Chapter 3 - Rachel’s Thirty-Five Percent Was Worth Far More Than the Agreement Said
Crescent Oak Learning Systems did not make toys.
Despite the name, it supplied:
classroom furniture,
sensory-room equipment,
modular library systems,
special-education learning spaces,
school-storage systems
to public and private schools across the Southeast.
Rachel started it at twenty-two.
Marcus joined six months later.
He handled:
operations,
vendors,
warehousing.
Rachel handled:
sales,
contracts,
finance.
Sarah joined four years later after working in commercial procurement.
By the time Rachel died, Crescent Oak employed:
126 people
and generated roughly:
$24.8 million in annual revenue.
Three years earlier, when the last Annual Agreed Value Certificate was signed, the entire company had been valued at:
$7.9 million.
Rachel’s 35%:
$2.765 million.
The company had since:
opened a second distribution center,
won two statewide school-system contracts,
expanded margins,
reduced debt,
built a strong order backlog.
An outside lender had recently estimated enterprise equity value nearer:
$12–14 million.
If that was correct, Rachel’s share might be worth:
roughly $4.2–4.7 million before appropriate discounts and adjustments.
A difference of:
well over one million dollars.
Money that would belong to Rachel’s estate.
Eventually:
Leo.
Not Marcus personally.
But Marcus still had something substantial to gain.
Once Crescent Oak redeemed Rachel’s 35% and canceled those shares, the remaining ownership percentages would automatically increase.
Marcus’s 40% would become roughly:
61.5%.
Control.
Sarah’s 15% would rise to:
about 23%.
Employee trust:
about 15%.
Marcus would become majority shareholder without purchasing Rachel’s shares personally.
The company would fund most of the redemption using:
a $3.2 million corporate-owned life-insurance policy on Rachel
plus:
a company note for the balance.
None of that was sinister by itself.
Key-person insurance and buy-sell agreements were normal.
The problem was price.
Sarah met with the company’s outside attorney the morning after the wake.
The lawyer, David Klein, was sixty-one and had advised Crescent Oak for almost a decade.
Sarah placed:
the old shareholder agreement,
the archive ticket,
Rachel’s recent emails
on the table.
David read silently.
Then:
“This agreement is unusually strict.”
Sarah knew.
She had helped make it strict.
The clause stated:
The most recently executed Annual Agreed Value Certificate shall remain controlling until replaced by a later certificate executed by shareholders holding not less than seventy-five percent of outstanding voting interests.
There was no automatic expiration.
No mandatory appraisal after twelve months.
No death-date revaluation.
No inflation adjustment.
The last signed certificate controlled indefinitely until replaced.
Sarah stared at the language.
She knew the words.
She had argued for them.
Years earlier.
David said:
“Rachel requested a new appraisal seven months ago.”
Sarah looked up.
“What?”
“She asked Marcus and me.”
“Why didn’t I know?”
David opened his correspondence file.
Rachel wrote:
The current certificate materially understates the company after the Durham expansion. We should update before year-end.
Marcus replied:
Agreed in principle. Not while we’re negotiating the school-system renewals.
Three months later, Rachel asked again.
Marcus:
Let’s wait until the warehouse refinancing closes.
Then again after her diagnosis.
Marcus:
Rachel, please stop turning everything into death planning. You are still working. We can address valuation after Q3.
Q3 passed.
No new certificate.
Sarah’s name appeared in one thread.
Rachel:
Sarah, can you please push this?
Sarah stared at her own response.
Rach, Marcus is probably right that we shouldn’t lock a value while the Durham contracts are unsettled. Let the refinance close first.
She closed her eyes.
She had forgotten.
Or perhaps she had chosen not to remember.
David said:
“Rachel asked several times.”
Sarah looked down.
“And I helped delay it.”
“Yes.”
The first major fact inside the archive had not implicated Marcus alone.
May you like
It implicated Sarah too.
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