EXHIBIT 10.76
AGREEMENT
THIS AGREEMENT ("Agreement") is made as of this first day of March,
1998, by and among Xxxxxxx X. Xxxxx, a Minnesota resident ("Xxxxx"), Xxxxx
Xxxxxx, a Minnesota resident ("Xxxxxx"), and Xxxxxxxx Bros. Construction, Inc.,
a Minnesota corporation ("Xxxxxxxx").
RECITALS
A. On January 2, 1997, Xxxxx resigned as an officer, director and full-time
employee of Xxxxxxxx. Since January 2, 1997, Xxxxx has continued to serve
Xxxxxxxx as a part-time independent consultant.
X. Xxxxx owns no voting common shares of Xxxxxxxx; Xxxxx owns 1,845 non-voting
common shares of Xxxxxxxx (the "Shares"). The Shares owned by Xxxxx represent
17.37% of all issued and outstanding shares of Xxxxxxxx, including both voting
and non-voting common shares.
X. Xxxxx and Xxxxxxxx wish to document the severance of Xxxxx' relationship with
Xxxxxxxx.
X. Xxxxx desires to sell the Shares to Xxxxxx and to Xxxxxxxx, and will grant to
Xxxxxx and to Xxxxxxxx an option to purchase the Shares on the terms and
conditions herein contained. Xxxxxx and Xxxxxxxx are referred to collectively
herein as the "Optionees."
E. The Optionees desire to purchase the Shares, and are prepared to purchase the
Shares on the terms and conditions herein, as a condition to maintaining an
option to purchase said Shares.
AGREEMENT
1. TERMINATION OF CONSULTING RELATIONSHIP.
1.1 Xxxxx and Xxxxxxxx agree that:
x. Xxxxx resigned as an officer, director and employee on January 2,
1997;
b. on January 2, 1997, Xxxxx commenced working as a part-time
independent consultant to Xxxxxxxx;
c. on September 25, 1997, Xxxxx terminated his consulting relationship
with Xxxxxxxx;
x. Xxxxxxxx has paid Xxxxx in full for his services as an independent
consultant for the period January 2, 1997 through September 25, 1997; and
x. Xxxxx is responsible for reporting and paying state and federal
withholding taxes and charges on Xxxxx' consulting income for such period.
Xxxxx acknowledges that Xxxxxxxx has no further obligations to Xxxxx
resulting from Xxxxx' resignation as an officer and employee of Xxxxxxxx, and
Xxxxx' services as an independent consultant from January 2, 1997 to and through
September 25, 1997.
1.2 Xxxxxxxx agrees to sell to Xxxxx the company truck that Xxxxx has used to
date for business purposes, for the sum of $6,900, on March 2, 1998. Xxxxxxxx is
electing to apply the $6,900 purchase price of the truck to the option payment
of $16,900 due under paragraph 2.1.e. hereunder on said date.
1.3 As a shareholder of Xxxxxxxx, Xxxxx was the beneficiary of certain life
insurance policies, the disposition of which the parties hereto agree as
follows:
x. Xxxxx, together with the other shareholders of Xxxxxxxx, is a
participant in and beneficiary of that certain Amended and Restated Xxxxxxxx
Bros. Construction, Inc. Stock Purchase Agreement dated February 1, 1993, as
amended ("Stock Purchase Agreement"). Xxxxxxxx has purchased and maintains life
insurance on each of the shareholders of Xxxxxxxx pursuant to the Stock Purchase
Agreement to fund the repurchase by Xxxxxxxx pursuant to the Stock Purchase
Agreement of the shares of such shareholder in the event of that shareholder's
death. Xxxxxxxx is the owner and beneficiary of all such insurance policies
purchased by Xxxxxxxx to fund Xxxxxxxx'x obligations under the Stock Purchase
Agreement. Xxxxxxxx currently pays all of the premiums on the insurance detailed
on Exhibit A to this Agreement on the life of Xxxxx ("Xxxxx Insurance").
