's knowledge, there has been no omission
which will result in the breach by it of any Container Lease.
(h) Title to Properties and Related Matters. Schedule 3(h)
hereto is a complete list of all personal property (including all
Containers and major items of furnishings and equipment) owned by the
Company. The assets reflected in Schedule 3(h) and in the Company's
Financial Statements, were at the date thereof, and, except for assets
consumed or disposed of in the ordinary course of business since the
date thereof (or distributed to the Shareholder as permitted hereunder),
are now owned by the Company by good title, free and clear from all
security interests, mortgages, liens, claims, defects and encumbrances
except liens, charges or encumbrances discussed or referred to in the
Company's Financial Statements, the related notes or schedules
10
<PAGE> 11
thereto or in Schedule 3(h) delivered to the Purchaser pursuant to this
Section 3. Except as disclosed in Schedule 3(h), to the best of the
Shareholder's knowledge, without any independent investigation, all such
assets are in good operating condition and repair, subject to ordinary
wear and tear. All of such assets have been properly maintained, with
no extraordinary maintenance planned or anticipated, and are adequate
and sufficient for the operation of the Company's business as
historically operated by the Company. There are no material capital
expenditures currently contemplated or necessary to maintain the current
operation of the Company's business.
(i) Consents and Approvals. Except as set forth in Schedule
3(i) hereof, no notification, authorization, permit, consent or approval
of, or notice to, or filing with, any governmental or regulatory
authority or other third party is required to be obtained, given or
made, or waiting period required to expire as a condition to the lawful
execution and delivery of this Agreement, the consummation by the
Shareholder and the Company of the transaction contemplated herein, or
the fulfillment of the terms and compliance with the provisions hereof.
(j) Receivables. All notes receivable, contracts receivable
and accounts receivable are properly reflected on the Company's books
and records, are valid, have arisen in the ordinary course of business,
and, less the bad debt reserve contained in the most recent Financial
Statements (December 31, 1997), are collectible and will be collected in
accordance with their terms at their recorded amounts. None of such
receivables have been the subject of any factoring by the Company.
Schedule 3(j) sets
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<PAGE> 12
forth a complete and accurate list of all notes and accounts receivable
as of December 31, 1997, which list includes the aging of such notes and
accounts receivable.
(k) Litigation and Proceedings. Except as described in
Schedule 3(k), to the best of the Shareholder's knowledge, there are no
actions, suits or proceedings pending or, threatened against or
affecting the Company or the Shareholder, at law or in equity, or before
or by any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or before any arbitrator of any
kind, which involve the possibility of any judgment or liability not
fully covered by casualty or liability insurance; and the Company is not
in default with respect to any judgment, order, writ, injunction,
decree, award, or, to the best of the Shareholder's knowledge and
belief, in default with respect to any rule or regulation of an court,
arbitrator or governmental department, commission, board, bureau, agency
or instrumentality.
(l) Insurance Coverage. The Company maintains policies of
casualty, liability, use and occupancy, and workmen's compensation and
other forms of insurance, covering its properties and assets in amounts
and against such losses and risks as are generally maintained for
comparable businesses and properties, and valid policies for such
insurance are now duly in force. There have been no claims made on any
of the Company's currently existing or previously effective policies of
insurance.
(m) Employee Relations. Except as set forth in Schedule
3(m), and except for the Company's "Group Health Plan" (within the
meaning of Section 162(i)(3) of the Internal Revenue Code of 1986, as
amended), the Company has no bonus,
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<PAGE> 13
incentive, compensation, disability pension, profit sharing, group
insurance or employee welfare plans of any nature whatsoever.
(i) To the best of the Shareholder's knowledge, the
Company is in compliance with all applicable laws respecting
employment and employment practices, terms and conditions of
employment and wages and hours of employees, and there is no
labor strike, dispute, slowdown or representation campaign or
work-stoppage pending or threatened with respect to employees of
the Company.
(ii) There is not, pending or threatened, any unfair
labor practice complaint against the Company pending before any
relevant authority or union representation petition respecting
the employees of the Company.
(iii) To the best of the Shareholder's knowledge, the
"Group Health Plan" maintained by the Company has been
administered in good faith compliance with the reasonable
interpretation of the continuation coverage requirements
contained in Title X of the Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA), if applicable.
(n) Patents, Trademarks and Licenses. The Company has no
patents or patent applications pending. To the best of the
Shareholder's knowledge, the Company owns or has all rights necessary to
use all trademarks, trade names and copyrights necessary for the conduct
of its business as currently conducted, and to the best of the
Shareholder's knowledge and belief, the conduct of such business does not
13
<PAGE> 14
conflict with or infringe upon any trademark, trade name, trade secret
or copyright of others. The Company has received no notice of any
claim of infringement or other complaint that its operations conflict
with or infringe upon the patents, trade names, trademarks, trade
secrets or copyrights of others.
(o) Approvals, Authorizations and Regulations. Except for the
failure of the Company to qualify to do business in jurisdictions other
than the State of Alabama, to the best of the Shareholder's knowledge
and belief, the Company's business is being conducted in compliance with
all applicable laws, ordinances, rules and regulations of all
governmental authorities, and neither the Company nor any officer,
director, stockholder, agent or employee has violated, in any material
respect, any law, ordinance, rule or regulation in connection with the
Company's business. Further, the Company has not received any notice
(written or otherwise) from any governmental authority asserting or
investigating any alleged failure to comply with any applicable law,
ordinance or regulation.
(p) Inventory. None of the inventories of the Company are
obsolete, defective or otherwise not saleable or usable in the ordinary
course of business. The levels of inventories currently on hand are not
in excess of or less than that necessary for the operation of the
Company's business in the ordinary course of business consistent with
past practices of the Company.
(q) Guarantees, Etc. The Company has not given any guarantee,
indemnity, warranty or bond, or incurred any other similar obligation or
created any security for or in respect of, liabilities, actual or
contingent, of any other person.
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<PAGE> 15
(r) OSHA. The Company has not received actual notice of any
violation by the Company, and to the best of the Shareholder's knowledge
and belief, the Company is not in violation of and has not been in
violation of, the Occupational Safety and Health Act of 1970, including
rules and regulations thereunder, or any other federal, state, local or
foreign laws, including rules and regulations thereunder, regulating or
otherwise affecting employee health and safety.
(s) Customers. The Shareholder does not have any knowledge or
information or reason to believe that any of the Company's customers has
ceased, or intends to cease, to acquire products or services from the
Company or has reduced, or intends to materially reduce, the use of the
products or services sold or leased by the Company (except for
cessations or reductions in the ordinary course of business) for any
reason or as a result of the transaction contemplated by this Agreement.
(t) Officers, Directors and Employees. Attached hereto as
Schedule 3(t) is a list of all officers, directors and employees of the
Company. There are no amounts owed to any officer, director or employee
of the Company other than as reflected in the Company's Financial
Statements. Except as set forth on Schedule 3(t), no officer, director
or employee of the Company, or any affiliate of the Company, owns,
directly or indirectly, beneficially or otherwise, any material interest
in, or is an employee, officer or director of, or a consultant, agent
for or representative of, any customer, competitor or supplier of the
Company.
(u) Absence of Adverse Agreements. The Company is not a party
to any instrument or agreement or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree,
award, rule or regulation which materially
15
<PAGE> 16
and adversely affects the business, properties, assets or condition,
financial or otherwise, of the Company.
(v) No Defaults. To the best of the Shareholder's knowledge,
the Company is not in default under, nor has any event occurred which
with notice or lapse of time or both, could result in a waiver (except
caused by the statute of limitations) of any material right or default
under, any outstanding indenture, mortgage, lease, contract or agreement
to which the Company is a party or by which the Company or its assets
may be bound, or under any provision of the Company's Articles of
Incorporation or By-Laws (or comparable instruments). All liabilities
of the Company are, and will be on the Closing Date, current and not in
default.
(w) Banks, Signatories. Schedule 3(w) is a list setting forth
the name of each bank, savings and loan or other financial institution
in which the Company has any account or safe deposit box, the style and
number of each such account or safe deposit box and the names of all
persons authorized to draw thereon or to have access thereto.
(x) No Conflicts. The execution and performance of this
Agreement and the transactions contemplated hereby will not violate any
provision of or result in a breach of or constitute a default under the
Articles of Incorporation or By-Laws of the Company, or under any order,
writ, injunction or decree of any court, governmental agency or
arbitration tribunal, or under any contract, agreement or instrument to
which the Company is a party or by which its properties may be bound,
or, to the best of the Shareholder's knowledge and belief, under any
law, statute or regulation.
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<PAGE> 17
(y) Books and Records. The books and records of the Company
are in all material respects complete and correct and to the best of the
Shareholder's knowledge and belief, have been maintained in accordance
with good business practice and reflect a true record of all meetings or
proceedings of the Board of Directors and Shareholders of the Company.
(z) Brokers. Neither the Company nor the Shareholder is a
party to or in any way obligated under a contract or other agreement,
and there are no outstanding claims against any of them, for the payment
of any broker's or finder's fees in connection with the origin,
negotiation, execution or performance of this Agreement.
(aa) Environment and Health.
(i) To the best of the Shareholder's knowledge, without
any independent investigation, the third party contractors
retained by the Company currently handle, use, store, treat, ship
and dispose of all hazardous and toxic substances, petroleum
products and waste, in compliance with all applicable
environmental, health or safety statutes, ordinances, orders,
rules, regulations and requirements.
(ii) No employee of the Company has submitted a claim to
the Company or any third party alleging that such employee
suffers from injury or illness resulting from exposure to toxic
substances, hazardous substances or manufacturing processes used
in connection with the Company's business or present at the place
of business of the Company.
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<PAGE> 18
(bb) Permits, Licenses, Etc. Except for any Material
Permits (as hereinafter defined) which the Company would be
required to obtain in order to do business in states other than
Alabama, the Company has all Permits that are required in order
to carry on the Company's business as presently conducted, the
absence of which would have a material adverse effect on the
Company (the "Material Permits"), and is not in material default
of any thereof. All Material Permits are in full force and
effect, and, to the best knowledge of the Shareholder, no
suspension, cancellation or non-renewal of any Material Permit is
threatened, nor, to the best of the Shareholder's knowledge, does
there exist any basis for such suspension, cancellation or
non-renewal.
(cc) Title to Shares and Authority. The Shareholder now
has and on the Closing Date will have valid title to the Shares
and on the Closing Date will have full right, power and authority
and due authorization to sell and transfer the Shares hereunder,
and upon the delivery of and payment for the Shares the
Shareholder will transfer to the Purchaser valid title thereto,
free and clear of any security interests, pledges, liens or
similar encumbrances. This Agreement constitutes the valid and
legally binding obligation of the Shareholder, enforceable in
accordance with its terms. The Shares are the sole and separate
property of the Shareholder, and his spouse has no interest,
community or otherwise, in and to the Shares.
(dd) Disclosure. To the best of the Shareholder's
knowledge, neither this Agreement, the Schedules attached hereto,
nor any other document furnished by the Company or the
Shareholder to Purchaser, taken as a whole, contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements contained herein and therein not
misleading, and except as disclosed herein
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<PAGE> 19
or therein, there is no fact (other than matters of a general
economic or a political nature which do not effect the business
of the Company uniquely) known to the Shareholder which
materially adversely effects or in the future can be reasonably
expected to materially adversely effect the properties, business,
operations or financial condition or prospects of the Company.
4. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Shareholder that:
(a) Organization, Standing and Authority of the Purchaser.
The Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas, and has full
corporate power and authority to conduct its business as it is now being
conducted, to enter into and carry out the provisions of this Agreement.
(b) No Violation. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any provision of the Articles of Incorporation or By-
Laws of the Purchaser, (ii) violate any provision of any agreement or
other obligation to which the Purchaser is a party or by which the
Purchaser is bound or to which its assets are subject, or (iii) violate
or result in a breach of, constitute a default under, any judgment,
order, decree, rule or regulation of any court or governmental agency to
which the Purchaser is subject.
(c) Corporate Proceedings of the Purchaser. The execution,
delivery and performance of this Agreement has been authorized by the
Board of Directors of the Purchaser, and this Agreement constitutes the
valid and legally binding obligation of the Purchaser, enforceable in
accordance with its terms.
