Full opinion text
BARTELS, District Judge. This is a class suit by minority stockholders of former General Outdoor Advertising Co., Inc. (General) against Gamble-Skogmo, Inc. (Skogmo), seeking an accounting and restitution arising out of the merger of General into Skogmo. The claim is predicated upon various grounds including breach of fiduciary obligations by Skogmo as a majority stockholder of General, illegality of the merger and misrepresentations contained in the proxy material. Plaintiffs and intervening plaintiffs are citizens and residents of the State of New York and were at the time of the merger on October 17, 1963, holders of 6,580 shares of stock of General, one of whom had owned 100 shares since February, 1961. Since the merger, some of the plaintiffs and intervenors have exchanged their shares of stock for Skogmo’s stock. General was a New Jersey corporation with its principal place of business in Chicago, Illinois, and Skogmo is a Delaware corporation with its principal place of business in Minneapolis, Minnesota. Federal jurisdiction is founded upon diversity of citizenship and violation of Section 17(a) of the Securities Act of 1933, as amended (15 U.S.C.A. § 77q), (1933 Act), and violations of Section 10 (b) and 14(a) of the Securities Exchange Act (15 U.S.C.A. §§ 78j and 78n (a)), (1934 Act), and Rules 10b-5 and 14a-9 of the Securities and Exchange Commission. COMPLAINT The allegations pertinent to the asserted violations of the fiduciary obligations and of the 1933 and 1934 Acts charge that from February, 1962 until the date of the merger Skogmo and its key officers owned 50.1% of General’s stock, controlled the affairs of General, its board of directors, executive committee and officers, and between June, 1962 and October, 1963, caused General to sell a substantial portion of its outdoor advertising properties at a profit resulting in an unnecessary tax of approximately $6,000,000, which could have been avoided had General been liquidated for the benefit of the stockholders; between May, 1962 and October, 1963 Skogmo caused General through a subsidiary, General Outdoor Realty Corp. (GOR) to assume certain financial commitments of Skogmo in order to assist Skogmo to obtain control of other companies which Skogmo intended to own and operate, in violation of General’s charter; in February, 1963 Skogmo determined to merge with General and liquidate the remaining General outdoor advertising assets after giving the stockholders of General shares of convertible preferred stock of Skogmo of the par value of $40 per share with a market value of $37 per share, in exchange for stock of General whose assets upon liquidation were worth $63 per share and after recoupment of General’s assets diverted by Skogmo for its own purposes, $68 per share; and to accomplish the merger Skogmo caused General’s directors to vote in favor of the merger and also to circulate a false and misleading proxy statement, in violation of the 1933 and 1934 Acts and the rules issued thereunder. Plaintiffs assert that the merger was illegal because it did not comply with the New Jersey corporation laws and that the proxy statement was misleading in that, among other things, it failed to disclose (i) the excess worth upon liquidation of the General assets above the value fixed by the merger terms; (ii) the intention of Skogmo to liquidate the General assets at such excess value after the merger pursuant to prior misunderstandings; and (iii) the illegality of the merger. Aside from the claim of breach of trust on the part of Skogmo in conducting General’s affairs for the benefit of Skogmo, the crucial thrust of the complaint is the contention that Skogmo failed in the proxy statement to disclose the true value of General’s outdoor advertising plants and its intention to sell those assets immediately after the merger at an expected profit of approximately $15,000,000, thus depriving the General stockholders of an undiluted interest in such capital gains realized on the sale of the General assets within nine months after the merger. Plaintiffs moved for a summary judgment before Judge Dooling who, while denying the motion, made a limited adjudication of the facts under Rule 56 (d), Fed.Rules Civ.Proc., 28 U.S.C.A., which while deemed to be established without substantial controversy are nevertheless subject to such modification and additions revealed by the testimony at the trial to prevent manifest injustice. Audi Vision Inc. v. RCA Mfg. Co., 136 F.2d 621, 147 A.L.R. 574 (2d Cir. 1943). After hearing the evidence, these findings are adopted by this Court subject to such clarification, embellishment and additions as appear from the following. I GENERAL BACKGROUND The background of this controversy has been developed at considerable length through many pages of testimony and innumerable exhibits, the substance of which it is necessary to narrate in order .to properly focus and resolve the critical issues. This is singularly true with respect to the issues of Skogmo’s intent to sell and liquidate General’s properties after the merger. While it is impossible to delve into the human mind, a course or pattern of human conduct may be such that the implication of the existence of a particular state of mind is not only permissible but frequently inescapable. Union Pacific R. Co. v. Chicago and North Western Ry. Co., 226 F.Supp. 400 (N.D.Ill.E.D.1964). In and before 1961-1963 Skogmo was engaged, directly and indirectly, through subsidiaries and franchised dealers and discount centers in the United States and Canada, in the wholesale and retail merchandising of durable and soft goods including major appliances, automotive equipment, hardware, furniture and floor coverings. It also purchased and financed the retail installment obligations acquired by owned and franchised stores. During the same period of 1961-1963, General was engaged in various aspects of the outdoor advertising business and was the largest company in that industry in the United States. Its principal outdoor advertising activities were the display of advertisers’ copy in the form of posters or paint bulletins upon outdoor structures owned by the company and located on sites leased for that purpose or, in some instances, on property owned by the company. In 1957 General acquired over 96% of the capital stock of Claude Neon Advertising, Limited, the largest outdoor advertising company in Canada, and in 1959 the company entered the Mexican market by acquiring 100% of the capital stock of Vendor, S.A., the largest Mexican outdoor advertising company. In the latter half of 1961 General was operating 36 branches, providing outdoor advertising in over 50 principal metropolitan areas in the United States. As an incident to its business, it owned approximately 600 parcels of real estate on which were located its offices, studios, manufacturing facilities and advertising display plants. During 1960 and 1961 General entertained proposals by persons desiring to purchase outdoor advertising plants and particularly from those who offered to purchase plants in major cities where there was direct local poster competition plus resulting low profit margins. Thereafter, between April 27, 1961 and March, 1962, Skogmo acquired 50.12% of the General stock as follows: (a) 310,-958 shares at $40 per share in 1961, by an offer to General stockholders made through Allen & Co.; (b) 150,118 shares at $42 per share in 1962, by a second offer to General