EXHIBIT 10.4 STOCK BUY AND SELL AGREEMENT
STOCK BUY AND SELL AGREEMENT
Prepared by:
Larry A. Koch
MASLON EDELMAN BORMAN & BRAND, LLP
3300 Wells Fargo
Center 90 South Seventh
Street Minneapolis,
Minnesota 55402-4140
(612) 672-8200
Copyright, 1999, 2000, 2001, 2002 Maslon Edelman Borman & Brand, LLP
(i) STOCK BUY AND SELL AGREEMENT
THIS AGREEMENT is entered into effective as of the ____ day of August,
2002 (the "Effective Date"), by and among Encore Acquisition Corporation, a
Minnesota corporation (the "Company"), and Michael Bell ("Bell").
INTRODUCTION
The Company issues to Bell and Bell owns 20,000 shares of the Common
Stock of the Company representing 20% of the outstanding common stock of the
Company as of the date hereof. The Stock was issued on condition that Bell
execute this Buy & Sell Agreement.
The parties hereto believe it to be in their best interests to restrict
the transfer of such stock and any other stock of the Company Bell may acquire
in the future and to provide for the orderly future disposition of such shares
if certain contingencies occur.
(ii) AGREEMENT
NOW, THEREFORE, in consideration of the facts stated above, which are a
part of this Agreement, the parties agree as follows:
RESTRICTIONS ON TRANSFER AND GENERAL DEFINITIONS
Restrictions on Transfer.
Governing Principle.
No Transfer (defined below) or attempted Transfer of
Shares (defined below) during lifetime or at death, whether
voluntary or involuntary, or with or without consideration,
will be effective and binding upon Bell or the Company unless
the parties first comply with all of the applicable provisions
of this Agreement relative to any such transfer.
During the first ten (10) years of this Agreement,
Bell shall not Transfer nor attempt to Transfer all or any of
the Shares to any person or entity other than the Company or
Navarre Corporation (Navarre) without the prior written
consent of the Company and Navarre.
Compliance with Securities Laws. No Transfer of any Shares
shall be made or be effective unless and until such Transfer complies
with all federal and state securities laws applicable to such
transaction. At the request of the Company, the Transferring
Shareholder shall deliver to the Company an opinion of counsel, which
counsel and opinion shall be reasonably satisfactory to the Company, to
the effect that the Transfer satisfies this Section.
Conditions to Transfer. No Transfer or attempted Transfer of
Shares by Bell during lifetime or at death, whether voluntary or
involuntary, or with or without consideration, whether or not permitted
under the terms of this Agreement, will be effective and binding upon
the Company unless the parties to the Transfer first comply with the
provisions of this Agreement that are relative to any such transfer
including the following conditions:
Any Shares Transferred shall remain subject to this
Agreement as if they were held by the Shareholder, except that
the Transferee(s) shall be substituted for the Shareholder or
the Shareholder's legal representative with respect to any
notices, payments or Transfer of Shares under this Agreement.
The Company and the Other Shareholders may require
the Transferee(s) and any beneficial owners of the Transferred
Shares, including, but not limited to, any beneficiaries,
partners or their guardians, to sign reasonable
acknowledgments that the Shares Transferred are subject to the
terms of this Agreement and powers of attorney authorizing the
execution of documents necessary to insure compliance with the
terms of this Agreement.
The Shareholder shall give the Company prompt written
notice of the Transfer together with such information
regarding the Transferee(s), or the trustee(s) as the case may
be, and any beneficial owners, as the Company may reasonably
request.
Transfers Not In Compliance. In the event any purported
Transfer of Shares by Bell does not comply with this Agreement, the
purported Transferee or successor by operation of law shall not be
deemed to be a shareholder of the Company for any purpose and shall not
be entitled to any of the rights of a shareholder, including, without
limitation, the right to vote the Shares or to receive a certificate
for the Shares or any dividends or other distributions on or with
respect to the Shares.
General Definitions. In addition to the terms defined above and
elsewhere in this Agreement, the following capitalized terms, for purposes of
this Agreement, have the respective meanings set forth below:
"Affiliate" shall have the meaning set forth in Rule 405
promulgated under the Securities Act.
"Affected Shares" means Shares subject to an actual or
proposed Voluntary or Involuntary Transfer, an Option or a right of
first refusal hereunder.
"Bell" means Michael Bell.
"Business Day(s)" means any weekday excluding Sundays,
Saturdays and federal holidays.
"Direct Lineal Descendants" of an individual means his or her
children, grandchildren, great grandchildren and so on, by natural
birth or legal adoption; including without limitation (i) any
illegitimate child acknowledged by his or her parent as the parent's
child, if the parent is such individual or his or her Direct Lineal
Descendant; and (ii) the Direct Lineal Descendants of such child.
"Involuntary Transfer" means a Transfer by legal process as
described in Section 2.3.2.2.
"Involuntary Transferee" means a person or entity that
receives Shares by reason of an Involuntary Transfer under Section
2.3.2.2 of this Agreement or a successor in title to such Affected
Shares.
"Option" means the right or option of any Shareholder or the
Company to acquire Affected Shares pursuant to Article 2 hereof.
"Option Period" means, unless another option period is
specifically provided, the thirty (30) day period following the date on
which the last of the Other Shareholders received written notice of a
proposed Transfer, unpermitted Transfer or Involuntary Transfer of
Affected Shares or the occurrence of any other event giving rise to a
right or option to acquire Affected Shares, in which the Permitted
Transferees may elect to purchase such Affected Shares pursuant to the
terms of this Agreement.
"Other Shareholders" means shareholders other than Bell who
hold shares other than Shares Transferred directly or indirectly from
Bell.
"Other Shares" means shares of stock of the Company held by
Other Shareholders.
"Permitted Affiliate" means an Affiliate of the Shareholder
the equity interests of which are held solely by the Shareholder,
Shareholder's spouse, Direct Lineal Descendant, parents, Permitted
Trusts and Permitted Partnerships.
"Permitted Partnership" means a partnership, the equity
interests of which are held solely by the Shareholder, Shareholder's
spouse, Direct Lineal Descendant, parents, Permitted Trusts and
Permitted Affiliates.
"Permitted Transfer" means any voluntary Transfers of Affected
Shares as permitted under this Agreement.
"Permitted Transferee" means (except as provided below):
the Shareholder's Spouse,
the Shareholder's Lineal Descendants,
the Shareholder's Parents,
a Permitted Affiliate,
a Permitted Trust,
a Permitted Partnership,
the Company,
in the event of the dissolution, liquidation or
winding up of any Shareholder that is a trust, partnership,
limited liability company or corporation, the beneficiaries of
a trust that is a Shareholder, the partners of a partnership
that is such Shareholder, the members of a limited liability
company that is such Shareholder, the stockholders of a
corporation that is such Shareholder, or a successor trust all
of the beneficiaries of which, a successor partnership all of
the partners of which, or a successor limited liability
company all of the members of which, or a successor
corporation all of the stockholders of which, are the Persons
who were the partners of such partnership, members of such
limited liability company or the stockholders of such
corporation immediately prior to the dissolution, liquidation
or winding up of such Person, or
any Person to whom Shares are Transferred in
compliance with the terms of this Agreement.
Notwithstanding the foregoing, if the Company is an
"S corporation" under the Internal Revenue Code, a Permitted
Transferee shall not include any of the foregoing Persons
whose ownership of any Shares would cause the Company to cease
to be an "S corporation".
