Exhibit 10.3

 

CIVIL SETTLEMENT AGREEMENT

 

This civil settlement agreement (“Agreement”) is made by and between The Armored
Group, LLC (“TAG”), a Nevada limited liability company, and Supreme Indiana
Operations, Inc., a Delaware corporation, successor to Supreme Corporation, a
Texas corporation, and Supreme Corporation of Texas, a Texas corporation
(collectively “Supreme”).  TAG and Supreme are the parties (“Parties”) to this
Agreement.

 

1.                                      Recitals, Representations and Conditions

 

1.1                                 TAG filed a lawsuit against Supreme in
Arizona which was removed to the federal court, No. CV-09-00414-PHX-NVW.

 

1.2                                 Supreme filed a lawsuit against TAG in
Indiana state court, and TAG has filed counterclaims against Supreme,
No. 20D03-0209-PL.

 

1.3                                 TAG and Supreme have reached a full
settlement of all claims and counterclaims in the lawsuits.

 

1.4                                 Supreme represents that (a) it has filed all
required reports under Section 13 or 15(d) of the Securities Exchange Act of
1934, as applicable, during the 12-month period preceding the date hereof,
(b) the information furnished or filed in such reports does not contain, as of
the date such report was filed, any untrue statement of a material fact with
respect to Supreme and does not omit to state any material fact with respect to
Supreme necessary in order to make the statements made therein, in light of the
circumstances under which made, not misleading, and (c) except as disclosed in
writing to TAG, no additional disclosures beyond those set forth in such reports
are necessary to (i) update or correct any untrue statement of material fact
with respect to Supreme in such reports as of the date hereof or (ii) cure any
omission to state any material fact with respect to Supreme in such reports
necessary in order to make the statements made therein, in light of the
circumstances under which made, not misleading, as of the date hereof.

 

1.5                                 TAG requests that all class A stock it
receives under this settlement agreement be registered.  Supreme represents and
warrants that it will register any stock issued and delivered to TAG or its
designee with

 

1

--------------------------------------------------------------------------------

 

the SEC on a Form S-1 Registration Statement (or, if possible, an S-3
Registration Statement) at Supreme’s sole expense and keep any such S-1 or S-3
Registration Statement current (“evergreen”) until the earlier of: (i) the date
on which TAG may sell all of the shares covered by such Registration Statement
without a restriction on the volume of shares that can be sold pursuant to
Rule 144 promulgated under the Securities Act of 1933, as amended (the
“Securities Act”); or (ii) the date on which TAG shall have sold all of the
shares covered by the Registration Statement.  Supreme shall act reasonably and
diligently and will exercise its best efforts to file an S-1 or S-3 Registration
Statement with the SEC within 30 days after the date of this Agreement with
respect to the 350,000 shares issued to TAG upon execution of this Agreement,
and within 30 days with respect to the 350,000 shares issued to TAG on
January 15, 2012, and then have such Registration Statements declared effective
promptly thereafter.  Supreme shall notify TAG when the Registration Statements
are effective.

 

1.6                                 Supreme represents that as of the date of
the signing of this settlement agreement that it has no plans to file any
actions in bankruptcy.

 

1.7                                 TAG acknowledges that the 700,000 shares of
class A stock to be issued pursuant to Section 2.2 hereof will be issued in
reliance upon the exemptions from registration or qualification under the
Federal and state securities laws based, in part, upon TAG’s representations in
this Section 1.7.  TAG is acquiring the shares of class A stock for its own
account and not with a view to, or for sale in connection with, any distribution
thereof.  TAG acknowledges that such shares may not be sold or transferred
unless such sale or transfer is registered or qualified with the appropriate
securities authorities or unless an opinion of counsel, reasonably satisfactory
to Supreme, is rendered that there then exists an exemption from such
registration or qualification applicable to such sale or transfer.  TAG
understands that the certificates evidencing the shares of class A stock shall
bear legends reflecting these restrictions on sale or transfer.  TAG is an
“accredited investor” as defined in Rule 501 promulgated under the Securities
Act.