19
<PAGE> 20
(d) Brokers. The Purchaser is not a party to or in any way
obligated under a contract or other agreement, and there are no
outstanding claims against it, for the payment of any broker's or
finder's fees in connection with the origin, negotiation, execution or
performance of this Agreement.
(e) Investment. The Shares will be acquired for investment
and not with a view to distribution thereof, nor with any intention of
distributing or selling or otherwise disposing of the Shares.
5. Additional Covenants and Agreements.
(a) Access to Records. At all reasonable times prior to
Closing, the Company shall give to the Purchaser, its counsel,
accountants, and other representatives, full and free access to all the
properties, books, contracts, commitments and records of the Company so
that the Purchaser may have full opportunity to make such investigation
as it shall desire to make of the business and affairs of the Company,
provided that such investigation shall not unreasonably interfere with
the operations of the Company. If this Agreement is terminated, the
Purchaser, its officers, directors, employees, agents and authorized
representatives shall keep confidential and shall not use in any manner
any information or documents obtained from the Company, unless such
information is readily ascertainable from public or published
information, or trade sources, or already known or subsequently
developed by the Purchaser independently of any investigation of the
Company, or received from a third party not under an obligation to the
Company to keep such information confidential. Further, if this
Agreement is terminated, the Purchaser shall immediately return to the
Company any documents obtained from the Company
20
<PAGE> 21
together with all copies thereof then in the Purchaser's possession or
under the Purchaser's control, and shall agree thereafter to keep the
contents thereof strictly confidential.
(b) Conduct of Business. Except as otherwise contemplated by
this Agreement, from the date hereof until the Closing Date, the
business of the Company will be conducted diligently and only in the
ordinary course. For purposes of this Paragraph 5(b), the phrase
"ordinary course" shall mean the conduct of the business of the Company
in the manner which the Company conducted its business in the last
twelve (12) months prior to the execution of this Agreement, following
its usual accounting practices, making ordinary accruals, incurring
ordinary liabilities or expenditures and making ordinary contracts and
commitments.
(c) Preservation of Goodwill. From the date hereof until the
Closing Date, subject to prudent business judgment, the Shareholder will
use his best efforts to preserve the business organization of the
Company, to keep available to the Company the services of the officers
and employees and to preserve for the Purchaser and the Company the
goodwill of all suppliers, customers and others having business
relations with them.
(d) Resignations. The Shareholder agrees to deliver to the
Purchaser at Closing (effective on the Closing Date) the resignations of
those officers and directors of the Company as may be requested by the
Purchaser.
(e) Delivery of Materials. At the Closing, the Shareholder
shall deliver to the Purchaser the minute books, stock certificate
books, corporate seals and other corporate books, records, data and
papers of the Company.
21
<PAGE> 22
(f) Tax Periods Ending on or before the Closing Date. The
Company shall prepare or cause to be prepared and file or cause to be
filed all tax returns for the Company for all periods ending on or prior
to the Closing Date which are filed after the Closing Date, including,
without limitation, a federal income tax return for the period ending on
the date immediately preceding the Closing Date. The Purchaser and the
Shareholder shall review and have the right to approve of each such tax
return described in the preceding sentence prior to filing. To the
extent permitted or required by applicable law, the Shareholder shall
include any income, gain, loss, deduction or other tax items for such
periods on his Tax Returns in a manner consistent with the all periods
prior to the Closing Date.
6. Conditions to Obligations of the Purchaser. The obligation of
the Purchaser to consummate the transaction contemplated hereby shall be
subject to the satisfaction, on or before the Closing Date, of all of the
following conditions unless expressly waived in writing by the Purchaser:
(a) Representations and Covenants. All representations and
warranties of the Shareholder and the Company contained in this
Agreement shall be true in all material respects on and as of the
Closing Date as if such representations and warranties were made on and
as of such date (except to the extent any such representation or
warranty is made as of a specified date), and the Shareholder and the
Company shall have performed all agreements and covenants to be
performed by the Shareholder and the Company on or prior to the Closing
Date, and the Purchaser shall have received a certificate dated the
Closing Date, signed by the Shareholder and the Company, to the effect
that such is the case.
22
<PAGE> 23
(b) Opinion of Counsel. The Purchaser shall have received the
opinion of Irby & Heard, P.C., counsel for the Shareholder and the
Company, dated the Closing Date, substantially in the form of Exhibit
"A" attached hereto.
(c) No Damage or Destruction. Prior to the Closing Date,
there shall not have occurred any casualty to any facility, property,
equipment or inventory owned or used by the Company as a result of which
either the monetary amount of damage or destruction aggregates five (5%)
percent or more of the aggregate book value shown on the books of
account of the entire facilities, properties, equipment and inventory of
the Company, or is more than $50,000, and such loss shall not be
substantially covered by valid, existing insurance underwritten by
responsible insurers.
(d) No Material Adverse Changes. The Shareholder shall have
delivered to the Purchaser his certificate stating that there has been
no material adverse change in the business, operations, financial
condition or properties of the Company since the date of the most recent
Company's Financial Statements (December 31, 1997).
(e) Absence of Litigation. No litigation, governmental
action, insolvency, receivership or other proceeding shall have been
threatened, asserted or commenced with respect to the transaction
contemplated herein.
(f) Employment Agreement. The Shareholder shall have entered
into an Employment Agreement with the Company in substantially the form
of Exhibit "B" hereto.
(g) Right of First Refusal and Put Agreement. The Purchaser
and the Shareholder shall have entered into a Right of First Refusal and
Put Agreement substantially in the form of Exhibit "C" hereto (the "Put
Agreement").
23
<PAGE> 24
(h) Consents. The Shareholder and the Company shall have
obtained all approvals and consents which must be obtained in order to
effectuate the transaction contemplated hereby and to satisfy the terms
and conditions of this Agreement.
(i) Southtrust Bank, N.A. Consent or Payoff. (A) Southtrust
Bank, N.A. ("Southtrust") shall have consented to the transaction
contemplated hereby on such terms as are satisfactory to the Purchaser,
and shall have released the Shareholder as a personal guarantor of the
Company's obligations to Southtrust, or (B) the Company's indebtedness
to Southtrust shall have been paid in full, and the Shareholder's
personal guarantee thereof shall have been released.
(j) Due Diligence. The Purchaser's due diligence
investigation of the Company as contemplated pursuant to Section 5(a)
hereof shall have been completed to the satisfaction of the Purchaser.
(k) Certified Resolutions. The Purchaser shall have received
resolutions of the Board of Directors of the Company, certified by the
Secretary or an Assistant Secretary of the Company, authorizing the
execution, delivery and performance of this Agreement.
7. Conditions to Obligations of the Shareholder. The obligation of
the Shareholder to consummate the transaction contemplated hereby shall be
subject to the satisfaction, on or before the Closing Date, of all of the
following conditions, unless expressly waived in writing by the Shareholder:
(a) Representations and Covenants. All representations and
warranties of the Purchaser contained in this Agreement shall be true in
all material respects on and as of the Closing Date as if such
representations and warranties were made on
24
<PAGE> 25
and as of such date and the Purchaser shall have performed all
agreements and covenants to be performed by it on or prior to the
Closing Date, and the Shareholder shall have received a certificate
dated the Closing Date, signed by the President or a Vice President of
the Purchaser, to the effect that such is the case.
(b) Opinion of Counsel. The Shareholder shall have received
the opinion of T. J. Falgout, III, General Counsel for the Purchaser,
dated the Closing Date, to the effect that:
(i) the Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Texas and has corporate power to carry on its business as it is
now being conducted;
(ii) each of this Agreement and the Put Agreement has been
duly authorized, executed and delivered by the Purchaser, and
(assuming valid execution and delivery by the other parties
hereto or thereto) is, or will be upon such execution, the valid
and binding obligation of the Purchaser in accordance with its
terms (except as otherwise limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors'
rights, and except that such counsel need not express an opinion
as to whether any covenant contained herein or therein is
specifically enforceable); and
(iii) to such counsel's knowledge, the consummation of the
transactions contemplated by this Agreement and the Put Agreement
will not result in the breach of or constitute a default under
the
25
<PAGE> 26
Articles of Incorporation or By-Laws of the Purchaser, or any
loan, credit or similar agreement or any court decree to which
the Purchaser is a party or by which the Purchaser or its
properties may be bound.
(c) Southtrust Bank, N.A. Consent or Payoff. (A) Southtrust
shall have consented to the transaction contemplated hereby on such
terms as are satisfactory to the Shareholder, and shall have released
the Shareholder as a personal guarantor of the Company's obligations to
Southtrust, or (B) the Company's indebtedness to Southtrust shall have
been paid in full, and the Shareholder's personal guarantee thereof
shall have been released.
(d) Employment Agreement. The Shareholder shall have entered
into an Employment Agreement with the Company in substantially the form
of Exhibit "B" hereto.
(e) Right of First Refusal and Put Agreement. The Purchaser
and the Shareholder shall have entered into the Put Agreement.
(f) Certified Resolutions. The Shareholder shall have received
resolutions of the Board of Directors of the Purchaser, certified by the
Secretary or an Assistant Secretary of the Purchaser, authorizing the
execution, delivery and performance of this Agreement.
8. The Closing. The execution and delivery of this Agreement and
the instruments, certificates and other documents required hereunder (the
"Closing") shall take place at the offices of Irby & Heard, 317 Magnolia
Avenue, Fairhope, Alabama 36533, at 10:00 a.m. local time on February 3, 1998,
or at such other time and day or other location as may be mutually agreed by
the Purchaser and the Shareholder. The date and time of such execution and
delivery is herein called the "Closing
26
<PAGE> 27
Date". On the Closing Date, certificates representing the Shares shall be
delivered by the Shareholder against delivery of the Purchase Price pursuant to
Section 2 hereof, and Closing shall be deemed to have occurred when such
deliveries have been made by the Purchaser and the Shareholder in accordance
with the terms hereof.
9. Nature and Survival of Representations and Warranties.
(a) Nature of Statements. All statements contained in any
schedule or any certificate or other instrument delivered by or on
behalf of the Shareholder or the Purchaser pursuant to this Agreement or
in connection with the transactions contemplated hereby shall be deemed
representations and warranties made by the Shareholder or the Purchaser,
as the case may be.
(b) Survival of Representations and Warranties. All
representations, warranties, covenants, agreements and undertakings
contained herein or in any Schedule, certificate or other document shall
remain operative and in full force and effect, and shall survive the
Closing Date and the delivery of all consideration and documents
pursuant to this Agreement, and shall continue in effect for a period of
two (2) years after the Closing Date and, as to representations made by
the Shareholder concerning or affecting any tax liability of the
Company, until a date which is six (6) months after the statute of
limitations has run against the Federal, state and local government;
provided, however, that any such representation, warranty, covenant,
agreement or undertaking as to which a bona fide claim shall have been
asserted during such survival period shall continue in effect until such
time as such claim shall have been resolved in accordance with the terms
of this Agreement.
10. Indemnification by Shareholder and Related Matters.
27
<PAGE> 28
(a) Indemnification by Shareholder. Subject to Section 10(c)
hereof, the Shareholder agrees to defend, indemnify and hold harmless
the Purchaser and the Company, and their respective successors and
assigns, from, against and in respect of any and all loss or damage
resulting from:
(i) the breach by the Shareholder of any of the
warranties, representations, covenants, agreements or
undertakings contained herein;
(ii) any liability arising out of any and all actions,
suits, proceedings, claims, demands, judgments, costs and
expenses (including reasonable legal and accounting fees)
incident to any of the foregoing (collectively, the "Losses").
