Full opinion text
OPINION MEANOR, District Judge. Background and Procedural History On May 3, 1978, the complaint in this diversity action was filed by Henry and Marianne Mayer, citizens of New Jersey. Defendant Development Corporation of America (hereinafter referred to as “DCA”) is a Florida corporation with its principal place of business in Hollywood, Florida. Defendant Alvin Sherman is a citizen of Florida and was, at all relevant times, the chief executive officer of DCA. Defendant Morris Sherman is a citizen of New York and was, at all pertinent times, counsel to DCA. The remaining individual defendants, Pedro Diaz, Irving Fishman, Edward Lempka and Berta Dee Stern, were alleged to have been members of DCA’s board of directors at all times pertinent hereto. Up to and during 1969, Henry and Marianne Mayer, along with others, owned all of the outstanding stock in three New Jersey corporations, namely, the Mayer Construction Co., Barnegat Light Development Co. and Coast Realty Co. Henry Mayer was the major stockholder in each of these companies and was president of Mayer Construction Co. from 1960 to 1969. On September 5, 1969, an “Agreement and Plan of Reorganization” (hereinafter referred to as “Agreement”), Exhibit D-2, was entered into by the parties. Pursuant to the Agreement, DCA was to acquire all the outstanding stock of the Mayer Corporation — an entity into which the three above mentioned corporations had been consolidated. The Agreement was the culmination of a series of negotiations which had their inception in the spring of 1969. The Agreement is also the focal point of the instant controversy. In their complaint, plaintiffs allege that actions taken by the defendants in connection with DCA’s claim for certain tax deductions constitute a breach of contract and various torts. The individual liability of defendants Alvin Sherman and Morris Sherman is predicated upon theories of tortious interference with the contractual relations between plaintiffs and DCA and the intentional infliction of emotional distress upon the plaintiffs. For relief, plaintiffs seek a declaratory judgment to that effect and that all Defendants are required, jointly and severally, to indemnify Plaintiffs for any and all damages which may be incurred by them as a result of Defendants’ wrongful conduct, including but not limited to all taxes, interests and penalties which may be found due and owing by Plaintiffs to the IRS as a result thereof, together with any and all expenses, costs and legal fees incurred by Plaintiffs in connection with the efforts of the IRS to collect the alleged deficiencies. Complaint at 15 to 16, para. (a)(iv). In addition, plaintiffs seek compensatory damages from DCA for the willful and deliberate breach of contract and compensatory damages from Messrs. Sherman and Sherman for their alleged tortious conduct and infliction of emotional distress. Lastly, they seek the imposition of punitive damages on all counts. The defendants have denied all allegations of wrongdoing and assert that their actions constitute neither a breach of contract nor tortious activity. After substantial discovery was had, the defendants moved for summary judgment on a variety of grounds. In an unpublished opinion, filed April 30, 1980, I granted in part and denied in part defendants’ motion. Mayer v. Development Corp. of America, Slip Op. (D.N.J., Apr. 30, 1980) (hereinafter cited as “Slip Op.”). The matter then came on for trial, without a jury, on October 31,1980. After four days of testimony, I reserved decision and requested the parties to submit their proposed findings of fact and conclusions of law with supporting memoranda shortly thereafter. The opinion which follows constitutes this court’s findings and conclusions pursuant to Fed.R.Civ.P. 52(a). I. Findings of Fact A. The 1969 Agreement. As mentioned above, on September 5, 1969, an “Agreement and Plan of Reorganization” was entered into between the parties. Pursuant to the Agreement, DCA acquired all the outstanding stock of the May-er Corporation. The Agreement was the culmination of a series of negotiations which had their inception in the spring of 1969. At that time, Henry Mayer had placed advertisements in the Wall Street Journal soliciting potential purchasers of the Mayers’ corporations. DCA’s reply was one of the approximately twelve responses received by Mayer in which Mayer expressed an interest. Tr. 183. As a result of Mayers response to the DCA inquiry, Mayer met with various DCA personnel, including DCA’s head of acquisitions, George Samuels, and its president and then largest stockholder, Alvin Sherman, in April and June of 1969 in Hollywood, Florida. Tr. 114, 162,183. At one of these meetings, Alvin Sherman proposed a formula by which DCA would acquire the Mayers’ corporations in a non-cash stock exchange. Tr. 184. Since the proposed acquisition would be cash-free, however, May-er insisted that the exchange would have to be tax-free. Tr. 185. Mayer testified that “since there was no cash involved ... [he] couldn’t very well come up with money to pay the taxes when ... [he] was in essence getting a piece of paper.” Tr. 186-6 to -8. Accordingly, a determination was made to structure any acquisition as a “tax-free exchange.” In a letter dated June 25, 1969, Henry Mayer also expressed his desire to be placed on the board of directors of DCA. D — 1, para. XI, at 4. In late July 1969, Mayer received from DCA a proposed draft of an acquisition agreement (hereinafter referred to as “Initial Draft”). DB-1. The Initial Draft was prepared by Morris Sherman. Tr. 313-18. It contemplated the acquisition of all the outstanding stock of the three Mayer corporations through the issuance and delivery of shares of DCA common stock to the shareholders of those companies in a tax-free reorganization pursuant to section 368(a)(1)(B) of the Internal Revenue Code (“I.R.C.”), 26 U.S.C. § 368(a)(lXB). In fact, the Initial Draft stated such explicitly: “it being intended by the parties hereto that such exchange be a tax-free reorganization within the meaning of Section 368(a)(1)(B) of the Internal Revenue Code of 1954, as amended, .. .. ” DB-1, at 2. The original structure of the transaction, as set forth in the Initial Draft, provided for the delivery of DCA stock to the Mayers in two “installments.” DB-1, Art. V, at 10. The first “installment,” termed the “Initial Shares,” was to be determined on the basis of a formula geared to the September 30, 1969, financial condition of the three Mayer companies. These shares were deliverable at the closing of the agreement. The second “installment,” termed the “Additional Shares,” would be determined on the basis of another formula geared to the earnings performance of the Mayer corporations during the three-year period ending December 31, 1972. Upon receipt of the Initial Draft, Henry Mayer had it reviewed by his accountant, Frank J. Ewart. Ewart then suggested that the agreement be reviewed by David Beck, Esq., an attorney considered by Ewart to be experienced in this field. May-er complied with this suggestion and a copy of the Initial Draft was forwarded to Beck for his review. Tr. 13. Beck’s primary concern was to determine whether the Initial Draft would qualify the transaction as a tax-free reorganization. Id. However, Beck also undertook a general review of the entire agreement. Id., 17. At some point during his review, the question of possible “imputed interest” arising out of