Exhibit 10.6
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STOCK OPTION AGREEMENT
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DATED May 17, 1995,
AMONG
BPN CORPORATION,
PAN AMERICAN GROUP, INC.,
XXXXX X. XXXXXX, XXXXXXX X. XXXXXX, XXXXXXXXX X. X'XXXX
AND
THE XXXXXX FAMILY TRUST
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STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT (this "Agreement") is entered into effective as
of _____ __, 1995 (the "Effective Date") by and among BPN CORPORATION, a
California corporation ("BPN"), PAN AMERICAN GROUP, INC., a Delaware corporation
("PAGI"), and XXXXX X. XXXXXX, an individual ("X. Xxxxxx"), XXXXXXX X. XXXXXX,
an individual ("X. Xxxxxx") (X. Xxxxxx and X. Xxxxxx collectively, the
"Walskis"), XXXXXXXXX X. X'XXXX, an individual ("X'Xxxx"), and THE XXXXXX FAMILY
TRUST, dated August 30, 1989 (the "Trust") (X. Xxxxxx, X. Xxxxxx and X'Xxxx,
each a "Principal" and collectively, the "Principals") (the Trust and X'Xxxx
each, a "Shareholder" and collectively, the "Shareholders"), with reference to
the following recitals:
RECITALS
A. As of the Effective Date, the Shareholders own beneficially and of
record all the issued and outstanding shares (the "Shares") of BPN as follows:
Shareholder No. of Shares
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Trust 750
X'Xxxx 350
B. BPN is engaged in the business of arranging insurance premium
financing loans and providing related marketing and servicing activities for
consumers and small commercial enterprises, primarily for the purposes of
obtaining automobile insurance, as well as other types of property and casualty
coverages (the "Program"). BPN currently operates the Program pursuant to the
terms of that certain Restatement and Amendment of the Management Services
Agreement (the "Republic Agreement") between BPN and Republic Bank, a California
corporation ("Republic").
C. The Principals are currently organizing and subsequent to the
Effective Date may organize corporations in certain other states, jurisdictions
or territories of the United States of America outside the State of California
for the purpose of operating the Program in such other states, jurisdictions or
territories (collectively, the "BPN Affiliates"). In connection therewith, the
Walskis' shares of each of the BPN Affiliates will be issued to the Trust. The
BPN Affiliates shall not, however, include corporations organized by the
Principals following the Closing Date (as defined in Section 4.2 hereof).
D. Subject to the terms and conditions contained herein, PAGI desires
to acquire options to purchase, and each Shareholder desires to grant to PAGI
such options to purchase, the Shares and all the issued and outstanding shares
of each of the BPN Affiliates (the "Affiliate Shares").
E. The Shareholders and the Walskis are each a party to a "Stock
Retirement Agreement" dated August 25, 1990, that provides for the disposition
of the Shares in certain situations. A copy of the Stock Retirement Agreement
is attached hereto as Exhibit A. The Shareholders and the Walskis shall cause
the Stock Retirement Agreement to be amended to provide that the rights of the
parties thereto, including such parties' respective estates, successors, legal
or personal representatives, heirs, distributees, designees and assigns, shall
be subordinated to terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. GRANT OF OPTION
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Each of the Shareholders hereby grants to PAGI the right to purchase such
Shareholder's Shares (the "Share Option") and the Affiliate Shares (the
"Affiliate Share Option") at a price and subject to the conditions set forth in
this Agreement.
2. CONSIDERATION FOR OPTION
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As consideration for the Share Option and the Affiliate Share Option, on
the Effective Date PAGI shall pay each of the Shareholders the following amount
(the "Option Payment")
Shareholder Amount
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Trust $6,500.00
X'Xxxx $3,500.00
The Option Payment shall be deemed earned upon receipt by each of the
Shareholders and nonrefundable.
3. OPTION PERIOD
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The Share Option and the Affiliate Share Option shall have a term (the
"Option Period") commencing on the Effective Date after BPN has given the
appropriate notice of termination under the Republic Agreement and ending March
31, 2000 (the "Option Termination Date"). Sections 2, 11 and 12 hereof shall
survive the expiration of the Option Termination Date or any termination of this
Agreement.