Xxxxxxxx agrees, so long as Xxxxxxxx pays the premiums on life insurance for the
other shareholders of Xxxxxxxx pursuant to the Stock Purchase Agreement,
Xxxxxxxx will pay the premiums on the Xxxxx Insurance, and continue to be the
owner and beneficiary of the Xxxxx Insurance. In the event of Xxxxx' death,
Xxxxxxxx will use the Xxxxx insurance to purchase, pursuant to the Stock
Purchase Agreement, all of the Shares not previously sold to either Xxxxxxxx or
Xxxxxx pursuant to the option contained herein, at the price, and on the terms
provided in the Stock Purchase Agreement.
x. Xxxxxxxx maintains so-called "split dollar plan" life insurance on
Xxxxx and on the other shareholders of Xxxxxxxx. The Xxxxxxxx split dollar
insurance insuring Xxxxx is detailed on Exhibit B to this Agreement ("Xxxxx
Split Dollar Insurance"). The premiums on the Xxxxx Split Dollar Insurance are
divided between Xxxxxxxx and Xxxxx, with Xxxxx paying a portion of the annual
premium equal to the then economic benefit cost. The Xxxxx Split Dollar
Insurance is owned by Xxxxx, and is subject to a collateral assignment of the
portion of the cash value and death benefit thereof equal to the lesser of the
total premiums paid or the net cash surrender value of the policies. The cash
value of the Xxxxx Split Dollar Insurance (and the Xxxxx Insurance) is owned by
Xxxxxxxx and is used by Xxxxxxxx as collateral for Xxxxxxxx'x working capital
credit facility. At any time on or after the date hereof, Xxxxxxxx may elect to
(i)
convert the Xxxxx Split Dollar Insurance to either term or whole-life insurance
on the life of Xxxxx, wholly owned by Xxxxxxxx, or (ii) terminate the Xxxxx
Split Dollar Insurance.
x. Xxxxxxxx pays the premiums on, and holds title to, disability
insurance on Xxxxx, as detailed on Exhibit C hereto ("Xxxxx Disability
Insurance"). The Xxxxx Disability Insurance is maintained to fund the purchase
of the Shares in the event of Xxxxx' permanent disability as defined in the
Stock Purchase Agreement, while Xxxxx is a full-time employee of Xxxxxxxx.
Inasmuch as Xxxxx has terminated his employment with Xxxxxxxx, the parties
hereto agree that the Stock Purchase Agreement will be amended in the form
attached hereto as Exhibit D to eliminate Xxxxx from the disability provisions
of the Stock Purchase Agreement. Xxxxxxxx will continue to pay the premiums on
the Xxxxx Disability Insurance to and through the first anniversary of this
Agreement ("Anniversary Date"). At any time on or before the Anniversary Date,
Xxxxx may elect, by so informing Xxxxxxxx in writing, to assume the Disability
Insurance, by agreeing to pay all future premiums due thereon. In the event
Xxxxx does not elect to assume the Xxxxx Disability Insurance, any premiums paid
by Xxxxxxxx thereunder shall remain the property of Xxxxxxxx.
1.4 Xxxxx, as a shareholder of Xxxxxxxx, will remain personally liable on
guarantees made by him to date on Xxxxxxxx'x indebtedness to financial
institutions. Xxxxxxxx will exclude Xxxxx from any such future guarantees. From
and after the date hereof, Xxxxx will not participate in any partnerships or
companies (i) consisting otherwise exclusively of Xxxxxxxx shareholders, and
(ii) doing business with Xxxxxxxx.
2. OPTION TO PURCHASE SHARES
2.1 Xxxxx hereby grants first to Xxxxxx, and then to Xxxxxxxx, the right and
option to purchase the Shares for $1,284,685, or $696.30 per share, on the
following terms and conditions:
a. The term of the option hereby granted shall run from the date hereof
to and through September 1, 2005 (the "Term"), subject to the terms and
conditions set forth below.
b. The initial price per share for each Share purchased pursuant to
this Agreement is $696.30 per share. The purchase price per Share shall increase
at the rate of 6% per annum during the Term, computed as of each anniversary
date of this Agreement. In the event any Shares are purchased between
anniversary dates of this Agreement, the price per share shall be adjusted PRO
RATA to reflect the portion of the year lapsed since the preceding anniversary
date.
c. All payments made pursuant to this Agreement for the purchase of
Shares pursuant to this Section 2 of the Agreement shall be applied to the
purchase of Shares, and Xxxxx shall assign and transfer to Xxxxxx or to
Xxxxxxxx, as the case may be, Shares equivalent to the payment then made, on the
date such payment is made.