(b) Procedure for Making Claims. If and whenever the
Purchaser desires to claim indemnification by the Shareholder pursuant
to the provisions of this Section 10, the Purchaser shall promptly
deliver to the Shareholder a certificate signed by the Chairman of the
Board, President or Vice President of the Purchaser (the "Notice of
Claim") (i) stating that the Purchaser or the Company, their successors
and assigns, has paid or properly accrued losses, damages or expenses in
an aggregate stated amount to which the Purchaser is entitled to
indemnification pursuant to this Section 10, provided, however, such
notice shall be given prior to the payment of an indemnity item if
reasonable in light of the circumstances causing, or threatening to
cause, a loss, and (ii) specifying the individual items of loss, damage
or expense included in the amount so stated, the date each such item was
paid or properly accrued and the nature of the misrepresentation, breach
of warranty or claim to which
28
<PAGE> 29
such item is related, provided, however, failure to notify the
Shareholder shall relieve the Shareholder from liability only if he is
prejudiced thereby. The Shareholder shall have the right to defend any
claim by a third party at the expense of the Shareholder. The Purchaser
and the Company, as the case may be, shall provide to the Shareholder
prompt and complete disclosure of all pertinent information in the
possession of or available to the Purchaser or the Company and shall
extend full and timely assistance in the cooperation in the
investigation of the defense of the claim, suit or action, with respect
to which such indemnification is claimed. The Shareholder, in the
defense of any such suit, action or proceeding, shall not consent to the
entry of any judgment or decree except with the written consent of the
Purchaser and the Company, nor enter into any settlement (except the
written consent of the Purchaser and the Company) which does not include
as an unconditional term thereof the giving by the claimant or plaintiff
to the Purchaser and the Company of a release from every liability in
respect of such claim, suit, action or proceeding. In any defense of
any claim by a third party, the Purchaser and the Company shall have the
right (but shall not be obligated) to participate in such defense
through counsel of its own selection and at its own expense.
(c) Limitation on Indemnification. The Shareholder shall not
be required to indemnify the Purchaser or the Company against the
matters referred to in Section 10(a) hereof (except for the obligation
of the Shareholder to pay any tax liability pursuant to Section 4(f)(ii)
hereof) until the Losses incurred by the Company or the Purchaser with
respect to such matters exceed $20,000 in the aggregate, whereupon
29
<PAGE> 30
the Shareholder shall be required to indemnify the Purchaser and the
Company with respect to all such further matters in excess of such
$20,000 minimum.
11. Indemnification by the Purchaser and Related Matters.
(a) Indemnification by the Purchaser. The Purchaser agrees to
defend, indemnify and hold harmless the Shareholder, his respective
successors, assigns and personal representatives, from, against and in
respect of any and all loss or damage resulting from:
(i) the breach by the Purchaser of any of its warranties,
representations, covenants, agreements or undertakings contained
herein; and
(ii) any liability arising out of any and all actions,
suits, proceedings, claims, demands, judgments, costs and
expenses (including reasonable legal and accounting fees)
incident to any of the foregoing (collectively, the "Losses").
(b) Procedure for Making Claims. If and whenever the
Shareholder desires to claim indemnification by the Purchaser pursuant
to the provisions of this Section 11, the Shareholder shall promptly
deliver to the Purchaser a certificate signed by the Shareholder (the
"Notice of Claim") (i) stating that the Shareholder, his heirs, personal
representatives, successors or assigns, have paid or properly accrued
losses, damages or expenses in an aggregate stated amount to which the
Shareholder is entitled to indemnification pursuant to this Section 11,
and (ii) specifying the individual items of loss, damage or expense
included in the amount so stated, the date each such item was paid or
properly accrued and the nature of the misrepresentation,
30
<PAGE> 31
breach of warranty or claim to which such item is related, provided,
however, failure to notify the Purchaser shall relieve the Purchaser
from liability only if it is prejudiced thereby. The Purchaser shall
have the right to defend any claim by a third party at the expense of
the Purchaser. The Shareholder shall provide to the Purchaser prompt
and complete disclosure of all pertinent information in the possession
of or available to the Shareholder and shall extend full and timely
assistance in the cooperation in the investigation of the defense of the
claim, suit or action, with respect to which such indemnification is
claimed. The Purchaser, in the defense of any such suit, action or
proceeding, shall not consent to the entry of any judgment or decree
except with the written consent of the Shareholder nor enter into any
settlement (except the written consent of the Shareholder) which does
not include as an unconditional term thereof the giving by the claimant
or plaintiff to the Shareholder of a release from every liability in
respect of such claim, suit, action or proceeding. In any defense of
any claim by a third party, the Shareholder shall have the right (but
shall not be obligated) to participate in such defense through counsel
of his own selection and at his own expense.
12. Expenses. The Shareholder and the Purchaser shall pay his or its
own expenses (including without limitation counsel and accounting fees and
expenses) incident to the preparation and carrying out of this Agreement and
the consummation of the transactions contemplated hereby.
13. Notices. All notices, demands and requests which may be given or
which are required to be given by either party to the other, and any exercise
of a right of termination provided by this Agreement, shall be in writing and
shall be deemed effective when either: (1) personally delivered to the intended
recipient; (2) sent by certified or registered mail, return receipt requested,
addressed to
31
<PAGE> 32
the intended recipient at the address specified below; (3) delivered in person
to the address set forth below for the party to which the notice was given; (4)
deposited into the custody of a nationally recognized overnight delivery
service such as Federal Express Corporation, Emery or Purolator, addressed to
such party at the address specified below; or (5) sent by facsimile, telegram
or telex, provided that receipt for such facsimile, telegram or telex is
verified by the sender and followed by a notice sent in accordance with one of
the other provisions set forth above. Notices shall be effective on the date
of delivery or receipt, of, if delivery is not accepted, on the earlier of the
date that delivery is refused or three (3) days after the date the notice is
mailed. For purposes of this Paragraph, the addresses of the parties for all
notices are as follows (unless changes by similar notice in writing are given
by the particular person whose address is to be changed):
(a) if to the Shareholder, to Van P. Finger, C/O Precision IBC,
Incorporated, PO Box 1171, Fairhope, Alabama 36533-1171; Fax 334-990-
6787;
With a copy to Sam W. Irby, Irby & Heard, P.C., 317 Magnolia
Avenue, PO Box 1031, Fairhope, Alabama 36533; Fax (334) 928-7993;
(b) if to the Company, to Precision IBC, Incorporated, PO Box
1171, Fairhope, Alabama 36533-1171; Fax 334-990-6787;
(c) or if to the Purchaser, to Crown Croup, Inc., 4040 North
MacArthur Boulevard, Suite 100, Irving, Texas 75038; Attention: Edward
R. McMurphy, President; Fax (972) 719-4466;
With a copy to T. J. Falgout, III, Executive Vice President and
General Counsel, Crown Croup, Inc., 4040 North MacArthur Boulevard,
Suite 100, Irving, Texas 75038; Fax (972) 719-4466.
Any party hereto may designate a different address by written notice given to
the other parties.
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<PAGE> 33
14. Satisfaction of Conditions; Termination.
(a) Best Efforts to Satisfy Conditions. The Shareholder and
the Company agree to use their best efforts to bring about the
satisfaction of the conditions specified in Section 6 hereof, and the
Purchaser agrees to use its best efforts to bring about the satisfaction
of the conditions specified in Section 7 hereof.
(b) Termination. This Agreement may be terminated, without
liability on the part of any party hereto to any other party hereto, by:
(i) the Purchaser, if a material default shall be made by
the Shareholder or the Company in the observance or in the due
and timely performance by the Shareholder or the Company of any
of the covenants of the Shareholder or the Company herein
contained, or if there shall have been a material breach by the
Shareholder or the Company of any of the warranties and
representations of the Shareholder or the Company herein
contained, or if the conditions of this Agreement to be complied
with or performed at or before the Closing shall not have been
complied with or performed at the time required for such
compliance or performance and such non-compliance or non-
performance shall not have been waived by the Purchaser, or if
the Closing shall not have occurred on or before February 28,
1998; or
(ii) the Shareholder, if a material default shall be made
by the Purchaser in the observance or in the due and timely
performance by the Purchaser of any of the covenants of the
Purchaser herein
33
<PAGE> 34
contained, or if there shall have been a material breach by the
Purchaser of any of its warranties and representations herein
contained, or if the conditions of this Agreement to be complied
with or performed by the Purchaser at or before the Closing shall
not have been complied with or performed at the time required for
such compliance or performance and such non-compliance or non-
performance shall not have been waived by the Shareholder, or if
the Closing shall not have occurred on or before February 28,
1998.
In the event of termination by the Purchaser or the Shareholder as provided
above, written notice shall forthwith be given to the other parties.
15. Miscellaneous.
(a) Assignment. This Agreement may not be assigned by any
party hereto without the prior written consent of the other parties,
provided, however, the Purchaser shall have the right at any time prior
to Closing to assign this Agreement to a corporation wholly owned by the
Purchaser, so long as the Purchaser, by written agreement acceptable to
the Shareholder, agrees to guarantee the performance by such assignee of
the terms and provisions hereof. Subject to the foregoing, this
Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns and the
heirs, executors, administrators and personal representatives of the
Shareholder.
(b) Section and Paragraph Headings. The Section and Paragraph
headings of this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
34
<PAGE> 35
(c) Amendment. This Agreement may be amended only by an
instrument in writing executed by the parties hereto.
(d) Entire Agreement. This Agreement and the exhibits,
Schedules, certificates and documents referred to herein constitute the
entire agreement of the parties, and supersede all understandings with
respect to the subject matter hereof.
(e) Knowledge. "Best knowledge" of a natural person means
actual knowledge of such natural person, and "best knowledge" of a
corporate person means actual knowledge of the directors, officers and
employees of such corporate person, in each case (unless otherwise
specifically set forth to the contrary) after reasonable inquiry and
investigation.
(f) Public Announcements. No publication and/or press release
of any nature shall be issued pertaining to this Agreement or the
transaction contemplated hereby without the prior written approval of
the Purchaser and the Shareholder, except as may be required by law.
(g) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
(h) Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS, AND
VENUE FOR ANY DISPUTE ARISING HEREUNDER SHALL BE IN DALLAS COUNTY,
TEXAS, AND THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE JURISDICTION OF
THE COURTS OF THE STATE OF TEXAS.
35
<PAGE> 36
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
as of the date and year first above written.
PURCHASER:
CROWN GROUP, INC.
By:
---------------------------
Edward R. McMurphy, President
COMPANY:
PRECISION IBC, INCORPORATED
By:
---------------------------
Van P. Finger, President
SHAREHOLDER:
-------------------------------
VAN P. FINGER
36
<PAGE> 1
================================================================================
PAACO, INC.
PREMIUM AUTO ACCEPTANCE CORPORATION
SHAREHOLDERS' AGREEMENT
AMONG
LARRY LANGE,
DANIEL CHU,
TED LANGE
AND
CROWN GROUP, INC.
DATED ON OR AS OF FEBRUARY 1, 1998
================================================================================
<PAGE> 2
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT (the "Agreement") is made and entered into on
or as of this 1st day of February, 1998, among PAACO, Inc., a Texas corporation
("PAACO"), Premium Auto Acceptance Corporation, a Texas corporation ("Premium"
and together with PAACO, the "Companies"), Larry Lange, Daniel Chu and Ted Lange
and their respective spouses (collectively, the "Original Shareholders"), and
Crown Group, Inc., a Texas corporation ("Crown" and, together with the Original
Shareholders, the "Shareholders").
WHEREAS, PAACO is incorporated under the laws of the State of Texas
with an authorized capitalization of 1,000,000 shares of common stock, $0.01 par
value per share ("PAACO Common Stock"), of which 141,845 shares are issued and
outstanding;
WHEREAS, Premium is incorporated under the laws of the State of Texas
with an authorized capitalization of 100,000 shares of common stock, no par
value ("Premium Common Stock" and, together with PAACO Common Stock, the "Common
Stock"), of which 1,419 shares are issued and outstanding;
WHEREAS, each Shareholder is the owner of the number of shares of such
issued and outstanding stock of each Company set forth opposite his or its name
on Exhibit A;
WHEREAS, Crown has purchased its shares of Common Stock pursuant to
that certain Stock Purchase Agreement of even date herewith (the "Stock Purchase
Agreement") and the Buyer's Warrants (as defined in the Stock Purchase
Agreement);
WHEREAS, the Original Shareholders have agreed to purchase warrants
(collectively, the "Warrants") to purchase shares of Common Stock pursuant to
that certain Stock Purchase Warrant of even date herewith;
WHEREAS, the parties hereto deem it in their best interests and in the
best interests of the Companies to set forth their respective rights and
obligations in connection with their investment in the Companies;
WHEREAS, the parties hereto also desire to restrict the sale,
assignment, transfer, encumbrance or other disposition of the shares of the
Common Stock, including issued and outstanding shares of the Common Stock as
well as shares of the Common Stock that may be issued hereafter, and to provide
for certain rights and obligations in respect thereto as hereinafter provided.