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4. EXERCISE OF OPTION
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4.1 The Shares and the Affiliate Shares. The Share Option and
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the Affiliate Share Option may be exercised as provided herein prior to the
Option Termination Date or the termination of this Agreement, whichever occurs
sooner, and shall only be exercised once during the Option Period in whole and
not in part with respect to the Shares, and if appropriate, all the Affiliate
Shares. The Affiliate Share Option may only be exercised if (a) the Share Option
is exercised simultaneously therewith and (b) it is exercised with respect to
all of the Affiliate Shares.
4.2 Written Notice. In the event that PAGI desires to exercise
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the Share Option, alone, or the Share Option and the Affiliate Share Option,
together, it shall do so by concurrently delivering an executed written notice
to each of the Shareholders and BPN, on or before the Option Termination Date,
of its election to exercise the same (the "Exercise Notice"). In the event that
the closing of the transaction described in the Exercise Notice (the "Closing")
is not consummated within twelve (12) months following the date of said notice,
BPN shall have the right, by providing written notice in accordance with Section
13.6 hereof, to terminate the Share Option and the Affiliate Share Option upon
such written notice to and without the consent or prior approval of PAGI. PAGI
shall provide the Shareholders and BPN with at least fifteen (15) days prior
written notice in accordance with Section 13.6 hereof of the date that it
desires to consummate the transactions described in the Exercise Notice (the
"Closing Date")
5. EXERCISE PRICE OF THE SHARE OPTION AND THE AFFILIATE SHARE OPTION
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5.1 Exercise Price of the Share Option. BPN shall provide
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written notice to PAGI (the "Lending Target Notice") in the event that it has
had $30 million or more in premium finance loans outstanding for six (6)
consecutive months (the "Lending Target") under that certain Insurance Premium
Financing Management Agreement (the "PAB Agreement") to be entered into as of
the Effective Date between BPN and PAGI's wholly-owned subsidiary, Pan American
Bank, FSB, a federal savings bank ("PAB"). If, prior to the Lending Target
Notice being met or within ninety (90) days following the date of the Lending
Target Notice, PAGI delivers an Exercise Notice as required pursuant to Section
4.2 hereof concerning its desire to exercise the Share Option, the exercise
price with respect thereto shall be $2 million. In the event that PAGI does not
deliver such Exercise Notice prior to the expiration of the aforementioned
ninety (90) day period, the exercise price of the Share Option shall thereafter
be the greater of (a) $2 million or (b) four (4) times BPN's pre-tax earnings
for the twelve (12) complete consecutive calendar months immediately preceding
the date of the Exercise Notice less the "Non-Competition Consideration" (as
defined in Section 10.4 hereof). For the purposes of this Section 5.1 and
Section 5.2 hereof, BPN's "pre-tax earnings" shall include the gross
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amounts of the salaries and other compensation and distributions, excluding
amounts paid with respect to the Facility Lease (as hereinafter defined), that
BPN paid to the Shareholders and the Walskis to the extent that such amounts
exceed $330,000 for such twelve (12) month period. For a period of two years
following the Closing Date, any Principal remaining as an employee of BPN shall
be paid an annual base salary of $110,000.00 for providing services to BPN
similar to those provided by the employed Principal immediately prior to the
Closing Date. The preceding sentence shall not be construed to create an
employment agreement between or be binding upon BPN or any Principal, but merely
represents the intention of the parties in the event that a Principal is
employed by BPN following the Closing Date. The exercise price described in this
Section 5.1 shall hereinafter be referred to as the "Share Option Exercise
Price."
5.2 Exercise Price of the Share Option and the Affiliate Share
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Option. In the event that PAGI desires to exercise both the Share Option and
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the Affiliate Share Option, the exercise price with respect thereto shall be the
sum of (i) four (4) times the BPN Affiliates pre-tax earnings for the twelve
(12) complete consecutive calendar months immediately preceding the date of the
Exercise Notice, plus (ii) the Share Option Exercise Price. The exercise price
described in this Section 5.2 shall hereinafter be referred to as the "Affiliate
Share Option Exercise Price."