stockholders made through Allen & Co.; (c) 139,460 shares between December 8, 1961 and May 29, 1962, in exchange and off-the-market transactions; and (d) 98,000 shares at $42 per share in 1962, from Burr L. Robbins, General's president since 1925 and also at the time of the merger. After the acquisition by Skogmo of control of General, a number of transactions and sales were consummated which it is necessary to relate in order to comprehend the value of the properties, the purpose of the merger and the intent of Skogmo as the surviving corporation. On October 31, 1961, Bertin C. Gamble, Chairman of the Board of Directors and controlling stockholder of Skogmo, was elected to the Board of Directors of General. On January 25, 1962, Roy N. Gesme, a retired vice-president of a bank and a former consultant to Skogmo, was also elected a director of General and functioned as a liaison man between Skogmo and General. In April, 1962, two vice-presidents of Skogmo, Gus S. Younger and Cyrus Rachie, were also elected members of the General board. While the General board of directors consisted of twelve, four were linked with Skogmo either as a director, officer or consultant. In April, 1962, Bertin C. Gamble personally negotiated a contract in the name of Skogmo and without the knowledge of General to engage one Donald E. Ryan as chief executive officer of General primarily in charge of sales of plants. Ryan had no previous experience in the advertising field, his experience being limited to the field of evaluating loan risks, especially construction loans and real estate mortgages. Thereafter Bertin C. Gamble assigned this contract to General which assumed the same. In the same month Ryan was elected a member of the board and executive vice-president of General and a member of its executive committee, effective May 1, 1962. Ryan was indisputably Skogmo’s man at General and was expected to evaluate General’s prospects and make recommendations to Skogmo for the future. Burr L. Robbins and George W. Caspari remained as president and vice-president, respectively, of General as the executives in charge of the company’s operations. Of the remaining seven directors, four were associated with the company as officers or employees and three were outside directors. Problems Facing General During the period of Skogmo’s controlling stock ownership of General, 1961-1963, the general outdoor advertising business faced severe problems. One of the most serious was the competition for the advertising dollar by radio and television, which caused a serious deterioration in the national sales of outdoor advertising and classified the business as a declining industry. At the same time the national sales organization of the industry, Outdoor Advertising Institute (OAI), which in the past stimulated, created and provided national sales for the outdoor advertising industry as a whole, was in a state of disorganization and chaos, resulting from the resignation of many major plant owners and operators and the absence of a president or leader who could inspire the confidence of the members. This lack of unity and leadership led to the loss by General of a number of national advertising accounts across the country. At the same time new governmental restrictions, federal, state and local, were imposed upon the use of outdoor advertising boards and bulletins which not only limited the available space for such advertising but at the same time created an adverse public image in the industry. Decline in General’s Operating Profits Early in January, 1962, Gesme, liaison between Skogmo and General, learned from Donovan Olson, senior vice-president of General, and Robbins that the fourth quarter operations for 1961 were disappointing and that the income from the advertising plants for the year 1961 was down from $1,540,000 in 1960 to approximately $1,125,000 in 1961. Although the New York plant was the only plant showing an actual loss, many other plants indicated a reduced rate of return on their respective investments. In March, 1962, Gesme received from Olson a detailed report of the property and earnings of General in book form (hereafter referred to as the “Green Book”) prepared at Gesme’s request by Olson and Robbins, from which it was also evident that the rate of return on the outdoor advertising business was declining. Ryan, upon assuming his duties, in May, 1962, made an intensive study of General’s business and plants for Bertin C. Gamble and concluded that the advertising plants could not be operated profitably and should be sold. At this time and since the late 1950s, General had been earning approximately 3% upon the estimated sales value of its outdoor advertising assets, which return was considered inadequate by both General and Skogmo. As advertising plants were sold, administrative and overhead expenses for the remaining plants were increased since practically the same costs were charged to fewer plants. On June 22, 1962, Walter Davies, treasurer of Skogmo, so advised Bertin Gamble. Consequently the operating profits of the remaining plants of General in 1962 were less than the profits of those plants in 1961. By the end of 1962, General had sold 23 of its 36 plants including 7 of the 11 plants listed by Burr Robbins at a July Board of Directors’ meeting as the top earners in the system. These sales naturally depressed the morale of the remaining employees. Despite the poor performance of General in 1961 and 1962, Burr Robbins expected a turn-around in 1963 based upon the following anticipations: (a) a decline in anti-outdoor advertising public opinion; (b) an increase in national advertising as a result of a reorganization of OAI; and (c) a sharp reduction of overhead and administrative expenses plus improved employee morale. However, Robbins’ hopes were dispelled in June of 1963 and earlier by the monthly income figures from all of General’s plants, which were considerably less than those for the corresponding month of 1962. The 1963 Claude Neon operations in Canada were also discouraging, the monthly income figures being less in 1963 than those for the corresponding months in 1962. Robbins admitted that in July, 1963, the second quarter figures of the company’s operations ending June, 1963, “made you sick to your stomach”. II SALES OF PLANTS PRIOR TO MERGER 1962 Sales The first sale which created a “break through” in the sale prices of outdoor advertising plants, was the sale of General’s competitive plant in St. Louis, which was negotiated in January, 1962. This occurred shortly prior to the time Skogmo obtained stock control of General. The price was fantastic and established a far higher sales price than had previously existed with respect to the sale of outdoor advertising plants and apparently provided the yardstick for the plant values shown in Gesme’s “Green Book,” which were in excess of the actual book values. On July 2, 1962, B. C. Gamble announced to the press his intention to have General sell its “less profitable” and “competing plants”. Subsequently, on July 10, 1962, B. G. Gamble addressed a meeting of General executives in Minneapolis at which he expounded his policy of “corporate mobility” and diversification, predicated upon the sale of less profitable General plants and the investment of the proceeds in more profitable and diverse growth projects. The recent sale of General’s St. Louis plant, coupled with a statement of B. C. Gamble’s philosophy on July 2, 1962, stimulated