"Permitted Trust" means any of the Trusts described below:
A revocable trust created by the Shareholder
primarily for the Shareholder's benefit during his or her
lifetime and/or for his spouse, Direct Lineal Descendants,
parents or charities are the primary beneficiaries upon
his/her death.
An irrevocable trust created by the Shareholder
primarily for the benefit of his or her spouse, Direct Lineal
Descendants and/or parents.
"Person" shall mean any individual, trust or trustee, firm,
partnership, limited liability company, corporation or other entity,
and shall include any successor (by merger or otherwise) of any such
individual or entity.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Shareholder" means unless the context otherwise requires a
different meaning, Michael Bell, any direct or indirect Transferee of
any of the Shares to whom any Affected Shares are Transferred in
accordance with the terms of this Agreement and solely for purposes of
subjecting any purported Transferee to the terms of this Agreement, any
Transferee of any of the Shares even if the Transfer was not in
compliance with the terms of this Agreement, such Transferee not being
entitled to vote, to receive distributions or otherwise exercise or be
entitled to any rights, distributions or preferences on liquidation of
the Company.
"Shares" means the Shares set forth in the Introduction and
any other Shares of the capital stock of the Company held directly or
indirectly by Bell or a Shareholder as defined herein.
"Transfer" means (i) as a noun, any actual or proposed or
attempted voluntary or involuntary, directly or indirectly through the
transfer of interests in controlled Affiliates or otherwise transfer
(by operation of law, bankruptcy proceedings, court order, testamentary
instrument or otherwise), sale, exchange, gift, assignment, pledge,
hypothecation, or other encumbrance, foreclosure of a security interest
upon, or other disposition of an item or the consummation of any such
transaction, or the agreement or soliciting of any offer or agreement
to consummate any of the foregoing; or (ii) as a verb, to voluntarily
or involuntarily cause or attempt to cause a Transfer of an item.
"Transferred" means, as an adjective, that an item has been the subject
of a Transfer.
"Transferee" means a person or entity that has received a
Transfer of an item.
"Transferee Shareholder" means a Shareholder who is a
Transferee of Affected Shares pursuant to a Transfer of Shares by Bell
or a Shareholder who is a Transferee of Shares directly or indirectly
from Bell.
"Transferring Shareholder" means a Shareholder who Transfers
Affected Shares.
"Transferor" means any person or entity that Transfers
Affected Shares.
PERMITTED TRANSFERS/PURCHASE OPTIONS
Transfers to Permitted Transferees. A Shareholder may Transfer all or
part of the Shareholder's Shares to Permitted Transferees as specified in this
Section 2.1 but only after complying with all conditions to such Transfer set
forth in this Agreement including but not limited to the conditions set forth in
Section 1.1 and this Section 2.1. The Shareholder shall give the Company prompt
written notice of the Transfer (in no event later than thirty (30) days after
the Transfer) together with such information regarding the Transferees as the
Company may reasonably request.
Transfers to Other than Permitted Transferees. A Shareholder may
Transfer his or her Shares to a Person other than a Permitted Transferee, but
only as and to the extent provided for in this Agreement and only after
complying with all of the terms and conditions set forth herein for such a
Transfer, including, but not limited to, the provisions of Section 2.3.
Options to Purchase.
General. Upon the occurrence of an Option Event, the Company
shall have the Option to purchase the Affected Shares on the terms set
forth herein for each such Option Event. If the Company does not
exercise the Option granted under this Section, the Other Shareholders
whose Shares are not the Affected Shares shall have an Option to
purchase the Affected Shares as provided in Article 3.
Option Events.
Voluntary Transfers to Non-Permitted Transferees.
Any Shareholder who desires to voluntarily
Transfer all or any of his or her Shares to any
Person other than a Permitted Transferee shall first
offer the Affected Shares for sale to the Company.
Any such offer shall be made in writing to the
Company by the Transferor and shall contain the name
and address of each person to whom such Shareholder
intends to Transfer such Affected Shares and the
consideration, if any, and other terms and conditions
of the intended Transfer. Except in the case of a
Transfer without consideration, the Company may,
prior to the Transfer of any Shares hereunder,
require evidence of a bona fide offer to purchase or
provide such Shares as security.
After receipt of the Offer, and during the
Option Period as described in Section 2.3, the
Company shall have the Option, exercised as provided
in Section 2.3.3, to purchase all (but not less than
all) of the Affected Shares at the price and on the
terms set forth below:
If the Shareholder offers Affected Shares
intending to sell or exchange such Shares, the
Company may purchase all such Affected Shares either
(i) at the price and on the terms and conditions of
the intended sale or exchange, as stated in the
Transferor's offer, or (ii) at the price and on the
terms specified in Articles 4 and 5 hereof, whichever
the Company elects.
If the Shareholder offers Affected Shares
intending to Transfer, pledge or otherwise encumber,
or otherwise dispose of such Affected Shares in any
manner not described in Article 2, the Company shall
have the Option to purchase such Shares at the price
and on the terms specified in Articles 4 and 5
hereof.
If the Company does not exercise the Option
granted under this Section, the Other Shareholders
whose shares are not the Affected Shares shall have
an Option to purchase the Affected Shares as provided
in Article 3.
If neither the Company nor any of such Other
Shareholders exercise their respective options, then
the Transferor may Transfer the Affected Shares but
only (i) in strict accordance with the terms of the
Offer made to the Company, (ii) during a period of
thirty (30) days following the expiration of the
Other Shareholders' Option, (iii) solely to the
persons or entities identified in the Offer to the
Company, and (iv) only if such persons or entities,
in writing, accept and become bound by all the terms
and conditions of this Agreement. If the Transferor's
proposed disposition is not consummated within such
thirty (30) day period, such Shares shall again be
subject to all the terms and conditions of this
Agreement.
Involuntary Transfers.
In the event of any Involuntary Transfer of
all or any of the Shares of any Shareholder by reason
of (i) sale pursuant to a levy of execution, (ii)
foreclosure of pledge, (iii) garnishment, (iv)
attachment, (v) property settlement in a marriage
dissolution proceeding, or (vi) other legal process,
such Shareholder shall notify the Company in writing
in advance of such impending Transfer.
If any such Involuntary Transfer of the
Affected Shares does occur, then each resulting
Involuntary Transferee of Affected Shares shall be
deemed (whether or not the Company received notice of
such Transfer) to be a Shareholder solely for
purposes of this Section 2.3.2.2 subject to this
Agreement and such Involuntary Transferee shall
immediately offer the Affected Shares for sale to the
Company.
The Company shall have the Option during the
Option Period set forth in Section 2.3 to purchase
all (but not less than all) such Affected Shares (i)
at the price and on the terms under which the
Affected Shares were acquired by such Involuntary
Transferee, or (ii) at the price and on the terms
specified in Articles 4 and 5 hereof, whichever the
Company elects.
Such offer by an Involuntary Transferee
shall be made in writing to the Company and shall
disclose the terms and conditions of the acquisition
of such Affected Shares by such Involuntary
Transferee.
If the Company does not exercise the Option
granted under this Section, the Other Shareholders
whose Shares are not the Affected Shares shall have
an Option to purchase the Affected Shares as provided
in Article 3.
If neither the Company nor any of such Other
Shareholders exercise their respective options, then
the Affected Shares in the hands of the Involuntary
Transferee, shall remain subject to the terms and
conditions of this Agreement as if such Involuntary
Transferee was a Shareholder.
Bankruptcy.
If, pursuant to any bankruptcy proceeding,
title to a Shareholder's Shares passes other than to
the bankruptcy estate of such Shareholder, the
Company shall have the Option for a period of six (6)
months from the date the Company receives notice of
such Transfer to purchase some or all of such Shares
at the price and on the terms specified in Articles 4
and 5 hereof.
