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corporation, Cyril would create a trust of the proceeds he
received, under the terms of which the income of said trust would
belong to Cyril for his life, and the principal would be
distributed upon his death to his three children.
Prior to the 1951 Agreement, Joseph and Cyril were concerned
about the future of their businesses. Cyril had begun dating
women after the death of his wife, Anna, and Joseph wanted to
ensure that the business would remain in the family and that
Cyril’s shares of stock would not go to one of these women.
Cyril, on the other hand, was concerned about control of the
business upon Joseph’s death. Control of the business was very
important to Cyril; he saw control of the business as a means to
enhance his social, political, and business position in the
community. Cyril also feared that if he had to share control
with his children, he might someday be fired by them.
As of October 31, 1951, JM had issued and outstanding
255,174 shares of stock, consisting of 72,717 shares of preferred
stock and 182,457 shares of common stock, all of which had voting
rights.2 The shareholdings of Joseph and Cyril in JM were as
2The articles of incorporation of Newman, Magnin & Co.
(subsequently JM) were silent as to the voting rights of the
preferred stock until a 1968 amendment, which expressly provided
that the preferred stock was entitled to voting rights equal to
those of the common stock. However, it appears that prior to the
1968 amendment, the preferred stock was considered to be voting
by the corporation and that the holders of the preferred stock
actually did exercise voting rights.
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Last modified: May 25, 2011