a strong buyer interest in the potential sale of other General advertising plants which emanated primarily from three sources: (1) owners of plants in competition with General’s plants; (2) owners of radio and television stations and advertising agencies having contacts with national advertisers; and (3) affluent persons seeking a tax shelter by means of a large depreciation write-off and an increased tax base for depreciation purposes. Under the ownership of General, the plants had been almost fully depreciated but when transferred to a new purchaser, a stepped-up basis for depreciation would be available, based upon the purchase price of the physical plant. From the high depreciation write-offs a favorable cash flow resulted, which in turn assisted the purchaser in paying from the operations the high initial purchase price. While Robbins was still interested in maintaining, as far as possible, the operations of the outdoor advertising plants, Ryan, on the other hand, was doing his utmost to sell the advertising plants. Ryan’s and Robbins’ objectives were substantially different and resulted in a form of corporate schizophrenia. For instance, Robbins, prior to the General board meeting on July 2, 1962, delivered to B. C. Gamble a list of what Robbins considered General’s most profitable plants from an operating viewpoint, and he recommended their retention as a nucleus of operation. B. C. Gamble agreed and the list of plants was noted upon the minutes of the board meeting; but Ryan continued to solicit offers for the sale of all the plants and in July and August, 1962, he mailed to prospective purchasers, including those who had made inquiries, 5-year operating statements of General’s plants. These were then supplemented in September, 1962 by 8-year earning projections for each plant and circulated to those interested. The first page of each projection computed the selling price of the branch and indicated that 29% of the selling price could be paid in cash and the balance could be paid out of 8-year earnings, leaving the purchaser with an investment and cash surplus. Ryan’s merchandising of the plants included attempts to sell a group of plants in a one-package deal, often combining a large plant in a geographical area with smaller surrounding plants and in particular attempting to package the New York plant, which was losing money, with other more profitable plants such as Philadelphia, Washington, Chicago or Harrisburg, as sweeteners. Subsequent to the St. Louis sale and through October 1, 1962, General completed sales involving 12 plants in eight separate deals for a gross sales price of $11,879,200. Suspension of General’s Sales Two questions were raised by General’s counsel in late 1962 causing the suspension of plant sales. General had received a large volume of purchasers’ notes in connection with the prior sale of its plants, and had also made a substantial investment in the stock of Allegheny Corporation. These facts stimulated counsel to question, in early October, 1962, whether General might be an investment company within the purview of the Investment Company Act of 1940. Although offers were being negotiated pending a solution of the problems, the officers of General, in early October, 1962, decided to suspend sales. Some of the suspended sales were: (1) the sale of the competitive Kansas City plant to Howard J. Stalcap, which was fully negotiated in October; (2) the sale of Akron, Dayton, Indianapolis, Youngstown, Denver, Duluth and Omaha plants to a group headed by Curtis L. Carlson of Minneapolis for approximately $10,000,-000, the terms of which were near agreement in early October; and (3) an offer of $1,000,000 for the Oklahoma City plant — which amount was almost its Green Book value — made by George C. Marden on October 29, 1962, the reply to which was postponed by Ryan. In 1963 George C. Marden purchased this plant for the amount of his October offering. Counsel also raised the question by letter dated November 27, 1962, whether the continued sales by General of its outdoor advertising plants and the resulting change in the character of its business necessitated the approval of its stockholders. In December, 1962, the Securities and Exchange Commission instituted an investigation to ascertain whether Skogmo was an investment company and in this connection subpoenaed General’s officers. In January, 1963, extensive hearings were held and one of the important issues relative to a potential violation of the Investment Company Act was the ownership by both General and Skogmo of the stock of the Allegheny Corporation. Due to this investigation General in January, 1963, again postponed sales of its plants. Resumption of Sales and Financing of General’s Notes Since more than 70% of the purchase price for the plants sold was payable in notes, B. C. Gamble and Walter Davies, in November, 1962, approached The First National Bank of Chicago (with which Skogmo had prior banking relationships) with a proposition of financing these notes. Davies was instrumental in forming a syndicate consisting of the First National and three other banks which agreed to purchase $14,000,000 of the 6% purchasers’ notes then held and endorsed by General. The purchase price was the face value of the notes at an interest rate of 5%, the extra 1% being set aside by the syndicate, to be paid to General upon full payment of the notes. Thereafter, on December 19,1962, a final modified and expanded agreement was reached with Carlson involving the sale of eleven of General’s plants, for a gross purchase price of approximately $14,000,-000. Following the Carlson agreement, the original note purchase agreement with the banking syndicate was replaced on December 26, 1962, by a new agreement to purchase up to $55,000,000 of purchasers’ notes endorsed by General, upon the same terms as the former agreement, although approximately $13,000,-000 additional purchasers’ notes were then available for sale. With the proceeds of the sales of the branches and the sales of the notes, General retired certain long-term debts and applied the remainder to the purchase of other interests. One of the acquisitions was the purchase for cash of approximately 98.% of the stock of Stedman Bros., Limited, a Canadian corporation operating a chain of small wares stores (infra), wrhich acquisition apparently solved General’s potential difficulties under the Investment Company Act, thus permitting the management to resume plant sales. Accordingly, form letters were sent on December 18, 20, 21, 26, 1962, by Ryan and others announcing the resumption of plant sales, pursuant to which all plants were offered for sale with the exception of Minneapolis. At this time the management had available the “Green Book”, a reference book setting forth the valuation of each plant, and also a memorandum of William H. Dolan, controller of General, dated November 28, 1962, showing an up-to-date valuation of General’s remaining plants based upon the experience of prior sales of other plants and the offers made by R. Edward Turner for three plants and by Curtis L. Carlson for eleven plants. Again this memorandum showed plant values substantially in excess of the book values of the plants. Summary of 1962 Sales At the end of 1962, as appears from the following table, General had sold 23 of its 36 plants for a gross purchase price 0f $29,832,260 ($5,247,506 in cash and $24,584,754 in notes) including 7 of the U Plants included