the transaction occurred to Beck. Beck testified that the structure of the exchange of the “Additional Shares” contingent upon the subsequent earning capacity of the acquired corporation presented this problem. As a result of some additional research, Beck believed that the Initial Draft violated [the] imputed interest rule which meant that on the exchange which we wanted to be tax free, the Internal Revenue Service by its own guidelines would read into this contract consequences whereby the shareholders would be taxed to the extent of ordinary income based on a formula being read in that they would have had interest imputed to them even though not stated in the agreement. . . . [I]t’s imputed to the stockholders, and by the same token the acquiring corporation would have had an offsetting deduction for income tax purposes. Tr. 18-22 to 19-7. The court is persuaded that Henry May-er, once appraised by Beck of the tax implications of the proposed agreement, as set forth in the Initial Draft, sought to avoid these implications at all costs. In both their deposition and trial testimony, Messrs. May-er, Tr. 191 to 197, 261 to 263, Mayer 50, and Beck, Tr. 28 to 33, 46 to 47, Beck 18 to 19, 21 to 24, 35 to 36, 39, 43, 44 to 45, stated that they consistently and unwaivingly expressed to DCA’s representatives their paramount desire to avoid the imputation of interest income to the Mayers as a result of this transaction. Morris Sherman’s testimony corroborates this point. Tr. 322 to 359. Mayer’s insistence was so definite that Beck testified that “there would have been no deal had we not changed it around.” Tr. 30 — 4; see Tr. 192. Accordingly, negotiations commenced between the parties in an attempt to produce a satisfactory agreement. Beck suggested to Morris Sherman that language be inserted for the purpose of avoiding imputed interest income to Mayer and precluding a deduction for imputed interest by DCA. Beck relied heavily upon Example 8 of the Regulations under section 483 and a tax article written by David R. Tillinghast entitled “Contingent Stock Payouts in Tax-Free Reorganizations,” appearing in 22 Tax Lawyer 467 (1969). DB-3. Morris Sherman does not deny that this material was shown to him during the course of the negotiations. Tr. 323 to 326. It was Beck’s position that to avoid the concept of an installment payment and the imputation of interest income, Tr. 24, the final agreement must provide for the immediate delivery of all DCA shares receivable by the Mayers, coupled with an escrow as to any “earn out” shares. Tr. 323. Beck also indicated that it would be necessary to change the term “installment” in the Initial Draft to “categories.” Tr. 28. Morris Sherman, DCA’s attorney and principal negotiator in this matter, acknowledged that he originally gave no consideration to the concept of imputed interest when he prepared the Initial Draft. Tr. 314. Beck injected the issue into the negotiations. Tr. 322, 457 to 458. Sherman admitted, however, that the avoidance of imputed interest was a “very important consideration at the time.” Tr. 323-15. He indicated that DCA had no objection in principle to Beck’s proposal of the avoidance of imputed interest, but its main concern was the protection of its business interests. Tr. 357-18. Sherman also indicated that certain “business considerations” prevented DCA from taking a position “that would have been clear, simple and unequivocal,” and that he did not form an opinion on the question of imputed interest until April 1974 when DCA was considering litigation against Mayer. M. Sherman 60 to 62. The actual negotiations on this issue and the results generated therefrom are matters of some dispute. Morris Sherman testified that Beck’s proposed method of avoiding the imputation of interest income to Mayer, i.e., the immediate delivery of all shares of DCA stock potentially receivable by the Mayers coupled with an escrow of divestible shares, could cause difficulty. Some of the business considerations which might have caused difficulty for DCA were alluded to by Mayer. The immediate delivery of all the shares, totaling 170,000, to the Mayers would dilute DCA’s earnings per share. Tr. 192 to 193. Also, it would have provided the Mayers with approximately the same number of voting shares as Alvin Sherman. Tr. 196. Furthermore, it was also possible that DCA was unwilling to agree in September 1969 that the purchase price of the Mayer corporations was 170,000 shares of DCA stock when the Mayer corporations at that time were only worth approximately one-half of that amount. Tr. 346 to 348, 350. Thus, it is clear to the court that the prospect of preserving a future tax deduction for imputed interest expense was not a motivating factor for DCA in 1969. On the other hand, the avoidance of imputed interest income was a matter of grave concern to the Mayers; it was a focal point in the negotiations to Henry Mayer. David Beck and Morris Sherman both testified that Beck’s concern over the avoidance of imputed interest caused them to draft substantial revisions to the Initial Draft in the form of the escrow provisions found in the final agreement. Tr. 23 to 24, 26 to 28, 33 to 34, 43, 329 to 331, 344, 438 to 440, 457 to 458. Of considerable interest to the court is Mayer’s testimony concerning the initial negotiations over the imputed interest problem. Mayer testified that during the negotiations he never relented on his insistence that interest income imputation be avoided. Tr. 192. When the issue finally came to a head, Messrs. Mayer and Alvin Sherman themselves negotiated the question. Mayer explains: During the drafting sessions — I won’t call them negotiations, although the imputed interest question was a negotiating item, but the rest was draftsmanship, I spoke — George Samuels got A1 Sherman on the phone and we discussed- — Al’s position was the only way that we can get around the imputed interest was the delivery of all of the shares initially. And Alvin’s reaction to that was negative because it would dilute the earnings per share of the parent companies. And I told him that if that was the only way that the deal was structured and if he was unwilling to go along with that there was no point in continuing the drafting sessions because they were expensive and we were not going to arrive at any conclusion. So he wanted some time to discuss it with his associates in Florida, and he called back an hour later to George Samuels and said, go ahead, and structure it with all the shares to be issued initially. Tr. 193-6 to 194-7. Furthermore, David Beck credibly testified that he believed he had reached an understanding and agreement with Morris Sherman, on behalf of DCA, that imputed interest would not apply to this transaction. Tr. 34, 45, 47. Beck explained that everything possible had been done by the parties to avoid the application of imputed interest in the agreement. Consequently, he did not consider it necessary to include in the agreement a declaration of intent similar to that found in section 13.10, in which the parties proclaimed their desire to preserve the tax-free nature of the reorganization under section 368(a)(1)(B). Tr. 35 to 36, 44, 104 to 105. The credible testimony discussed above lends strong support to a finding by the court that the parties reached an understanding in 1969 that, regardless of any potential entitlement under the Internal Revenue Code, DCA would contractually forego its right to claim a subsequent tax deduction for any imputed interest. Of course, DCA’s forebearance and loss is merely the concomitant of the Mayers’ benefit, i.e., the avoidance of imputed interest income and the associated taxation. This finding; however, is greatly buttressed when the court considers the other evidence before it. A review of the executed Agreement reveals that it was structured along the lines demanded by Mayer and Beck. Pursuant to section 5.1(a) of the Agreement, the Mayers were to exchange their stock in their corporation for DCA stock “to be delivered and maintained in two separate categories . . . referred to as the ‘Initial Shares’ and the ‘Additional Shares.’ ” D-2, § 5.1(a), at 14. That section also provides that “D.C.A. shall deliver ... to the Shareholders, . . . 85,000 shares of its Common Stock as the Initial Shares....” Id. at 15 to 16. Of these 85,000 Initial Shares, 25,000 shares were escrowed for a short period with Messrs. Morris Sherman and Beck to await verification of the financial performance of the Mayer companies through and including September 30,1969. Id., § 5.1(b), at 16. With respect to these escrowed shares, all dividends received were to be delivered by the registered owners into escrow. Id., § 5.1(c)(i), at 16 to 17. Furthermore, the registered owners would have the right to vote the escrowed shares “as though the same had not been deposited in escrow.” Id., § 5.1(c)(ii), at 17. With respect to the so-called “Additional Shares,” the Agreement provided: On the Post-Closing Delivery Date, ... D.C.A. shall deliver to the Shareholders, . . . the Additional Shares due Shareholders hereunder, determined in accordance with the factors, calculations and methods set forth in Section 5.4 hereof; provided, however, that the maximum number of such Additional Shares shall in any event be limited to, and shall not exceed, the number of shares of D.C.A. Common Stock comprising the Adjusted Initial Shares.... Id., § 5.2(a), at 19. In an acceleration provision, the Agreement further stated: Notwithstanding the foregoing provisions hereof, D.C.A. shall, within 15 business days after receipt of written request from any Shareholder made at any time following the calculation and determination of the number of Adjusted Initial Shares made by Ewart under the provisions of Section 5.3 hereof, deliver to such Shareholder prior to the Post-Closing Delivery Date, as the Additional Shares due him hereunder, in certificates of such denominations as requested by such Shareholder, but subject nevertheless to the terms and conditions set forth hereinbelow, such number of shares of D.C.A.’s voting common stock as shall be equal to such Shareholder’s interest in the number of Adjusted Initial Shares to which the Shareholders collectively are entitled under Section 5.3.... Upon the delivery by D.C.A. of the said Additional Shares: (i) The Shareholder shall, concurrently with the receipt of the certificates representing such Additional Shares, deliver all of the said certificates duly endorsed in blank, ... to the Escrow Agents named in Section 5.1(b) hereof [Messrs. Beck and M. Sherman]. (ii) Said Escrow Agents shall receive ... said Additional Shares as a separate escrow fund, .. . [T]he escrow period for such Additional Shares shall end on April 30,1973, at which date the Escrow Agents shall, ... distribute and deliver said Additional Shares to and between D.C.A. and the Shareholders as their respective interests may then appear under the computations, (iii) The delivery of said Additional Shares to the Escrow Agents by D.C.A. pursuant to the foregoing ... shall discharge pro tanto the obligations of D.C.A. to the requesting Shareholder.... Id., § 5.2(b), at 19 to 21. Like the escrowed Initial Shares, the registered owners received the dividends and then escrowed them and enjoyed full voting rights with respect to all the shares so escrowed. Id., § 5.2(b)(ii), at 20, 16 to 19. There is no dispute that' after the Agreement was executed 85,000 Initial Shares were, in fact, delivered to the Mayers at the Closing and that 25,000 of these shares were escrowed for a short period of time, until the financial performance of the Mayers’ corporations through September 30, 1969, was verified. Tr. 187. With respect to the second category of shares — the Additional Shares — they were issued, registered in the Mayers’ names and delivered to them in April 1970, although escrowed with Messrs. Morris Sherman and Beck. Tr. 188 to 189, 278. As the quoted provisions of the Agreement illustrate, it is clear the parties contemplated that the delivery of the Additional Shares to the escrow agents was in lieu of physical delivery of the stock certificates to the Mayers. Furthermore, stock dividends declared and paid by DCA on both the Initial Shares and the Additional Shares were sent directly to the Mayers. They then returned the certificates to Beck and Morris Sherman for division into smaller denominations to effectuate the escrow arrangements. Tr. 189 to 190. No cash dividends were paid by DCA between 1969 and 1973. Tr. 189. Also, the Mayers voted both the Initial and Additional Shares throughout the escrow period. Tr. 190. Furthermore, during the escrow period, Morris Sherman, in a letter dated May 1, 1970, advised Beck that: The attorneys preparing the proxy statement for D.C.A. have advised me that Henry must prepare and file a “Form 13D” with the Securities and Exchange Commission as soon as possible. This is due to the fact that Henry became the beneficial owner of more than 10% of D.C.A.’s issued and outstanding stock with the delivery of the Additional Shares. Henry is aware of this. Will you please follow up on obtaining and filing this Form. DT-5. Finally, in April 1973, the total amount of Additional Shares were released from escrow to the Mayers. In addition to these facts, certain documentary evidence before the court compels a finding that the parties agreed to eliminate imputed interest from this transaction. In the early part of 1971, a minor dispute between the parties occurred concerning the number of shares that the Mayers could register for an upcoming public sale. In a letter from Beck to Mayer, dated January 13,1971, Beck advised Mayer that the registration sales factor of ten percent should be applicable “to the total of the Initial Shares and Additional Shares received, as defined.” D-13, at 3. Mayer then calculated the number of shares that his group would register and forwarded his calculations, as well as a copy of Beck’s opinion letter, to Alvin Sherman. D-13. Upon receipt of Mayer’s letter of January 15, 1971, Alvin Sherman sought an opinion from Morris Sherman. Although Morris Sherman reasoned that the ten percent factor was not applicable to the Additional Shares, his letter casts light on the present controversy. He wrote: The original understanding of the parties to the Agreement involved a payment divided into two parts; i.e., a fixed amount of D.C.A. shares to be delivered at the Closing and the later delivery of a contingent number of D.C.A. shares to be computed on the basis of Mayer’s future performance during the period ending December 31, 1972. The Mayer Shareholders did not dispute this approach but merely insisted upon avoiding a higher rate of income tax which would apply by reason of a portion of the contingent payment being deemed “unstated interest”. It was in compliance with their demand that D.C.A. agreed to the procedure of immediately issuing