XXXXXXX STOCK PURCHASE AGREEMENT
This Xxxxxxx Stock Purchase Agreement (the "Agreement") is made and
entered into by and between American Capitol Insurance Company ("AC"), a
Texas insurance company with its offices and principal place of business
in Houston, Xxxxxx County, Texas, and Xxxx X. Xxxxxxx ("Xxxxxxx"), an
individual resident of Houston, Xxxxxx County, Texas.
WHEREAS, AC and Xxxxxxx have, contemporaneously with the execution of
this Agreement, entered into an employment agreement (the "Employment
Agreement") pursuant to which AC has agreed to employ Xxxxxxx as its
President, Chief Operating Officer and a director of AC under the terms
and consideration set forth therein; and
WHEREAS, as an additional inducement to Xxxxxxx to enter into the
Employment Agreement, AC desires to enter into this Agreement pursuant to
which Xxxxxxx shall be granted an irrevocable option to require AC to
purchase certain shares of stock owned by Xxxxxxx described herein under
the terms and circumstances set forth in this Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
Definitions
1.1. At present there is a "control" relationship involving Guest's
ownership of 51.8% of all of the issued and outstanding stock of InsCap
Corporation ("InsCap"), InsCap's ownership of approximately 44% of Acap
Corporation ("Acap") and Acap's ownership of 100% of AC. For purposes of
this Agreement, "loss of control of AC" shall be deemed to occur whenever
Guest's ownership of InsCap or InsCap's ownership of Acap falls below
33.3% of the issued and outstanding stock of such entity, or whenever
Acap's ownership of AC falls below 51.0% of AC's issued and outstanding
stock.
1.2. "Xxxxxxx Stock" shall mean any shares of the capital stock of
Acap acquired by Xxxxxxx while he is a full-time employee of AC or an
affiliate, whether acquired before or after the date hereof, but shall not
include (a) any stock acquired by Xxxxxxx when he is not an employee of AC
or an affiliate; (b) any stock acquired by Xxxxxxx in excess of 67 shares
in any single year, except as provided below; (c) any stock that is not
owned solely by Xxxxxxx as hereinafter provided; or (d) any stock acquired
by Xxxxxxx that is not properly "registered" as hereinafter provided. If
Xxxxxxx acquires less than 67 shares in a year, then such shortfall amount
may be carried over as an increase in the 67 shares per year limit that is
otherwise applicable to the next succeeding two years, except that in no
event shall the 67 shares per year limit be increased in this manner by
more than 33 shares in the aggregate. To properly register such stock,
Xxxxxxx shall deliver to AC's Chairman of the Board a dated written notice
(signed by Xxxxxxx) within 30 days of the date hereof for any such stock
acquired prior to the date hereof and, within 30 days after acquiring any
such stock for any such stock acquired on or after the date hereof,
identifying the stock acquired, stating the number of shares acquired, the
date of acquisition, the cumulative total of all Xxxxxxx Stock owned by
him as of the date of the notice, and a statement that he is the sole
owner of all such Xxxxxxx Stock. To be the sole owner of Xxxxxxx Stock,
there can be no other interest in such stock except a pledge or security
interest in the event such stock is pledged as collateral for a loan made
exclusively to Xxxxxxx and his spouse and/or his spouse's community
property interest in such stock, and such sole interest by Xxxxxxx must
exist throughout the period in which such stock otherwise qualifies as
Xxxxxxx Stock. Xxxxxxx is not obligated to purchase any Acap stock, but
if he does, and if it falls within the parameters stated in this Section
1.2, it shall be deemed "Xxxxxxx Stock."
1.3. "Xxxxxxx" shall mean Xxxx X. Xxxxxxx or his heirs or estate.
1.4. Any stock acquired by Xxxxxxx as a result of a merger or other
corporate reorganization as a successor to the Acap stock shall be treated
as Xxxxxxx Stock if the predecessor Acap stock would have qualified as
Xxxxxxx Stock. Such substituted stock shall be treated, for valuation
purposes, as though the substitution had not occurred, i.e., as though
the original Acap shares were being valued under the provisions of this
Agreement.