NOW, THEREFORE, for and in consideration of the mutual agreements and
understandings set forth herein, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS AND RELATED MATTERS
SECTION 1.1 DEFINITIONS. When used in this Agreement, the following terms
shall have the respective meanings set forth below:
"AFFILIATE" shall mean, when used with respect to a specified person, any
person which (a) directly or indirectly controls, is controlled by or is under
common control with such specified person, (b) owns or controls 10% or more of
the outstanding voting interests of such person, (c) is an officer, director,
general partner, trustee, manager, administrator, representative or agent of
such person, or (d) is an officer, director, trustee, manager, administrator,
representative or agent, or owns or controls 10% or more of the outstanding
<PAGE> 3
voting interests, of a person described in clause (a), (b) or (c) of this
sentence. As used in this definition, the term "control" means possession,
directly or indirectly (through one or more intermediaries), of the power to
direct or cause the direction of management and policies of a person through an
ownership of voting securities (or other ownership interests), contract, voting
trust or otherwise.
"COMMON STOCK" shall mean PAACO Common Stock and Premium Common Stock.
"DISABILITY" shall mean the total and permanent disability (whether
physical or mental) of any Original Shareholder.
"DISPOSITION" shall mean any sale, assignment, hypothecation, gift, inter
vivos transfer, pledge, mortgage or other encumbrance, or any other disposition
of Common Stock whatsoever, whether voluntary or involuntary.
"FAIR MARKET VALUE" with respect to shares of Common Stock of either
Company shall mean the value of such Common Stock as determined by an appraiser
knowledgeable in such matters by reason of education or experience mutually
selected by such Company and the Shareholder or the executor of the deceased
Shareholder's estate, as the case may be. If the Company and such Shareholder or
executor, as the case may be, cannot agree on an appraiser, each of the Company
and such Shareholder or executor, as the case may be, shall select one appraiser
and the appraisers so selected shall select a third appraiser to determine the
fair market value of the Common Stock so offered.
"INITIAL PUBLIC OFFERING" shall mean the first public offering of equity
securities of either Company effected by such Company or one or more
Shareholders pursuant to a registration statement that has been declared
effective under the Securities Act.
"PAACO BYLAWS" shall mean PAACO's bylaws, certified by the secretary of
PAACO, a copy of which is attached hereto as Exhibit B.
"PAACO'S ARTICLES OF INCORPORATION" shall mean PAACO's Articles of
Incorporation, as amended, a copy of which is attached hereto as Exhibit C.
"PAACO COMMON STOCK" shall mean all issued and outstanding shares of PAACO
Common Stock, together with all shares of capital stock of PAACO of any class
which may hereafter be issued. Moreover, all references herein to PAACO Common
Stock owned by a Shareholder includes the community interest, if any, of the
spouse of such Shareholder in such PAACO Common Stock. If any New Securities are
issued in accordance with Section 2.2, PAACO Common Stock shall be deemed to
include such New Securities.
"PERSON" shall mean an individual, partnership, limited partnership,
limited liability company, foreign limited liability company, trust, estate,
corporation, custodian, trustee, executor, administrator, nominee or entity in a
representative capacity.
"PERSONAL REPRESENTATIVE" shall mean the executor, administrator, guardian,
or other personal representative of any natural person who has become deceased
or subject to Disability, or any successor or assignee thereof whether by
operation of law or otherwise.
"PREMIUM BYLAWS" shall mean Premium's Bylaws, certified by the secretary of
Premium, a copy of which is attached hereto as Exhibit D.
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"PREMIUM ARTICLES OF INCORPORATION" shall mean Premium's Articles of
Incorporation, a copy of which is attached hereto as Exhibit E.
"PREMIUM COMMON STOCK" shall mean all issued and outstanding shares of
Premium Common Stock together with all shares of capital stock of Premium of any
class which may hereafter be issued. Moreover all references herein to Premium
Common Stock owned by a Shareholder includes the community interest, if any, of
the spouse of such Shareholder in such Premium Common Stock. If any New
Securities are issued in accordance with Section 2.2, Premium Common Stock shall
be deemed to include such new securities.
"PRO RATA SHARE" shall mean, as applied herein to the proportion of shares
of Common Stock which a Shareholder shall have the right to purchase or sell at
any particular time under this Agreement, that proportion of the shares of
Common Stock subject to purchase or sale at such time which the shares of Common
Stock owned by the particular Shareholder bears to the shares of Common Stock
owned by all of the Shareholders having the same right to purchase or sell at
such time under this Agreement. In addition, if any shares of Common Stock
subject to purchase or sale at such time under this Agreement are not purchased
or sold by any other Shareholder entitled to purchase or sell the same, the term
"Pro Rata Share" shall also include that proportion of the shares of Common
Stock not purchased or sold by any Shareholder entitled to purchase or sell the
same hereunder which the shares of Common Stock owned by the particular
Shareholder bears to the shares of Common Stock owned by all of the Shareholders
having the right to purchase or sell hereunder other than the Shareholder or
Shareholders not purchasing or selling all of the shares of Common Stock he or
they are entitled to purchase or sell under the first sentence of this
definition.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time and any successor statute thereto.
SECTION 1.2 RELATED DEFINITIONAL MATTERS. As used in this Agreement,
pronouns in masculine, feminine and neuter genders shall be construed to include
any other gender, and words in the singular form shall be construed to include
the plural and vice versa, unless the context clearly otherwise requires. As
used in this Agreement, the term "including" shall be construed to be expansive
rather than limiting in nature and to mean "including, without limitation,"
except where the context clearly otherwise requires.
SECTION 1.3 COMMON STOCK SUBJECT TO AGREEMENT. This Agreement shall extend
and apply to all shares of Common Stock now owned by each of the Shareholders
and to all shares of Common Stock as may hereafter be acquired by any of the
Shareholders, whether such shares constitute the separate property or community
property of any of the individual Shareholders, and regardless of the capacity
in which title to such shares is held or taken. This Agreement shall also apply
to all shares of Common Stock to which the spouse of any Shareholder is entitled
by virtue of any community property or any other laws.
ARTICLE II
SHAREHOLDERS, CAPITAL STRUCTURE,
OTHER SHAREHOLDER MATTERS
SECTION 2.1 SHAREHOLDERS. The Shareholders of the Companies and the number
of shares of Common Stock held by each are set forth in Exhibit A.
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SECTION 2.2 PREEMPTIVE RIGHTS.
(a) If either Company issues additional shares of capital stock (including
Common Stock) or any rights, options or warrants to purchase capital stock or
any securities of any type whatsoever convertible into capital stock
(collectively, "New Securities"), each Shareholder shall have the preemptive
right to acquire such number of New Securities that will entitle such
Shareholder to maintain his or its Pro Rata Share of the outstanding capital
stock of such Company (including Common Stock and any such New Securities). If
any Original Shareholder does not purchase any or all of his Pro Rata Share of
such New Securities, the remaining Original Shareholders originally offered New
Securities shall have the right to purchase such unpurchased New Securities on a
Pro Rata Basis until all of the New Securities are purchased or until no other
Original Shareholder desires to purchase any more New Securities. In the event
of an Initial Public Offering, each Shareholder shall, at a meeting convened for
the purpose of amending the Articles of Incorporation of such Company, vote to
remove from such Articles of Incorporation requirements, if any such
requirements are at such time imposed thereby, granting preemptive rights with
respect to the Common Stock of such Company.
(b) If and when either Company intends to issue New Securities, such
Company shall give each Shareholder written notice ("Preemption Notice") of its
intention, describing the type of New Securities, the price and the terms upon
which such Company proposes to issue the same. Each Shareholder shall have 30
days from the date he or it receives the Preemption Notice to agree to purchase
all or any portion of such New Securities as he or it is entitled pursuant to
Section 2.2(a) for the price and upon the terms specified in the Preemption
Notice by giving written notice to such Company and stating therein the quantity
of New Securities to be purchased. A further Preemption Notice shall be given to
the appropriate Shareholders pursuant to Section 2.2(a) if any of the New
Securities are not purchased as set forth therein.
SECTION 2.3 NON-LIABILITY OF SHAREHOLDERS. No Shareholder shall be liable
for the debts, liabilities, contracts or other obligations of either Company
except to the extent of any unpaid capital contributions such Shareholder has
agreed to make to such Company.
SECTION 2.4 LIMITATIONS ON SHAREHOLDERS. Other than as specifically
provided for in either Company's Articles of Incorporation, Bylaws, this
Agreement and applicable law, no Shareholder shall, solely as a result of its
status as such: (a) be permitted to take part in the business or control of the
business or affairs of either Company; (b) have any voice in the management or
operation of any property owned by either Company; or (c) have the authority or
power to act as agent for or on behalf of such Company or any other Shareholder,
to do any act which would be binding on either Company or any other Shareholder,
or to incur any expenditures for or on behalf of either Company. Inasmuch as the
Board of Directors of each Company has been vested, pursuant to this Section 2.4
and the Bylaws of each Company, with exclusive power to manage and direct the
business and affairs of each Company, the Shareholders shall not be permitted,
pursuant to this Article II or otherwise, to take any action in the place or
stead of the Board of Directors or any action that circumscribe, limit or
otherwise adversely affects the power and authority of such Board of Directors,
except as otherwise specifically required by applicable law or as permitted by
this Agreement.
ARTICLE III
RESTRICTIONS ON DISPOSITIONS OF COMMON STOCK
SECTION 3.1 RESTRICTIONS ON DISPOSITIONS.
(a) No Shareholder, any spouse of any Shareholder, any Personal
Representative of any Shareholder, or any legal representative, agent or
assignee of any Shareholder or any spouse of any Shareholder, as the case may
be, shall make any Disposition of any shares of Common Stock, or any right or
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interest therein, except as provided in this Article III. The parties agree that
the restrictions contained in this Agreement are fair and reasonable and in the
best interests of each Company and the Shareholders.
(b) Anything in this Agreement to the contrary notwithstanding, no
Disposition of Common Stock otherwise permitted or required by this Agreement
shall be made unless such Disposition is in compliance with federal and state
securities laws, including without limitation the Securities Act and the rules
and regulations thereunder. In connection with any Disposition or proposed
Disposition of Common Stock, if requested by the applicable Company before such
Disposition, the holder of such Common Stock proposing to effect such
Disposition shall provide to such Company either (i) a written opinion of legal
counsel who shall be reasonably satisfactory to such Company, addressed to such
Company and reasonably satisfactory in form and substance to such Company, to
the effect that the proposed Disposition of Common Stock may be effected without
registration under the Securities Act and applicable state securities laws, or
(ii) a "no-action" letter from the staff of the Securities and Exchange
Commission (the "SEC") to the effect that the disposition of such securities
without registration under the Securities Act will not result in a
recommendation by the staff of the SEC that action be taken in respect thereof;
provided, however, that no such opinion shall be required in connection with a
transfer to a Permitted Transferee.
(c) Anything in this Agreement to the contrary notwithstanding, unless
otherwise agreed to in writing by the applicable Company and each of the
Shareholders, no Disposition of Common Stock otherwise permitted or required by
this Agreement shall be effective unless and until the transferee (and such
transferee's spouse, if applicable) shall execute and deliver to such Company an
Addendum Agreement in the form attached hereto as Exhibit F in which such
transferee (and such transferee's spouse, if applicable) agrees to be bound by
this Agreement and to observe and comply with this Agreement and with all
obligations and restrictions imposed on Shareholders hereby; each person to whom
a Disposition of Common Stock is permitted by this Agreement who receives a
Disposition of Common Stock during the period when this Agreement is in effect,
and who agrees in writing to be bound by the provisions hereof, shall thereafter
become a "Shareholder" for all purposes of this Agreement.