by Robbins in his list of plants to be kept. Date Sale Closed Branch Gross Sales Price Cash Notes Purchaser 3/1/62 St. Louis 2.953.000 $653,000 $ 2,300,000 St. Louis Outdoor 6/30/62 Louisville 1.625.000 300.000 1.325.000 Alwes Outdoor 7/31/62 New Orleans 1,899,642 433,780.32 1,465,861.40 Industrial Outdoor 8/31/62 Davenport 288,903 72,225.75 216,677.25 Tri-City Posting 8/31/62 Cedar Rapids Sioux City & Sioux Falls 858.000 214,500 643,500 StonerMcCray 8/31/62 Peoria 520.000 144.000 376.000 Logeman Outdoor 8/31/62 Atlanta Richmond Roanoke 4,071,339 730.000 3,341,399 Turner 8/31/62 Nashville 928,661 270.000 658,661 John R. Ozier 10/1/62 Memphis 1,687,715 375.000 1,312,715 King & Stanley 12/31/62 Dayton 975.000 195.000 780.000 Dayton Outdoor 12/31/62 Akron Indianapolis Youngstown 4.300.000 860.000 3.440.000 Carlson 12/31/62 Denver Duluth Omaha 4.725.000 4.725.000 Carlson 12/31/62 Asheville Kinston Raleigh Winston-Salem Jacksonville 5,000,000 1,000,000 4,000,000 Carlson Total 1962 $29,832,260 $5,247,506.07 $24,584,754.65 The remaining plants included many of the smaller plants and three competitive plants. During the same period Gesme and Ryan indicated a willingness to sell Philadelphia, Washington and Chicago, three of the other plants on Robbins’ list, as sweetners in a package deal for New York. Pre-Merger 1963 Sales Defendant, relying on the testimony of Gesme and Robbins, explains the drop in pre-merger sales in 1963 with the assertion that acceptable offers “dried-up” during that period. Plaintiffs claim that acceptable offers were available in 1963 but were not accepted because of (i) Skogmo’s Investment Company Act problems; (ii) the threatening necessity of shareholder approval for further sales; and (iii) the intentional postponement of sales until the resolution of the question of possible consolidation of the two companies. The record supports the plaintiffs’ position. In fact, Robbins testified on cross-examination that between October, 1962 and October, 1963 General was unprepared to accept offers except those for which previous commitments had been made. In the early part of 1963 General updated its 8-year projections for its unsold plants to include 1962 operating results and forwarded them to prospective purchasers. On January 31, 1963, the closing of the agreement of sale for the Kansas City plant made with Stalcap, Inc. was consummated at a purchase price of $2,300,000. In the same month Ryan wrote, in response to purchasers’ inquiries, that all sales were being suspended. On February 18, 1963, Donald May, secretary of General, prepared for submission to the Securities and Exchange Commission, a memorandum showing the market value of domestic advertising plants as being $19,924,638 in excess of book value, and the market value of the shares of Claude Neon as being $10,164,768 in excess of adjusted cost to General. On March 5, 1963, Ryan received an offer from Allan Kander, a business broker, on behalf of Wayne Rollins, president of Rollins Broadcasting Company, of $4,000,000 for the Philadelphia and Harrisburg plants. On the same day Allan Kander advised Ryan that Wayne Rollins had authorized him to negotiate upon an all cash basis for the purchase of all the unsold plants of General except those located within the greater New York City area. Nothing further was done about negotiating for all of the plants but Ryan did reject the offer for Philadelphia and Harrisburg as being too low, indicating a strong desire, however, to meet Rollins after March 21, 1963 for further negotiations, which meeting was never held. On March 11, 1963, Gesme prepared and submitted to Skogmo a report showing the “Green Book Value”, “Probable Sales Value”, “Cost on General’s Books”, and “Net Profit After Tax”. The “Probable Sales Value” in each case was substantially in excess of the “Cost on General’s Books” and the “Net Profit After Tax” on all plants totalled, according to his memorandum, $19,925,000. In the same month Brown Bolte raised to $850,000 an earlier bid of $750,000 for the Hartford plant, which he subsequently purchased after the merger for $900,000. On April 2, 1963, Gordon Fawcett made an offer of $700,000 to purchase the Binghamton plant, which offer remained unanswered until June 20, 1963, at which time General stated that another offer at a price equivalent to the “Green Book” value had been rejected. While these offers were being received, the Board of Directors of General on April 11, 1963, adopted a resolution stating that for the present “GOA will continue to operate the plants operated by it excepting Oklahoma City where negotiations for sale are now pending”, which resolution appeared in General’s quarterly letter dated April 11, 1963 to its stockholders accompanying the quarterly statement of earnings. According to Robbins, this resolution was adopted to improve employee morale which had sunk to a low point as the result of plant sales and fear of loss of jobs and because Robbins thought that General was not in a position to sell further plants without stockholder approval. On May 31, 1963, General completed its sale to National Outdoor Advertising, Inc. for the Oklahoma City plant for $1,000,000, the October, 1962 offering price. During this period Kluge of Metromedia had continually made known to Ryan his interest in the Chicago plant. On July 2, 1963, the proposed merger of the two companies was approved by the General board and on July 19, 1963 a draft of the proxy statement was filed with the S. E. C. Because any sale or agreement for sale thereafter would require a modification of the proxy material, General suspended the sale of plants and also serious negotiations with prospective purchasers. Nevertheless, in late September or early October, 1963, General sent to prospective purchasers an updated 8-year projection of earnings, taking into account operating results for the first nine months of 1963. B. C. Gamble testified that the market for the sale of plants remained good in 1962 and 1963, and Ryan testified that the market was better in early 1963 than after the merger because of the poor operating profits of the plants in the summer of 1963. Including the two 1963 sales of the Kansas City and Oklahoma City plants, all the sales of the outdoor advertising plants made before the merger may be summarized as follows: Number Pre- of Merger Plants Gross Book Sales Value Price Gross Tax on Net Profit Profit Profit (In Thousands of Dollars) 1962 23 $10,102 $29,682 $19,580 $5,396 $14,184 1963 2 1,145 3,300 2,155 632 1,523 Investment of Proceeds of Sales A. Formation of General Outdoor Realty Corporation It was the judgment of Walter Davies that segregation in a separate corporation of the 600 parcels of real estate owned by General would enable General to obtain greater borrowing power. Accordingly, at his suggestion, General formed in June, 1962, a wholly-owned subsidiary, General Outdoor Realty Corporation (GOR), to which it transferred all of its real estate. Because of the nature of its business, there was a high turnover rate of these small parcels, making an appraisal difficult. Consequently, the formation of GOR did not enable General to increase its borrowing leverage. Since it failed in its purpose, GOR in July, 1963 transferred its assets back into General. During the year of its existence, however, GOR performed the functions of a holding company for General’s investments as hereafter appears. B. Channing Corporation Tied-in with