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Times Mirror’s ambitious stock repurchase program obviously freed
up other resources to be used for working capital.
Reed’s vice president of taxes, Fontaine, who negotiated the
structure on behalf of Reed, testified:
Q [Counsel for petitioner] And what was Reed’s
position with regard to nonvoting common stock in the
structure?
A [Fontaine] Reed did not like the fact that it
was common stock. We were hoping that it would be
changed to a preferred stock because of issues
surrounding fiduciary duties.
Q Could you elaborate?
A Generally speaking, a common shareholder is
owed a fiduciary duty, and because Matthew Bender at
the time would have had a common shareholder of MB
Parent, and indirectly TMD, that that would be–-there
would be a fiduciary duty ultimately to Times Mirror as
a result of that shareholding as to the operations of
Matthew Bender.
Q What was the result of those negotiations?
A The nonvoting common stock was changed to
nonvoting participating preferred stock.
Thus, the parties understood that they were deliberately negating
any fiduciary obligations owed to Reed with respect to the cash
or owed to Times Mirror or TMD with respect to Bender operations.
Times Mirror’s understanding of its rights with respect to
the cash was described in its report to the board on October 8,
1998, as follows:
Since the July Board meeting, we have continued to
sharpen our focus on our intended use of the proceeds
from the Mosby and Matthew Bender dispositions as well
as our continuing significant free cash flow. It had
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