If the Company does not exercise the Option
granted under this Section, then the Other
Shareholders whose Shares are not the Affected Shares
shall have an Option to purchase some or all of such
Affected Shares as provided in Article 3.
If neither the Company nor any of such Other
Shareholders exercise their respective Options with
respect to all of the Affected Shares, then the
Affected Shares in the hands of any persons or
entities who receive them from the bankruptcy estate
shall remain subject to the terms and conditions of
this Agreement.
Sale of Assets. Upon sale of substantially all of the
Company's assets, the Company shall have the Option during the
Option Period to purchase all (but not less than all) of the
Shares at the price equal to the net price per share which
would be paid to all Shareholders upon liquidation of the
Company in the manner provided by law immediately after such
sale after payment of or establishment of reserves for all
liabilities of the Company.
Sale of Substantially all of the Other Shares. Upon
the sale of substantially all of the Other Shares of the
Company to Persons or entities in one or more related
transactions, the Company shall have the Option to purchase
all, but not less than all, of the Shares belonging to the
Shareholder at the average price and on substantially the
terms at which the holders of the Other Shares sold their
Other Shares in the Company.
Death of Bell. Upon the death of Bell, the Company
shall have an Option to purchase for a period of nine (9)
months from the later of (i) the date on which a personal
representative is appointed, or (ii) if none is appointed, the
date of Bell's death, all, but not less than all, of the
Shares held by Bell, his heirs, or his estate, or any
Transferee Shareholder, at the price equal to and on the terms
specified in Articles 4 and 5 hereof.
Termination of Bell's Employment Other Than by Death.
If Bell's employment with the Company terminates for any
reason other than his death, the Company shall have the Option
during the Option Period to purchase all (but not less than
all) of the Shares owned by Bell or any Transferee Shareholder
at the price and on the terms specified in Articles 4 and 5
hereof.
Exercise of Option.
The exercise of any Option by the Company pursuant to
this Article 2 shall be accomplished by mailing or personally
delivering written notice of such exercise to the Shareholder
of the Affected Shares or to his or her Transferee or legal
representative, as the case may be, within the Option Period.
Failure to give such written notice of exercise within the
Option Period shall constitute a rejection of the Offer or
waiver of the Option as the case may be.
If any such Option is not fully exercised by the
Company, then on or prior to the last day of the Option
Period, the Company shall mail or otherwise deliver written
notice of such non-exercise to all Other Shareholders.
Restriction on Company Purchase. Notwithstanding any other provisions
of this Agreement, the Company shall neither elect nor be obligated to purchase
any Shares if the payment of the Purchase Price would render the Company unable
to pay its debts in the ordinary course of business or would violate any terms
of any agreement to which the Company is a party provided such agreement was
entered into in the ordinary course of business and not with a view to prevent
redemptions under this Agreement.
Transferee Stock. If the Company has the right or Option to purchase
the Shares held by the Shareholder, subject to the Option as provided in Article
3, the Company shall have the right and Option, but not the obligation, to
purchase any of the Transferred Shares previously owned by the Shareholder and
Transferred by the Shareholder whether such Transferee was or was not a
Permitted Transferee unless such right was expressly waived in writing by the
Company and the Other Shareholders. If the Company has the right, Option or
obligation to purchase the Affected Shares held by the Shareholder, subject to
the Option as provided in Article 3, the Company shall have the right, Option
and obligation to purchase any of the Transferred Shares previously owned by the
Shareholder unless such right was expressly waived in writing by the Company and
the Other Shareholders.
Required Purchase of Shares.
Bell's Put Right.
Within thirty (30) days after any calendar quarter
beginning on or after the Effective Date, Bell, at his sole
option, may cause the Company to repurchase that number of
Shares which when added to all Shares previously purchased by
the Company pursuant to this Section is equal to or less than
fifty percent (50%) of 20,000 as adjusted for any stock splits
multiplied by the Acquisition Percentage (defined below) (the
"Put Right") at the purchase price per share determined
pursuant to Section 0. Bell shall exercise the Put Right by
delivering written notice of same to the Company in compliance
with Section 0.
Within thirty (30) days after the end of any calendar
quarter beginning after the date which is five (5) years after
the Effective Date, Bell, at his sole option, may cause the
Company to repurchase all or any of Shares not previously
purchased pursuant to this Section 2.6.1.1 at the purchase
price determined under Section 0.
Deceased Shareholder's Put Option. After the death of Bell,
the personal representative of Bell (or if no personal representative
is appointed, Bell's heirs at law, devisees and any Permitted
Transferees who are Shareholders but only as and to the extent that
they received a Transfer of Shares from Bell) may during each of the
five (5) consecutive twelve (12) month periods beginning on Bell's
death require the Company to purchase from such personal
representative, heirs at law, devises or Permitted Transferees in each
such twelve (12) month period up to twenty percent (20%) of the Shares
held by such personal representative, heirs at law, devisees or
Permitted Transferees, as the case may be, at the price and on the
terms specified in Articles 4 and 5 hereof. To require such purchase,
the personal representative, heirs at law, devisees or Permitted
Transferees, as applicable, shall mail or personally deliver written
notice of such required purchase to the Company.
Tag-Along Rights. Except as provided below, if during a
twenty-four (24) month period, the Other Shareholders sell more than
fifty percent (50%) of their Other Shares to one or more Persons who
are not Affiliates of the Company or the Transferring Other
Shareholder, in one or a series of related transactions, such Other
Shareholders or the Company shall provide Bell and each Shareholder who
is a Transferee of Bell (each a "Notice Recipient") and the Company
with not less than twenty (20) business days' prior written notice of
such proposed sale, which notice shall include all of the material
terms and conditions of such proposed sale and which shall identify
such Shares and such purchaser (the "Sale Notice"); and each Notice
Recipient shall have the Option, exercisable by written notice to the
Company or such Transferring Other Shareholder within ten (10) business
days after receipt of the Sale Notice, to require the Transferring
Other Shareholders to arrange for such purchaser to purchase the same
percentage (the "Percentage") of such Shares then owned by such Notice
Recipient as the ratio of the total number of such Other Shares which
are to be sold by the Other Shareholders pursuant to the proposed sale
to the total number of such Shares owned by the Other Shareholders
immediately prior to such Transfer, or any lesser amount of such Shares
as such Notice Recipient shall desire, together with the Other Shares
at the same time as, and upon the same terms and conditions (including
all direct or indirect consideration or compensation) at which, the
Other Shareholders sell their Other Shares. If a Notice Recipient shall
so elect, the Other Shareholders shall either (a) arrange for the
proposed purchaser to purchase all (or such portion as such Notice
Recipient shall specify) of the same Percentage of such Shares then
owned by such Notice Recipient at the same time as, and upon the same
terms and conditions at which the Other Shareholders sell their Other
Shares, including any related covenant not to compete or similar
restriction, provided that, if such purchaser shall elect to purchase
only such aggregate number of such Shares as originally agreed with the
Other Shareholders, then the number of such Shares to be sold by the
Other Shareholders and all Notice Recipients electing to participate in
the proposed sale shall be reduced pro rata to such aggregate number,
or (b) not effect the proposed sale to such purchaser. In the event
that a Notice Recipient does not exercise its right to participate in
such sale or declines to so participate, the Other Shareholders shall
have one hundred twenty (120) days from the date of such Sale Notice to
consummate the transaction on terms substantially no more favorable
than those set forth therein without being required to provide an
additional Sale Notice to the Shareholders.