the Additional Shares, subject to certain safe-guards to assure that the ultimate receipt and ownership of such shares by the Mayer Shareholders would not occur until the financial results of Mayer’s operations during the period ending December 31, 1972 had finally been computed. DB-8, at 2 (emphasis added). Clearly, these statements reflect the understanding between the parties that DCA would forego the possibility of an interest deduction. This forebearance would be the only method of complying with the Mayers’ “demand.” Further support for this finding surfaces in an April 30, 1974, letter from Morris Sherman to Pedro Diaz, vice-president of DCA. DT 4. The letter contained a discussion of the availability to DCA of a deduction under section 483 for “ ‘unstated interest’ in respect of the 192,610 shares of ‘Additional Shares’ which were delivered to the former Mayer Shareholders, ... under the Reorganization Agreement of September 5, 1969.” DT-4, at 1. At this time, DCA was considering a claim for an interest deduction with respect to the Additional Shares. Morris Sherman wrote: Essentially, the determining factor as to whether a portion of these “Additional Shares” may be deemed to include “unstated interest” depends on when these Shares were “received” by the Mayer Shareholders and whether they constitute an “indefinite payment”. First, in considering the time at which they were “received”, we must go back to the circumstances existing at the time of the negotiations between D.C.A. and the Mayer Shareholders and the intention of the parties involved at arriving at the Agreement which was executed on September 5, 1969. As the draftsman of the Agreement and as one of the principal negotiators involved, I clearly recollect that it was the intention of D.C.A. to pay the Mayer Shareholders a fixed number of “Initial Shares” upon the closing of the transaction and to pay them a number of “Additional Shares” early in 1973 computed and determined by reference to the operating results of The Mayer Corporation during the period October 1, 1969 through December, 1972. Said “Additional Shares” were limited in number so that, regardless of operating results, they could not exceed the number of “Initial Shares”. There was no dispute between the parties on this basic point but when Dave Beck brought to our attention the possible problem of “unstated interest” which might result from the foregoing procedure, we agreed to try to accommodate the Mayer Shareholders by issuing and delivering the maximum number of “Additional Shares” which might thereafter accrue to said Shareholders to Dave and myself, as Escrow Agents, to hold until such time as the actual number of such shares would be computed pursuant to the formula set forth in the Agreement. It was never the intention of D.C.A. to transfer to The Mayer Shareholders the full beneficial ownership to any specific number of “Additional Shares”. We agreed, in effect, merely that under certain conditions we would advance to the Escrow Agents at a date following the closing the maximum number of shares which D.C.A. might become obligated to deliver in 1973 under the formula applicable to The Mayer Corporation’s operations during the period ending December 31, 1972. This was as far as we agreed to go in order to help the Mayer Shareholders solve their “unstated interest” problem; and although we admittedly made sufficient changes in the original drafts of Agreement to create some ambiguity we did not, in my opinion, go far enough to eliminate the problem. DT-4, at 1 to 2 (emphasis added). Although this explanation contains certain inconsistencies, the existence of an “accommodation” is clearly conveyed. However, if DCA had not agreed to forego its possible interest deduction, the accommodation would be entirely illusory. It is apparent that DCA agreed to structure the transaction in such a manner so as to eliminate the blatant and obvious violations of section 483 that would spark an I. R. S. investigation, yet it sought to maintain enough flexibility in the Agreement so as to protect its non-tax business considerations. It is inconceivable then that plaintiffs would allow this accommodation to be frustrated by DCA lighting the match itself. In addition, in its Letter Protest to the I. R. S. dated October 20, 1975, supporting its imputed interest expense deduction, DCA stated: It should be noted that Section 5.2(a) of the Reorganization Agreement provides that “Additional Shares” were to be delivered on the “Post-Closing Delivery Date”, which would have been some time in May of 1973 in accordance with the provisions of Section 8.2. Section 5.2(b) was included in the Reorganization Agreement at the request of counsel to the former Mayer shareholders for the sole purpose of creating an escrowed pool of shares — flowing from D.C.A. through the Mayer shareholders to the Escrow Agents in a simultaneous series of transactions — so that the former Mayer shareholders might be given some basis for claiming that their shares had been delivered to them prior to 1973, and thus preclude any “unstated interest” problem. DT-3, at 63. DCA then contends that this was “ineffective” since this did not alter the fundamental concept that the “Additional Shares” were not to be given to the former Mayer shareholders until some time in 1973 and only to the extent determined under the formula in Section 5.4 of the Reorganization Agreement. Id. Even in this entirely self-serving document, there is support for the court’s finding that the Agreement was structured, at the insistence of Beck and Mayer, in such a manner so as to avoid imputed interest to the Mayers. It is logically inconsistent to suppose that plaintiffs would bargain for a “basis for claiming that their shares had been delivered to them prior to 1973, and thus preclude any ‘unstated interest’ problem” without including in that bargain an agreement from DCA that it would not attempt to erode that basis. Finally, certain language in the January 5, 1976, Releases, which were executed during the settlement of prior litigation between the parties, provides strong inferential support for this finding. The Releases ran to all claims except those arising out of certain tax actions taken by DCA “with respect to any tax year through and including 1974.” D-20, at 3; D-26, at 3. The exempted claims were those that might arise from DCA’s deductions for either “imputed interest” or any other tax treatment asserted by DCA inconsistent with the treatment “expressly or by implication contemplated by the parties to the ... Agreement ... at the time its provisions were negotiated and agreed upon.” Id. (emphasis added). Thus, several years prior to the Mayers’ institution of this litigation there is a reservation of rights against DCA with respect to causes of actions which would arise from the actions of DCA contrary to those implicitly contemplated by the parties during the negotiations. Although this reservation is merely circumstantial support for plaintiffs’ position, it is language agreed upon by both parties. I do not believe that the Mayers would have bargained for a reservation founded upon non-existent agreements. Accordingly, the court concludes, on the basis of the testimonial and documentary evidence before it, that the parties reached an understanding in 1969 that, regardless of any potential entitlement under the Internal Revenue Code, DCA would contractually forego its right to claim a