In other words, it would substitute one property right for a different property right, and cause irreparable injury to intervening petitioners. It would enhance the rights now incident to Common A stock to the detriment of the Common B stock. It does maintain the ratio of dividends of ten to one, presently in favor of the Common A stock, accomplished by the giving of four shares of new stock for one share of present A stock, and the giving of 4/10 of a share of new stock for the present B stock, and providing that the new stock shall share equally in dividends. But in so doing, it increases the voting rights of the present Common A stock and decreases the voting rights of the present Common B stock. The plan also abolishes the liquidation rights incident to Common A stock, the preemptive rights of Common B stock, and the redemption provision incident to Common A stock, which is advantageous to Common B stock.
The contention of defendant that the proposed plan is wise and desirable for future financing, in the opinion of experts, is not a legal reason for contravening the statute. The intervenors apparently have a different view of what is wise and desirable to be done with the property they claim to be their own, and are entitled to the protection of the statute.
Neither am I impressed by the argument of defendant that liquidation rights are of no value because liquidation at the moment appears to be remote. It is still a right, and whether remote or not (and none of us can see into the future), it is also one that deserves protection. I see no necessity for going into the question of what would happen today in case of liquidation, extensive arguments on which have been made based on book value and estimated value. The fact still remains that each share of present Common A stock, in case of liquidation, has a $ 75 preference, after which the assets are distributable in equal parts to holders of Common A and Common B shares, and this would be eliminated under the proposed plan with detrimental results.
Nor do I see validity in the argument of defendant that the change in voting rights is of no consequence. Under the proposed plan, Common A shares would be increased to four votes instead of one, and Common B shares would be reduced to 4/10 of a vote instead of one. Moreover, the non-American intervenors now permitted to buy any newly issued shares, under the proposed plan would be prevented from purchasing any of the more than 1,800,000 new Class B shares, because they are to be restricted as to ownership and transfer to American nationals. Furthermore, if defendant should sell any of the non-Interhandel shares vested in him -- and he is considering such a sale, according to the proxy statement -- they would likewise be converted into the new Class B restricted common shares unavailable for purchase by the non-American intervenors. The practical effect of this would be further to impair intervenors' ability to protect their voting position in the corporation.
So far as preemptive rights are concerned, the present charter gives Common B shareholders the right to subscribe for additionally authorized common stock, over the presently authorized three million shares, at $ 1 per share. The defendant contends that the preemptive rights are without value because the chances of any newly authorized Common B stock ever being issued at $ 1 per share 'are remote.' The remoteness of a right would affect its value, but it is still one of the incidents of ownership.
Nor can I follow the argument that because Common A shares are not traded or listed on any stock exchange, the redemption right which is based on market price as shown by average quotations is illusory and without value. I cannot forecast that at a future date it will not be listed on a recognized stock exchange.
Lastly, I cannot read into Section 9(a) of the Trading With the Enemy Act, which provides for retention and which defendant does not claim has been repealed, the power to do what is proposed by virtue of the provisions of Sections 5(b) and 12 of the Act, 50 U.S.C.A.Appendix, §§ 5(b), 12. If read as defendant contends, the 'retention' provision would be nullified in cases like the instant one, wherein defendant wishes to change, as he does here, the basic stock structure of the corporation whose stock he has vested.
It should further be borne in mind that in this case the defendant has not planned to do as he proposes by reason of circumstances beyond his control, such as bankruptcy, perishability of the property vested, lack of control in putting the plan into effect. As above stated, the defendant here is in control of the corporation.
Under these circumstances, and balancing the equities, I reach the conclusion that an injunction should issue on behalf of the intervening plaintiffs against the defendant, as prayed. If counsel believe that further findings and conclusions of law are necessary in addition to those set forth herein, they will submit them on notice, along with a decree carrying the decision herein into effect. I shall also hear counsel on the question of bond.
© 1992-2004 VersusLaw Inc.