PURCHASE BY OTHER SHAREHOLDERS
Other Shareholders' Option to Purchase. If any Option granted by
Article 2 is not exercised by the Company, then such Option shall be considered
to have been granted to the Other Shareholders whose Shares are not subject to
any such Option. For a period of thirty (30) days commencing on the day
following the expiration of the Company's Option Period, such Other Shareholders
shall have the right and Option to purchase all (but not less than all) of such
Affected Shares at the same terms and per-share price at which such Affected
Shares were made available to the Company under Article 2. If the Company had an
election under Article 2 regarding the per-share price and terms, the per-share
price and terms for purchase by the Shareholders under this Section shall be the
per-share price and terms elected by the vote of a majority of the Other Shares
owned by the Other Shareholders exercising the Option to purchase the Shares.
Procedure. The exercise of any Option by a Other Shareholder to
purchase Affected Shares pursuant to Section 3.1 shall be accomplished by
mailing or personally delivering written notice of such exercise to the
Shareholder (or his or her Transferee, successor, or legal representative, as
the case may be) of the Affected Shares, within the thirty (30)-day Option
Period. An Other Shareholder's failure to give such written notice of exercise
within the thirty (30)-day period shall constitute a rejection of the Offer made
by the Shareholder (or Transferee, successor, or legal representative) of the
Affected Shares.
Proportional Purchases. If more than one Other Shareholder exercises
any Option to purchase Affected Shares pursuant to Section 3.1, each Other
Shareholder so exercising the Option shall be entitled to purchase the same
proportion of the Affected Shares as the total number of Shares owned by such
Other Shareholder, on the first day the Option is exercisable, bears to the
total number of Other Shares owned on that date by all Other Shareholders
electing to exercise that Option.
PURCHASE PRICE
Purchase Price.
Except as otherwise provided in Article 2 or this Article, the
Purchase Price of each Share held by a Shareholder shall be the Formula
Value of each Share, as determined pursuant to Section 4.2, multiplied
by, the Acquisition Percentage set forth in Section 4.1.2.
Except as provided below, the Acquisition Percentage shall be
as set forth in the following table:
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Acquisition
The Period in which the Termination of Bell's Employment Percentage
occurs or the occurrence of the event giving rise to the Option to
buy or the Put, which ever is earlier:
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After the Date hereof and on or before September 30, 2002 1%
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On or after October 1, 2002 and on or before December 31, 2002 4%
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On or after January 1, 2003 and on or before March 31, 2003 10%
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On or after April 1, 2003 and on or before June 30, 2003 15%
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On or after July 1, 2003 and on or before September 30, 2003 20%
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On or after October 1, 2003 and on or before December 31, 2003 25%
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On or after January 1, 2004 and on or before March 31, 2004 30%
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On or after April 1, 2004 and on or before June 30, 2004 35%
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On or after July 1, 2004 and on or before September 30, 2004 40%
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On or after October 1, 2004 and on or before December 31, 2004 45%
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On or after January 1, 2005 and on or before March 31, 2005 50%
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On or after April 1, 2005 and on or before June 30, 2005 55%
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On or after July 1, 2005 and on or before September 30, 2005 60%
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On or after October 1, 2005 and on or before December 31, 2005 65%
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On or after January 1, 2006 and on or before March 31, 2006 70%
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On or after April 1, 2006 and on or before June 30, 2006 75%
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On or after July 1, 2006 and on or before September 30, 2006 80%
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On or after October 1, 2006 and on or before December 31, 2006 85%
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On or after January 1, 2007 and on or before March 31, 2007 90%
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On or after April 1, 2006 and on or before June 30, 2007 95%
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On or after July 1, 2007 100%
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Notwithstanding the foregoing table, the Acquisition
Percentage shall be one hundred percent (100%):
Upon a termination of Bell's employment with the
Company by the Company for any reason (including but not
limited to death or disability) other than Cause as defined
herein, or the reduction of Bell's responsibilities in the
Company for any reason other than Cause; or
Upon the occurrence of a Change of Control as defined
herein; or
Upon Bell's termination of his employment by the
Company for Good Reason as defined below.
Cause. Termination for "Cause" shall mean:
the willful and continued failure by Bell to
substantially perform his material duties under his Employment
Agreement with the Company (other than any such failure
resulting from Bell's incapacity due to physical or mental
illness or any such actual or anticipated failure after the
issuance of a Notice of Termination by Bell for Good Reason),
after written demand for substantial performance of his
material duties is delivered by the Company that specifically
identifies the manner in which the Company believes Bell has
not substantially performed his material duties, or
the willful engaging by Bell in misconduct which is
materially injurious to the Company, monetarily or otherwise.
No act, or failure to act, on Bell's part shall be considered
"willful" unless done, or omitted to be done, by him not in
good faith and without reasonable belief that his action or
omission was in the best interest of the Company.
Notwithstanding the foregoing, Bell shall not be
deemed to have been terminated for Cause without (i)
reasonable notice to Bell setting forth the reasons for the
Company's intention to terminate for Cause, (ii) an
opportunity for Bell, together with his counsel, to be heard
before the Board, (iii) delivery to Bell of a Notice of
Termination from the Board finding that in the good faith
opinion of the Board Bell was guilty of conduct set forth
above in Sections 0 or 0 hereof, and specifying the
particulars thereof in detail and (iv) a period not to exceed
thirty (30) days after such Notice of Termination to cure such
breach provided that Bell shall be entitled to only one cure
period within any twelve (12) consecutive monthly period.
Change in Control. A "Change in Control" of the Company shall
occur if:
any person (as defined in Sections 3 (a) (9) and
13(d)(3) of the '34 Act) becomes the "beneficial owner" (as
defined in Rule 13d-3 promulgated pursuant to the '34 Act),
directly or indirectly, of more than 50% of combined voting
power of Navarre or the Company's then outstanding securities;
provided, however, that if any such person is now the
beneficial owner of more than 50% of such voting power as of
the date of execution of this Agreement, the present existence
of such ownership shall not constitute a "Change in Control"
unless such person changes in identity or composition or the
same person becomes the beneficial owner, directly or
indirectly, of 50% of such voting power; or
the occurrence within any twelve (12)-month period
during the term of the Agreement of a change in the Board with
the result that the Incumbent Members (those directors who
were directors as of the date hereof or whose replacements
were approved by such directors) do not constitute a majority
of the Board; or
the merger or consolidation with or into another
corporation other than an Affiliate of Navarre, but only if
such transaction results in which the shareholders of the
Company immediately before such event do not hold directly or
indirectly more than fifty percent (50%) of the voting stock
of the merged or consolidated companies; or
the consummation of an agreement to sell or otherwise
dispose of all or substantially all of the Company's assets
(including a plan of liquidation).
Good Reason. Termination for "Good Reason" shall mean one or
more of the following:
A demeaning or a material adverse involuntary change
in Bell's duties, status, title or position as Chief Executive
Officer of the Company, such as the removal of Bell as Chief
Executive Officer of the Company, or a material reduction of
his responsibilities without the consent of Bell; or
A material change in the principle business of the
Company.
a reduction by the Company in Bell's base salary as
in effect on the date hereof or as the same may be increased
from time to time during the term of this Agreement; or
an involuntary transfer of Bell's place of work to a
location which is more than fifty miles from Bell's place of
work as of the date hereof; or
any material breach by the Company of any provision
of this Agreement or Bell's Employment Agreement with the
Company which is not cured within 30 days (10 days in the
event of a failure to pay money) of written notice to the
Company of such breach, provided, that the Company shall be
entitled to only one such breach in any twelve (12)
consecutive monthly period.