subsequent tax deduction for imputed interest expense arising out of this transaction. As previously mentioned, it is equally clear to the court that the parties intended the Agreement to be a tax-free reorganization under section 368(a)(1)(B) of the I. R. C. Mayer credibly testified that the transaction would have to be tax-free since no cash was involved. Tr. 185 to 186. Morris Sherman also testified that DCA intended the transaction to qualify under section 368(a)(1)(B) for certain business, not tax, considerations. He explained that the business considerations centered around the “pooling of interest” and the avoidance of large cash expenditures for the acquisition. Tr. 317 to 319, 321, 322. In fact, Morris Sherman stated that if the transaction did not qualify as a tax-free reorganization, the desired “pooling of interest” treatment would not be available to DCA. Tr. 322. Alvin Sherman also testified concerning DCA’s interest that the transaction qualify for the benefits from the pooling of interest. Tr. 128. This mutual intent permeates the entire Agreement — both the preliminary and final drafts. For instance, the Preamble, wherein is stated the “Intent of the Parties,” reads: WHEREAS, the Shareholders desire to transfer to D.C.A. and D.C.A. desires to acquire from the Shareholders all of the outstanding shares of the Corporations, solely in exchange for shares of voting common stock of D.C.A. which has no other class of stock outstanding, and for no cash or other property, upon the terms and conditions hereinafter set forth, it being intended by the parties hereto that such exchange be a tax-free reorganization within the meaning of Section 368(a)(1)(B) of the Internal Revenue Code of 1954, as amended, and that upon and after such exchange D.C.A. shall be the sole record and beneficial owner of all of the issued and outstanding capital stock of the Corporations; D-2, at 1 to 2. Furthermore, under “ARTICLE XIII — MISCELLANEOUS PROVISIONS,” section 13.10 states: 13.10 Actions of the Parties After Closing Neither Shareholders, D.C.A. nor any of the Corporations shall hereafter knowingly or deliberately take, maintain or defend any course of action or position which may reasonably be construed as repudiating, conflicting with or being inconsistent with the interest of the parties as expressed herein that the exchange of stock as provided for in this Agreement shall be a tax-free reorganization within the meaning of Section 368(a)(1)(B) of the Internal Revenue Code of 1954. D-2, § 13.10, at 49. Beck’s testimony, both at trial and during depositions, is especially helpful. During the course of his deposition testimony, Beck discussed his understanding of section 13.10. He stated: At the time that I participated in the preparation of this document, this provision was put in to preclude anybody, shareholders, DCA, any of the corporations from taking any action that would upset the intent and spirit of this Agreement. Now, the intent and spirit of this Agreement ran to the tax-free nature of the reorganization, and it was understood between Morris and me that there would be no adverse tax consequences to anybody. That included Henry Mayer. It included Alvin Sherman. It included anybody. It was supposed to be a deal that was free of tax consequences that would be inconsistent with the interest of the parties. Beck 38 — 4 to 17. I note, however, that at trial there was some retraction from the broadness of these statements. During cross-examination, Beck testified: Q So you would admit, then, that the words in Article 13.10 are not aimed at all tax ramifications, correct? A Yes. I would say they didn’t aim at all tax ramifications, right. Q My question to you is that 13.9b of DB-1 limits itself only to tax implications which now are going to be avoided by section 368 A1B [sic], correct? A That is correct. And for a purpose. Tr. 76-3 to —7, 77-10 to -13. On redirect, Beck explained what that purpose was: Q We have heard in your cross-examination, Mr. Beck, about the several references to Section 368 that appear in the preamble and Section 13.10. Why are there no references to Section 483 in either the preamble or 13.10 or any other section of that agreement? THE WITNESS: The reason is — it’s not repetitive but to some extent overlaps. 438 is an automatic section. If you meet the requirements of what the Internal Revenue Service said on how to structure an escrow deal, then there’s no imputed interest. It doesn’t matter insofar as intent is concerned or not. But on the reorganization section intent is very important for the very reason, ... that sometimes things can happen outside of the four corners of the documents that we may not know about. So we put in a clause to the effect that intention is here. Mr. Sherman, Morris Sherman, drafted that in his initial agreement. That wasn’t my language, that was his. And I saw no reason to take it out because we all intended that there be a reorganization. Tr. 104-2 to 105-10. Due to the parties’ expressed urgency to consummate the deal, an advance tax ruling from the I. R. S. that the Agreement constituted a tax-free reorganization was not obtained. Tr. 30 to 31. However, Beck testified that he and Morris Sherman attempted to meet the published criteria of the I. R. S. in drafting an agreement that would qualify the transaction as a tax-free reorganization. Tr. 40 to 43; DB-3, at 470. It is undisputed that the Initial Draft provided that: (1) all stock was to be issued within five (5) years; (2) there was a “valid business reason” for issuing the Initial Shares immediately and not issuing the Additional Shares until the “earn out” period had been concluded; (3) and (4) the maximum number of shares was to be stated in the Agreement in the sense that the number of Additional Shares could only be. equal to, but not greater than, the number of Initial Shares; (5) the right to receive stock was expressly made non-assignable; and (6) only additional stock of DCA would be receivable by the Mayers. Tr. 41 to 44; Tillinghast, DB-3, at 470; Defendant’s Proposed Findings of Fact at 18, para. 58. Furthermore, it is undisputed that the Agreement itself met the applicable criteria for qualification as a tax-free reorganization under section 368(a)(1)(B). Defendant’s Proposed Findings of Fact at 18, para. 59. On the basis of the facts discussed above, I conclude that the parties intended the transaction as structured in the Agreement to be a tax-free reorganization within the meaning of section 368(a)(1)(B). I also find that the parties sought to protect the tax integrity of the Agreement from each other’s unforeseen assaults thereon by explicitly agreeing not to do so. Accordingly, any deliberate action by a party in conflict with the previously expressed interest of the parties that the transaction be a tax-free reorganization within the meaning of section 368(a)(1)(B) is thus an outright breach of the Agreement. In light of the various defenses raised in this action, other provisions in the Agreement, as well as subsequent developments between the parties, must be discussed. Section 6.2 of the Agreement provides: 6.2 None of the parties hereto shall assert any claim against any other party, arising out of or relating to this Agreement after December 31, 1973. D-2, § 6.2, at 28. The immediately preceding section describes certain indemnification rights of DCA in the event of material inaccurate representations or breaches of warranty by