(d) Dispositions of Common Stock may only be made in strict compliance
with all applicable terms of this Agreement, and any purported Disposition of
Common Stock that does not so comply with all applicable provisions of this
Agreement shall be null and void and of no force or effect, and neither Company
shall recognize or be bound by any such purported Disposition and shall not
effect any such purported Disposition on the stock transfer books of such
Company.
(e) The restrictions on Dispositions of Common Stock contained in this
Section 3.1 with respect to each Company shall terminate and be of no further
force or effect immediately after the closing of each Company's Initial Public
Offering; provided, however, that any such termination shall not terminate or
otherwise affect the requirements set forth in Section 3.1(b), which
requirements shall continue in full force and effect until the termination of
this Agreement.
(f) Notwithstanding anything to the contrary contained herein, except as
otherwise permitted or required by Sections 3.10 through 3.13, Larry Lange shall
have no right to sell any shares of Common Stock during the Employment Term (as
defined in that certain Employment Agreement of even date herewith between PAACO
and Larry Lange) without unanimous Board approval.
SECTION 3.2 PERMISSIBLE TRANSFERS.
(a) Subject to the provisions of Section 3.1, a Shareholder or his
Personal Representative may at any time or times transfer any or all of his
shares of Common Stock to any person who is a Permissible Transferee with
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respect to the transferor Shareholder. As used herein, the term "Permissible
Transferee" with respect to a transferor Shareholder means (i) the spouse of the
transferor Shareholder, (ii) a trust, the sole beneficiary of which is a spouse
of the transferor Shareholder, (iii) solely with respect to an Original
Shareholder, any other Original Shareholder, or (iv) the partners or
stockholders of a Shareholder that is a partnership or corporation; provided,
however, that such transfer does not conflict with or constitute a violation of
state or federal securities laws.
(b) If any Shareholder seeks to transfer shares of Common Stock to a
Permissible Transferee pursuant to this Section 3.2, the shares of Common Stock
which the transferor Shareholder desires to transfer to the Permissible
Transferee in accordance with the terms hereof shall not be transferred on the
books of the applicable Company nor shall any such transfer be effective unless
and until such Company consents to such transfer, which consent shall not be
unreasonably withheld, and such Permissible Transferee has agreed to become a
party to this Agreement by executing an Addendum Agreement.
(c) A transfer or disposition of any kind or character otherwise
prohibited by this Agreement may be permitted if approved by a two-thirds vote
of the Board of Directors of the Company and by a vote of eighty percent (80%)
in interest of the Shareholders who are parties to this Agreement.
Notwithstanding anything to the contrary contained in this Section 3.2(c), a
transfer or disposition otherwise permitted under Sections 3.3 through 3.8
hereof shall not be prohibited by this Section 3.2. Any transferees pursuant to
such a permitted transfer or disposition must execute an Addendum Agreement.
SECTION 3.3 NOTICE OF RIGHT OF FIRST REFUSAL. In the event that a
Shareholder receives a bona fide offer (a "Third Party Offer") for the purchase
of all or a part of his or its Common Stock (or any rights or interests therein)
that such Shareholder desires to accept, such Shareholder (the "Offeror
Shareholder") agrees to give written notice of such Third Party Offer (the
"Notice of Right of First Refusal") to the Secretary of the subject Company and
to the other Shareholders (the "Other Shareholders"). The notice must set forth
the name of the proposed transferee (the "Third Party"), the number of shares to
be transferred (the "Offered Stock"), the price per share (the "Offer Price"),
all details of the payment terms and all other terms and conditions of the
proposed transfer. A Third Party Offer may not contain provisions related to any
property other than the Common Stock of the Offeror Shareholder, and the Offer
Price shall be expressed only in terms of cash or credit terms contained in the
proposed transfer. The Offeror Shareholder shall deliver such Notice of Right of
First Refusal to the parties noted above immediately upon receiving such Third
Party Offer, but in any event not less than seventy (70) days prior to the date
of the proposed transfer.
The last date that the Notice of Right of First Refusal is received by the
Other Shareholders shall constitute the "First Refusal Notice Date." The subject
Company shall be obligated to promptly determine the First Refusal Notice Date
following its receipt of a Notice of Right of First Refusal, and such date shall
be promptly communicated in writing by such Company to all Shareholders within
five (5) days of the determination of such date. For purposes of this Section
3.3, a "Third Party Offer" to purchase part or all of a Shareholder's Common
Stock shall mean a written offer to purchase such Common Stock from a person or
entity unrelated to that Shareholder. Without limitation of the generality of
the foregoing, a Third Party Offer does not include an offer where the
Shareholder receiving such offer has an option or obligation to reacquire all or
part of the Common Stock covered by such offer.
SECTION 3.4 PRIMARY RIGHT OF FIRST REFUSAL BY CORPORATION. The subject
Company shall have the sole and exclusive option to acquire all or any portion
of the Offered Stock in accordance with the provisions of the Notice of Right of
First Refusal for a period of twenty (20) days from the First Refusal Notice
Date. Such Company may exercise such option by giving written notice of exercise
to the Offeror Shareholder and to all Other Shareholders prior to the
termination of its exclusive option period. Such notice of exercise shall refer
to the Notice of Right of First Refusal and shall set forth the number of shares
of Common Stock to be acquired by such Company.
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SECTION 3.5 SECONDARY RIGHT OF FIRST REFUSAL BY ORIGINAL SHAREHOLDERS. In
the event the Company elects to purchase less than all of the Offered Stock and
if the Offeror Shareholder is an Original Shareholder, each of the other
Original Shareholders (the "Other Original Shareholders") shall have the
exclusive option from the twenty-first day to the fortieth day following the
First Refusal Notice Date to acquire his Pro Rata Share of the Offered Stock not
purchased by the subject Company. The Other Original Shareholders may exercise
such option by giving written notice of exercise to the Offeror Shareholder and
to all the Other Shareholders prior to the termination of their exclusive option
period. Such notice of exercise shall refer to the Notice of Right of First
Refusal and shall set forth the number of shares of Common Stock to be acquired
by such Other Original Shareholder.
SECTION 3.6 SECONDARY RIGHT OF FIRST REFUSAL BY OTHER SHAREHOLDER(S). In
the event the Offeror Shareholder is not an Original Shareholder or in the event
some or all of the Other Original Shareholders do not elect to acquire their Pro
Rata Share of the Offered Stock not purchased by the subject Company, the Other
Shareholders shall have the exclusive option from the twenty-first day to the
sixtieth day, if the Offeror Shareholder is an Original Shareholder, following
the First Refusal Notice Date to acquire the Offered Stock not purchased by the
subject Company in accordance with the procedure described in this Section. The
Other Shareholders may, by agreement, allocate among themselves the right to
acquire such part of the Offered Stock that will not be acquired by the subject
Company or the Other Original Shareholders, if appropriate.
In the absence of such an agreement between the Other Shareholders, each
Other Shareholder will be entitled to give written notice to the Offeror
Shareholder, to the subject Company and to the Other Shareholders, within forty
(40) days from the First Refusal Notice Date, of such Shareholder's election to
acquire all or any part of his Pro Rata Share of the Offered Stock that is not
being acquired by the subject Company or the Other Original Shareholders, as
appropriate.
If the subject Company and Other Shareholders have not given written notice
of election to acquire all of the Offered Stock within forty (40) days of the
First Refusal Notice Date if the Offeror Shareholder is not an Original
Shareholder, or within sixty (60) days, if the Offeror Shareholder is an
Original Shareholder, then between the forty-first and fiftieth day, or the
sixty-first and seventieth day, as the case may be, following the First Refusal
Notice Date the subject Company or any of the Other Shareholders may give
written notice to the Offeror Shareholder, to the subject Company and to the
Other Shareholders of an election to purchase any or all of the Offered Stock
that the subject Company or the Other Shareholders have not previously agreed to
purchase. Such additional shares of Common Stock shall be allocated on a
first-to-give-notice basis determined as of the date written notice is received
by the subject Company.
SECTION 3.7 PURCHASE PRICE. The total purchase price (the "Purchase Price")
for all the Common Stock to be purchased pursuant to Section 3.3 will be the
total purchase price for the proposed transfer, and upon the same terms and
conditions, as set forth in the Third Party Offer.
SECTION 3.8 COMPLIANCE REQUIRED. Any Disposition described in this Article
III of a Shareholder's Common Stock without complying with the giving of a
Notice of Right of First Refusal and the Right of First Refusal provisions of
this Article III shall be void, and the subject Company shall issue a Notice of
Right of First Refusal upon discovery of such transfer, a copy of which shall be
sent to the person or entity making such transfer, his or its transferee, the
subject Company and all Shareholders. The duty of the subject Company to see to
the issuance of such Notice of Right of First Refusal shall not be considered to
be elective, but shall be mandatory. Upon the giving of the Notice of Right of
First Refusal, the time periods for the exercise of the options specified in
Sections 3.4, 3.5 and 3.6 shall commence running. If a Notice of Right of First
Refusal had already been given to the subject Company, but the subject Company
is required to issue a new Notice of Right of First Refusal under this Section,
the prior Notice of Right of First Refusal shall have
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no effect and the time periods under the Notice of Right of First Refusal issued
by the subject Company shall apply.
SECTION 3.9 CERTAIN RIGHTS OF INCLUSION.
(a) No Shareholder shall, individually or collectively, in any transaction,
sell or otherwise dispose of shares of Common Stock held by such Shareholder to
a third party unless the terms and conditions of the Third Party Offer include
an offer, at the same price and on the same terms as the offer to the selling
Shareholders, to each of the other Shareholders (the "Offerees"), to include at
the option of each Offeree, in the sale or other disposition to the Third Party,
a number of shares of Common Stock owned by each Offeree determined in
accordance with this Section 3.9.
(b) The Shareholder or Shareholders that receives the Third Party Offer
(the "Selling Shareholder") shall cause the Third Party Offer to be reduced in
writing (which writing shall include an offer to purchase or otherwise acquire
shares of the Common Stock from the Offerees as required by this Section 3.9)
and shall send written notice of the Third Party Offer together with a copy of
the Third Party Offer (the "Inclusion Notice") to each of the Offerees in the
manner specified in Section 6.1 hereof. At any time within twenty (20) calendar
days after delivery of the Inclusion Notice, an Offeree may accept the offer
included in the Inclusion Notice by furnishing written notice of such acceptance
to the Selling Shareholder.
(c) Each Offeree shall have the right (an "Inclusion Right") to sell
pursuant to the Third Party Offer a number of such Offeree's shares of Common
Stock equal to the product of (x) the number of shares of Common Stock held by
such Offeree and (y) a fraction, the numerator of which is the total number of
shares of Common Stock covered by the Third Party Offer and the denominator of
which is the total number of shares of Common Stock then outstanding.
SECTION 3.10 DEATH OF A SHAREHOLDER. The death of a Shareholder shall
constitute a Third Party Offer hereunder at Fair Market Value for such deceased
Shareholder's stock (including the interest, if any, in such stock held by such
Shareholder's spouse) and the provisions of Sections 3.3 through 3.6 shall apply
to such Third Party Offer.
SECTION 3.11 TERMINATION OF MARITAL RELATIONSHIP. If the marital
relationship of a Shareholder is terminated by divorce and such Shareholder does
not succeed to his or her spouse's community interest in the Common Stock, such
Shareholder shall have the option to purchase all of his or her spouse's
interest in the Common Stock, and his or her spouse shall be obligated to sell
such Common Stock. The price per share at which such Common Stock shall be
purchased shall be an amount equal to the net book value of one (1) share of
such Common Stock as determined under generally accepted accounting principles
as of the most recent fiscal year end. Such option must be exercised within
ninety (90) days after such divorce. Should such Shareholder fail to exercise
such option within such 90-day period, such spouse's community interest in the
stock shall be offered to the Other Shareholders, and the provisions of Sections
3.3 through 3.6 shall apply with the exception that the price per share at which
the Common Stock shall be purchased shall be the net book value per share of
Common Stock as determined under generally accepted accounting principles as of
the most recent fiscal year end.