Formula Value.
The "Formula Value" of each Affected Share shall be determined
as of the end of the month preceding the month in which the Company's
sixty (60)-day option period commences to run pursuant to Article 2, or
as of the end of the month immediately preceding the date of the
deceased Shareholder's death or the date of the notice of required
purchase under Section 2.6.1 or the end of the month immediately
preceding the date on which Bell exercises his Put Right , whichever
applies, and shall be equal to (a) the amount determined under Section
0, divided by (b) the total number of shares of common stock (voting
and non-voting) then outstanding.
The amount determined under this Section shall be equal to:
(a) the Weighted Net Sales (defined below) multiplied by thirteen and
one-half percent (13.5%), plus (b) the Weighted EBITDA (defined below)
multiplied by four hundred percent (400%), minus
(c) Acquisition Cost (defined below), minus (d) New Debt (defined
below), minus (e) New Leases (defined below), and minus (f) any amount
previously paid to Bell pursuant to this Agreement.
Definitions. For purposes of Section 0:
"Net Sales" shall mean the Company's gross sales less
returns and allowances for the immediately preceding four
quarters, determined in accordance with generally accepted
accounting principles.
"EBITDA" shall mean earnings before interest, income
taxes, depreciation and amortization for the immediately
preceding fiscal year, determined in accordance with generally
accepted accounting principles.
"Acquisition Cost" shall mean the sum of Ten million
Dollars ($10,000,000.00).
"New Debt" means outstanding principle and accrued
interest attributable to any interest bearing debt existing on
the date of exercise of the Put Right but not assumed in
connection with the purchase of the assets of the Company.
"New Leases" means the present value of minimum lease
commitments, determined as of the date of exercise of the Put
Right in accordance with generally accepted accounting
principles, less the present value of minimum lease
commitments on the date the assets of the Company were
purchased by Navarre and/or its affiliated entities.
"Weighted EBITDA" means an amount equal to: (a) the
sum of (i) the EBITDA for the most recent completed fiscal
year of the Company multiplied by three, plus (ii) the EBITDA
for the fiscal year of the Company next preceding the most
recent completed four quarters of the Company, divided by (b)
four (4).
"Weighted Net Sales" means an amount equal to: (a)
the sum of (i) the Net Sales for the most recent completed
four quarters of the Company multiplied by three, plus (ii)
the Net Sales for the four quarters nos. 5, 6, 7 and 8 divided
by (b) four (4).
The Formula Value shall be determined, by the independent
public accountants then serving the Company, in accordance with
generally accepted accounting principles applied consistently with the
principles previously followed in preparing annual financial statements
of the Company. The expense of determining the Formula Value shall be
borne by the selling Shareholder (or his or her transferee or legal
representative, as the case may be) if the Shareholder is exercising
any right under this Agreement to have his Shares purchased and by the
Company if the Company is exercising its right or option to purchase
Shares pursuant to this Agreement.
PAYMENT OF PURCHASE PRICE
Payment in Cash or by Installments. Except as otherwise provided in
Article 2, the Purchase Price of any Affected Shares purchased by the Company or
any Shareholder pursuant to this Agreement shall be payable in installments by
delivery of a negotiable promissory note of the purchaser, substantially in the
form attached hereto as Exhibit 5.1, payable in forty-eight (48) equal monthly
installments of principal and interest, commencing on the date of tender as
provided in Section 6.1, and bearing interest from the date of tender at the
mid-term applicable federal rate, compounded monthly (determined under Internal
Revenue Code Section 1274(d)). Notwithstanding the foregoing, the payment
hereunder shall not be less than the amount necessary to pay any payment due
under any obligation to the Company arising in connection with the acquisition
of such Shares by Bell from the Company.
CLOSING AND SECURITY
Closing of Purchase. If the Company is required to purchase Shares
pursuant to Article 2 or if the Company exercises any of its Options under
Article 2 to purchase Shares, then within thirty (30) days after the event
giving rise to the Company's purchase obligation or the expiration of the
Company's Option Period under Article 2, whichever applies, the Company shall
tender to the selling Shareholder or other offeror, as the case may be, the
Purchase Price for such Shares, in cash or as otherwise provided in Article 5.
If any Shareholders exercise any of their Options to purchase Shares pursuant to
Article 3, then within thirty (30) days after the expiration of the
Shareholders' Option Period, the Shareholders exercising such Option shall
tender the Purchase Price for the Shares in cash or as otherwise provided in
Article 5. Coincident with the payment of said Purchase Price, the Shareholder
or other offeror shall deliver the certificate or certificates representing such
Shares to the Company, duly endorsed in blank for transfer of record upon the
books of the Company. In the case of a purchase from a transferee or legal
representative of a Shareholder, the certificates shall be accompanied by
satisfactory evidence of its title.
Security for Installment Payments. If the Company or any Shareholder
acquiring any Affected Shares pays all or a portion of the purchase price in
installments, the certificates representing the Affected Shares so purchased,
together with a stock power and pledge agreement reasonably acceptable to the
Transferring Shareholder and signed by the Transferee Shareholder indicating
that such Shares have been pledged as security for the payment shall thereupon
be delivered to the Company and the Company shall deliver new certificates for
the Affected Shares so purchased in the name of the Transferee Shareholder or
the Company as the case may be and such certificates shall be delivered together
with the pledge agreement to the Transferring Shareholders.
If such pledge agreement is not effective under applicable
law, the certificates together with the stock power shall be delivered
by the Transferring Shareholder in escrow to a bank or other
institution agreed upon by the Transferring Shareholder and the Company
or the Transferee Shareholder, to serve as security for the payment of
the promissory note issued by the acquiring Shareholder or the Company
as the case may be. If the purchaser is other than the Company, then
the Shares held in escrow shall, for so long as the purchaser is not in
default under the terms of such promissory note, be treated as though
they were held by the Transferee Shareholder for the purposes of
voting, dividends and other rights. In the event that a default under
the terms of such promissory note remains uncured for thirty (30) days
after written notice of such default is given to the maker of the note,
the holder of the note may take either or both of the following
actions:
The holder of the note may declare the full amount of
such note (including accrued interest, collection costs and
attorneys' fees) due and payable forthwith by so notifying the
maker of the note.
The escrow agent shall, upon request of the holder of
the note and subject to all applicable securities laws, offer
such Shares for public or private sale after ten (10) days
notice to the Company (and any other maker of the note), and
the maker of such a note hereby waives all other notice and
legal requirements for foreclosure. The proceeds of any such
sale shall be applied first to expenses of sale (including
legal expenses), then to sums due on such note, and then to
the maker of the note.
Upon payment in full of such note, the escrow agent
shall release the certificates representing the Transferred
Shares securing the note to the pledgor of such Shares.
REPRESENTATIONS AND WARRANTIES; CERTAIN COVENANTS
Representations and Warranties of the Company. The Company represents
and warrants to each Shareholder, as of the date hereof, as follows:
Corporate Authority. The Company has full power and authority
to execute, deliver and perform this Agreement;
Due Authorization. This Agreement has been duly and validly
authorized, executed and delivered by the Company and constitutes a
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except that (i) the
enforceability hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect affecting creditors' rights, (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to certain equitable defenses and to the discretion of the
court before which any proceedings therefor may be brought, and (iii)
the rights to indemnity hereunder may be limited by federal or state
securities laws or the public policy underlying such laws;
No Conflict. The execution, delivery and performance of this
Agreement by the Company do not violate or conflict with or constitute
a default under (i) the Company's certificate of incorporation or
by-laws, (ii) any judgment, order or decree, or statute, law,
ordinance, rule or regulation, of any governmental entity applicable to
the Company or (iii) any material agreement to which it is a party or
by which it or its property is bound;
Registration Rights. Except as provided herein, no other party
is entitled to any registration or similar right with respect to any
securities of the Company; and
Voting Agreements. Except as set forth herein, the Company is
not aware of any voting trust, voting agreement or arrangement with
respect to any of its voting securities.