Skogmo’s and General’s pattern of selling plants was a corollary principle of investing proceeds in promising enterprises. Thus in May and June, 1962, Skogmo, through an extension of its credit, acquired for General approximately 13.8% of the common stock of Channing Corporation; a Delaware corporation, engaged in writing lines of insurance and providing financial services. The purpose of the acquisition was to enable Channing to increase its profits by selling its insurance policies through the retail stores of Skogmo. General was unaware of the original purchase by Skogmo, but its Board subsequently approved the transfer of stock to GOR on June 29, 1962, after Davies explained the potentialities of the investment. Apparently the plan to merchandise Channing insurance policies through Skogmo’s stores was unsuccessful. Less than four (4) months after the purchase, General caused GOR to sell its interest in the Channing Corporation to Curtis L. Carlson for $5,250,000 (the cost to GOR) at a time when the market for the shares was between $3,179,000 and $3,-342,000. The sale was made for the purpose of obtaining funds to invest in the stock of the Allegheny Corporation. As part of the transaction, Carlson was granted a one-year option to “put” or resell this stock to General, which, as later appears, was subsequently exercised for approximately $5,660,000. C. Allegheny Corporation On October 5, 1962, GOR accordingly purchased 750,000 shares of common stock of Allegheny Corporation for $7,-500,000, whose interests included investments in the New York Central Railroad and Investors Diversified Services, Inc. (IDS), which conducted operations similar to those carried on by Channing. At the same time, Skogmo purchased a similar number of shares for the same price. The combined purchase was slightly more than 15% of the outstanding common shares of Allegheny, and GOR’s purchase was made at the suggestion of B. C. Gamble without the prior approval of General’s Board of Directors. However, after Walter Davies again explained the advantages of the investment, the General Board on October 25, 1962, approved the purchase by GOR. Skogmo at the same time had a “put” and “call” agreement covering the shares of IDS, indicating the community of investments by the two corporations. Robbins thought that Allegheny offered to both corporations the possibility of controlling the New York Central Railroad which, in turn, owned many parcels of land upon which General could possibly erect billboards. As it turned out, Skogmo and General were unable to establish the working relationship with Allen P. Kirby, a controlling stockholder in Allegheny, necessary to effectuate the merchandising of the IDS services through the stores of Skogmo. GOR continued to own the Allegheny stock to the date of the merger. D. Stedman Bros., Limited For many years Skogmo had been interested in acquiring control of Stedman Bros., Limited, a Canadian corporation, which operated a chain of retail variety stores specializing in soft goods. In December, 1962, Skogmo suggested that General acquire control of this corporation and consequently on December 28, 1962, General purchased for $22,459,000 in cash approximately 98% of the outstanding shares of the common stock of Stedman at an approximate price of $20 per share. Again the purchase was initiated and accomplished through the assistance of Skogmo and, as discussed above, removed the threat of a violation by General of the Investment Company Act. The operations of Stedman stores in many ways complemented the operations of the McLeod stores, a retail chain owned by Skogmo, specializing in the sale of hard goods in Canada. Ill AGREEMENT TO MERGE It is in this background and within this framework that the merger negotiations were entered into and finally agreed upon on July 2, 1963. In February and March, 1963, the possible consolidation between Skogmo and General was proposed to Walter Davies, treasurer of General, by Paul Judy, then vice-president of A. G. Becker & Co., Inc. (Becker). The desirability of consolidating the operations of General and the newly acquired Stedman stores with those of Skogmo and McLeod was an important factor in motivating the marriage. Consolidation also appealed to Davies as a step in simplifying Skogmo’s complicated corporate structure and he requested Judy to submit a preliminary proposal. Becker was later engaged by both companies to review the terms of the merger and expressed an opinion (included in the proxy statement) that the terms of the merger were fair to the stockholders of both companies. The independence of this opinion has been attacked by the plaintiffs because of Becker’s prior relationship with Skogmo. In early 1962 Becker, in association with Lehman Brothers, sold on behalf of one of Skogmo’s wholly owned subsidiaries, $20,-000,000 principal amount of its Senior Subordinated Sinking Fund Notes and in the fall of the same year Becker, in association with Lehman Brothers, rendered services for Skogmo in obtaining an amendment of Skogmo’s $10,000,000 6% Notes, maturing 1965-1975, held by ten institutions. On March 11, 1963, Becker submitted to Skogmo a preliminary memorandum relating to the possible acquisition by Skogmo of the remaining public shares of General by means of a voluntary exchange offer of Skogmo stock for General stock. In this memorandum Becker compared the earnings, dividends, book value and marketability of General and Skogmo common stock and analyzed the basic advantages and disadvantages of two possible offers. The first was an exchange on a share-for-share basis, in which Becker stated that Skogmo would pick up $37 a share in book value per Skogmo share issued, which book value would be “approximately $13 under estimated final liquidation value per share, taking the book value of the Stedman and Allegheny investments, and other non-plant assets, as the fair market value.” By such a share-for-share exchange, Becker stated that Skogmo “would be implicitly selling its own new shares of common stock at about $50 * * * providing steps with respect to the liquidation of GOA prove out as expected”. The second was an exchange of one share of new Skogmo’s $20 convertible preferred 5% stock (convertible initially into % share of Skogmo’s common) plus V2 share of Skogmo’s common for one share of General's common stock, which was considered more likely to be acceptable to General’s stockholders. Either offer would have required registration under the 1933 Act. In a March 19, 1963 memorandum to Walter Davies, W. P. Berghuis, a director, senior vice-president, secretary and general counsel of Skogmo, reviewed the Becker memorandum and also the alternative of a statutory merger. In this memorandum he indicated, among other things, that the merger would not require registration but that the proxy statements “would have to be very complete in the matters disclosed to the stockholders of both companies” and further that “Where as here, one of the constituent corporations already owns the controlling block of stock in, and hence controls the management of, the other constituent corporation, it is of tantamount importance that the exchange offer in any merger be fair to the minority stockholders in GOA” (emphasis added). He concluded that experts, not excluding Becker as a possibility, might be employed to assist in determining a fair stock exchange ratio to prevent overreaching or unfairness. In May, 1963, both