SECTION 3.12 TERMINATION OF ORIGINAL SHAREHOLDER'S EMPLOYMENT. (a) If any
Original Shareholder's employment with either Company is terminated for Cause
(as defined in the Employment Agreement of even date herewith by and between
each Original Shareholder and PAACO (collectively, the "Employment Agreements"))
or if such Original Shareholder resigns or otherwise voluntarily terminates his
employment with PAACO, each Company shall have the right but not the obligation
to purchase all of such Original Shareholder's shares of Common Stock. The price
per share at which such Common Stock shall be
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purchased shall be an amount equal to 80% of the Fair Market Value of one (1)
share of such Common Stock. The Original Shareholder whose employment is
terminated shall not be entitled to vote (if on the Board of Directors of either
Company) with respect to exercising such option.
(b) If any Original Shareholder's employment with PAACO is terminated
without Cause, such Original Shareholder shall have the right but not the
obligation to request the Companies to purchase all of such Original
Shareholder's shares of Common Stock. The price per share at which such Common
Stock shall be purchased shall be an amount equal to 120% of the Fair Market
Value of one (1) share of such Common Stock.
SECTION 3.13 BANKRUPTCY OF SHAREHOLDER. In the event a Shareholder (i)
files a voluntary petition in bankruptcy, (ii) makes an assignment for the
benefit of creditors, or (iii) is adjudicated bankrupt or insolvent, the other
Shareholders shall have the right, but not the obligation, to purchase all of
such Shareholder's shares of Common Stock at the price per share equal to the
Fair Market Value of one (1) share of Common Stock.
SECTION 3.14 DISPOSITIONS PURSUANT TO SECTIONS 3.10, 3.11, 3.12 AND 3.13.
Prior to or upon any Disposition of Common Stock (as provided for in Sections
3.10, 3.11, 3.12 and 3.13), the Shareholder who owns such Common Stock, or his
Personal Representative (or the Companies, in the event of a Disposition
pursuant to Section 3.12(a)), shall send written notice thereof, within 10 days
of the determination of Fair Market Value, by certified or registered mail,
return receipt requested, disclosing in full to each Company and the other
Shareholders the nature and details of such Disposition. Unless specifically
provided for otherwise herein, in the event of such Disposition, such
Shareholder's shares of Common Stock shall be sold in accordance with the
provisions of Sections 3.3 through 3.6 (with the purchase price being payable in
cash), and the last date such notice is received by the Other Shareholders shall
constitute the "First Refusal Notice Date."
SECTION 3.15 TRANSFERS IN CONNECTION WITH ESTATE PLANNING. The Original
Shareholders shall be entitled to transfer any shares of Common Stock they own
to any trust, estate or other estate planning entity created by such Original
Shareholder in connection with estate planning, and, subject to Section 3.10
hereof, the ownership of such shares upon the death of such Original Shareholder
shall be transferred in accordance with the terms of the instrument creating
such trust, estate or other estate planning entity. Upon such a transfer, such
entity shall be deemed to be a "Shareholder" for all purposes and shall be
entitled to all rights, and shall have all obligations, of a Shareholder under
this Agreement. If requested by the other Shareholders, such entity shall become
a party to this Agreement by execution of an Addendum Agreement.
SECTION 3.16 ENDORSEMENT OF STOCK CERTIFICATES.
(a) Conformed copies of this Agreement shall be filed with the Secretary of
each Company and kept with the records of each Company at its principal office.
An officer of each Company shall endorse each certificate representing the
shares of Common Stock of such Company heretofore or hereafter issued by such
Company to the Shareholders by causing to be placed on the face thereof the
following:
TRANSFER IS SUBJECT TO RESTRICTIVE STOCK LEGEND ON BACK
and by causing to be placed on the back thereof the following legend:
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THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS OF A SHAREHOLDERS' AGREEMENT DATED ON OR AS OF FEBRUARY 1, 1998,
BY AND AMONG THE COMPANY AND CERTAIN OTHER PERSONS, WHICH AGREEMENT
CONTAINS, AMONG OTHER PROVISIONS, RESTRICTIONS ON THE TRANSFER, SALE,
OR OTHER DISPOSITION OF THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE. A COPY OF SUCH SHAREHOLDERS' AGREEMENT HAS BEEN FILED,
AND IS AVAILABLE FOR REVIEW BY THE RECORD HOLDER OF THIS CERTIFICATE,
AT THE PRINCIPAL OFFICE OF THE COMPANY.
(b) In addition to the legend required under Section 3.16(a), each
Shareholder agrees that, if legal counsel to either Company deems appropriate,
each certificate representing shares of Common Stock also shall bear a legend in
substantially the following form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED,
TRANSFERRED, OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF PROVIDES
EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY (WHICH, IN THE
DISCRETION OF THE COMPANY, MAY INCLUDE AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY) THAT SUCH OFFER, SALE, PLEDGE, TRANSFER,
OR OTHER DISPOSITION WILL NOT VIOLATE APPLICABLE FEDERAL OR STATE
SECURITIES LAWS.
SECTION 3.17 SPECIFIC PERFORMANCE. Each of the parties to this Agreement
acknowledges that it shall be impossible to measure in money the damage to the
Companies or the Shareholder(s), if any of them or any transferee or any legal
representative of any party hereto fails to comply with any of the restrictions
or obligations imposed by this Article III, that every such restriction and
obligation is material, and that in the event of any such failure, the Companies
or the Shareholder(s) shall not have an adequate remedy at law or in damages.
Therefore, each party hereto consents to the issuance of an injunction or the
enforcement of other equitable remedies against him at the suit of an aggrieved
party without the posting of any bond or other security, to compel specific
performance of all of the terms of this Article III and to prevent any
disposition of shares of Common Stock in contravention of any terms of this
Article III, and waives any defenses thereto, including, without limitation, the
defenses of: (i) failure of consideration; (ii) breach of any other provision of
this Agreement; and (iii) availability of relief in damages.
ARTICLE IV
SPECIAL MANAGEMENT/GOVERNANCE PROVISIONS
SECTION 4.1 ARTICLES OF INCORPORATION; NO CONFLICT WITH AGREEMENT. Attached
hereto as Exhibits B and C and D and E are copies of the Articles of
Incorporation and Bylaws, respectively, of each Company which are in effect as
of the date hereof. Each Shareholder shall vote his shares of Common Stock, and
shall take all the actions necessary, to ensure that the Articles of
Incorporation and Bylaws of each Company do not, from time to time, conflict
with the provisions of this Agreement.
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<PAGE> 12
SECTION 4.2 CERTAIN PROHIBITIONS.
(a) Any future sales of shares or issuance of capital stock (or warrants,
options or rights to acquire shares of capital stock or securities convertible
into or exchangeable for capital stock) of each Company must be made at a price
equal to or greater than the price per share (as adjusted from time to time to
reflect any stock splits, stock dividends or similar events) paid by Crown for
the shares of Common Stock it has acquired on the date hereof unless otherwise
agreed by the parties hereto.
(b) Any redemptions or offers for Common Stock (made pursuant to a right of
first refusal) must be made available to all Shareholders on a pro rata basis
and at the same consideration per share.
(c) Any issuances of capital stock of either Company senior to such
Company's Common Stock (including rights to acquire such capital stock of such
Company), or any changes to the rights of such Common Stock, must be unanimously
approved by the Shareholders.
SECTION 4.3 BOARD OF DIRECTORS.
(a) From and after the date hereof, the Shareholders and their assigns
shall vote their shares of Common Stock, at any regular or special meeting of
shareholders called for the purpose of filling positions on the Board of
Directors of the Company, or in any written consent executed in lieu of such
meeting of shareholders and shall take all the actions necessary, to ensure the
election to the Board of Directors of the Company of four individuals: (i) two
of which shall be designated by the Original Shareholders (the "Management
Nominees") and (ii) two of which shall be designated by Crown (the "Crown
Nominees").
(b) From and after the date hereof, each Company shall maintain an
Executive Committee of the Board of Directors comprised of the two Management
Nominees and one of the Crown Nominees.
SECTION 4.4 REMOVAL.
(a) If a director designated and elected pursuant to Section 4.3, (i) has
been designated by Crown pursuant to Section 4.3 and, during such director's
term as director, Crown requests that such director be removed (with or without
Cause) by written notice to the Original Shareholders or (ii) has been
designated by the Original Shareholders pursuant to Section 4.3 and, during such
director's term as director, holders of a majority of the Common Stock held by
the Original Shareholders request that such director be removed (with or without
Cause) by written notice to Crown, then such director may be removed, with or
without Cause, upon the affirmative vote of holders of a majority of the
outstanding shares of Common Stock, and each Shareholder hereby agrees to vote
all shares of Common Stock owned or held of record to effect such removal or
consent in writing to effect such removal upon such request.
(b) No director shall be removed without Cause except as provided in
Section 4.4(a) hereof and any director shall be removed for Cause if the holders
of a majority of the outstanding shares of Common Stock consent in writing to
such removal. For the purposes of this Section 4.4(b), "Cause" shall mean a
commission by a director of a felony which in the opinion of a majority of such
Company's Board of Directors is injurious to the business reputation of the
Company or any subsidiary thereof or the wilful commission by a director of a
dishonest act effecting such Company or any subsidiary thereof. Each Original
Shareholder that is a member of the Board of Directors agrees to resign as a
member of the Board of Directors upon the termination of his employment with
PAACO for Cause as defined in the Employment Agreement dated of even date
herewith between such Original Shareholder and PAACO.
11
<PAGE> 13
SECTION 4.5 VACANCIES. In the event that a vacancy is created on the Board
of Directors at any time by the death, disability, retirement, resignation or
removal (with or without Cause) of a director, each Shareholder will cause the
directors designated by it to vote for the individual designated to fill such
vacancy by whichever of the Shareholders designated (pursuant to Section 4.3
hereof) the director whose death, disability, retirement, resignation or removal
(with or without Cause) resulted in such vacancy on the Board (in the manner set
forth in Section 4.3); provided, however, that such other individual so
designated may not previously have been a director of the Company who is removed
for Cause from the Board of Directors.
SECTION 4.6 COVENANT TO VOTE. Each Shareholder hereby agrees to take all
actions necessary to call, or cause each Company and the appropriate officers
and directors of each Company to call, a special or annual meeting of the
shareholders of such Company and to vote all shares of the Common Stock owned or
held of record by such Shareholder at any such annual or special meeting in
favor of, or take all actions by written consent in lieu of any such meeting
necessary to cause, the election as members of the Board of Directors of those
individuals so designated in accordance with, and otherwise to effect the intent
of Article IV. In addition, each Shareholder agrees to vote the shares of Common
Stock owned by such Shareholder upon any other matter arising under this
Agreement submitted to a vote of the Shareholders in a manner that will
implement the terms of this Agreement.
SECTION 4.7 DESIGNATION OF PROXY. In order to effectuate the provisions of
this Article IV and in addition to and not in lieu of Sections 4.3 through 4.5
hereof, each of the Original Shareholders hereby grants to Larry Lange a proxy
to vote at any meeting of Shareholders or take any action by written consent in
lieu of such meeting with respect to, all of the shares of Common Stock owned or
held of record by such Original Shareholders solely for (i) the election of
directors designated in accordance with Section 4.3 hereof, and (ii) the
election of a director to fill any vacancy on the Board of Directors in
accordance with Section 4.5 hereof.
SECTION 4.8 FINANCIAL REPORTS. (a) Within 20 days after the end of each
fiscal month, each Company shall furnish to each Shareholder a balance sheet as
of the end of such month and an income statement and statement of cash flows for
such month prepared in accordance with generally accepted accounting principles,
consistently applied.
(b) Within 90 days after the end of each fiscal year, each Company shall
furnish to each Shareholder an audited balance sheet as of the end of such
fiscal year and an income statement and statement of cash flows for such fiscal
year prepared in accordance with generally accepted accounting principles,
consistently applied.
(c) Notwithstanding anything to the contrary contained herein, the
obligations of each Company to furnish financial information pursuant to this
Section 4.8 shall cease with respect to such Company upon the consummation of an
Initial Public Offering by such Company.