the Mayers in connection with the Agreement. In its entirety, section 6.1 states: 6.1 The Shareholders agree that D.C.A. shall have the right of indemnification in respect to any loss, cost, expense, liability or damage resulting from material inaccurate representation made by the Shareholders in this Agreement, or from any material breach of any warranty made by them in this Agreement, including but not limited to the value of any asset appearing on Exhibits “B” and “C” to which the Corporations do not have good and marketable title and the amount of any lien or encumbrance existing against such assets. In the event D.C.A. shall have a right of indemnification as provided for in this paragraph, such indemnification shall first be effected by re-delivery of Initial Shares or Additional Shares previously delivered and then by set-off, against the Additional Shares of D.C.A. stock, if any, to be delivered as hereinafter described, which right shall be asserted at the figure of $15 per share, to be adjusted for stock splits, stock dividends, etc., as hereinafter provided. To the extent that D.C.A. has been unable to obtain complete indemnification by reason of Shareholders failure or refusal to re-deliver Initial Shares or Additional Shares or by reason of the insufficiency of its right of set-off against Additional Shares it shall have the right to assert a general claim against the Shareholders at any time prior to December 31, 1973. D-2, § 6.1, at 27 to 28. I note that 6.1 and 6.2 are the only two sections in Article VI. Article VI is entitled “INDEMNITY FOR DAMAGES.” D-2, Art. VI, at 27. It is the defendants’ contention that the contractual limitation set forth in section 6.2 bars this litigation, since the present suit was not commenced before December 31, 1973. In response to this argument, plaintiffs have previously contended that several factors foreclose the application of section 6.2 to the present suit. Slip Op. at 10 to 14. First, plaintiffs contend that section 13.11 of the Agreement, which provides that Florida law governs the interpretation of the contract, renders void such a limitation. Second, they assert that section 6.2 relates only to section 6.1, dealing with indemnification by the Mayers for material misrepresentations, and, accordingly, its time limitation is only applicable to causes of action based on those misrepresentations. Third, the plaintiffs contend that the limitation is unenforceable, even under New Jersey law, due to its unreasonableness in that its enforcement would ignore the continuing business relationship between the parties. Fourth, the plaintiffs argue that the defendants waived the application of section 6.2 by the institution of an earlier suit in Delaware. Fifth and lastly, plaintiffs assert that the Settlement Agreement of August 1975 when considered in conjunction with the Releases delivered thereunder in January 1976 terminated the Agreement and, thus, the section 6.2 time bar, while preserving the plaintiffs’ claims arising out of defendants’ imputed interest deduction and alleged violation of section 13.10. The majority of these contentions were disposed unfavorably to the plaintiffs in my earlier summary judgment opinion. In that opinion, I held that section 6.2 should be construed to limit the applicability of the choice of Florida law made in section 13.11. Slip Op. at 11 to 13. I also ruled that section 6.2 was reasonable, writing “[pjlaintiff will not be heard to assert that a ‘cut off’ of liability bargained for and sought by plaintiff is now unreasonable simply because it proves to be a ‘two-edged sword.’ ” Slip Op. at 14. Furthermore, in that opinion I discussed the effect of the institution of the prior action, as well as the scope of the Settlement Agreement and subsequent Releases. I will discuss these occurrences in greater detail shortly. However, in my earlier opinion I did note that “[t]here is a material issue of fact as to whether § 6.2 was intended to apply to the causes of action asserted by plaintiffs in this case or, framed another way, whether § 6.2 was intended only to apply to the claims enumerated in § 6.1 of the 1969 Agreement.” Id. I now address this issue. The origin of section 6.2 is surrounded by dispute. In the Initial Draft, Article VI, entitled “INDEMNITY FOR DAMAGES,” contained only one paragraph. The original Article, as drafted by Morris Sherman, read: The Shareholder, agrees that D.C.A. shall have the right of indemnification in respect to any loss, cost, expense, liability or damage resulting from any material inaccurate representation made by the Shareholder in this Agreement, or from any material breach of any warranty made by him in this Agreement, including but not limited to the value of any asset appearing on Exhibits “B” and “C” to which the Corporations do not have good and marketable title and the amount of any lien or encumbrance existing against such assets. In the event D.C.A. shall have a right of indemnification as provided for in this paragraph, such indemnification shall first be effected by re-delivery of Initial Shares and then by set-off, against the Additonal [s/c] Shares of D.C.A. stock to be delivered as hereinafter described, which right shall be asserted at the figure of $15 per share, to be adjusted for stock splits, stock dividends, etc., as hereinafter provided. To the extent that D.C.A. has been unable to obtain complete indemnification by reason of Shareholders failure or refusal to re-deliver Initial Shares or by reason of the insufficiency of its right of set-off against Additional Shares it shall have the right to assert a general claim against the Shareholder at any time prior to December 31, 1973. DB-1, Art. VI, at 15 to 16; Tr. 361-23 to -25. However, in the margin of the August 1, 1969, draft (hereinafter referred to as “August 1st Draft”), Exhibit DB-2, there are handwritten notations which would appear to suggest changes of the original language. Beck testified that “[a]t the bottom of the page my handwriting says: ‘In no event shall DCA commence any cause of action under this agreement against the shareholders or any of them for any reason whatsoever after December 31,1973.’ ” Tr. 52-19 to -22. He indicated that he made these notes “because ... the first paragraph talks about giving DCA the right of indemnification in respect to any loss, expense, liability and so forth resulting from any materially inaccurate representations made by the shareholder in this agreement. And Mr. Mayer wanted a cutoff date.” Tr. 52-24 to 53-4. Mayer’s testimony is in accord with these expressions. Mayer at 40 to 42; Tr. 271-10 to 276-23. I also note that there are additional notations beneath those discussed above. These notations read: “Neither party to commence c/a vs other.” DB-2, at 16. The words “Neither party” are then scratched out and “None of the parties” is written above them. Id. Beck explained that these changes were the result of his negotiations with Morris Sherman. Tr. 54-4. Interestingly, the phrase “for any reason whatsoever” was also deleted from the final Agreement. When questioned as to the scope of these insertions, Beck testified that section 6.2 only related to section 6.1. Tr. 54, 61. This interpretation is corroborated by the testimony of Mayer. Tr. 272 to 277. Beck further indicated that if section 6.2 were intended to have a broader application, it would have been added as a separate and independent article. Tr. 62, 82. However, he