 

2

--------------------------------------------------------------------------------

 

2.                                      Consideration

 

2.1                                 Supreme will pay TAG $1,100,000 in cash. 
This cash payment is in addition to any voluntary payments made by Supreme to
TAG during the course of the lawsuit.  $400,000 shall be paid upon the signing
of this Agreement.  The remaining $700,000 shall be paid over the next twelve
months in the principal amount of $58,333 per month plus accrued interest at
5.75% simple interest, commencing thirty days after the signing of this
Agreement.  Upon any refinancing of the Supreme companies prior to the end
payment of the $1,100,000, Supreme shall pay any remainder of the amount in full
without prepayment penalty.  All payments shall be made to the Osborn Maledon
trust account.

 

2.2                                 Upon the signing of this Agreement, Supreme
shall issue and deliver to TAG or its designee 700,000 shares of class A stock
on the following schedule: 350,000 shares on the signing of this Agreement;
350,000 shares on January 15, 2012.  TAG or its designee may place no more than
50,000 shares for sale on the open market for any thirty day period.  Supreme,
in its sole discretion, can authorize TAG to sell more than 50,000 shares a
month under this agreement upon request.  If TAG requests permission to sell
more than 50,000 shares per month, it will notify Supreme and Supreme shall have
72 hours to agree or not agree.  This notice can be given along with the notice
of right to first refusal discussed below in paragraph 2.3.  Supreme shall
report the issuance and delivery of class A stock to TAG or its designee on a
form 1099 when stock is received by TAG or its designee.  In the event of a
forward stock split, stock dividend, reverse stock split, or recapitalization,
TAG will be treated in the same manner as all of the other holders of Supreme’s
Class A Common Stock.

 

2.3                                 Prior to selling any class A stock, TAG or
its designee will give Supreme three days notice in writing of the amount of
stock TAG intends to sell, and Supreme (or its designee) shall have a right to
purchase the class A stock that TAG or its designee has stated it intends to put
on the market at the then market price which will be the closing price of the
stock on the day preceding the written notice in writing.  The written notice
shall be sent to the addresses provided for notice to Supreme below.  E-mail
notice is delivered on the day it is

 

3

--------------------------------------------------------------------------------

 

sent.  If Supreme (or its designee) elects to purchase the stock, then Supreme
shall give notice to TAG at the address provided for notice below and the cash
payment for the stock will be made within 48 hours of Supreme’s (or its
designee’s) notice that it will buy the stock and payment will be wired to an
account to be provided by TAG.  This agreement applies only to TAG or its
designee, and does not apply to any buyer of the stock from TAG or its
designee.  If Supreme (or its designee) elects not to purchase the stock, then
the right to purchase as to those shares ceases and TAG or its designee may sell
those shares on the open market when it chooses.

 

2.4                                 The lawsuits, complaints and counterclaims
referred to above shall be dismissed by stipulation with prejudice subject to
the provisions of sections 2.5, 2.6 and 2.9.

 

2.5                                 Each side will bear its own attorneys’ fees
and costs in the lawsuits, complaints and counterclaims referred to above.

 

2.6                                 TAG and all of its owners (specifically
including Robert Pazderka), agents, officers, members, attorneys, employees,
representatives, affiliates and their owners, agents, officers, directors,
members, and representatives release and forever discharge Supreme and all of
its insurers, sureties, agents, officers, directors, members, attorneys,
employees, subsidiaries, parents and affiliates from any and all liabilities,
claims, counterclaims, debts, demands, damages, costs, deprivation of rights,
loss of services, disabilities, expenses, compensation actions, causes of
action, or suits in equity, of whatever kind and of whatever nature, which are
now known or may hereafter be discovered arising from or in connection with the
civil lawsuits, except for any obligation arising from this Agreement.  This
release shall be effective upon the signing of the Agreement and the payment of
the $400,000 referenced above, provided, however, that in the event that any
action is ever commenced by Supreme in a bankruptcy court, then Supreme agrees
to give TAG a liquidated damage judgment in the amount of $3,400,000
(“Liquidated Amount”) minus all cash payments made to TAG (which are not finally
determined to be preferential transfers) as set out below.

 

4

--------------------------------------------------------------------------------

 

Assuming that the $1,100,000 cash payment by Supreme has been paid and is not
determined to be a preferential transfer, the Liquidated Amount will have been
reduced to $2,300,000.