Representations and Warranties of the Shareholders. Each Shareholder
individually represents and warrants to each other Shareholder and the Company
as follows:
Corporate Authority. The Shareholder has full power, capacity
and authority to execute, deliver and perform this Agreement;
Due Authorization. This Agreement has been duly and validly
authorized, executed and delivered by the Shareholder and constitutes a
valid and binding obligation of the Shareholder, enforceable against
the Shareholder in accordance with its terms, except that (i) the
enforceability hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect affecting creditors' rights, (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to certain equitable defenses and to the discretion of the
court before which any proceedings therefor may be brought, and (iii)
the rights to indemnity and contribution hereunder may be limited by
federal or state securities laws or the public policy underlying such
laws; and
No Conflict. The execution, delivery and performance of this
Agreement by the Shareholder do not violate or conflict with or
constitute a default under (A) the Shareholder's organizational
documents, (B) any judgment, order or decree or statute, law,
ordinance, rule or regulation of any governmental entity applicable to
the Shareholder, or (C) any material agreement to which it is a party
or by which it or its property is bound.
LEGEND AND CONSENT TO AGREEMENT
Legend.
Contemporaneously with the execution of this Agreement, the
Shareholders shall deliver to the Company certificates for all Shares
and the Company shall cause a legend, reading as follows, to be
conspicuously endorsed on each certificate:
"NOTICE"
The transfer or pledge of the Shares represented by
this Certificate is restricted by, and subject to, the
provisions of a certain Stock Buy and Sell Agreement between
the Company and Michael Bell, dated ______, 2002, providing
restrictions on the transfer of this stock. A copy of said
Stock Buy and Sell Agreement is on file at the registered
office of the Company. By accepting this Certificate the
holder thereof agrees to be bound by the terms of said Stock
Buy and Sell Agreement.
During the term of this Agreement, a legend reading as above
shall be conspicuously endorsed on each certificate representing Shares
hereafter issued by the Company. The failure of (a) the Shareholders to
surrender their stock certificates, or (b) the Company to endorse a
legend on the certificates shall not void this Agreement as between the
parties to the Agreement or any Person with knowledge of this
Agreement.
Filing of Agreement. An executed counterpart of this Agreement shall be
placed and remain on file at the registered office of the Company.
Transferee Consent to Agreement. No sale, Transfer, assignment,
exchange, pledge, encumbrance or other disposition of Shares shall be made by
any Shareholder (or his or her transferee or legal representative) to any person
(including any individual, partnership, corporation or other entity) unless and
until such person shall agree in writing to take such Shares subject to, and
shall subscribe to the terms and conditions of, this Agreement. Any person who
so agrees in writing to take Shares subject to, and subscribes to the terms and
conditions of this Agreement shall become a "Shareholder" as that term is used
in this Agreement and shall be entitled to the benefits of, and shall be bound
by, this Agreement.
REMEDIES
It is understood and agreed by the parties hereto that, in the event of
any breach (whether threatened or hereafter existing) of this Agreement, the
measure of damages at law to the affected party would be difficult to ascertain
and the remedy at law would be inadequate. Accordingly, it is specifically
agreed that any party hereto shall be entitled to any and all appropriate
equitable remedies, including without limitation, the remedies of specific
performance and temporary and permanent injunctions to affirmatively enforce the
terms and conditions of this Agreement, as well as temporary or permanent
injunctive relief prohibiting threatened or existing breaches of this Agreement.
Such equitable remedies as shall be available from time to time during the term
of this Agreement, shall be cumulative, not exclusive, and shall be in addition
to any other remedies which the party may have at law or otherwise. For purposes
of this Agreement, time shall be considered of the essence.
SHAREHOLDER CONTROL PROVISIONS
Voting Rights. It is the intent of the parties that neither Bell nor
any Transferee of Bell shall have limited right to exercise the voting rights
attributable to the Shares. To that end, Bell and his Transferees hereby
irrevocably assigns to the Other Shareholders as of the date hereof in
proportion to their ownership of Stock in the Company ("Current Shareholders")
that portion of Bell and his Transferees' voting rights determined by
subtracting the corresponding to Acquisition Percentage (determined as if the
Employee's employment had terminated as of the earlier of , the actual
termination of Bell's employment or the date of the vote on any issue coming
before the shareholders of the Company) set forth in Section 0 from 100%. To the
extent necessary to effectuate the parties' intent, Bell and his Transferees
hereby grant such Current Shareholders an irrevocable proxy to vote the Shares
held by Bell and his Transferees and further agree, as necessary, to exercise
all voting rights with respect to the Shares which the Other Shareholders are
entitled to vote as may be directed by each Current Shareholder from time to
time with respect to such Current Shareholder's pro rata share of the voting
rights of the Shares and to execute and deliver all documents reasonably
requested by such Current Shareholders to effectuate such rights. In addition,
Bell and his Transferees hereby irrevocably appoint the Current Shareholders as
their lawful attorney-in-fact, with full right of substitution, to execute such
documents and take such action for and on behalf of Bell and his Transferees as
may be necessary or appropriate to effectuate the intent of the parties with
respect to such voting rights.
COVENANT NOT TO COMPETE.
Covenant Not To Compete.
In consideration of the purchase of all or part of the Share
of owned by Bell or his Transferee's, Bell hereby agrees that, during
the "Restricted Period" (defined below), Bell shall not, without the
Company's prior written consent (which may be withheld with or without
reason), "engage or be interested, directly or indirectly" (as
hereinafter defined), whether alone or together with or on behalf of or
through any "other entity" (as hereinafter defined), whether as sole
proprietor, partner, investor, stockholder, or any type of principal
whatever, or as agent, technical advisor (except as Bell is employed by
the Company), lender, trustee, beneficiary, or otherwise, in any phase
of the "Restricted Business" in the "Restricted Area" (defined below)
with any Customer (as defined below) or any Prospective Customer (as
defined below).
Definitions.
Except as provided below, the term "Restricted Business" as
used herein means any business any part of which consists of the
[design, manufacture and/or sale and servicing of equipment and
supplies of the type sold by the Company at any time] and likewise
includes any business of a kind in whole or in part similar to that
engaged in by the Company. The term "Restricted Business" shall not
include [Exclusions].
The term "other entity" as used herein means any person, firm,
partnership, association, trust, venture, corporation or business
organization, entity or enterprise, or any combination thereof.
The term "engage or be interested, directly or indirectly" as
used herein shall include, without limitation, giving advice or
technical or financial assistance by loan, guarantees, stock
transactions or in any other manner or to any other entity doing or
about to do such Restricted Business in the Restricted Area covered by
this Agreement, but shall not by itself include the ownership of less
than one percent (1%) of the outstanding stock of a corporation the
shares of which are publicly traded (other than shares of the Company).
The "Restricted Period" means the period commencing on the
date hereof and ending on the earlier of (i) the date that Bell no
longer is receiving or being paid his salary and benefits or (ii) the
date which is five (5) years after the date that the Bell ceases to
render services to the Company under this Agreement for any reason.
The "Restricted Area" means any location in the world where
the Company has sold products during the one (1) year period ending on
the date hereof.