averred that he had no recollection of discussing section 6.2 in the context of a separate article. Tr. 69. During the course of Beck’s testimony, I inquired of Beck concerning the utility of section 6.2 to his client in light of the concluding language in section 6.1. Recall that section 6.1 reads: “To the extent that D.C.A. has been unable to obtain complete indemnification ... it shall have the right to assert a general claim against the Shareholders at any time prior to December 31, 1973.” D-2, § 6.1, at 27 to 28. I suggested the possibility that the interpretation pressed by plaintiffs might necessitate a finding that the limitation in section 6.2 was superfluous in light of the rights and limitation thereof in section 6.1. Tr. 57 to 61. Eventually, Beck responded to my inquiry by explaining that “Mr. Mayer wanted the head of the nail hit harder.” Tr. 62-22. He conceded that “in hindsight, I don’t know that we did.” Tr. 63-1. When questioned about this difficulty, Mayer noted that “[n]ot every contract is perfect.” Tr. 276-19. The testimony of Morris Sherman is in direct contradiction to that of Beck and Mayer. Sherman testified that there was no discussion between Beck and himself limiting the effects of section 6.2 “in any way” to section 6.1. Tr. 362-18 to -22. Rather, Sherman stated that “Mr. Beck and I agreed that this would bar anybody from having any claims against any party after December 31st, 1973.” Tr. 363-9 to —11; 366-2 to -14. The testimony of Alvin Sherman on this point is not particularly favorable to the defendants. In fact, it is more consistent with the plaintiffs’ witnesses’ reconstruction of the event. Alvin Sherman indicated that section 6.2 was in the Agreement because “Henry Mayer was rather adament [sic] that once he got paid or completed his earn-out.. . . [h]e didn’t want to be later subjected to any lawsuits, litigation or whatever. When he got paid he wanted to keep what he got and be done with it and the matter be closed.” Tr. 119-4 to -13. This testimony is entirely consistent with that of both Beck and Mayer. A review of the various drafts of the agreement and the credible testimonial evidence before the court persuades me that plaintiffs’ interpretation of the scope of section 6.2 is correct. The evidence strongly points to the conclusion that the time limitation contained in section 6.2 was intended to be limited in its application to those causes of action that might arise due to violation of rights set forth in section 6.1. This is the testimony of the draftsman of the language in dispute and it is testimony that I find credible. I find extremely persuasive Beck’s testimony that had he intended the time limitation to apply to the entire agreement he would have drafted section 6.2 as a separate article. Tr. 62, 82. This assertion is conceded by the defendants. Another specter, however, haunts this Agreement. Yet, I find plaintiffs’ explanation of this problem satisfactory. Since section 6.1 granted only DCA a right of indemnification for any loss resulting from misrepresentations made by Mayer and that section contained its own time limitation of December 31, 1973, the position taken by plaintiff, i.e., the December 31,1973, limitation contained in section 6.2 is only applicable to the causes of action accruing under section 6.1, might require the court to interpret the contract in a manner which would render part of it superfluous. At trial, however, I noted that there is a distinction between superfluity and redundancy. The testimony of Beck persuades me that the language contained in section 6.2 is merely redundant. In Beck’s own phraseology, section 6.2 merely hit the head of the nail harder. Tr. 62-22. B. The Voting Agreement. Another aspect of the parties’ relationship is also important in resolving the instant controversy. During the preliminary negotiations, Mayer had expressed an interest in assuring himself representation on DCA’s board of directors. D-l, para. XI, at 4. Despite the large block of DCA stock that Mayer would hold after the execution of the Agreement, he would not have been guaranteed representation on the board since DCA did not provide for cumulative voting. It is undisputed that on or about July 21, 1969, Alvin Sherman forwarded to Mayer a proposed voting agreement (hereinafter referred to as “July 1969 Letter Voting Agreement”). In pertinent part, the letter stated: This will confirm, that upon the execution of the Agreement and Plan of Reorganization between Mayer Construction Co. and Development Corporation of America, you and we, have agreed to vote the shares of DCA respectively held by us, in the following manner: 1) So long as you shall hold at least 50% of the shares of DCA, received by you under the Agreement, we shall vote our shares, at all meetings held for the election of members of the Board of Directors of DCA, so as to insure that the Board of Directors will always contain one member nominated by you. 2) You shall vote all shares of DCA, held by you, at all meetings held for the election of members of the Board of Directors of DCA, in favor of all other directors as Alvin Sherman shall advise you. D-4. Mayer denied having executed this draft, but admitted that it did constitute a “gentlemen’s agreement.” Mayer at 54, 58. The parties agreed at trial that as of July 1969 this agreement was no more than an “agreement to agree.” Mayer would receive no DCA stock until the closing of the agreement. Furthermore, the next DCA stockholders meeting would not take place until June 1970. Tr. 378 to 380. By cover letter dated May 11, 1970, Pedro Diaz, the vice-president and treasurer of DCA, forwarded to Mayer “a copy of a revision to our letter agreement of July 21, 1969.” D — 7. Diaz requested that Mayer review it prior to the transmission of the executed original. The attached copy was back-dated to April 1, 1970, so as to be properly included in the DCA’s 1970 proxy statement. Tr. 379; see Affd. of Henry D. Mayer and Plaintiffs’ Exhibits Submitted in Connection with Plaintiffs’ Memorandum in Opposition to Defendants’ Motion for Summary Judgment, Ex. 5 Supplemental Formal Protest of Mayers, Dated March 9, 1978, Ex. 8, at 4. The only change from the July 1969 Letter Voting Agreement was the addition of a third condition. The condition was that “[t]his agreement between us shall terminate upon the earlier to happen of your death or December 31,1980.” D-7, at 2. Mayer approved the draft. By cover letter dated May 13, 1970, Diaz sent Mayer the original signed by Alvin Sherman, Irving Fishman and Edward Lempka. He requested that Mayer execute the original, return it to DCA and forward a fully executed copy to Gerald S. Backman, Esq., at Weil, Gotshal & Manges. D-8. Mayer complied with these requests and forwarded by cover letter dated May 18, 1970, an executed copy of the voting agreement (hereinafter referred to as “April 1970 Voting Agreement”), Exhibit D-5, to Backman. Mayer was placed on the DCA board of directors in 1970. Furthermore, the April 1970 Voting Agreement was disclosed in DCA proxy statements through April 1974. C. The Delaware Litigation, Settlement Agreement and Releases. In April 1973, plaintiffs’ Additional Shares were released from escrow pursuant to the Agreement. See DT-4, para. 1, at 1. In early 1974, however, serious disputes arose between the parties. On March 28, 1974, Mayer was suspended from DCA’s board of directors for alleged mismanagement of the affairs of the