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Exhibit 1 to Schedule 13D
STOCK REDEMPTION AGREEMENT
THIS STOCK REDEMPTION AGREEMENT ("Agreement") is made and entered into
as of the 25th day of August, 1998, by and among XXXXX PHARMA INCORPORATED, a
Delaware corporation (the "Company"); XXXXXX X. XXXXX ("DMJ"), individually and
as trustee of the Xxxxxx X. Xxxxx Amended and Restated Revocable Trust dated
March 16, 1993; and XXXXXX X. XXXXX ("JAJ"), individually and as trustee of the
Xxxxxx X. Xxxxx Amended and Restated Revocable Trust dated June 8, 1993. DMJ and
JAJ are hereinafter collectively sometimes referred to as the "Insureds" or
individually as an "Insured." DMJ and JAJ, together with their respective
revocable trusts, are sometimes referred to as the "Shareholder" or collectively
as the "Shareholders."
RECITALS:
A. The Shareholders own a substantial number of shares of the common
stock of the Company (the "Shares") which said Shares constitute a major portion
of the Insureds' respective estates.
B. Each Shareholder has for many years served, and currently serves, as
a senior executive officer and as a director of the Company.
C. The Company believes it to be in the best interest of the Company to
have "key person" insurance proceeds available on the death of the Insureds in
order to minimize the negative impact on the Company in the event of the deaths
of the Insureds, and with the consent of the Insureds the Company has purchased
the life insurance policies identified on Exhibit A attached hereto (the
"Policies")
D. As an inducement to the Insureds to consent to and cooperate with
the Company in the purchase of the Policies, the Insureds have requested the
Company to agree to utilize some or all of the proceeds from such Policies to
redeem all or part of the Shares as hereinafter set forth in this Agreement with
a view to providing liquidity to their estates and certain trusts and
beneficiaries.
E. In recognition that the Shareholders currently own in excess of
fifteen percent of the Company's outstanding common stock; in the interest of
preserving an orderly market for such common stock; and in recognition that such
use of the proceeds should benefit the Company's shareholders by increasing the
per share book value of the shares of such common stock not redeemed, the
Company is willing to agree to such request and believes that the arrangement is
in the best interests of its shareholders generally.
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants and agreements contained herein, the parties agree as follows:
1. The Company shall maintain and keep the Policies in full force and
effect during the lives of the Insureds unless otherwise agreed in writing by
the Insureds, or the survivor of them. The Company shall pay all premiums
required and shall perform such other acts and deeds as may be necessary in
order to keep and maintain the Policies in full force and effect.
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2. The Company shall not sell, assign, pledge, borrow against,
surrender or otherwise terminate the Policies, without the written consent of
the Insureds, or the survivor of them. The Company shall not alter or amend
elections with respect to the application of dividends or policy earnings in any
manner without the written consent of the Insureds, or the survivor of them.
3. On the death of the second to die of the Insureds, the Company shall
promptly perform such acts and deeds and sign such documents and instruments as
may be reasonably required to collect the insurance proceeds (the "Proceeds")
payable to the Company with respect to the Policies as the result of the death
of the Insureds. The Company agrees to place such Proceeds in one or more
segregated accounts to assure that such funds are available for the purposes of
this Agreement and acknowledges that such Proceeds shall be deemed subject to an
equitable lien in connection therewith. Upon its own initiative or upon the
written request of a Shareholder, the Company agrees to execute and file a
contingent collateral assignment of the Proceeds in favor of the Eligible
Holders (as hereinafter defined).
4. As promptly as practicable upon the death of an Insured, the
executor or personal representative of such Insured and the successor trustee of
such Insured's revocable trust, shall give written notice to the Company
identifying any trust or other beneficiary entitled to receive distribution of
any Shares as a result of such death. As promptly as practicable upon the death
of the second to die of the Insureds, the executor or personal representative of
such Insured and the successor trustee of such Insured's revocable trust shall
give written notice to the Company identifying any trust or other beneficiary
entitled to receive distribution of Shares as a result of such death. In
addition, if the revocable trust of the first Insured to die remains in
existence as of the date of death of the second to die of the Insureds, then the
successor trustee of such first Insured's revocable trust shall then give
written notice to the Company identifying any beneficiary entitled to receive
distribution of Shares as a result of the death of the second to die of the
Insureds. The term "Eligible Holder," as hereinafter used, shall mean (i) the
respective estates of the Insureds, (ii) the respective revocable trusts of the
Insureds (including any trusts created thereby upon the death of an Insured for
the benefit of the spouse or descendants of such Insured), and (iii) any
beneficiary of any of such estates or trusts identified to the Company as a
result of the notices delivered pursuant to this Section 4, but only if such
beneficiary is a descendant of one of the Insureds or a trust for the benefit of
one or more such descendants. (The failure of the Company to receive notices as
provided in this Section 4 shall not affect the rights of the Insureds'
respective estates and trusts as Eligible Holders, but no other beneficiary
shall be deemed an Eligible Holder unless notice of such beneficiary's status
has been given to the Company as herein provided.)