 

When the Registration Statement covering the 350,000 shares of stock issued and
delivered by Supreme to TAG, on the signing date of the Settlement Agreement, is
declared effective (the “Effective Date”) by the SEC, TAG will be in a position
to sell 50,000 shares during every thirty day period.  During the first
twenty-four (24) months following the signing of this agreement, the Liquidated
Amount will be reduced by the actual sales prices received by TAG for all shares
sold during that twenty-four (24) month period.  At the end of such twenty-four
(24) month period, the then remaining Liquidated Amount shall be further reduced
by the fair market value of each block of unsold 50,000 shares (or portion
thereof) for the month during which each such block of 50,000 shares (or portion
thereof) could have been sold on the market.  For valuation purposes, the fair
market value of any such block of 50,000 shares (or portion thereof) of unsold
stock will be the closing price of Supreme’s Class A Common Stock on the NASDAQ
for on the last day of such month.  For example, assume that at the end of the
twenty-four month period referred to above, there is a block of 50,000 shares of
unsold stock that could have first been sold on the market by TAG during the
month of October, 2011. The then remaining amount of the Liquidated Amount will
be reduced by 50,000 times the closing price of Supreme’s Class A Common Stock
on the NASDAQ on October 31, 2011.

 

On January 15, 2012, Supreme will issue and deliver to TAG an additional 350,000
shares of stock. Reductions in the Liquidated Amount will occur in the same
manner as explained in the preceding paragraph.

 

Although TAG is prevented from selling more than 50,000 shares in any thirty day
period, if it requests a waiver of this restriction so that it can sell more
than 50,000 shares in one thirty day period, and Supreme grants such waiver,
then the reduction in the Liquidated Amount will be based on the actual number
of shares sold during that single thirty day period (valued in the manner
provided two paragraphs above).

 

5

--------------------------------------------------------------------------------

 

However, no reductions will be made to the Liquidated Amount for Supreme stock
distributed by Supreme to TAG which is later determined to have been a
preferential transfer.

 

2.7                                 Supreme and all of its, agents, officers,
members, attorneys, employees, representatives, affiliates, subsidiaries and
their owners, agents, officers, directors, members, and representatives releases
and forever discharges TAG and all of its insurers, sureties, agents, officers,
directors, members, attorneys, employees, subsidiaries, parents and affiliates
from any and all liabilities, claims, counterclaims, debts, demands, damages,
costs, deprivation of rights, loss of services, disabilities, expenses,
compensation actions, causes of action, or suits in equity, of whatever kind and
of whatever nature, which are now known or may hereafter be discovered arising
from or in connection with the civil lawsuits, except for any obligation arising
from this Agreement.

 

2.8                                 This Agreement shall be confidential and not
disclosed to anyone except employees or attorneys of the Parties or their
affiliates who need to know, current or prospective insurance companies of the
Parties, accountants who review or audit financial statements of the Parties,
directors of the Parties, entities who underwrite securities of the Parties,
representatives of Supreme’s current and proposed lending institutions, or upon
order of the Court or the request of any governmental entity or as may otherwise
be required by law (such as SEC filing and disclosure requirements).

 

2.9                                 Time is of the essence in this Agreement. 
In the event that Supreme fails, on a timely basis, to make a cash payment or
distribution of stock to TAG as above required, TAG shall give written
notification to Supreme of its default. Supreme will then have a period of five
(5) business days to cure such default. In addition to the sums due to cure the
default,  Supreme will be liable for payment of a $1,500 penalty to TAG (in
addition to all of its other remedies) to cure the default.

 

If Supreme fails to make a cash payment under section 2.1, and cure the default
within five business days after notice, then Supreme consents to the entry of
judgment against it for the full remaining cash consideration unpaid at the time
of default upon motion by TAG to

 

6

--------------------------------------------------------------------------------

 

the federal district court in Arizona, No. CV-09-00414-PHX-NVW.  Interest on the
judgment shall run at the Arizona statutory rate.

 

If Supreme fails to make a stock distribution under section 2.2, and cure the
default within five business days after notice, then TAG, at its sole election,
may either move for specific enforcement of this settlement agreement upon
motion to the federal district court in Arizona, No. CV-09-00414-PHX-NVW, or
Supreme consents to the entry of judgment against it for the fair market value
of the stock which was not issued and distributed to TAG upon motion by TAG to
the federal district court in Arizona, No. CV-09-00414-PHX-NVW (such fair market
value to be based upon the number of shares of such stock times the closing
price of the Supreme Class A Common Stock on the NASDAQ on the fifth business
day).  Interest on the judgment shall run at the Arizona statutory rate.

 

Supreme agrees that its duties under this settlement agreement are subject to
specific enforcement upon a motion for enforcement of its settlement duties in
the federal district court in Arizona, No. CV-09-00414-PHX-NVW.