Mayer Corporation. Tr. 202. He was also informed that the April 1970 Voting Agreement would not be honored. At this time, Mayer was also removed as president of the Mayer Corporation. As a consequence of these actions, several lawsuits were filed by the parties in the spring of 1974 in both Delaware and Florida. The actions were then consolidated in the United States District Court for the District of Delaware. In these actions, Mayer alleged, inter alia, that the April 1970 Voting Agreement had been breached. However, in support of his contentions, he affixed to the various complaints a copy of the July 1969 Letter Voting Agreement rather than the later executed April 1970 Voting Agreement. D — 9, D-10, D — 11, Exhibit A. In an opinion filed with respect to various motions made by the parties in the Delaware litigation, the Hon. Murray M. Schwartz referred to the July 1969 Letter Voting Agreement as evidencing the terms of the voting agreement between the parties. In its discussion of the factual background, the court detailed two “ancillary agreements” executed pursuant to the Plan of Acquisition. Mayer v. Development Corp. of America, 396 F.Supp. 917, 920 (D.Del.1975). The first ancillary agreement was the employment contract between Mayer and the newly formed May-er Corporation. The court continued: In the second ancillary agreement, three DCA directors, Sherman, Fishman, and Lempka, agreed to vote their shares at all meetings held for the election of members of the DCA Board of Directors in such a way as to assure the election of at least one member nominated by May-er. In return, Mayer agreed to vote his shares of DCA for the election of such nominees as Alvin Sherman might designate. Id. at 920. The other significant reference to the voting arrangement was in the court’s discussion of Mayer’s claim that the DCA proxy statement contained material misstatements and omissions in violation of section 14(a) of the 1934 Exchange Act, 15 U.S.C. § 78n(a), and Rule 14a-9 thereunder. The opinion contained a detailed explanation of the proxy statement, including a reproduction of the proxy statement’s discussion of the voting agreement. Footnote 12 of the opinion reproduced, in its entirety, the July 1969 Letter Voting Agreement. Id. at 925 n. 12. Plaintiffs now contend that the July 1969 Letter Voting Agreement was erroneously attached to the complaints in these actions and that these findings of Judge Schwartz were incorrect. However, nothing was done to correct the record. Mayer contends that he did not wish to jeopardize ongoing settlement discussions. In any event, a settlement agreement was entered into by the parties on August 25, 1975 (hereinafter referred to as “Settlement Agreement”). Exhibit DB-7. Of particular interest to the court is paragraph 12. In relevant part, it reads: The Agreement and Plan of Reorganization dated as of September 5, 1969, the Employment Agreement and letter of Voting Agreement, which are the subjects of C.A. 74-73, 74-98, and 74-106, shall be terminated as of the Closing [of the Settlement Agreement] and any obligation of ... HDM[ayer] to refrain from competing with DCA or MAYER CORP. shall thereupon cease and determine. DB-7, para. 12, at 7. Mayer testified that after the Settlement Agreement was executed in August 1975, he was informed by his accountant that “he, in turn, got in touch with the accountant for Development Corporation of America and was advised DCA had made certain deductions or claims in their tax returns.” Tr. 229-11 to -13. Mayer then requested Alvin Sherman “to send whatever information he had relative to the deduction which they had claimed which, on the other hand, would adversely affect me.” Tr. 229-19 to —21. Sherman complied with this request by sending to Mayer, under cover letter dated September 12, 1975, a copy of a four page excerpt of an I. R. S. examining agent’s report prepared in July 1975 concerning the imputed interest deduction aspect of DCA’s 1973 Federal Income Tax return. Tr. 230; DT-2. A review of the excerpt is enlightening. It is basically a discussion of the impropriety of DCA’s attempted imputed interest deduction. The agent decreased DCA’s claimed deduction by $596,673. On the last page of the excerpt, however, the I. R. S. agent writes: The instant case as in Rev.Rul. 70-120 and in Example 8, Reg. § 1.483-l(b) do [s/c] not involve a deferred payment sales contract since, the shares deposited in escrow were issued in the names of the former stockholder of selling corporation and they are entitled to vote the stock and receive all dividends paid on such stock. Thus, all the shares of stock placed in escrow were transferred to the Mayer stockholders as of the effective date of the reorganization when they agreed on basic terms. As in Mr. Sherman’s letter of April 15, 1975, if a voting agreement executed April 1970 is “ancillary” to the reorganization, then certainly modification and issuance of stock in escrow as finally agreed upon and issued in April 1970 would be also. The voting agreement that Mr. Sherman now holds as a severe restriction was of mutual benefit since neither group controlled enough votes independent of each other to control an election. This is the only voting compromise and as stated in all Development Corporation documents relating to same, Mayer Corporation shareholders were given full voting rights on shares in escrow. DT-2, at 5 (emphasis added). Thus, within the material supplied to Mayer there is a direct reference to a letter of Morris Sherman dated April 15, 1975. This letter was neither requested by Mayer nor voluntarily supplied by Alvin Sherman. The letter, dated April 15, 1975, is directed to Alvin Sherman and contains Morris Sherman’s discussion of Judge Schwartz’s finding that the July 1969 Letter Voting Agreement was “ancillary” to the reorganization. After a lengthy discourse on certain Revenue Rulings and Judge Schwartz’s finding, Morris Sherman posits: it would certainly be my firm opinion that the shares of DCA received by Henry Mayer did not constitute “voting stock” because of the severe restrictions upon his right to freely vote for the election of directors. Therefore, the tax free nature of the exchange of DCA stock for Mayer’s stock under the Reorganization Agreement of September 1969 is doubtful. DT-1, at 2 to 3. Morris Sherman then discusses the imputed interest deduction. He writes: The status of the Additional Shares finally delivered to Henry in April of 1973 as an 1973 transaction is also affected by this concept. As I remember, Pedro has advised me that the agent reviewing our “imputed interest” deduction is questioning our theory of a 1973 delivery because he claims Henry was given voting rights over the Additional Shares placed in escrow early in 1970. Now, however, if we follow the thrust of Revenue Ruling 72-72 it appears that Henry’s voting rights in respect of these Additional Shares was so limited that he could not be said to have any real “voting rights” at all. As a matter of fact, since you retained the right to direct the voting of all of Henry’s shares for eight out of the nine directors who were elected each year from 1969-1973 it may be said that you possessed the most important voting rights in respect of Henry’s shares dating back to the time they were placed in escrow. DT-1, at 3. Morris Sherman concluded by suggesting that Alvin Sherman review the letter “with John Cranshaw so that he may be properly armed in dealing