5.3 Determination of Pre-Tax Earnings. The pre-tax earnings of BPN
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and, if appropriate, the BPN Affiliates, shall be determined in accordance with
generally accepted accounting principles ("GAAP"), consistently applied with
prior periods, except as modified by Section 5.1 hereof respecting the treatment
of compensation and distributions paid to the Shareholders and the Walskis. In
the event that PAGI desires to exercise the Share Option and, if appropriate,
the Affiliate Share Option, within forty-five (45) days of BPN's receipt of an
Exercise Notice, BPN shall provide PAGI with a statement of income for the
relevant twelve (12) month period for which pre-tax earnings are to be
calculated, computed on an accrual basis prepared in accordance with GAAP,
consistently applied with prior periods, together with such supporting detail as
PAGI may reasonably request. The calculation of pre-tax earnings contained in
the income statement shall be deemed to be accepted by PAGI unless PAGI notifies
BPN in writing within thirty (30) days following its receipt of the income
statement that it rejects the calculation of pre-tax earnings contained therein.
In the event of such rejection, the Shareholders shall, at PAGI's expense,
engage the Big 6 Accounting Firm of their choice to conduct an audit of BPN for
the twelve (12) month period covered by the income statement in question. The
accounting firm's determination of pre-tax earnings as a consequence of
conducting that audit shall be binding on the parties hereto.
5.4 Lending Target Audit. In order to verify whether BPN has
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reached the Lending Target, PAGI shall, at its own expense and during BPN's
regular business hours, have the right to
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conduct an audit of BPN's insurance premium financing activities under the
Program.
6. TERMINATION AND OPTION PERIOD REDUCTION
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6.1 Termination of the Share Option and the Affiliate Share Option.
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The Share Option and the Affiliate Share Option shall terminate immediately upon
the occurrence of any of the following events prior to the Option Termination
Date:
(a) The institution of any bankruptcy, reorganization,
insolvency or similar proceedings by or against PAGI;
(b) The assignment of the Share Option and/or the Affiliate
Share Option by PAGI for the benefit of its creditors; or
(c) PAGI's failure to exercise the Share Option and the
Affiliate Share Option, if appropriate, within thirty (30) days following the
date of a "Notice of Curtailment" (as defined in Section 6.2 hereof).
6.2 Option Period Reduction. In the event that the Lending
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Capacity is reduced below $30 million on an annual basis and such reduction
results in the inability of BPN to fund then existing available loans under the
Program that satisfy PAB's lending and underwriting criteria as consistently
applied during the Option Period, BPN shall provide PAGI with written notice in
accordance with Section 13.6 hereof of any such curtailment (a "Notice of
Curtailment") and PAGI shall have thirty (30) days from the date thereof to
deliver an Exercise Notice as required pursuant to Section 4.2 hereof. The
Option Period shall terminate without the further action of the Shareholders or
PAGI in the event that PAGI fails to exercise the Share Option and, if
appropriate, the Affiliate Share Option, within such thirty (30) day period.
7. CLOSING OF THE SHARE OPTION AND THE AFFILIATE SHARE OPTION
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7.1 Purchase and Sale. Subject to the terms, conditions,
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representations and warranties set forth herein, on the Closing Date the
Shareholders shall sell to PAGI and PAGI shall purchase from the Shareholders
the Shares and, if appropriate, the Affiliate Shares.
7.2 Consideration. On the Closing Date, the Shareholders shall
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deliver to PAGI all certificates for the Shares and, if appropriate, the
Affiliate Shares, duly assigned and endorsed to PAGI in good form for transfer
or accompanied by stock powers duly endorsed, and PAGI shall deliver to (a) the
Shareholders cashier's checks made payable to each of the Shareholders in an
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amount equal to each Shareholder's respective portion of the Share Option Price
or Affiliate Share Option Price, as is appropriate and (b) the Principals
cashier's checks made payable to each of the Principals in an amount equal to
each Principal's respective portion of the Non-Competition Consideration (as
defined in Section 10.4 hereof).
7.3 Closing Location. The Closing shall take place on the Closing
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Date at the offices of counsel to the Shareholders and BPN, Xxxxxx & Xxxxx, 000
Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000.
8. REPRESENTATIONS AND WARRANTIES
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8.1 Representations and Warranties of the Shareholders and the
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Walskis.
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The Shareholders and the Walskis hereby jointly and severally represent and
warrant to PAGI, as of the Effective Date and the Closing Date, as follows:
(a) Capitalization of BPN. The authorized capital stock of
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BPN consists of 10,000 shares of common stock, $0.10 par value per share, of
which one thousand (1,000) shares are issued and outstanding. Provided, however,
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the number of issued and outstanding Shares referred to above in this Section
8.1(a) may be subject to reduction in accordance with the terms of the Stock
Retirement Agreement. The Shares, which represent all the issued and outstanding
equity interests of BPN, are validly issued, fully paid and nonassessable. BPN
has no other shares of capital stock of any kind authorized, issued or
outstanding and there are no outstanding subscriptions, options, warrants,
calls, convertible or exchangeable securities, or other rights or commitments of
any kind to issue, sell or acquire any shares of capital stock of BPN.
(b) Corporate Existence, Power and Authorization of BPN. BPN
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is a corporation duly organized, validly existing and in good standing under the
laws of the State of California, with full power and authority, corporate and
other, to carry on its business as it is now being conducted and to own or lease
the properties and assets which it now owns or leases.
(c) Authority. The Shareholders and the Walskis have full
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power and authority to execute and deliver this Agreement and to perform their
respective obligations hereunder and such actions will not constitute a default
under or be prohibited or restricted by any other agreements or obligations to
which the Shareholders or the Walskis are or BPN is a party.
(d) Compliance with Covenants. As of the Closing Date, the
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Shareholders and the Walskis shall have complied and, as applicable, shall have
caused BPN to comply with each of the covenants set forth in Section 9 hereof.
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(e) No Other Representations and Warranties. Except as set
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forth in subsections (a), (b), (c) and (d) of this Section 8.1, the Shareholders
and the Walskis are not making any other representations or warranties
whatsoever with respect to BPN.
8.2 Representations and Warranties of PAGI.
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PAGI hereby represents and warrants to the Shareholders and the Walskis, as
of the Effective Date and as of the Closing Date, as follows:
(a) Corporate Existence, Power and Authorization of PAGI.
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PAGI is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, with full power and authority,
corporate and other, to carry on its business as it is now being conducted and
to own or lease the properties and assets which it now owns or leases.
(b) Authority. The execution, delivery and performance of
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this Agreement and the transactions contemplated by this Agreement by PAGI have
been duly authorized by any necessary corporate action, including, without
limitation, any necessary director or shareholder approval. PAGI has full power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder and such actions will not constitute a default under or be
prohibited or restricted by any other agreements or obligations to which PAGI is
a party.
(c) Title to Shares of PAB. As of the Effective Date only,
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PAGI has full and valid title, both legal and beneficial, to all the issued and
outstanding shares of PAB.
(d) Regulatory Approvals. The Execution of this Agreement is
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not subject to any federal, state or local regulatory approvals or notification
requirements.
8.3 Survival of Representations and Warranties. The
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representations and warranties in Sections 8.1 and 8.2 hereof shall survive the
Closing Date.
9. COVENANTS OF THE SHAREHOLDERS AND THE WALSKIS
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The Shareholders and the Walskis hereby jointly and severally covenant and
agree as follows:
9.1 Operations of BPN. BPN shall engage in no business other than
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the insurance premium financing business in a manner consistent with the terms
of the PAB Agreement and, to the extent applicable, the Republic Agreement. Each
of the Principals shall devote such time to the business of BPN as shall be
required to fully develop, implement and manage the Program.
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9.2 Legend on Share Certificates. During the Option Period, all
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certificates representing the Shares and the Affiliate Shares shall bear a
legend reflecting the restrictions on transfer imposed by this Agreement.
9.3 Statements of Income and Loss. The Shareholders and Principals
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shall cause BPN to provide PAGI with quarterly statements of income and loss,
cash flow and capitalization, together with such other financial information as
PAGI may reasonably request in order to keep fully apprised of the financial
condition, prospects and results of operations of BPN or to satisfy any
applicable regulatory requirements.
9.4 No Shop. Unless this Agreement is otherwise terminated in
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accordance with its terms, from the Effective Date until the Option Termination
Date, the Shareholders and the Walskis will cause BPN to conduct its affairs
only in the ordinary course of business consistent with past practices and the
Shareholders and the Principals will not enter into any discussions,
negotiations or agreements for the purpose of merging BPN with or selling BPN's
assets to any other person, or issuing any stock or other equity interests or
any options, warrants or other rights to purchase stock or other equity
interests of BPN.
9.5 Liabilities. Except for the lease obligation on BPN's office
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facility located at 00000 Xxxxxxxx Xxxxxx, Xxxxx, Xxxxxxxxxx 00000 (the
"Facility Lease"), on the Closing Date, BPN shall have no liabilities, whether
fixed or contingent, which are reflected, or are required to be reflected, as
liabilities on the balance sheet of BPN as prepared in accordance with GAAP
other than current liabilities incurred in the ordinary course of business.