The term "Customers" as used herein means any person or entity
that has purchased goods or services form the Company during the one
(1) year period ending on the date of the Bell's termination of
employment.
The term "Prospective Customers" as used herein means any
other entity that the Company has actively sought as a customer during
the one (1) year period ending on the date of the Bell's termination of
employment.
Extended Duration. The duration of the foregoing covenant shall be
extended beyond the time period set forth therein for a period equal to the
duration of any breach or default of such covenant by Bell.
GENERAL
Benefit and Assignment. This Agreement shall bind and, except as
otherwise stated herein, shall inure to the benefit of the parties hereto, their
successors, assigns, heirs and legal representatives, as the case may be. The
Company, by action of its Board of Directors, may assign, in whole or in part,
with or without consideration, any option or other rights given it hereunder to
the Shareholders on a pro rata basis.
Termination. This Agreement shall terminate upon the voluntary written
agreement of all parties to this Agreement or, except as otherwise specifically
provided hereunder, upon the bankruptcy, receivership or dissolution of the
Company. Upon the termination of this Agreement, the Shareholders shall
surrender to the Company their certificates for their Shares and the Company
shall issue to them new certificates for an equal number of Shares without the
legend set forth in Section 8.1 hereof.
Notices.
Any and all notices provided for in this Agreement shall be in
writing and sent, by prepaid registered or certified mail, to the
respective party's address, as set forth below:
If to the Company: To the address of the Company's principal office.
If to a Shareholder: To the address last shown for the Shareholder in
the records of the Company or to such other
address as the Shareholder may hereafter designate
by written notice to the other parties.
Any party hereto may change its address by notice to the other
parties given as set forth above. Any notice and any payment due
hereunder shall be deemed given or paid, as the case may be, when
mailed as set forth above.
Proxy. For so long as this Agreement is in effect, if any Shareholder
fails or refuses to vote that Shareholder's Shares pursuant to this Agreement,
then, without further action by such Shareholder, each other Shareholder shall
have an irrevocable proxy coupled with an interest to vote such Shareholder's
Shares in accordance with this Agreement, and each Shareholder hereby grants to
the other Shareholders such irrevocable proxy coupled with an interest.
Entire Agreement. This Agreement contains the entire agreement between
the parties hereto with respect to the transactions contemplated hereby, and
contains all of the terms and conditions thereof and supersedes all prior
agreements and understandings relating to the subject matter hereof.
Amendment. This Agreement may be altered, amended or terminated only by
a writing signed by the Company and all the Shareholders.
Construction. This Agreement shall be governed by and construed
according to the laws of the State of Minnesota without regard to such state's
principles regarding conflict of laws. Venue for any proceeding regarding the
terms of this Agreement or the enforcement thereof shall be only in Hennepin
County, Minnesota. The headings and captions are for the benefit of the reader
and shall not be taken into account in interpreting the terms of this Agreement.
Jury Trial/Arbitration. THE PARTIES HERETO WAIVE THEIR RIGHT TO A JURY
TRIAL WITH RESPECT TO DISPUTES HEREUNDER AND ALL SUCH DISPUTES SHALL BE SETTLED
BY BINDING ARBITRATION PURSUANT TO THE RULES OF THE AMERICAN ARBITRATION
ASSOCIATION IN MINNEAPOLIS, MINNESOTA AND THE ORDER OF SUCH ARBITRATORS SHALL BE
CONCLUSIVE, FINAL AND BINDING ON ALL PARTIES HERETO AND MAY BE ENTERED AS A
JUDGMENT IN ANY COURT HAVING JURISDICTION OVER THE PARTIES.
Severability. If any provision of this Agreement is held to be unlawful
or unenforceable in any respect by a court of competent jurisdiction, such
provision shall be severed and shall not affect the validity or enforceability
of the remaining provisions. Further, if any provision of this Agreement is held
to be over broad, such provision shall be deemed amended to narrow the
application to the extent necessary to render the provision enforceable
according to applicable law.
Counterparts. This Agreement may be executed in any number of
counter-parts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first above stated.
ENCORE ACQUISITION CORPORATION
By ________________________________
Its ____________________________
"COMPANY"
________________________________
Michael Bell
"SHAREHOLDER"
LIMITED GUARANTY
The undersigned hereby guarantees the collection of all amounts payable
by Encore Acquisition Corporation ("Encore") to Michael Bell pursuant to that
certain Stock Buy & Sell Agreement dated August 1, 2002 between Encore and
Michael Bell (the "Buy & Sell Agreement") during the twelve month period
beginning on the Effective Date of the Buy & Sell Agreement but only as and to
the extent that the undersigned as received disproportionate distributions of
cash or property from Encore.
This Guaranty shall be governed by the laws of the State of Minnesota
without regard to such State's conflict of laws principles.
Executed this ___ day of August, 2002.
Navarre Corporation
By: ________________________
Its: _________________________
EXHIBIT 5.1
PROMISSORY NOTE
$______________ Minneapolis, Minnesota
-----------, ---------
FOR VALUE RECEIVED, _____________________________ ("Maker"), promises
to pay to the order of [Holder] ("Holder") at its office at [Holder's Address]
or at such other place as the Holder hereof may from time to time designate in
writing, in lawful money of the United States of America, the principal sum of
____________________ and ___/100 Dollars ($___________), together with interest
from the date hereof on the principal balance from time to time unpaid at the
rate of ____ percent (_____%) per annum compounded (monthly) (annually). In no
event shall interest hereunder be in excess of the maximum interest rate
permitted by law.
1. The principal sum and interest thereon shall be payable in _______ (___)
equal monthly installments of principal and interest, in the amount of
_______________________________Dollars ($___________________) each, the first of
said installments of principal and interest being due and payable on
______________, 20 ___, and thereafter on the same day of every succeeding month
until ______________, 20___, when a final installment will be due and payable,
equal to the remaining balance, if any, of principal and accrued interest. All
payments hereunder shall be applied first to interest then due and the balance,
if any, to be applied on the principal.
2. [Option: At the option of the Holder, the entire principal and interest due
under this Note shall be due and payable in full upon (i) the sale of
substantially all of the assets of the Maker or (ii) a change in control as
defined in Minnesota Statutes '302A.671 or (iii) the merger or consolidation of
the Maker with another entity or (iv) the redemption of all or part of the stock
of any shareholder owning more than [twenty percent (20%)] of the outstanding
shares of stock, by class, of the Maker.]
3. This Note and the obligation hereunder are subject to the terms of that
certain Stock Buy-Sell Agreement between the Maker and the Holder dated [date].
4. This Note may be prepaid in whole or in part at any time without payment of
any prepayment penalty or fee, but with interest on the unpaid balance until
paid in full. Any prepayment shall be applied to principal payments due in the
inverse order of the date such principal payments are due and payable.
5. The Maker shall remain liable for the payment of this Note, including
interest and any other charges payable hereunder, notwithstanding any extension
or extensions of time for payment or any indulgence of any kind that Holder may
grant to Maker.