companies engaged the services of Becker to assist them in connection with the possible consolidation, which ultimately resulted in agreement between the managements of Skogmo and General on the statutory merger. As early as May, 1963, Skogmo decided to offer to General’s stockholders $40 4%% preferred stock, convertible into Skogmo’s common stock on a share-for-share basis and callable after 5 years beginning at $42.50. The terms of the merger were informally agreed upon during June, 1963, and were formally approved by the Board of Directors of each company on July 2, 1963. Becker then prepared and submitted to the Boards of Directors of Skogmo and General a memorandum, dated July 1, 1963, upon the “Fairness and Equitability of the Plan of Merger”. The memorandum discussed the relative market value, dividends, security, rights, permanency, historical, current, and prospective earning power of the shares of the respective corporations and also potential values arising out of further sales of plants. The report stated that any investor in General’s shares could, either alone or with an investment adviser, estimate the potential sale value and related income of retained plants and also recognize the problems and risks associated with profits from such sales including the obligor’s ability to repay any purchase money notes. In conclusion Becker stated that, in its opinion, the plan was fair and equitable. The Board of Directors of Skogmo and General approved the terms of the merger on July 2, 1963 and thereafter a draft of the proxy statement to the stockholders of both corporations for approval of the merger was filed with the S.E.C. on July 19, 1963. Final approval was obtained and copies were mailed to the shareholders of each corporation by their respective officers on September 11, 1963, with the intention that they should rely on the statements of fact therein contained. In a July 12, 1963 letter sent by Becker to the various holders of Skogmo’s 6% Notes, seeking an amendment of the Notes, Becker stated that it was contemplated that Skogmo might from time to time sell additional advertising plant branches of GOA, Inc., a new wholly-owned subsidiary of General, to which the plants would be transferred on the eve of the merger, recovering the investment therein plus a profit. Becker suggested that the amendment to the Notes was important since they expected to be able to bring funds generated especially out of the profits realized in GOA, Inc. into Skogmo “by the retirement of capital notes”. Merger To facilitate the consummation of the proposed merger, General transferred on October 7, 1963, immediately prior to the stockholders’ meetings, all of its assets except 250,000 shares of Allegheny stock, to a new corporation incorporated in Nevada under the name of General Outdoor Advertising Company, Inc. (GOA). The stockholders of General held a meeting on October 11, 1963 and approved (i) an amendment to its certificate of incorporation by expanding its objects and purposes by adding thereto the same objects and purposes stated in paragraphs A and B of Article THIRD of Skogmo’s certificate of incorporation, and (ii) the agreement of merger between General and Skogmo. The stockholders of Skogmo held a meeting on October 15, 1963 and approved (i) an amendment to its certificate of incorporation by expanding its objects and purposes by adding thereto those objects stated in five new paragraphs, being the same objects as stated in paragraphs 1 through 5 of Article THIRD of General’s certificate of incorporation, and (ii) the agreement of merger between General and Skogmo. The votes on the two proposals at each meeting were separate and the stockholders of both corporations were advised in the proxy statement that if the stockholders of one or both of the corporations did not approve the merger as required by law, or if the Board of Directors of either corporation should determine as provided in the agreement of merger that the merger should not be made effective for any other reason, then the Board of Directors of each corporation would not make the proposed amendments to the respective certificates of incorporation effective, notwithstanding the requisite approval of such amendments at the respective stockholders’ meetings. The amendments to the certificate of incorporation of General were made effective on October 14, 1963 (a day before the Skogmo meeting), and the amendments to the certificate of incorporation of Skogmo were made effective on October 16, 1963, in each case by completing the necessary statutory filings. The agreement of merger provided in Article XIII that each Board of Directors reserve the right, in its discretion, to refrain from making the merger effective notwithstanding the stockholders’ approval of each of the constituent corporations, for any reason which should make it inadvisable or inexpedient, in the opinion of such Board of Directors, including, among other things, number of dissents, material adverse changes in the financial conditions of either or both of the constituent corporations, and inability to obtain satisfactory tax rulings relative to the consequences of the merger. On October 17, 1963, two days after the Skogmo meeting, the agreement of merger was filed in the offices of the Secretaries of the States of Delaware and New Jersey, upon which date the merger became effective. IY PLANT SALES AFTER THE MERGER Sales of the branches were brisk after the merger. In the late summer and fall of 1963, prior to the merger, Ryan met with prospective purchasers, including many who purchased subsequently, and informed them that General would probably be willing to sell plants immediately after the merger. In other words, he kept the offers warm. Within nine months after the merger, Skogmo, as the surviving corporation, had sold all of its remaining domestic outdoor advertising plants and its Mexican operation for a gross purchase price of approximately $25,000,000 — about $14,000,000 more than the book value of the assets. Two of the sales were cash sales aggregating $14,116,121 and the remainder were sales involving $2,370,000 in cash and $8,-595,000 in deferred note payments maturing between 1964 and 1972. Chicago and. New York The first agreement to sell after the merger was made by telephone between Donald Ryan and John W. Kluge, president of Metromedia, on October 18, 1963, one day after the date of the merger, and involved the sale of the New York and Chicago plants to Metromedia for approximately $13,551,121 in cash. These two plants represented over one-half of the remaining domestic outdoor advertising properties formerly owned by General and the purchase price exceeded the book value by $7,645,779. Kluge had informed Ryan from Spring, 1962 to October, 1963, that he desired to buy Chicago but he knew that other people were also interested in this plant. Metromedia, a broadcasting concern, had entered the outdoor advertising business in 1960 and had received from General, late in 1962, eight of its 8-year earning projections and selling price computations, identified above, including the projections for Chicago and New York. Consequently, Kluge knew of General’s willingness and desire to sell some of its advertising plants. Early in 1963 Kluge received updated 1957-1962 financial data on the Chicago plant, and on or about September 11, 1963, Metromedia prepared an office memorandum on “Proposed Financing”, which included certain