d. From September 26, 1997 to and through December 31 1997, Optionees
made bi-weekly payments of $3,269.23, in total payments of $22,884.61, as option
payments. From
January 2, 1998 to and through February 27, 1998, Optionees have made bi-weekly
payments of $3,269.23, in total payments of $16,346.15, as option payments. On
February 27, 1998, Xxxxx had received total payments of $39,230.76 as option
payments made pursuant to this paragraph.
e. In order to maintain this option, Optionees must make the following
additional option payments to Xxxxx in 1998: on March 12, 1998, $16,900; on
April 1, 1998, $10,000; on each of May 1, 1998, June 1, 1998 and July 1, 1998,
$20,000; and on August 3, 1998, $23,653.85. On payment of the final payment
provided by the preceding sentence, Xxxxx will have received an additional
$110,553.85 as option payments made pursuant to this paragraph, and received a
total of $149,784.61 under paragraphs 2.1. d and e of this Agreement as option
payments.
f. In the event, but only in the event, that all of the payments
described in paragraph 2.1.e have been made by Optionees to Xxxxx on or before
the scheduled dates for the same, then on August 3, 1998 Xxxxx shall assign and
transfer to either Xxxxxx or Xxxxxxxx, as the case may be, 215.12 Shares. In the
event the Optionees fail to make any of the option payments required under
paragraph 2.1.e no shares will be sold or conveyed by Xxxxx hereunder, and the
options hereby granted by Xxxxx to the Optionees shall immediately lapse on the
date a scheduled payment is not made hereunder.
g. From and after September 1, 1998, and provided the Optionees have
made the option payments provided under paragraph 2.1.e, Optionees shall have
the right and option, but not the obligation, to make additional payments to
Xxxxx and thereby to purchase additional Shares. Neither Xxxxxx nor Xxxxxxxx
shall be obligated to make any additional payments, and/or to purchase any
additional Shares after September 1, 1998. However, in the event the Optionees
fail to purchase Shares on the following schedule, the option hereby granted by
Xxxxx to the Optionees shall immediately lapse as of the date a scheduled
payment is not made hereunder, all without the requirement of any further
documentation. The Optionees may at any time purchase more Shares than the
minimum purchases provided hereunder. In the event the Optionees elect to
purchase more than the minimum Shares required to keep this option in full force
and effect, the additional payments and purchases so made will not reduce the
number of Shares the Optionees must purchase on the next payment dates hereunder
in order to keep this option in full force and effect.
h. In order to maintain this option, Optionees must make the following
additional purchases of Shares on the following schedule:
(1) On or before September 1, 1998, $67,115.39 to purchase 90.93
Shares;
(2) on or before September 1, 1999, $241,712.75 to purchase
308.95 Shares;
(3) on or before September 1, 2000, $100,000 to purchase 120.58
Shares;
(4) on or before September 1, 2001, $100,000 to purchase 113.76
Shares;
(5) on or before September 1, 2002, $354,700.98 to purchase
380.66 Shares;
(6) on or before September 1, 2003, $100,000 to purchase 101.24
Shares;
(7) on or before September 1, 2004, $100,000 to purchase 95.51
Shares; and
(8) on or before September 1, 2005, $464,164.79 (the
then-balance of the purchase price) to purchase 418.24
Shares (the then-balance of the Shares).
i. In order to exercise his option in each year that the above option
runs, Xxxxxx shall give written notice of his intent to exercise his option that
year to Xxxxxxxx and to the other shareholders of Xxxxxxxx (except Xxxxx) on or
before August 1 of that year. In the event Xxxxxx fails to give such written
notice, Xxxxxx shall have waived Pflaum's right to exercise any portion of the
option granted hereunder for that respective year. Pflaum's rights to exercise
the option in any subsequent year hereunder shall not be affected by such
failure to give notice.