1
6. The occurrence of any one of the following events shall constitute an event
of default under this Note (each such event is hereinafter referred to as an
"Event of Default"):
6.1 the failure of Maker to make any payment required to be
made under this Note on or before the date such payment is required;
6.2 the failure of Maker to make any other payment that Maker
owes to Holder within five (5) days after such payment is due and
payable or the failure of Maker to perform, observe or keep any other
obligation that Maker owes to Holder if the same is not cured within
the earlier of either (i) five (5) days after notice of such failure is
sent by Holder to Maker, or (ii) five (5) days after Maker knew or
should have known of such failure;
6.3 The occurrence of any of the following events with respect
to the Maker of the Note:
6.3.1 the admission in writing of insolvency or
inability to pay debts generally as they become due;
6.3.2 the commission of an act of bankruptcy,
including, but not limited to, an assignment for the benefit
of creditors, the calling of a meeting of creditors, the
appointment of a committee of creditors or a liquidating
agent, or an offer of a composition or an extension to
creditors;
6.3.3 if by the order of a court of competent
jurisdiction, a receiver or liquidator or trustee of the Maker
is appointed and shall have not been discharged within a
period of ten (10) days or if, by decree of such a court, the
Maker is adjudicated a bankrupt or any substantial part of his
property shall be sequestered and such decree shall continue
undischarged and unstayed for a period of ten (10) days after
the entry thereof pursuant to the Federal Bankruptcy Code, as
it now exists or as it may hereafter be amended or pursuant to
any other analogous statute applicable to the Maker as now or
hereinafter in effect, shall be filed against Maker and shall
not be dismissed within ten (10) days;
6.3.4 if the Maker files a petition of voluntary
bankruptcy under any provision of any bankruptcy law or a
petition to take advantage of any insolvency act, or consents
to the appointment of a receiver or receivers for all or any
part of its business or consents to the filing of any
bankruptcy, arrangement or reorganization petition by or
against it under any provision of the bankruptcy law, or
(without limiting the generality of the foregoing) the Maker
files a petition or answer seeking an arrangement or
reorganization of the Maker pursuant to the Federal Bankruptcy
Code, as it now exists or as it may hereafter be amended, or
pursuant to any other analogous statute applicable to the
Maker as now or hereafter in effect;
6.3.5 the entry of a judgment or issuance of a writ
of attachment or injunction before or after the date of this
Note against Maker or against any property of Maker or the
commencement of any proceedings supplementary to execution
relating to any judgment against Maker and such judgment, writ
of attachment, injunction or supplementary proceedings is not
stayed, satisfied, vacated, enjoined or bonded-off within ten
(10) days from the entry, issuance or commencement thereof;
6.3.6 the death or dissolution of Maker;
6.3.7 if any material representation, warranty or
statement made by Maker to Holder shall be incorrect or
misleading in any material respect.
For purposes of defining an "Event of Default" under this Note, a
notice shall be conclusively deemed to have been sent by Holder at the time such
notice is deposited with the United States Postal Service.
7. Upon the occurrence of one or more Events of Default, Holder may, at its sole
and absolute discretion, declare all outstanding obligations by Maker to Holder,
whether evidenced by this Note or any other instrument, although otherwise
unmatured or contingent, to be immediately due and payable in full without
demand. From and after maturity, whether by acceleration or otherwise, the
principal balance hereunder shall bear interest at the "Default Rate", which
shall be the lesser of (i) the highest rate permitted by law, or (ii) ten
percent (10%). Other provisions of this Note to the contrary notwithstanding, on
the occurrence and during the existence of any default, any amounts or payments
thereafter held or received by Holder for application to this Note may be
applied to any amounts owed under this Note in such manner as Holder may
determine, in its sole discretion, regardless of any contrary instructions
Holder may receive respecting such application.
8. The Maker agrees to pay on demand the costs of collection, including, without
limitation, reasonable attorneys' fees incurred by Holder in collecting or
attempting to collect any amount under this Note that is not paid when due or to
enforce its rights under this Note. All such costs of collection shall bear
interest, payable on demand, from the date of payment thereof by Holder until
paid in full by Maker at the rate applicable to the principal amount of this
Note.
9. Holder shall not by any act of omission or commission be deemed to waive any
of its rights or remedies hereunder unless such waiver is in writing and signed
by an authorized officer of Holder and then only to the extent specifically set
forth therein. A waiver on one occasion shall not be construed to be a
continuing waiver of such right or remedy on any other occasion.
10. Every person who is at any time liable for the payment of the debt evidenced
by this Note hereby waives presentment for payment, demand, notice of nonpayment
of this Note, protest and notice of protest, and the right to trial by jury in
any litigation arising out of, relating to, or connected with this Note or with
any instrument given as security herefor, and hereby agrees that Holder may
extend, without affecting their liability hereon, the time for payment of any
part of or the whole of the debt evidenced by this Note, at any time, at the
request of any other person or entity liable for said debt.
11. Should this Note be signed by more than one person, partnership or
corporation or any combination thereof, all of the obligations herein contained
shall be considered joint and several obligations of each signer hereof. In such
case, the liability of each such signer shall be absolute and unconditional and
without regard to the liability of any other party hereto.
12. This Note is given and accepted as evidence of indebtedness only and not in
payment of or in satisfaction of any indebtedness or obligation.
13. The form and essential validity of this Note shall be governed by the laws
of the State of Minnesota applicable to contracts made and to be performed
wholly within Minnesota, without giving effect to conflicts of laws principles.
All lawsuits and judicial proceedings regarding the interpretation of this Note,
any dispute arising hereunder or the collection of any amount due under this
Note shall be brought and heard in the District Court, State of Minnesota,
Fourth Judicial District, and Maker hereby consents to such jurisdiction. If any
portion of this Note is unenforceable, the remainder of this Note shall continue
in full force and effect.
14. Time is of the essence with respect to all of Maker's obligations and
agreements under this Note.
15. This Note and all the provisions, conditions, promises and covenants hereof
shall inure to the benefit of Holder, its successors and assigns, and shall be
binding upon the Maker, his personal representatives, heirs, successors and
assigns.
IN WITNESS WHEREOF, the Maker has caused this Note to be signed on its
behalf on the day and year first above written.
----------------------------------
"MAKER"
UNANIMOUS ACTION IN WRITING
IN LIEU OF MEETING OF
THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
ENCORE ACQUISITION CORPORATION
The undersigned, constituting all of the members of the Board of
Directors and Shareholders of ENCORE ACQUISITION CORPORATION ("Company") do
hereby make and adopt the following unanimous action in lieu of a meeting, said
action to have the same force and effect as if taken at a meeting of the Board
of Directors and Shareholders called and held on the date hereof.
AGREEMENTS WITH MICHAEL BELL
WHEREAS, the Board of Directors of the corporation has determined that
it is in the best interests of the Company to continue to employ Michael Bell as
its Chief Executive Officer,
NOW, THEREFORE, BE IT HEREBY
RESOLVED, that the Employment Agreement, Stock Purchase
Agreement, and Buy & Sell Agreement with Michael Bell in the form
attached as Exhibits A, B and C hereto are hereby approved and
ratified. The Secretary shall retain one copy of said Agreements as
part of the permanent records of the Company.
RESOLVED FURTHER, that the officers of the Company be and they
hereby are authorized and directed to execute and deliver the aforesaid
Agreements for and on behalf of the Company and to settle and approve
all details in connection with said Agreement exercising their
discretion to the extent that they shall deem appropriate in
determining questions which may arise and to approve the final form of
said agreement and to execute the same for and on behalf of the
Company.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands
effective as of the ________ day of __________, 2002.
- --------------------------------------- ------------------------------------
Navarre Corporation, Sole Shareholder Charles Cheney, Director
-------------------------------------- ------------------------------------
Eric Paulson, Director Jim Sippl, Director
------------------------------------- ------------------------------------
Michael Snow, Director Alfred Teo, Director
------------------------------------- ------------------------------------
Tom Weyl, Director Dickinson Wiltz, Director
Exhibit A
Employment Agreement with Michael Bell
Exhibit B
Stock and Unit Purchase Agreement
Exhibit C
Buy and Sell Agreement