1.5 A "sale" by Guest shall mean any transfer, sale or exchange of
any shares of InsCap stock owned by Guest for cash, other stock, or other
consideration, except that it shall not include a merger or corporate
reorganization involving only InsCap and an InsCap affiliate, whether or
not such merger or corporate reorganization results in a loss of control
of AC.
1.6. "Guest" shall mean Xxxxxxx X. Guest or his heirs or estate.
1.7. A "sale" by InsCap shall mean any transfer, sale or exchange of
any shares of Acap stock owned by InsCap for cash, other stock, or other
consideration, except that it shall not include a merger or corporate
reorganization involving only Acap and an Acap affiliate, whether or not
such merger or corporate reorganization results in a loss of control of
AC. InsCap shall include any corporate or other entity which is the
successor of InsCap.
1.8. The "Total Value of InsCap" means the price per share paid to
Guest in any sale of any shares of his InsCap Stock multiplied by the
total number of shares of InsCap that are issued and outstanding.
1.9. The "Fair Value of InsCap's Investment in Acap" means the Total
Value of InsCap less the fair market value of any assets of InsCap other
than InsCap's investment in Acap.
1.10. The "Fair Value of Acap" means the Fair Value of InsCap's
investment in Acap divided by InsCap's percentage of ownership of the
outstanding common stock of Acap, prior to the sale of any Acap shares by
InsCap.
1.11. The "Fair Value per Share of Acap" means the Fair Value of
Acap divided by the total number of shares of Acap that are issued and
outstanding.
ARTICLE II
Grant of Sale Option
2.1. AC agrees to xxxxx Xxxxxxx and does hereby irrevocably xxxxx
Xxxxxxx the right, but not the obligation, to require AC to purchase all
of, or a portion of, the Xxxxxxx Stock (the "option") in the event that
(a) Guest sells all of or a portion of his InsCap stock, or InsCap sells
all of or a portion of its Acap stock, and (b) such sale or sales by Guest
and/or InsCap result in a loss of control of AC as hereinabove defined, or
which take place subsequent to a prior loss of control of AC which occurs
on or after the date of this Agreement.
2.2. In the event of a sale by Guest subsequent to or resulting in a
loss of control of AC as set forth above, the price to be paid Xxxxxxx by
AC for the Xxxxxxx stock shall be an amount equal to the Fair Value per
Share of Acap multiplied by the number of Acap shares included in the
Xxxxxxx Stock.
2.3. In the event of a sale by InsCap subsequent to or resulting in
a loss of control of AC as stated above, the price to be paid Xxxxxxx by
AC for the Xxxxxxx Stock shall be the per share price InsCap received for
each share of Acap stock sold by InsCap multiplied by the number of Acap
shares included in the Xxxxxxx Stock.
2.4. In the event of a sale by Guest or InsCap resulting in or
subsequent to a loss of control of AC as stated above, the amount to be
paid to Xxxxxxx as determined in Sections 2.2 and/or 2.3 (as applicable)
shall be paid by AC to Xxxxxxx in cash within 30 days from the date or
dates on which Xxxxxxx exercises the Option to require AC to purchase any
shares of the Xxxxxxx Stock.
ARTICLE III
Exercise and Expiration of Option
3.1. At any time before the expiration of one (1) year from the date
of closing of any sale of InsCap stock by Guest or Acap stock by InsCap as
contemplated in Section 2.1 of this Agreement (the "Expiration Date"),
Xxxxxxx may exercise the Option granted him under this Agreement and
require AC to purchase all or a portion of the Xxxxxxx Stock upon the
terms set forth herein.
3.2. In the event that any shares of Xxxxxxx Stock are still owned
by Xxxxxxx upon the Expiration Date and Xxxxxxx has failed to exercise the
Option to require AC to purchase such shares as provided for herein, such
Option with respect to such shares of Xxxxxxx Stock shall expire and be of
no further force and effect.
