## Facts

- Crowder Construction Company (Crowder) was a closely held company that allowed certain employees to acquire stock through employee stock-option plans.
- Eugene P. Kiser was a long-time Crowder employee who purchased Crowder stock for $7 per share under those plans: 2,000 shares in 1986 and 4,750 shares in 1988.
- Crowder’s shareholders’ agreement included buy-sell provisions requiring an employee-shareholder, upon termination of employment, to sell his shares back to Crowder.
- The agreement set the repurchase price using a formula tied to “book value per share,” subject to specified adjustments (“adjusted book value”).
- The agreement used a holding-period split:
  - If shares were held at least seven years, Crowder would repurchase them at the company’s adjusted book value per share as of the contract’s specified fiscal-year measurement date.
  - If shares were held less than seven years, Crowder would repurchase them for $7 per share, plus or minus the change in adjusted book value per share since the employee’s purchase.
- By 1994, Crowder faced economic difficulties, and Kiser’s relationship with Crowder’s president and other senior officers deteriorated; Kiser openly disagreed with management’s business decisions.
- Crowder terminated Kiser’s employment in January 1995—more than seven years after the 1986 purchase but less than seven years after the 1988 purchase.
- Using adjusted book value per share as of March 31, 1994, Crowder calculated:
  - $56.42 per share for the 2,000 shares (held at least seven years), and
  - $18.59 per share for the 4,750 shares (less than seven years), reflecting $7 plus the increase in adjusted book value per share since 1988.
- Kiser claimed that if he had remained employed until later in 1995, the 4,750-share block would have crossed the seven-year mark and yielded substantially more under the agreement’s pricing method.
- Kiser refused to tender his shares at Crowder’s calculated price.
- Crowder sued in North Carolina Superior Court (Business Court) seeking specific performance of the shareholders’ agreement; Kiser opposed enforcement, arguing the pricing determination and the circumstances of his termination made enforcement unfair, including claims that Crowder timed his firing to reduce the buyback amount and terminated him without warning.

## Issues

1. Whether Crowder’s calculation of “adjusted book value” and the resulting repurchase price presented a genuine issue of material fact that would bar summary judgment.
2. Whether ordering Kiser to sell his shares back under the agreement’s formula would be unconscionable under the circumstances alleged by Kiser.
3. Whether Kiser’s equitable defenses based on alleged bad faith in the timing and manner of his termination precluded specific performance of the buy-sell provisions.

## Decision

- The Business Court granted summary judgment for Crowder.
- The court ordered specific performance compelling Kiser to sell his shares back to Crowder at the price produced by the shareholders’ agreement’s formula and measurement date.
- The court concluded Kiser failed to produce evidence creating a triable dispute that Crowder’s “adjusted book value” calculation violated the agreement.
- The court rejected Kiser’s unconscionability argument, holding that the contractual pricing method and holding-period structure were enforceable even if they produced a lower payout because Kiser’s employment ended before the seven-year threshold for the later block of shares.
- The court determined Kiser’s asserted equitable defenses did not justify denying specific performance on the record presented.
- The North Carolina Court of Appeals later affirmed the trial court’s judgment.

## Legal Principles

- Courts enforce clear buy-sell provisions in closely held corporations as written, including price formulas tied to adjusted book value and contractual measurement dates.
- A party opposing summary judgment must produce specific facts showing a genuine issue for trial; disagreement with the economic outcome of a contract is not enough.
- Unconscionability requires a strong showing of unfairness in the contract formation process and/or in the contract’s substantive terms; a hard bargain or unfavorable result does not, by itself, make an agreement unconscionable.
- Specific performance is a proper remedy to enforce a mandatory stock repurchase obligation in a closely held company where the agreement defines the transfer obligation and the pricing method and the shares lack a ready market.
- Allegations that an employer terminated an employee before a contractual holding period or before a more favorable valuation date, without more, do not automatically bar enforcement of a stock-repurchase agreement.

## Conclusion

Crowder Construction Co. v. Kiser enforced a closely held corporation’s mandatory repurchase provisions on summary judgment, compelling the departing employee-shareholder to sell back his shares at the contract’s adjusted-book-value price and rejecting claims that the buyback was unconscionable or inequitable based on the timing and circumstances of the termination.


Crowder Construction Co. v. Kiser, 1998 WL 34032496 (1998)