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with new classes of shares that had various voting rights and
dividend preferences. For each old share, family shareholders
had the right to receive either $52,700 in cash or one share of
voting common stock (which had one vote per share), 244 shares of
series A nonvoting common stock, and 5 shares of series B
nonvoting common stock (which carried the right to an additional
cumulative cash dividend4 of $15 per share for each of 20 years
following the reorganization). Nonfamily shareholders could not
elect to accept new shares. Instead, they were required to
either accept the $52,700 per old share cash out price or to
exercise dissenter’s rights.
All of the new shares of Kohler stock were subject to
transfer restrictions and a purchase option to ensure that family
shareholders would continue to own all of the shares of Kohler.
The reorganization qualified as a tax-free reorganization under
section 368(a).
Certain nonfamily shareholders exercised their dissenters’
rights in the reorganization and litigated with Kohler to achieve
a higher price for their shares. Some of these shareholders also
claimed that Kohler management breached their fiduciary duties.
Kohler ultimately settled with these shareholders for varying
4An additional cumulative cash dividend is a dividend paid
in addition to the dividends periodically declared and paid to
all shareholders. If the additional dividend is not declared and
paid when due, the arrears accumulate.
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Last modified: May 25, 2011