ARTICLE V
RESTRICTIONS ON CERTAIN TRANSACTIONS
SECTION 5.1 EXECUTIVE COMMITTEE. Neither Company shall, without the
unanimous approval of its Executive Committee:
(a) make any capital expenditure, commitment, contract or undertaking that
is in excess of $120,000;
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<PAGE> 14
(b) enter into any transaction with any Shareholder, officer or director,
or any relative or Affiliate of any shareholder, officer or director or become a
guarantor, surety or indemnitor of any indebtedness, undertaking or obligation
of any such person or any entity controlled by any such person;
(c) extend loans or other credit not in the ordinary course of business in
excess of $25,000.
(d) (i) pledge or otherwise encumber shares of capital stock of such
Company or any subsidiary outside the ordinary course of business; or (ii)
mortgage or pledge any of its assets, tangible or intangible, or create or
suffer to exist any lien thereupon other than in the ordinary course of
business;
(e) enter into, adopt or amend or terminate any bonus, profit sharing,
compensation, severance or termination agreement or plan for the benefit or
welfare of any Original Shareholder or any stock option, stock appreciation
right, restricted stock, performance unit, stock equivalent, stock purchase,
pension, retirement, deferred compensation, or other employee benefit trust,
plan, fund or other arrangement for the benefit or welfare of any director,
officer or employee;
(f) acquire, sell, lease, transfer or otherwise dispose of, directly or
indirectly, any assets other than inventory with a purchase price in excess of
$50,000, individually, or $250,000, in the aggregate, other than in the ordinary
course of business;
(g) make and adopt an annual budget of each of the Companies; or
(h) authorize or propose, or agree in writing or otherwise to take, any of
the actions described in this Section 5.1.
SECTION 5.2 BOARD OF DIRECTORS. Neither Company shall, without the
unanimous approval of its Board of Directors:
(a) amend any provision of its or its subsidiaries' Articles of
Incorporation or Bylaws;
(b) (i) split, combine, or reclassify any shares of its capital stock; (ii)
declare, set aside, or pay any dividend or other distribution (whether in cash,
stock, or property or any combination thereof) in respect of its capital stock;
(iii) repurchase, redeem or otherwise acquire any of its securities or any
securities of any subsidiary; (iv) adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing a liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of such Company or any subsidiary (including any spin-off or
spin-out of a subsidiary of such Company); or (v) issue any New Securities;
(c) change the appointment of independent auditors selected to audit such
Company's financial statements, provided, however, that the Board of Directors
of each Company agree to appoint Coopers & Lybrand, LLP, if requested by Crown;
(d) acquire or dispose of (by merger, consolidation, or acquisition of
stock or assets or otherwise) any corporation, partnership, or other business
organization or division thereof; or
(e) engage in any business or businesses the nature of which differs in any
material respect from any business currently conducted by such Company or any
subsidiary thereof.
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<PAGE> 15
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 MANNER OF GIVING NOTICE. All notices required to be given
hereunder shall be in writing and shall be deemed to be duly given if personally
delivered, telecopied and confirmed, or mailed by certified mail, return receipt
requested, or overnight delivery service with proof of receipt maintained, at
the following address (or any other address that any such party may designate by
written notice to the other parties):
PAACO, Inc.
605 S. Loop 12
Irving, Texas 75060
Premium Auto Acceptance Corporation
605 S. Loop 12
Irving, Texas 75060
If to any Shareholder, at his address as set forth on Exhibit A of this
Agreement.
Any such notice shall, if delivered personally, be deemed received upon
delivery; shall, if delivered by telecopy, be deemed received when confirmed;
and shall, if delivered by mail, be deemed received upon the earlier of actual
receipt thereof or five business days after the date of deposit in the United
States mail.
SECTION 6.2 WARRANTS. In the event the Original Shareholders exercise the
Warrants to purchase shares of Common Stock, the Original Shareholders agree
that the shares purchased upon exercise of the Warrants will be bound by and
subject to the provisions of this Agreement.
SECTION 6.3 WAIVER OF NOTICE. Whenever any notice is required to be given
to any Shareholder or director of the Company under the provisions of this
Agreement, a waiver thereof in writing signed by the person or persons entitled
to such notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Attendance of a director at a meeting
of the Board of Directors shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business on the ground that the meeting is not
lawfully called or convened.
SECTION 6.4 COUNTERPART SIGNATURES. This Agreement may be executed in any
number of counterparts, all of which together shall constitute a single
instrument. It shall not be necessary that any counterpart be signed by each of
the Shareholders so long as each counterpart shall be signed by one or more of
the Shareholders and so long as the other Shareholder shall sign at least one
counterpart which shall be delivered to the Company.
SECTION 6.5 SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term of this Agreement, such provision shall be fully severable; this
Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part of this Agreement; and the
remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Agreement. Furthermore, in lieu of each such illegal,
invalid or unenforceable provision, there shall be added automatically as a part
of this Agreement a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
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<PAGE> 16
SECTION 6.6 JOINDER OF SPOUSES. The spouses of all married Shareholders
have joined in the execution of this Agreement in order to evidence their
agreement and consent to be bound by the terms and conditions hereof as to their
interest, whether as community property or otherwise, if any, in the shares of
Common Stock owned by their respective spouses.
SECTION 6.7 ENTIRE AGREEMENT; AMENDMENTS.
(a) This Agreement supersedes all prior agreements among the parties with
respect to the subject matter hereof. This instrument and the Stock Purchase
Agreement among the Companies, the Original Shareholders and Crown of even date
herewith contain the entire agreement among the parties with respect to such
subject matter and may not be amended, supplemented, or discharged, and no
provision hereof or thereof may be modified or waived, except by an instrument
in writing signed by the Company and all persons then a party to this Agreement
as shareholders of the Companies.
(b) No waiver of any provision hereof by any party shall be deemed a waiver
by any other party nor shall any such waiver by any party be deemed a continuing
waiver of any matter by such party.
(c) No amendment, modification, supplement, discharge or waiver hereof or
hereunder shall require the consent of any person not a party to this Agreement.
SECTION 6.8 GOVERNING LAW AND VENUE. This Agreement shall be governed and
construed in accordance with the laws of the State of Texas, without regard to
the conflicts of law principles of such state and the exclusive venue for any
dispute arising hereunder shall be the federal or state courts located in Dallas
County, Texas.
SECTION 6.9 BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the benefit of the Companies and each Shareholder and his respective
heirs, permitted successors, permitted assigns, permitted distributees and legal
representatives, and by their signatures hereto, the Companies and each
Shareholder intends to and does hereby become bound. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any person
other than the parties hereto and their respective permitted successors and
assigns any legal or equitable right, remedy or claim under, in or in respect of
this Agreement or any provision herein contained.
SECTION 6.10 FUTURE ACTIONS. The Companies and the Shareholders shall
execute and deliver all such future instruments and take such other and further
action as may be reasonably necessary or appropriate to carry out the provisions
of this Agreement and the intention of the parties as expressed herein,
including if necessary any action required to authorize and direct the officers
and directors of the Companies to amend the Company's Articles of Incorporation
so that this Agreement is enforceable under the laws of the State of Texas.
SECTION 6.11 HEADINGS; EXHIBITS. All article and section headings herein
are for convenience of reference only and are not part of this Agreement, and no
construction or inference shall be derived therefrom. The Exhibits attached
hereto and referred to herein are a part of this Agreement as if fully set forth
herein. All references to Sections and Exhibits shall be deemed references to
such parts of this Agreement, unless the context shall otherwise require.
SECTION 6.12 TERMINATION OF THIS AGREEMENT. Except as provided herein, this
Agreement shall immediately and automatically terminate, without any further
action by any party, upon any of the following: (i) the unanimous written
consent to the termination hereof of all persons then a party to this Agreement
as
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<PAGE> 17
Shareholders, (ii) the dissolution, bankruptcy, receivership or insolvency of
either of the Companies, as to such Company, or (iii) with respect to a Company,
if such Company completes an Initial Public Offering.
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<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day, month and year first above written.
PAACO: PAACO, INC.
By:
------------------------------------------
Daniel Chu
President
PREMIUM: PREMIUM AUTO ACCEPTANCE CORPORATION
By:
------------------------------------------
Daniel Chu
President
SHAREHOLDERS: SPOUSE:
------------------------------------------
- --------------------------------- ------------------------------------------
Larry Lange
- ---------------------------------
Daniel Chu
- ---------------------------------
Ted Lange
CROWN GROUP, INC.
By:
------------------------------
Edward R. McMurphy
President
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<PAGE> 19
EXHIBIT A
LIST OF SHAREHOLDERS AND SHARE OWNERSHIP
<TABLE>
<CAPTION>
Shares of PAACO Shares of Premium Percentage of
Shareholder (Name and Address) Common Stock Owned Common Stock Owned Total Shares Outstanding
- ------------------------------ ------------------ ------------------ ------------------------
<S> <C> <C> <C>
Larry Lange 35,333.51 353.51 24.91%
c/o PAACO, Inc.
605 S. Loop 12
Irving, Texas 75060
Daniel Chu 16,666.75 166.75 11.75%
c/o PAACO, Inc.
605 S. Loop 12
Irving, Texas 75060
Ted Lange 14,666.74 146.74 10.34%
c/o PAACO, Inc.
605 S. Loop 12
Irving, Texas 75060
Crown Group, Inc. 75,178 752 53.00%
4040 N. MacArthur Blvd. ------- ----- -------
Suite 100 141,845 1,419 100.00%
Irving, Texas 75038 ======= ===== =======
</TABLE>
A-1
<PAGE> 1
EXHIBIT 10.12
RIGHT OF FIRST REFUSAL AND PUT AGREEMENT
THIS RIGHT OF FIRST REFUSAL AND PUT AGREEMENT (the "Agreement"), made
on February 3, 1998, between CROWN GROUP, INC., a Texas corporation ("Crown"),
and VAN P. FINGER (the "Shareholder"), an individual residing in Baldwin
County, Alabama;
W I T N E S S E T H:
WHEREAS, the Shareholder is the owner of twenty (20%) percent of the
issued and outstanding shares of Common Stock, $1.00 par value per share, (the
"Stock") of PRECISION IBC, INCORPORATED, an Alabama corporation (the
"Company"); and
WHEREAS, Crown and the Shareholder desire to promote their mutual
interest and interest of the Company by imposing certain rights, restrictions
and obligations on themselves and the shares of Stock owned by the Shareholder;
NOW, THEREFORE, in consideration of the promises contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, it is hereby agreed as follows:
1. Definitions. The term "Stock" shall mean all shares of Common
Stock, $1.00 par value per share, of the Company, together with all shares of
capital stock of the Company of any class which may hereafter be issued.
Moreover, all references herein to Stock owned by the Shareholder include the
community interest, if any, of the spouse of the Shareholder in such Stock.
2. Right of Refusal. If the Shareholder desires to sell any or
all of his Stock and has received a bona fide offer for same, he shall first
give Crown written notice of the terms of such offer. The purchase price for
the Stock subject to such offer shall be expressed only in terms of cash and
<PAGE> 2
credit terms. For a period of thirty (30) days after receipt of said notice,
Crown shall have an option to purchase such Stock on the same terms and
conditions as set out in such written notice.
3. Non-Exercise. If, at the end of the option period, the
Shareholder has not received notice of an election by Crown to buy the Stock
offered by him, he may, within a period of thirty (30) days after the end of
said option period, sell such Stock to the buyer named in the Shareholder's
notice at the same price and upon the same terms set out in such written
notice, but if such Stock is not sold by the end of such period, the Stock
shall again be subject to the terms and provisions of this Agreement.
4. Gift or Pledge; Estate Planning. The Shareholder shall not
make a gift or pledge of his Stock without first making arrangements
satisfactory to Crown that the provisions hereof shall continue to apply to
such Stock. With the written consent of Crown, which consent will not be
unreasonably withheld, the Shareholder shall be entitled to transfer his shares
of Stock to any trust, estate or other estate planning entity created by the
Shareholder in connection with estate planning and the ownership of such shares
upon the death of the Shareholder shall be transferred in accordance with the
instrument creating such trust, estate or other estate planning entity. Upon
such transfer, such entity shall be deemed a "Shareholder" for all purposes
hereunder and shall be entitled to all rights, and shall have all obligations
of the Shareholder under this Agreement. Such entity shall become a party to
this Agreement by execution of an agreement reasonably satisfactory to the
legal representative of such entity and Crown.