2.2 Xxxxx hereby represents and warrants to the Optionees that he has good and
marketable title to the Shares, and that the same are free of any liens,
charges, security interests or other encumbrances of any kind or nature. Xxxxx
hereby covenants and represents to the Optionees that he will maintain good and
marketable title in the Shares, and that the same will remain free and clear of
any liens, charges, security interests or other encumbrances of any kind or
nature, during the Term. Xxxxx further represents and warrants that, during the
Term, he will not sell, assign or transfer any of the Shares. Provided
nevertheless, and any language in this paragraph 2.2 to the contrary
notwithstanding, in the event the option granted to the Optionees hereunder
lapses as a result of the Optionees' failure to purchase Shares in accordance
with the schedule set forth in subparagraph 2.1(g) above, Xxxxx shall be free to
sell, assign, transfer or otherwise encumber any of the Shares not then sold
hereunder.
2.3 In the event, at any time from the date hereof to and through the third
anniversary date of the date hereof, a third party acquires from the then
shareholders of Xxxxxxxx all of the common shares of Xxxxxxxx not covered by
this option ("Other Shares"), Xxxxx agrees to sell, and Xxxxxxxx and Xxxxxx
agree to cause such third party to purchase, the then-remaining Shares at the
price to be paid for such Other Shares, and on the terms and conditions for
payment of the Other Shares.
2.4 In the event, at any time from the date hereof to and through the second
anniversary date of the date hereof, one or more of the existing shareholders of
Xxxxxxxx enters into an agreement to sell to the Optionees all of his then
shares of Xxxxxxxx, for a price, and/or on terms and conditions which are more
favorable than those provided Xxxxx under this Agreement, the parties shall
amend this Agreement as to the remaining number of Shares subject to this
option, to provide Xxxxx the benefit of the more favorable price and/or terms
and conditions so provided to the shareholder then selling his shares. Provided,
nevertheless, and any language in this paragraph 2.4 to the contrary
notwithstanding, there shall be no adjustment to the price per Share paid to
Xxxxx hereunder in the event one or more of the existing shareholders of
Xxxxxxxx enters into an agreement to sell to the Optionees all of his then
shares of Xxxxxxxx for a price that does not exceed the then book value per
share, as computed by the independent public accountants then serving Xxxxxxxx.
3. AGREEMENTS NOT TO COMPETE
3.1 a. As used in this Section 3.1, "Proprietary Information" means all
information with respect to the conduct or details of the single family home
building business and operations of Xxxxxxxx, including without limitation
methods of operation, customers and customer lists, details of contracts with
customers, consultants, suppliers or employees, products, proposed products,
former products, proposed prices and pricing policies, costs, plans, designs,
drawings, blueprints, layouts, specifications, models, and any and all
memoranda, whether written or electronic, trade secrets, know-how, software and
marketing methods of Xxxxxxxx.
x. Xxxxx acknowledges and agrees that all of the Proprietary
Information is the exclusive property of Xxxxxxxx. Xxxxx hereby covenants and
agrees that for a term ("Term") equal to the period of time the option under
Section 2 hereof is in effect, Xxxxx shall keep completely confidential and
shall not directly or indirectly disclose, communicate or divulge to any person
or to any business entity or organization, or use for the benefit of any such
person or business entity or organization, any of the Proprietary Information.
The restriction contained in the preceding sentence shall not apply to any
Proprietary Information that (i) is a matter of public knowledge on the date
hereof, (ii) becomes a matter of public knowledge after the date hereof solely
from a source other than Xxxxx, or (iii) is required by law or by the order of
any court or government agency, or in any litigation or similar proceeding to be
disclosed.
3.2 During the Term, Xxxxx shall not invest in, own, manage or control, or share
in the ownership, management or control of, any business or enterprise that
either engages or proposes to engage in a business which is in competition with
the single family home building business of Xxxxxxxx within a one hundred fifty
(150) mile radius of Xxxxxxxx'x corporate offices in Wayzata, Minnesota.
3.3 During the Term, Xxxxx shall not directly or indirectly solicit, divert or
accept business from or otherwise take away or interfere with, any customer of
or supplier to Xxxxxxxx, or any distributor or seller of products of Xxxxxxxx.
4. DISPUTE RESOLUTION
4.1 In the event any dispute arises out of or relates to this Agreement, and
cannot be resolved by mutual agreement of the parties hereto, all matters so
disputed shall be submitted to a single arbitrator (herein, the "Arbitrator")
selected by the presiding officer of the American Arbitration Association in
Minneapolis, Minnesota, for binding arbitration in accordance, where applicable,
with this Agreement, and otherwise in accordance with the then rules of the
American Arbitration Association. Such arbitration shall take place in
Minneapolis, Minnesota.
