P
PLNCBoss
Guest
The following portion of our shareholder agreement covers the distribution of proceeds in the event our company is sold:
"...in the event of a Change of Control of the Company, the first $X of the net proceeds thereof will be distributed to the holders of Class A Common Shares, and in the event the net proceeds exceed $X such excess will be allocated pro rata among the holders of all classes of outstanding Common Shares, the consideration to be received by the Compelled Holders for each class or series of Covered Shares sold pursuant to this Section 3 shall be the same consideration per share received by "Principal"".
The Principal owns 94% of outstanding Class "A" and 7% of Class "B". I own 2.5% of the Class "A" stock and 27% of the Class "B". Class "B" shares total 45% of all outstanding stock. Our company is being sold and the deal call for 72% in cash, 14% in stock of the acquiring firm released over four years, and 14% in a note reduced over 4 years. The Principal is claiming that "net proceeds" means cash and therefor the Class "A" holders get the first $X amount in cash. Furthermore, the note will go to class "A" holders and the balance of their share of the distribution will be in stock. The cash and the stock left over go to the Class "B" shareholders. The results give the Pricincipal a payout of 75% in cash while my cash is only 63% of my share of the proceeds. I claim that all shareholders should get 72% of their distribution in cash. The Principal's motivation is to insure top management stays for the whole four years so that his earn-out is protected. What can I do?
[This message has been edited by PLNCBoss (edited June 19, 2000).]
"...in the event of a Change of Control of the Company, the first $X of the net proceeds thereof will be distributed to the holders of Class A Common Shares, and in the event the net proceeds exceed $X such excess will be allocated pro rata among the holders of all classes of outstanding Common Shares, the consideration to be received by the Compelled Holders for each class or series of Covered Shares sold pursuant to this Section 3 shall be the same consideration per share received by "Principal"".
The Principal owns 94% of outstanding Class "A" and 7% of Class "B". I own 2.5% of the Class "A" stock and 27% of the Class "B". Class "B" shares total 45% of all outstanding stock. Our company is being sold and the deal call for 72% in cash, 14% in stock of the acquiring firm released over four years, and 14% in a note reduced over 4 years. The Principal is claiming that "net proceeds" means cash and therefor the Class "A" holders get the first $X amount in cash. Furthermore, the note will go to class "A" holders and the balance of their share of the distribution will be in stock. The cash and the stock left over go to the Class "B" shareholders. The results give the Pricincipal a payout of 75% in cash while my cash is only 63% of my share of the proceeds. I claim that all shareholders should get 72% of their distribution in cash. The Principal's motivation is to insure top management stays for the whole four years so that his earn-out is protected. What can I do?
[This message has been edited by PLNCBoss (edited June 19, 2000).]