data concerning General’s Chicago outdoor advertising plant which apparently was under consideration for acquisition at a cost of $10,000,000. It was carried on a pro forma balance sheet as $9,000,000 for tangibles and $1,000,000 for intangibles. On October 9, 1963, Metromedia received from General updated 6-year statements of operations of both the Chicago branch and the New York branch. On or about October 9, 1963, Kluge and Ryan had a dinner meeting in New York at which Kluge again discussed his interest in purchasing Chicago. Ryan told Kluge that he could not negotiate until a meeting of some kind (not explained) occurred, but that Kluge should be prepared to put up cash after that event. Ryan also claimed there was some general discussion of plant prices. Kluge said he did not mention New York to Ryan at the dinner meeting or to Metromedia’s treasurer prior to October 18, 1963, which was the time he talked with Ryan on the telephone and made a quick switch by making a package offer for both New York and Chicago, thus sweetening his original offer for Chicago. Ryan, however, maintained that the dinner discussions with Kluge included New York as well as Chicago. The court believes Ryan’s version of the facts. Ryan is substantiated by the fact that on October 10, 1963, the treasurer of Metromedia and a member of Kuhn, Loeb & Co. representing Metromedia, discussed with the Bank of New York the possibility of funding Metromedia’s then existing bank loan and opening an additional revolving credit. In connection with this discussion the bank official understood that Metromedia contemplated the purchase of General’s Chicago branch for $10,000,000 and its New York branch for $5,000,000. At all events, by October 28, 1963, the final terms for the purchase by Metro-media of the Chicago and New York plants were closed and the price expressed as ultimately paid was $13,500,-000. In addition to the $13,500,000 paid for tangible property, $1,500,000 was paid for accounts receivable and prepaid items. The purchase price for the plants exceeded the book value of $5,-905,342 by $7,504,802. Once the New York plant was sold, there was no longer any need to retain the remaining plants as possible sweeteners for the sale of any other plant and Gesme and Rachie so testified and indicated that from then on it was inadvisable to keep any of the remaining properties. Then ensued a relatively quick disposition of branches in the following sequence: PhiladelphiaWashington and Mexico In February, 1963, General sent to Allan Kander Associates, Inc., a business broker which had represented Rollins Broadcasting, Inc. in business transactions with General, a 5-year statement of operations and assumptions and 8-year projections of earnings of the Washington plant. On March 5, 1963, Kander, on behalf of Rollins, offered by letter to negotiate for all the unsold plants of General on a cash basis except certain parts of the New York plant. While an appointment was made for Ryan and Rollins for late March, it was postponed until May, 1963 and never held. On March 5, 1963, Rollins also offered General $4,000,000 for the Philadelphia and Harrisburg outdoor advertising plants, which was rejected. In the summer and fall of 1963 Rollins discussed with Don Ryan the possible acquisition of the Philadelphia and Washington plants. After a visit by Rollins to General's Chicago office, General sent Rollins on November 1,1963 updated figures for the Washington branch for the nine months ended September 30, 1963, and on November 8, 1963 updated figures for Binghamton, Harrisburg, Philadelphia, Utica and Washington. On November 14, 1963, Rollins made a proposal to buy the Philadelphia and Washington plants for $5,300,000, which, on November 22, 1963, resulted in a preliminary agreement between the parties and was followed by a formal agreement on December 2, 1963, the closing being on March 2, 1964. The gross sales price was $5,300,000, which exceeded the book value of $1,965,263 by $3,334,737, payable as follows: $50,000 on November 14, 1963, $200,000 on the signing of the formal contract on December 2, 1963, and the remainder at the closing: $1,-250,000 in cash and $3,800,000 in notes (made by Continental Broadcasting, Inc. and guaranteed by Rollins) payable in eight installments of $475,000 each due March 2d of each year from 1965 through 1972. In March, 1963, General supplied Rollins, through Kander, figures covering General’s Mexican subsidiary, including working capital requirements for the company. On October 28, 1963, Rollins made a proposal to buy the Mexican subsidiary for $500,000 and entered into a formal contract for the same on November 18, 1963, the closing taking place on December 10, 1963. At the closing Rollins paid only $475,000, $120,000 in cash and $355,000 in notes payable in five equal annual installments. The sale was $173,000 less than the book value of $648,000 for the plant. Hartford Next in point of time was the sale of the Hartford plant, which was sold on November 30, 1963 for $900,000, being $719,357 in excess of the book value. The offer was originally made on November 1st or 2d, 1963, by one Brown Bolte, which constituted a revision of an earlier offer submitted on March 14, 1963. Bolte’s interest in Hartford, as well as in Binghamton and Utica, related back to 1962, which Bolte described as intense. Bolte delayed his offer for Hartford in the fall of 1963, until he was able to find a manager. Minneapolis Minneapolis was sold on December 27, 1963 to Naegele Outdoor Advertising, Inc. for $2,500,000, excluding the “Home Office”, the purchase price exceeding the book value of the plant by approximately $1,650,000. An oral offer for the plant was made and accepted some time between October 25th and December 1st, 1963. Harrisburg This plant was agreed to be sold on November 13, 1963 and the sale was effectuated on January 13, 1964 to Arthur A. Porter for $790,000, approximately $650,000 above the book value. F.K.M. Advertising Corporation had been interested in Harrisburg as early as October, 1962, but was advised by General that sales had been suspended. It made a further inquiry in November, 1963, stating that it wished to make a bid, but was given an evasive answer. South Bend South Bend was sold to Charles B. Burkhardt on November 12, 1963 for $565,000 in cash, approximately $250,-000 above the book value. He was interested in the South Bend plant as far back as September, 1962, as a possible model plant for demonstration purposes. Binghamton and Utica Both of these plants were sold to Roy H. Park on July 10, 1964 for $1,000,000, which was approximately $500,000 in excess of the book value. Park had offered this amount for these plants as early as November 18, 1963. The sale to Park for $1,125,000 was approved by General’s executive committee in December, 1963, but apparently this sum was unacceptable to him. His interest in these plants related back to August, 1962, when Ryan quoted a package price of $1,250,000 for the two plants plus Hartford. Park was still negotiating with General for the Binghamton and Utica plants on January 4, 1963. A summary table of the post-merger sales is as follows: Branch Contract Date Book Value Selling Price Chicago New York Westchester ío/si/esl 11/ l/63> 6/ 3/64J $ 5,905,342 $13,551,121 Hartford 11/30/63 180,643 900.000 Vendor, S. A. 11/25/63 648,000 475.000 Minneapolis 12/23/63 844,209 2.500.000 Harrisburg 1/13/64 240,826 790.000 South Bend 1/30/64 312,829 565.000 Philadelphia and Washington 12/ 2/63 1,965,263 5.300.000 Binghamton and Utica 7/13/64 479,306 1,000,000 Total Plants $10,576,418 $25,081,121 Excess of Sales Price Over Book Value $14,504,703 The total amount of sales of all plants as of the date of the merger was $33,-132,260.72, of which $5,547,506.07 was in cash and $27,584,754.65 was in notes, the unpaid balance upon which on that date was $25,336,098.88. The total amount of sales for all plants subsequent to the date of the merger was $25,081,-121, of which $16,486,121 was in cash and $8,595,000 in notes. The total amount of all sales of plants was $58,-213,381.72, of which $22,033,627.07 was in cash and $36,179,754.65 in notes. Although payment of some notes was extended, none of said notes were in default. The amount of each note and the uncollected balance appear from the following table: Plant 1962 Date of Sale Original Amount of Notes Uncollected Balance as of Oct. 17,1963 or when issued St. Louis 3/ 1/62 ; 2,300,000.00 ; 2,053,000.00 Louisville 6/30/62 1.325.000. 