3.3. The Option granted by this Agreement may be exercised by
Xxxxxxx on or before the Expiration Date in whole at any time or in part
from time to time, by delivery to AC at its principal office of a written
notice of the exercise of the Option that specifies the number of shares
of Xxxxxxx Stock as to which the Option is being exercised, and a request
for payment for such shares. Upon receipt of the written notice, AC shall
promptly pay Xxxxxxx the price for such shares of Xxxxxxx Stock as
provided in Article II of this Agreement.
ARTICLE IV
Survival of Agreement
4.1. This Agreement is made and entered into contemporaneously with
the execution by Xxxxxxx and AC of an Employment Agreement relating to
Xxxxxxx'x employment by AC. Notwithstanding anything to the contrary
herein contained, AC's obligation to purchase any or all of the Xxxxxxx
Stock as herein provided shall terminate in the event Xxxxxxx is
terminated for cause under the terms of said Employment Agreement. It is
expressly agreed, however, that neither Xxxxxxx'x death nor his
disability, nor the termination or expiration of the Employment Agreement
in accordance with its terms other than as set forth above will terminate
Xxxxxxx'x right to require AC to purchase and AC's obligation to purchase
any or all of the Xxxxxxx Stock as herein provided, and such right and
obligation shall survive the termination of the Employment Agreement, and
be enforceable under the terms of this Agreement.
4.2. This Agreement shall be binding upon any successor or
successors of AC.
ARTICLE V
Miscellaneous
5.1. Notices. Any notice required or permitted under this Agreement
shall be in writing and shall be deemed to be delivered three business
days after deposit in the United States mail, postage prepaid, certified
or registered mail, return receipt requested, addressed as follows:
If to AC: American Capitol Insurance Company
00000 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxxxxxx X. Guest
If to Xxxxxxx: Xxxx X. Xxxxxxx
10922 Xxxxxxxx
Xxxxxxx, Xxxxx 00000
Notice given in any other manner shall be effective when received by
the addressee. The address for notice may be changed by notice given in
accordance with this provision.
5.2. Amendments. This Agreement and any attachments incorporated by
reference constitute the entire agreement between the parties and may not
be amended, supplemented, waived, or terminated except by written
instrument executed by the parties.
5.3. Waiver. No waiver of any provision of this Agreement shall
constitute a waiver of any other provision of this Agreement, nor shall
such waiver constitute a waiver of any subsequent breach of such
provision.
5.4. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties and their respective successor and
assigns. Notwithstanding anything herein to the contrary, this Agreement
is not assignable by Employee.
5.5. Governing Law. The validity, construction, and enforcement of
this Agreement shall be governed by the laws of the State of Texas. In
the event of a dispute concerning this Agreement, the parties agree that
venue lies in a court of competent jurisdiction in Xxxxxx County, Texas.
5.6. Severability. If any provision of this Agreement is declared
unenforceable by a court of last resort, such declaration shall not effect
the validity of any other provisions of this Agreement.
5.7. Construction. The headings contained in this Agreement are for
reference purposes only and shall not affect this Agreement in any manner
whatsoever. Whenever required by the context, any gender shall include
any other gender, the singular shall include the plural, and the plural
shall include the singular.
5.8. Time for Performance. If the time for performance of any
obligation set forth in this Agreement falls on a Saturday, Sunday, or
legal holiday, compliance with such obligation on the next business day
following such Saturday, Sunday, or legal holiday shall be deemed
acceptable.
5.9. Counterparts. This Agreement may be executed in multiple
and/or separate counterparts, each of which shall be deemed an original
but all of which shall be deemed one instrument.
5.10. Expenses. AC shall pay legal fees incurred by Xxxxxxx in
connection with the preparation of this Agreement.
5.11. Authorization. The making and performance by AC of this
Agreement have been duly authorized by all necessary corporation actions
of AC, and the undersigned representative of AC is fully empowered and
authorized to execute this Agreement on its behalf.
This Agreement is executed to be effective as of April 1, 1997.
AMERICAN CAPITOL INSURANCE COMPANY
By: /s/Xxxxxxx X. Guest
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Name: Xxxxxxx X. Guest
Title: Chairman of the Board
/s/Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx
