- 30 -
Also, the agreement was among Mr. Hess, Mrs. Hess, Mr.
Kucklick, and HII. It provided specific rights and obligations
with respect to those shareholders. It defined their
relationship as shareholders and accounted for factors peculiar
to that relationship. Although we disagree with petitioners’
contention that the agreement was not entered into at arm’s
length, we do agree that factors, other than those factors that a
hypothetical buyer might consider, went into the agreement.
Indeed, Mr. Hess testified on this point:
There were a couple of important points that took
place at that time. First of all, my wife became--my
wife, Johanna Hess, became a shareholder; therefore,
she had to be included in a stockholder’s agreement.
Secondly, at that point, the company had grown in size
very substantially and in net assets; we were able to
afford to buy substantial life insurance on Mr.
Kucklick’s and my lives--the company was able to.
And we wanted to make sure at that point in time
that, first of all, both families would be taken care
of in case of death of one of the partners and,
secondly, also, that any stock repurchase by the
company under the agreement would be done in a very
orderly fashion--
Mr. Hess testified that the pricing formula allowed for a higher
price in the case of death of one of the shareholders which could
be funded in part with the life insurance proceeds.
It is also clear that the shareholders were not bound to the
value per share derived under the formula provision, since they
could agree in writing among themselves to a specified value per
share. Further, the stockholders agreement was applicable only
Page: Previous 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 NextLast modified: May 25, 2011