00 1,262,500.00 New Orleans 7/31/62 1,465,861.40 1,282,609.60 Davenport 8/24/62 216,677.25 184,176.82 Cedar Rapids, 1 Sioux City and >- Sioux Falls J 6/27/62 643.500.00 523,133.31 Peoria 8/22/62 376.000. 00 329.000. 00 Atlanta, Richmond, Roanoke 9/ 6/62 3.341.339.00 2,513,754.68 Nashville 9/ 7/62 658.661.00 440,274.12 Memphis 8/27/62 1.312.715.00 1,127,650.35 Dayton 12/19/62 780.000. 00 780.000. 00 Akron, Indianapolis, Youngstown 12/19/62 3.440.000. 00 3.440.000. 00 Denver, Duluth, Omaha 12/20/62 4.725.000. 00 4.525.000. 00 Asheville, Kinston, Raleigh Winston-Salem and Jacksonville 12/19/62 4.000. 000.00 4.000. 000.00 TOTAL -1962 $24,584,754.65 $22,461,098.88 1963 - Prior to Merger Kansas City 2/20/63 $ 2,000,000.00 1.875.000. 00 Oklahoma City 5/31/63 1,000,000.00 1.000. 000.00 TOTAL -1963 - Prior to Merger $3,000,000.00 $ 2,875,000.00 Sales Subsequent to Oct. 17, 1963 Chicago, New York, 11/ 1/63 Westchester 6/ 3/64 Hartford 11/30/63 675.000. 00 675.000. 00 Vendor, S. A. 11/25/63 355.000. 00 355.000. 00 Minneapolis 12/23/63 2,425,000.00 2,425,000.00 Plant 1962 Date of Sale Original Amount of Notes Uncollected Balance as of Oct. 17, 1963 or when issued Sales Subsequent to Oct. 17, 1963 Harrisburg 1/13/64 590.000. 00 590.000. 00 South Bend 1/30/64 Philadelphia and Washington 12/ 2/63 3,800,000.00 3,800,000.00 Binghamton and Utica 7/13/64 750.000. 00 750.000. 00 TOTAL-Subsequent to Oct. 17,1963 $ 8,595,000.00 $ 8,595,000.00 TOTAL ALL PLANTS $36,179,754.65 $33.931,098.88 Y LEGALITY OF MERGER Plaintiffs allege that the merger of the two corporations violates Section 14:12-1 of the New Jersey General Corporation Law permitting the merger only of corporations organized to carry on “any kind of business of the same or a similar nature”. The charge is based upon the fact (i) that the charter amendments in this case were not filed before the merger vote was taken, and (ii) that the authorization for the charter amendments were subject to certain conditions. This same claim was raised upon the motion for summary judgment. Judge Dooling in a thorough and analytical opinion decided that the objections were technical and did not affect the validity of the meetings or the action taken thereat. This conclusion is adopted. Both General’s and Skogmo’s stockholders voted to amend their charters for the purpose of carrying on business of “the same or a similar nature”, General’s on October 11, 1963, and Skogmo’s on October 15, 1963. General’s amendment was made effective by filing on October 14, 1963, and Skogmo’s was made effective by filing on October 16, 1963. At the same meetings the stockholders of both General and Skogmo, respectively, voted to approve the agreement of merger. The votes on the two proposals were separate and distinct in each case, although at the same meeting. General’s amendment was made effective before Skogmo’s stockholders’ meeting. The stockholders of General were advised that if they did not approve the merger or if the Board of Directors of either company decided not to make the merger effective, then the amendment would not be effectuated even if approved. The stockholders of Skogmo were advised that if the stockholders of either General or Skogmo failed to approve the merger or if the Board of Directors of either company decided not to make the merger effective, then the amendment would not be effectuated even if approved. The practice of amending charters in New Jersey in anticipation of merger is of long standing and there is no policy considerations or conflict in legislative goals requiring more than a literal compliance with the statute. Brundage v. New Jersey Zinc Company, 48 N.J. 450, 226 A.2d 585 (1967) ; Clarke v. Gold Dust Corporation, 106 F.2d 598, 602 v (3d Cir. 1939), cert. denied, 309 U.S. 671, 60 S.Ct. 614, 84 L.Ed. 1017 (1939). But the charter amendment must be separate and cannot be the creation of the merger and consequently cannot “be made either in concert with, or as a sequence of, the completed merger”. Imperial Trust Company v. Magazine Repeating Razor Co., 138 N.J.Eq. 20, 46 A.2d 449 (Ch. 1946). As indicated by the statute, stockholders must be afforded an opportunity to vote directly upon the question of charter amendment and the act cannot be evaded or circumvented by vote by a merger agreement which in itself purports to change the corporate objects. Colgate v. United States Leather Co., 75 N.J.Eq. 229, 72 A. 126 (E. & A. 1909). In Outwater v. Public Service Corporation, 103 N.J.Eq. 461, 143 A. 729 (Ch. 1928), affirmed, 104 N.J.Eq. 490, 146 A. 916 (E. & A. 1929), after a bill to enjoin the merger raised a question of dissimilarity of purposes, the charters of the merging companies were amended to make their objects identical. Thereafter a duplicate merger agreement was approved by the stockholders and although both events occurred pendente lite, the court approved the merger. In Brundage, supra, although the shareholders voted at the same meeting to approve the amendments and the merger agreement, the meeting was adjourned to permit the. filing of the amendments and thereafter reconvened twenty days later to approve the merger. In Clarke, supra, the amendments were first filed and the merger vote taken thereafter. While there seems to be no reported decision in New Jersey upon the particular procedure followed in this case, the court must rely upon the guidelines gleaned from the interpretations placed upon the statute by the New Jersey authorities. Prom these the court concludes that inasmuch as the amendments were voted on separately and actually made effective before the merger agreement was filed, there was a literal compliance with the statutes. Although the procedures differ from those in the Clarke and Outwater cases, the conditions attached to the authorizations for filing the amendments were satisfied before the merger and hence did not fall within the procedures condemned in Colgate and Imperial. VI ALLEGED $6,000,000 TAX LOSS Among the many offenses charged, the complaint contains an allegation that between June and October, 1962, Skogmo sold outdoor advertising properties of General at substantial profits, causing General to pay approximately $6,000,000 in taxes which could have been avoided had Skogmo caused General to liquidate and distribute its assets within one year for the benefit of its shareholders tax free pursuant to a plan of complete liquidation authorized