 

3.0                               Other Provisions

 

3.1                                 This Agreement shall be binding upon and
inure to the benefit of and be enforceable by and against the Parties, their
spouses and successors, and each of their present and former officers, agents,
heirs, assigns, shareholders, owners, servants, directors, employees, former
employees, investors, lawyers and all other representatives or anyone acting on
behalf of them.

 

3.2                                 No failure on the part of the Parties to
exercise any of their rights under this Agreement or any of the other documents
executed by the Parties shall be construed as a waiver or shall in any way
prejudice the Parties from pursuing their rights in the event of any subsequent
breach.  No delay on the part of the Parties in executing any of their rights
shall preclude them from exercising their rights in the future.

 

3.3                                 The Parties hereto have reviewed this
Agreement and agree that the normal rule of construction that any ambiguities in
this Agreement are to be construed against the drafter shall not be employed in

 

7

--------------------------------------------------------------------------------

 

interpretation of this Agreement.

 

3.4                                 The Parties to this Agreement represent and
warrant that they have not sold, conveyed, transferred or otherwise disposed of
any of their claims raised in the litigation and released in this Agreement. 
The Parties represent and warrant that the individuals signing this Agreement
have full authority to sign for and bind the Parties.

 

3.5                                 This Agreement can be executed in any number
of counterparts (including facsimile), each of which shall be an original but
all of which shall constitute one instrument.

 

3.6                                 If any other clause or term is deemed by a
court to be void, illegal, against public policy, or otherwise unenforceable,
that clause or term, and only that clause or term, will be invalid and the
remaining terms of this Agreement shall remain in force and effect.

 

3.7                                 From time to time, without consideration,
upon request by any one of the Parties, their successors or assigns, the Parties
hereto agree to execute any other or further documents or take any and all
actions reasonably necessary or desirable for the effectuation of the terms or
provisions of this Agreement.

 

3.8                                 This Agreement shall be governed by and
construed in accordance with the laws of the State of Arizona, including,
without limitation, all matters of formation, interpretation, construction,
validity, performance and enforcement, without regard to any Arizona conflict of
law provisions.

 

3.9                                 The Parties agree that this Agreement is a
compromise and settlement of disputed claims and that no liability with respect
to such claims is admitted.  This settlement is being made solely to terminate
the present disputes and avoid litigation.

 

3.10                           If there is a dispute over this Agreement, the
prevailing party shall be entitled to reasonable attorneys’ fees, expenses and
costs.

 

3.11                           Any notices to TAG under this Agreement shall be
mailed by first class mail to The Armored Group, c/o Robert Pazderka, 5221 North
Saddlerock Drive, Phoenix, Arizona 85018; and e-mailed to Robert

 

8

--------------------------------------------------------------------------------

 

Pazderka at paz@armoredcars.com; and first class mailed to Colin Campbell,
Osborn & Maledon, 2929 North Central Ave., 21st floor, Phoenix, Arizona
85012-2793; and e mailed to Colin Campbell at Ccampbell@omlaw.com

 

3.12                           Any notices to Supreme under this Agreement shall
be mailed by first class mail to Kim Korth, Supreme Industries, Inc., 2581
Kercher Road, Goshen, Indiana 46528; and e-mailed to Kim Korth at
kim.korth@supremecorp.com; and first class mailed to Rice Tilley, Haynes and
Boone, LLP, 201 Main Street, suite 2200, Fort Worth, Texas 76102-3126; and e
mailed to Rice Tilley at rice.tilley@haynesboone.com

 

[signature page follows]

 

9

--------------------------------------------------------------------------------

 

Dated this 25 day of May, 2011.

 

 

 

 

 

The Armored Group, LLC, a Nevada limited liability company

 

 

 

/s/ Robert Pazderka

 

Robert Pazderka, President

 

 

 

 

 

/s/ Robert Pazderka

 

Robert Pazderka, Individually (but only for purposes of Sec. 2.6)

 

 

 

 

 

Supreme Indiana Operations, Inc., a Delaware corporation

 

 

 

/s/ Kim Korth

 

By:

Kim Korth

 

 

President and CEO

 

 

 

 

 

Supreme Corporation of Texas, a Texas corporation

 

 

 

/s/ Kim Korth

 

By:

Kim Korth

 

 

President and CEO

 

 

10

--------------------------------------------------------------------------------