Except upon six (6) months prior written notice to PAGI and BPN given on or
after the Closing Date, the rent payable under the Facility Lease shall not be
increased following the Closing Date to an amount exceeding the rent paid on a
monthly basis for the twelve (12) consecutive months preceding the Closing Date.
9.6 Termination of the Facility Lease. On or following the Closing
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Date, either PAGI or the Principals may terminate the Facility Lease upon six
(6) months prior written notice. In the event of the termination of the
Facility Lease, a Principal may terminate his or her employment agreement then
in force between such Principal and BPN as of the date of such termination.
9.7 Program Assets.
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(a) On the Closing Date, BPN shall own the computer hardware
and own or have the right to use all computer software (the "Program Software"),
proprietary designs, trademarks, trademark applications, trade names, trade
secrets, service marks, brand marks, brand names, and copyrights utilized by BPN
in connection with its operation of the Program, all of which shall hereinafter
be referred to as the "Program Assets." The rights to
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the Program Assets as a whole for use in connection with insurance premium
finance applications will be exclusive to BPN except as otherwise provided
herein.
(b) In the event that PAGI does not exercise the Affiliate
Share Option, the BPN Affiliates and any and all other entities organized by the
Principals, jointly or severally, following the Closing Date shall automatically
be deemed to have an irrevocable license at no cost to use the Program Assets
(excluding the computer hardware) in connection with insurance premium
financing-related activities by such entities (the "License"). In the event that
the covenant not to compete set forth in Section 10 hereof is violated or
breached in any way, the License shall be immediately revoked. PAGI acknowledges
that it has been informed by the Principals that for a period of two (2) years
following the date of termination of the Republic Agreement, Republic has
nonexclusive license to use the Program Software at no cost, and PAGI does not
object to nor will it interfere with such nonexclusive license.
(c) The cost of all upgrades or modifications to the Program
Software made by or on behalf of BPN, the BPN Affiliates, or PAB shall be shared
equitably by such parties, and all such upgrades or modifications shall be
provided to any of such parties entitled to use the Program Software.
9.8 Distribution of Assets. At any time and from time to time
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prior to the Closing Date, the Shareholders may cause BPN to distribute to the
Shareholders all or any portion of its income and/or assets, other than the
Facility Lease, the Program Assets and BPN's books and records.
9.9 Minimum Net Worth. On the Closing Date the Shareholders shall
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cause BPN to have a net worth of at least $0, which shall be determined in
accordance with GAAP.
9.10 Organization of BPN Affiliates. Prior to the Closing Date, the
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shares of each of the BPN Affiliates shall be owned by the Shareholders in the
same proportion as the share ownership of BPN and the Shareholders shall cause
all certificates representing the Affiliate Shares to bear a legend reflecting
the restrictions on transfer imposed by this Agreement.
9.11 Stock Retirement Agreement. As of the Effective Date, the
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Stock Retirement Agreement shall be amended to provide that the rights of the
parties thereto, including such parties' respective estates, successors, legal
or personal representatives, heirs, distributees, designees and assigns, shall
be subordinated to the terms and conditions of this Agreement. The Shareholders
and the Walskis shall not amend the Stock Retirement Agreement without the prior
written consent of PAGI prior to the earlier of either the Option Termination
Date or the termination of this Agreement. The redemption of any of the Shares
pursuant to the Stock Retirement Agreement shall not constitute a breach of this
Agreement.
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10. COVENANT NOT TO COMPETE
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10.1 California Non-Compete. For a period of five (5) years
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commencing on the Closing Date (the "Non-Competition Period"), within the State
of California, each of the Principals and the BPN Affiliates, if not acquired
hereunder, shall not, jointly or severally, directly or indirectly, organize,
own, manage, operate, control, consult with or otherwise participate in or carry
on any business (either financially as a shareholder of or lender to such
business or of the entity that controls such business, or as an employee,
director, officer, partner, consultant or agent or in any capacity that calls
for the rendering of personal services, advice, or acts of management, operation
or control or in any other manner whatsoever) that is competitive with the
premium finance business conducted by BPN on the Closing Date. Notwithstanding
the foregoing, a Principal may own as a passive investment up to five percent
(5%) of the outstanding voting securities of any publicly held entity that is
engaged in the insurance premium finance business that competes with the
operations of BPN.
10.2 BPN Affiliates Non-Compete. During the Non-Competition Period
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within any state, jurisdiction or territory of the United States of America in
which a BPN Affiliate that was acquired hereunder by PAGI is engaged in
operating the Program, each of the Principals shall not, jointly or severally,
directly or indirectly, organize, own, manage, operate, control, consult with or
otherwise participate in or carry on any business (either financially as a
shareholder of or lender to such business or of the entity that controls such
business, or as an employee, director, officer, partner, consultant or agent or
in any capacity that calls for the rendering of personal services, advice, or
acts of management, operation or control or in any other manner whatsoever) that
is competitive with the premium finance business conducted by BPN Affiliates on
the Closing Date. Notwithstanding the foregoing, a Principal may own as a
passive investment up to five percent (5%) of the outstanding voting securities
of any publicly held entity that is engaged in the insurance premium finance
business that competes with the operations of a BPN Affiliate.
10.3 Survival of Non-Competition Provision. The covenants contained
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in each of Sections 10.1 and 10.2 hereof (the "Non-Competition Provisions") are
separate and distinct. If any Non-Competition Provision or any provision or
portion thereof is held invalid, inoperative or unenforceable, the remaining
Non-Competition Provision and the provisions or portions thereof shall be
considered valid, operative and enforceable, and, to the extent possible, effect
shall be given to the intent manifested by the Non-Competition Provision or the
Non-Competition Provisions, or the provisions of portions thereof, held invalid,
inoperative or unenforceable. The Non-Competition Provisions may be specifically
enforced by a court of competent jurisdiction and the parties hereto acknowledge
that monetary damages will not adequately compensate PAGI or BPN for any
violation thereof. Such remedy shall not,
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however, limit any other remedy available to PAGI, BPN or their respective
successors or assigns.
10.4 Consideration for Covenant Not to Compete. As consideration
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for the covenant not to compete contained in this Section 10, on the Closing
Date PAGI shall pay the Principals the aggregate amount of $2 million (the "Non-
Competition Consideration"), which shall be allocated among the Principals in
accordance with the following percentages:
Principal Percentage
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X. Xxxxxx 35%
X. Xxxxxx 30%
X'Xxxx 35%
In the event that one or more of the aforementioned Principals is not employed
by BPN on the Closing Date, the Non-Compensation Consideration consisting of $2
million shall be divided among the remaining Principals consistent with the
above table. For example, in the event that (a) X. Xxxxxx is no longer employed
by BPN, X. Xxxxxx and X'Xxxx shall each receive fifty percent (50%) of the Non-
Compensation Consideration, or (b) X'Xxxx is no longer employed by BPN, X.
Xxxxxx shall receive 53.85 percent of the Non-Competition Consideration and X.
Xxxxxx shall receive 46.15 percent of the Non-Competition Consideration.
11. INDEMNIFICATION
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11.1 Indemnification of PAGI. The Shareholders and the Walskis
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shall jointly and severally indemnify, defend and hold harmless PAGI, PAB and
their respective affiliates as well as their respective directors, officers,
agents, employees and shareholders (each, an "Indemnified Party" and
collectively, the "Indemnified Parties") from and against any and all claims,
suits, hearings, actions, damages, liabilities, fines, penalties, costs, losses
or expenses, including reasonable attorney's fees (in the singular, an
"Indemnification Claim" and collectively, "Indemnification Claims"), caused by
or resulting from the relationship of BPN and the Principals with Republic with
respect to any period of time prior to the Closing Date, including but not
limited to any breach or alleged breach or termination of the Republic
Agreement, any claim that any Indemnified Party induced BPN or the Principals to
breach or terminate the Republic Agreement or otherwise interfered with the
Republic Agreement, or, as to PAGI only, any misconduct, error, omission, or
other unauthorized act by BPN or by BPN's officers, directors, shareholders,
employees, agents or representatives that occurred prior to the Closing Date.
11.2 Notice of Claim for Indemnification. Upon obtaining knowledge
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of an Indemnification Claim which could give rise to indemnification under this
Section 11, the Indemnified Party demanding such indemnification (the
"Indemnitee") shall promptly
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notify the party from whom indemnification is sought (the "Indemnitor"), in
writing, of any Indemnification Claim which the Indemnitee has determined has
given or could give rise to a right of indemnification under Section 11.1 hereof
(the "Notice of Claim") The Notice of Claim shall specify, in reasonable detail,
the nature of any such Indemnification Claim giving rise to the right of
indemnification.
11.3 Defense of Third Party Claims. With respect to any third party
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Indemnification Claim set forth in a Notice of Claim, the Indemnitor may defend,
in good faith and at its own expense, any such Indemnification Claim and the
Indemnitee, at its expense, shall have the right to participate in the defense
of any such third party Indemnification Claim. In connection with its defense of
a third party Indemnification Claim, the Indemnitor shall have the right to
choose or approve counsel for the defense or prosecution of such action, subject
to the reasonable approval of the Indemnified Party. So long as the Indemnitor
is defending in good faith any such third party Indemnification Claim, the
Indemnitee shall not settle or compromise such third party Indemnification Claim
without the consent of the Indemnitor, which shall not unreasonably be withheld.
The Indemnitee shall make available to the Indemnitor or its representatives all
records and other materials reasonably required by them for its use in
contesting any third party Indemnification Claim and shall cooperate fully with
the Indemnitor in the defense of all such Indemnification Claims. The Indemnitor
shall furnish, at its expense, any bond or other security required to release
any lien, garnishment, attachment or execution required in connection with any
third party proceeding subject to this Section 11. The Indemnitor may settle any
claim without the consent of the Indemnitee in the event that the sole relief
requested is money damages and such money damages are paid in full by the
Indemnitor and all litigation against the Indemnitee with respect thereto is
dismissed with prejudice (or an unconditional release satisfactory to Indemnitee
is entered into).
12. CONFIDENTIALITY
---------------
Subject to disclosure as otherwise required by law, pursuant to legal
process, PAGI shall, and shall cause its agents, accountants and attorneys, to
keep confidential any and all trade secrets and confidential information (unless
readily ascertainable from public or published information or resources)
obtained from BPN, the Shareholders or the Walskis in connection with this
Agreement. In the event that this Agreement shall terminate or upon the Option
Termination Date, promptly following any such termination, all documents,
including copies and reproductions thereof, obtained by PAGI in connection with
the transactions contemplated by this Agreement and not previously made public,
shall be returned to BPN. No information concerning BPN (except such that is
readily ascertainable from public sources) obtained in connection with the
transactions contemplated by this Agreement shall be used by PAGI for any
purposes whatsoever other than purposes consistent with this Agreement.
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13. GENERAL PROVISIONS
------------------
13.1 Press Release. No press release or other public announcement
-------------
in respect of the transactions contemplated by this Agreement shall be made
except upon the mutual agreement of the Shareholders, the Walskis and PAGI.
13.2 Costs. Each party hereto shall pay its own costs and expenses
-----
associated with the preparation of this Agreement.
13.3 Assignment. This Agreement and the rights, duties and
----------
obligations of the parties hereto shall not be assignable by either party hereto
without the prior written consent of the other party and any purported
assignment in the absence of such consent shall be void; provided, however, PAGI
-------- -------
may assign the Share Option or the Affiliate Share Option to any affiliate of
PAGI. In addition, PAB may assign participations in or sell loans made under the
PAB Agreement, which loans shall be included, as necessary, in determining if
the Lending Capacity has been satisfied.
13.4 Further Instruments. Each party shall execute and deliver all
-------------------
further instruments, documents and papers, and shall perform any and all acts
necessary, to give full force and effect to all of the terms and provisions of
this Agreement.
13.5 Severability. If any provision of this Agreement, as applied
------------
to any party or to any circumstance, shall be found by a court of competent
jurisdiction or panel of arbitrators to be void, invalid or unenforceable, the
same shall in no way affect any other provision of this Agreement, the
application of any such provision in any other circumstance, or the validity or
enforceability of this Agreement.
13.6 Notices. All notices which are required to be given or
-------
submitted pursuant to this Agreement shall be made in writing and shall be
deemed given when deposited with the United States Postal Service, postage
prepaid, registered or certified mail, return receipt requested, or when
deposited with an overnight mail delivery service, to the last address of record
of each party being notified which is maintained by the other party in the
ordinary course of business.
Any notice or demand required to be made under this Agreement to X. Xxxxxx
shall be given to:
Xx. Xxxxx X. Xxxxxx
0000 Xxxxxxx Xxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
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Any notice or demand required to be made under this Agreement to X. Xxxxxx
shall be given to:
Xx. Xxxxxxx X. Xxxxxx
0000 Xxxxxxx Xxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Any notice or demand required to be made under this Agreement to X'Xxxx
shall be given to:
Xx. Xxxxxxxxx X. X'Xxxx
00000 Xxxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Any notice or demand required to be made under this Agreement to the Trust
shall be given to:
The Xxxxxx Family Trust
0000 Xxxxxxx Xxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Any notice or demand required to be made under this Agreement to BPN shall
be given to:
BPN Corporation
00000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx and Xxxxxxxxx X. X'Xxxx
Any notice or demand required to be made under this Agreement to PAGI shall
be given to:
Pan American Group, Inc.
1999 Avenue of the Stars
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxxx Xxxx
Any party may, by virtue of written notice in compliance with this paragraph,
alter or change the address or the identity of the person to whom any notice, or
copy thereof, is to be sent.
13.7 Waivers. A waiver by any party of any of the terms and
-------
conditions of this Agreement in any one instance shall not be deemed or
construed to be a waiver of such term or condition for the future, or of any
subsequent breach thereof, nor shall it be deemed a waiver of performance of any
other obligation hereunder.
13.8 Entire Agreement. This Agreement contains the entire
----------------
understanding of the parties hereto relating to the subject matter hereof and
supersedes all prior and collateral agreements, understandings, statements and
negotiations of the parties. Each party acknowledges that no representations,
inducements, promises or
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agreements, oral or written, with reference to the subject matter hereof have
been made other than as expressly set forth herein.
13.9 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California.
13.10 Gender and Number. In all matters of interpretation, whenever
-----------------
necessary to give effect to any provision of this Agreement, each gender shall
include the other, the singular shall include the plural and the plural shall
include the singular.
13.11 Section and Subsection Headings. The titles of the sections of
-------------------------------
this Agreement are for convenience only and shall not in any way affect the
interpretation of any provision or condition of this Agreement.
13.12 Third Parties. Except as may be expressly set forth herein,
-------------
the parties hereto do not intend to confer any rights or remedies upon any
person other than the parties hereto.
13.13 Successors and Assigns. This Agreement shall be binding upon
----------------------
and shall inure to the benefit of the parties hereto and their respective
estates, successors, legal or personal representatives, heirs, distributees,
designees and assigns.
13.14 Legal Action. In the event of any litigation between or among
------------
the parties hereto respecting or arising out of this Agreement, the prevailing
party or parties shall be entitled to recover reasonable attorneys' fees and
costs, whether or not such litigation proceeds to final judgment or
determination.
13.15 Amendment. This Agreement may not be amended except by a
---------
writing signed by both parties.
13.16 Counterparts. This Agreement may be executed in counterparts
------------
which, taken together, shall constitute the whole of the Agreement as between
the parties.
13.17 Asset Purchase. The purchase of the Shares and, if
--------------
appropriate, the Affiliate Shares, may, at the election of PAGI, be structured
as a purchase of the assets of such entity or entities, as the case may be,
provided that the Shareholders receive the same after tax consideration they
would have received had the
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Share Option and, if appropriate, the Affiliate Share Option, been exercised as
a stock purchase or stock purchases, as the case may be.
IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the day and year first above written.
PAGI: PAN AMERICAN GROUP, INC>
By: /s/ XXXXXXX XXXX
------------------------------
Its: Chairman
----------------------------
Printed Name: Xxxxxxx Xxxx
--------------------
BPN: BPN CORPORATION
By: /s/ XXXXX X. XXXXXX
------------------------------
Its: President
-----------------------------
Printed Name: Xxxxx X. Xxxxxx
--------------------
Trust: THE XXXXXX FAMILY TRUST,
August 30, 1989
By: /s/ XXXXX X. XXXXXX
------------------------------
Xxxxx X. Xxxxxx, Trustee
By: /s/ XXXXXXX X. XXXXXX
------------------------------
Xxxxxxx X. Xxxxxx, Trustee
X. Xxxxxx: /s/ XXXXX X. XXXXXX
---------------------------------
XXXXX X. XXXXXX
X. Xxxxxx: /s/ XXXXXXX X. XXXXXX
---------------------------------
XXXXXXX X. XXXXXX
X'Xxxx: /s/ XXXXXXXXX X. X'XXXX
---------------------------------
XXXXXXXXX X. X'XXXX
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