5. (a) On the death of the second to die of the Insureds (the
"Decedent"), the Eligible Holders of the Shares shall have the right ("Put
Right") to require the Company to purchase such number of Shares as may be
purchased with the Proceeds, at a purchase price and on such terms and
conditions as are hereinafter set forth in Section 6 of this Agreement. In the
event that the Proceeds are not sufficient to purchase all of the Shares that
are tendered to the Company for redemption by such Eligible Holders, then the
Company shall purchase a pro rata portion of the Shares tendered by each
Eligible Holder; provided, however, that priority shall first be given to the
purchase of any Shares (the "Includable Shares") tendered which are included in
the federal estate tax return with respect to the
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second of the Insureds to die. For example, if (i) the Redemption Price (as
hereinafter defined) is $50.00 per share, (ii) the amount of Proceeds is $40
million, and (iii) 500,000 Includable Shares are tendered to the Company for
redemption by one or more Eligible Holders and 400,000 other Shares are tendered
to the Company for redemption by one or more Eligible Holders, then the Company
shall redeem 100% of the Includable Shares tendered, with 300,000 Shares being
purchased, pro rata in relation to the respective numbers of Shares tendered,
from the other Eligible Holders. Similarly, if the facts in clause (iii) of such
example were that 1,000,000 Includable Shares were tendered by one or more
Eligible Holders and an additional 200,000 other Shares were tendered, then the
Company would redeem 80% of the Includable Shares, pro rata in relation to the
respective numbers of Includable Shares tendered, and would purchase none of the
other Shares tendered.
(b) The Eligible Holders may exercise their respective Put Rights by
giving written notice ("Put Notice") thereof to the Company at any time not
earlier than seven (7) months nor later than eight (8) months after the date of
death of the Decedent (the "Put Period"). If the Put Notice is not given by an
Eligible Holder with respect to a certain number of Shares within the Put
Period, said Eligible Holder's Put Rights shall be null and void and the Company
shall not be required to redeem any Shares held by such Eligible Holder. The Put
Notice shall set forth the number of Shares that the Eligible Holder desires to
tender to the Company for redemption.
(c) Upon receipt of the Put Notice(s) as herein set forth, the
Company shall purchase and redeem, and the Eligible Holders of the Shares shall
sell, such number of Shares as are set forth in the respective Put Notices,
subject to reduction (determined in accordance with clause (a) above) based upon
the amount of Proceeds available and the Redemption Price (as hereinafter
defined) of the Shares to be purchased.
6. (a) The per share purchase price for the Shares (the "Redemption
Price") shall be the average closing price per share of the Shares on the last
ten (10) trading days immediately preceding the date of death of the Decedent.
The Redemption Price payable for the Shares shall be paid by the Company to each
respective electing Eligible Holder of Shares by cashiers check or wire transfer
of funds, at closing.
(b) The closing of the purchase and sale of all of the Shares being
redeemed by the Company shall occur on such date and at such time and place as
the Company shall specify in its written notice (the "Company Notice") to each
Eligible Holder who gave a timely Put Notice. The date of closing shall be not
sooner than ten (10) days nor later than twenty (20) days after the end of the
Put Period, the time of closing shall be between 9:00 a.m. and 3:00 p.m., local
time, and the place of closing shall be at the principal office of the Company
or at a bank or lawyer's office within the City or County of St. Louis,
Missouri, as the Company shall determine, or at such other date, place and time
as the Company and the respective Eligible Holders shall agree.
(c) At the closing, the Company shall pay the Redemption Price to
each respective Eligible Holder of Shares by cashiers check or wire transfer of
funds, and each such Eligible Holder shall deliver the Shares to the Company
duly endorsed for transfer to the Company together with all other documents as
the Company may reasonably request. Any and all transfer taxes payable with
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respect to the transfer of said Shares to the Company shall be paid by the
respective Eligible Holder(s) of the Shares.
7. In order to induce the Company to enter into this Agreement and
agree to the redemption of Shares as herein set forth, the Shareholders jointly
and severally guarantee that in the event that the Company does not realize from
the Policies an amount equal to the premiums paid by the Company with respect to
the said Policies, the Shareholders will pay to the Company, the excess, if any,
of any and all premiums paid by the Company with respect to the Policies over
and above the amount of proceeds received by the Company with respect to the
said Policies, and without regard to the Put Rights set forth in this Agreement.
8. This Agreement shall be construed and interpreted in accordance with
the laws of the State of Missouri.
9. This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and shall not be amended or modified
except by a written instrument signed by all parties hereto.
10. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, personal representatives,
successors and assigns, provided, however, that no Shareholder shall voluntarily
or involuntarily transfer or assign its rights or obligations hereunder without
the express written consent of the Company. Notwithstanding the foregoing,
nothing herein shall limit the ability of DMJ or JAJ to revoke or amend their
respective revocable trusts or to require that the Company consent thereto. The
term "Shareholders" as used herein shall include any revocable, irrevocable or
testamentary trust hereafter created by DMJ or JAJ holding any of the Shares as
to which a surviving spouse or descendant of the settlor is a beneficiary. The
term "Shares" as used herein shall include any shares of the common stock of the
Company or its successors hereafter acquired by any Shareholder.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
XXXXX PHARMA INCORPORATED
/s/ Xxxxxx X. Xxxxx /s/Xxxxxxx X. Xxxxxxxx
_______________________________ By________________________________
Xxxxxx X. Xxxxx (individually and as trustee Duly Authorized
of the Xxxxxx X. Xxxxx Amended and Restated
Revocable Trust dated March 16, 1993)
/s/ Xxxxxx X. Xxxxx
_______________________________
Xxxxxx X. Xxxxx (individually and as trustee
of the Xxxxxx X. Xxxxx Amended and Restated
Revocable Trust dated June 8, 1993)
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EXHIBIT A
Insurance Policies
1. Insurer: The Northwestern Mutual Life Insurance Company
Policy No.: 14 765 059
Insureds: Xxxxxx X. Xxxxx and Xxxxxx X. Xxxxx
Owner: Xxxxx Pharma Incorporated
Initial Face Amount of Policy: $26,000,000
2. Insurer: Sun Life of Canada
Policy No.: 20044708
Insureds: Xxxxxx X. Xxxxx and Xxxxxx X. Xxxxx
Owner: Xxxxx Pharma Incorporated
Initial Face Amount of Policy: $14,000,000
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