Frost, Glen, and Bradley own 50%, 40%, and 10% respectively of the authorized and issued voting stock of Xon Corp. they had a written stockholders’ agreement that provided that they would vote for each other as directors of the corporation. At the initial stockholders’ meeting,

Frost, Glen, Bradley and three others were elected to a 6-person board of directors. The board elected Frost as president of the corporation, Glen as secretary and Bradley as vice president. Frost and Glen were given 2-year contracts with annual salaries of $50,000. Bradley was given a 2-year contract for $10,000 per year.

At the end of the first year of operation, Xon was in financial difficulty. Bradley disagreed with the way Frost and Glen were running the business. At the annual stockholders’ meeting, a new board of directors was elected. Bradley was excluded because Frost and Glen did not vote for

Bradley. Further, despite the corporation’s financial difficulties, the new board, relying on the assurances of Frost and Glen and based on fraudulent documentation provided by Frost and Glen, declared and paid a $200,000 dividend. Payment of the dividend caused the corporation to become insolvent.

a. Bradley sued Frost and Glen to compel them to follow the written stockholders' agreement and reelect Bradley to the board.

b. Bradley sued each member for declaring and paying an unlawful dividend and demanded its repayment to the corporation.

State whether Bradley would be successful in each of the above suits and give the reasons for your conclusion.

Answer rating: 100% (QA)

The detailed answer for the above question is provided below A Bradley would likely be successful in ... View the full answer