5. Put Rights.
(a) Shareholder Put Right. Commencing June 1, 2000
through June 30, 2000, and June 1, 2001 through June 30, 2001 (the
"Put Exercise Periods"), the Shareholder shall have the right to
require Crown or the Company to purchase all (but
2
<PAGE> 3
not less than all) of the Stock held by the Shareholder (the "Put
Right") at a price equal to the fair market value of such Stock, as
determined in accordance with subparagraph (c) below (the "Fair Market
Value").
(b) Exercise of Put Right. In order to exercise the
rights granted to him pursuant to this Paragraph 5, the Shareholder
shall deliver to Crown and the Company a written notice (the "Put
Notice") during either of the respective Put Exercise Periods, stating
that he elects to require Crown or the Company to purchase all of the
Stock owned by the Shareholder (the "Repurchased Securities").
(c) Determination of Fair Market Value. The Fair Market
Value of the Repurchased Securities shall be the lesser of the EBITDA
Value (as hereinafter defined) or the Appraised Value (as hereinafter
defined).
(i) The "EBITDA Value" shall mean the value of the
Repurchased Securities, determined by (A) multiplying by five
(5) the Company's earnings before interest, income taxes,
depreciation and amortization, plus or minus any extraordinary
charges or credits ("EBITDA") for the fiscal year ended April
30, 2000 with respect to the year 2000 Put Exercise Period,
and for the fiscal year ended April 30, 2001 for the year 2001
Put Exercise Period, (B) subtracting from the product thereof
all Company Indebtedness (as hereinafter defined), and (C)
multiplying the remainder by a fraction, the numerator of
which is the number of shares of Stock owned by the
Shareholder, and the denominator of which is the total number
of shares of Stock issued
3
<PAGE> 4
and outstanding. Expressed as an equation, the EBITDA Value
is to be determined as follows:
EBITDA Value = A/B [(5 x C) - D]
Where:
A = Shares of Stock owned by Shareholder
B = Total shares of Stock outstanding
C = EBITDA
D = Company Indebtedness
The determination of the EBITDA Value shall be made in accordance with generally
accepted accounting principles consistently applied ("GAAP"), and the
resolution of all questions with respect to accounting procedures or valuation
in connection therewith, shall be made by the independent public accountants
employed by the Company and the determination of such independent public
accountants shall be conclusive and binding hereunder upon all parties
concerned. The determination of the EBITDA Value shall be made within sixty
(60) days of the date of the Put Notice. The term "Company Indebtedness" shall
mean the principal amount and all interest accrued through the applicable
fiscal year end owed by the Company to all lenders, exclusive of trade debt in
the ordinary course of business. In determining the EBITDA Value, there shall
be excluded from the Company's expenses management fees or other fees charged
by Crown to the Company, but there shall be included all payments by the Company
to Crown to reimburse Crown for costs actually incurred by, or properly
chargeable to, the Company.
(ii) The "Appraised Value" shall mean the value of
the Repurchased Securities, determined as follows:
(1) Within ten (10) days after delivery of the
Put Right Notice, the Shareholder and Crown shall each engage
an independent appraiser (an "Initial Appraiser") for the
purpose of determining the
4
<PAGE> 5
Appraised Value of the Repurchased Securities (which
determination shall be made within thirty [30] days after the
selection of the Initial Appraisers). Upon the determination
by each Initial Appraiser of the Appraised Value of the
Repurchased Securities, such Initial Appraiser shall prepare
and deliver to Crown, the Company and the Shareholder and the
other Initial Appraiser a written report (an "Initial
Appraisal Report") stating its determination of the Appraised
Value of the Repurchased Securities and setting forth in
reasonable detail the method by which the same was determined.
(2) After delivery of an Initial Appraisal Report
by each Initial Appraiser, the Initial Appraisers shall
attempt in good faith to agree upon a determination of the
Appraised Value of the Repurchased Securities. If the
independent appraisers agree upon a determination of the
Appraised Value of the Repurchased Securities within ten (10)
days after delivery of an Initial Appraisal Report by both
Initial Appraisers, such determination shall be final,
conclusive and binding on the parties.
(3) If the Initial Appraisers do not agree upon a
determination of the Appraised Value of the Repurchased Shares
within the aforesaid period, the Initial Appraisers shall
promptly select a third independent appraiser (the "Final
Appraiser") to determine the Appraised Value of the
Repurchased Securities. Upon the determination of the
Appraised Value of the Repurchased Securities
5
<PAGE> 6
by the Final Appraiser (which determination shall be made
within thirty [30] days after the election of the Final
Appraiser), the Final Appraiser shall prepare and deliver to
Crown, the Company, the Shareholder and the Initial
Appraisers, a written report (the "Final Appraisal Report")
stating its determination of the Appraised Value of the
Repurchased Securities and setting forth in reasonable detail
the method by which the same was determined. Upon delivery of
the Final Appraisal Report, the Appraised Value of the
Repurchased Securities for purposes of this Paragraph 5 shall
be conclusively deemed to be the average of (i) the Appraised
Value of the Repurchased Securities stated in the Final
Appraisal Report and (ii) the Appraised Value of the
Repurchased Securities stated in the Initial Appraisal Report
closest in amount to the Appraised Value stated in the Final
Appraisal Report.
(4) In determining the Appraised Value, there
shall be no discount applied to the Shareholder's Stock based
upon the minority status of such shares of Stock or the lack
of marketability with respect to such shares.
(5) The fees and expenses of the Initial
Appraisers and the Final Appraiser shall be borne equally by
the Shareholder and Crown.
(6) Crown and the Shareholder shall cause the
Company to cooperate in good faith with any appraisal
procedure undertaken pursuant to this Paragraph 5, such
cooperation to include, without
6
<PAGE> 7
limitation, providing the independent appraisers with such
reasonable information as may be requested by such Initial
Appraisers and, if applicable, the Final Appraiser.
(d) Put Right Closing. The closing of the sale and
purchase of the Repurchased Securities pursuant to this Paragraph 5
shall take place on the tenth (10th) business day after the later of
the determination of the EBITDA Value as provided for in subparagraph
5(c)(i) hereof and the determination of the Appraised Value as
provided in subparagraph 5(c)(ii) above, at the principal office of
the Company or at such other location as may be mutually agreed upon
by the Shareholder and Crown. At such closing, the Shareholder shall
deliver the certificates or other instruments evidencing the
Repurchased Shares to Crown or the Company, duly endorsed in blank or
accompanied by stock powers duly executed in blank or otherwise in a
form acceptable for transfer on the books of the Company. Upon
receipt of such certificates or other instruments, Crown or the
Company shall pay to the Shareholder the Fair Market Value of the
Repurchased Shares in immediately available funds. Following payment
of the Fair Market Value of the Repurchased Securities as set forth in
this subparagraph 5(d), all right, title and interest in and to the
Repurchased Securities shall pass to Crown or the Company, as the case
may be.
(e) Non-Assignability and Termination of Put Right. The
Shareholder's Put Right is not assignable by the Shareholder, and the
Put Right shall terminate if it is not exercised during either of the
two Put Exercise Periods. Further, the Put Right shall terminate upon
the completion of an Initial Public Offering (as hereinafter defined)
by the Company. The term "Initial Public Offering" shall mean the
first
7
<PAGE> 8
public offering of equity securities of the Company effected by the
Company pursuant to a registration statement that has been declared
effective under the Securities Act of 1933, as amended (the "Act")
from time to time and any successor statute thereto.
(f) Additional Put Rights. In addition to the
Shareholder's Put Right set forth in subparagraph 5(a) hereof, the
Shareholder shall have Put Rights in the event that (i) the
Shareholder's employment with the Company is terminated without cause
pursuant to Paragraph 11 of the Employment Agreement dated of even
date herewith between the Company and the Shareholder, or (ii) the
Company files a registration statement under the Act for an Initial
Public Offering. The Put Exercise Period in the event of the
termination of employment of the Shareholder as set forth above shall
commence on the effective date of termination of employment and expire
thirty (30) days thereafter and, in the event of the filing of a
registration statement for an Initial Public Offering, the Put
Exercise Period shall commence on the date of filing of such
registration statement and terminate on the date of closing of the
Initial Public Offering. The EBITDA Value shall be determined for the
twelve (12) month period ending immediately prior to the first day of
the month in which the Shareholder gives a Put Exercise Notice
pursuant to this subparagraph. Further, in the event the Shareholder
exercises his Put Right based upon the filing of a registration
statement for an Initial Public Offering, the Fair Market Value shall
be the EBITDA Value. If the Shareholder does not give a Put Exercise
Notice with respect to an Initial Public Offering within the
applicable Put Exercise Period (as set forth above), the Shareholder's
Put Right with respect thereto shall terminate as set forth in
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subparagraph 5(e) above. The closing of a Put Right exercised
pursuant to this subparagraph shall take place in accordance with
subparagraph 5(d) hereof.
6. Notices. All notices, demands and requests which may be given
or which are required to be given by either party to the other, and any
exercise of a right of termination provided by this Agreement, shall be in
writing and shall be deemed effective when either: (1) personally delivered to
the intended recipient; (2) sent by certified or registered mail, return
receipt requested, addressed to the intended recipient at the address specified
below; (3) delivered in person to the address set forth below for the party to
which the notice was given; (4) deposited into the custody of a nationally
recognized overnight delivery service such as Federal Express Corporation,
Emery or Purolator, addressed to such party at the address specified below; or
(5) sent by facsimile, telegram or telex, provided that receipt for such
facsimile, telegram or telex is verified by the sender and followed by a notice
sent in accordance with one of the other provisions set forth above. Notices
shall be effective on the date of delivery or receipt or, if delivery is not
accepted, on the earlier of the date that delivery is refused or three (3) days
after the date the notice is mailed. For purposes of this Paragraph, the
addresses of the parties for all notices are as follows (unless changes by
similar notice in writing are given by the particular person whose address is
to be changed):
(a) if to the Shareholder, to Van P. Finger, C/O Precision
IBC, Incorporated, PO Box 1171, Fairhope, Alabama 36533-1171; Fax
334-990-6787;
With a copy to Sam W. Irby, Irby & Heard, P.C., 317 Magnolia
Avenue, PO Box 1031, Fairhope, Alabama 36533; Fax (334) 928-7993;
(b) or if to Crown, to Crown Croup, Inc., 4040 North
MacArthur Boulevard, Suite 100, Irving, Texas 75038; Attention: Edward
R. McMurphy, President; Fax (972) 719-4466;
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With a copy to T. J. Falgout, III, Executive Vice President
and General Counsel, Crown Croup, Inc., 4040 North MacArthur
Boulevard, Suite 100, Irving, Texas 75038; Fax (972) 719-4466.
Either party hereto may designate a different address by written notice given
to the other parties.
7. Endorsement of Stock Certificates. All certificates of Stock
of the Company now owned or that may hereafter be acquired by the Shareholder
shall be endorsed on the back thereof as follows:
"The shares of capital stock of the within named Company represented
by this Certificate are subject to the restrictions and purchase
options and obligations contained in that certain Right of First
Refusal and Put Agreement between the owner of this Certificate and
Crown Group, Inc., and the Company will furnish the record holder of a
Certificate without charge, upon written request to the Company at its
principal place of business or registered office, a copy of such
Agreement."
Such certificate shall be endorsed on the front thereof as follows:
"See restrictions on transfer on reverse side hereof."
8. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF ALABAMA.
9. Benefit. Subject to the restrictions on assignment set forth
in Paragraph 5(e) hereof, this Agreement shall be binding upon, and inure to
the benefit of, Crown and the Shareholder and their respective heirs,
executors, administrators, successors and assigns.
10. Amendment. This Agreement may be amended from time to time by
an instrument in writing signed by the parties to this Agreement at the time of
such amendment, such instrument being designated on its face as an "Amendment"
to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
or as of the date and year first above written.
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CROWN:
CROWN GROUP, INC.
By:
---------------------------------------
Edward R. McMurphy, President
SHAREHOLDER:
--------------------------------------------
VAN P. FINGER
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