4.2 The Arbitrator shall be requested by the parties to make his or its
determination as soon as possible after the matter or matters in dispute are
submitted to the same, and such determination shall be final and binding upon
the parties hereto. All fees and disbursements of the Arbitrator shall be paid
in accordance with the decision of the Arbitrator. Any payment
required to be made as a consequence of the decision of the Arbitrator shall be
made by the party hereto then obligated to pay the same, not later than 30 days
after the receipt of such decision.
4.3 The Arbitrator shall have the authority to award any remedy or relief that a
court of the State of Minnesota could order or grant, including, without
limitation, equitable remedies, rescission, or specific performance of any
obligation created under this Agreement, the issuance of an injunction, or the
imposition of sanctions for abuse or frustration of the arbitration process,
provided, however, that punitive or exemplary damages shall not be awarded by
the Arbitrator or by any court.
5. MISCELLANEOUS
5.1 Disclaimer. Xxxxx hereby acknowledges that Xxxxx has had the opportunity to
obtain, and has obtained, advice from his own professional tax advisors
regarding the tax consequences of the transactions described in this Agreement;
and that Xxxxx has not received from Lundgren, Pflaum, or any other
representatives of Xxxxxxxx, and is not relying upon, any advice regarding the
tax consequences of such transactions.
5.2 Survival. All representations and warranties of Xxxxx contained in this
Agreement shall continue to and through the sale and transfer of the last of the
Shares to Optionees hereunder, or the termination of the Term, whichever first
occurs.
5.3 Notices. All notices and other communications hereunder shall be in writing,
and may be delivered personally (including by courier) or by first class
registered or certified mail, postage pre-paid, addressed to the parties at the
following addresses, or to such other addresses as may be furnished in writing
by one party to the other:
a. If to Pflaum and to Xxxxxxxx:
Xxxxxxxx Bros. Construction, Inc.
000 X. Xxxxxxx Xxxxxxxxx
Xxxxxxx, XX 00000
with a copy to:
Xxxxxxx, Street and Deinard
Attn: Xxxxxxx X. Xxxxxx, Esquire
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, XX 00000
b. If to Xxxxx:
Xxxxxxx X. Xxxxx
00000 Xxx Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
with a copy to:
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Service of any such notice or other communication so made by mail shall
be deemed to be complete on the day of actual delivery thereof as shown by
addressee's registry or certification receipt.
5.4 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Minnesota, without regard to such
jurisdiction's conflicts of law principles.
5.5 Modification; Waiver. This Agreement shall not be altered or otherwise
amended except by an instrument in writing signed by all of the parties hereto.
Any party hereto may waive any covenant, obligation or agreement of any other
party, provided that mere inaction or failure to exercise any right, remedy or
option under this Agreement or delaying the exercise of the same, will not
operate as, nor be construed as, a waiver, and no waiver will be effective
unless set forth in writing, and only to the extent specifically stated therein.
5.6 Entire Agreement. This Agreement and the Exhibits hereto constitute the
entire agreement of the parties hereto with respect to the matters contemplated
hereby, and supersede all previous written or oral negotiations, commitments,
representations and agreements.
5.7 Assignment. This Agreement may not be assigned by any party hereto without
the prior written consent of the other parties.
5.8 Severability. The provisions of this Agreement are severable, and in the
event any one or more provisions are deemed illegal or unenforceable, the
remaining provisions shall remain in full force and effect.
5.9 Third-Party Beneficiaries. Notwithstanding paragraph 4.6 regarding
non-assignability of this Agreement, this Agreement shall inure to the benefit
of, and be binding upon, the heirs of Xxxxx and the successors of the other
parties hereto.
5.10 Execution in Counterpart. This Agreement may be executed in one or more
counterparts, 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 as
of the day and year first above written.
XXXXXXXX BROS. CONSTRUCTION, INC.
By
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Xxxxx Xxxxxx, President
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Xxxxx Xxxxxx
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Xxxxxxx X. Xxxxx
