Professor Gary S. Rosin
Fall 2004
CORPORATE FINANCE
SYLLABUS
PREFACE (xxi-xxiv)
INTRODUCTION AND PROBLEM—THE ENORMOUS ROOM (1-3)
CHAPTER 1—THE CORPORATE FORM—THEORIES & CONSEQUENCES
Section 1. The Ownership Model (6)
Trustees of Dartmouth College v. Woodward (6)
Dodge v. Ford Motor Co. (9)
Section 2. The Ownership Model Refined (11)
Berle, Corporate Powers As Powers In Trust (11)
Dodd, For Whom Are Corporate Managers Trustees? (13)
Note on Unocal Corp. v. Mesa Petroleum Co., Revlon, Inc. v. MacAndrews & Forbes
Holdings, Inc. and Paramount Communications, Inc. v. Time, Inc. (18)
Note on Paramount Communications, Inc. v. QVC Network, Inc. (website)
American Law Institute, Principles of Corporate Governance: Analysis and
Recommendations (19)
Section 3. Economic Theories: The Agency/Contract Model (20)
Joy v. North (21)
Fama, Agency Problems and the Theory of the Firm (23)
Easterbrook & Fischel, The Corporate Contract (27)
Williamson, Corporate Governance (31)
Section 4. The Neo-Traditional Response (33)
Brudney, Corporate Governance, Agency Costs and the Rhetoric of Contract (33)
Clark, Agency Costs Versus Fiduciary Duties (34)
Problems (39)
Section 5. Corporate Form and Corporate Governance (39)
The Current Debate (39)
Bebchuk, The Debate on Contractual Freedom in Corporate Law (39)
Dallas, Two Models of Corporate Governance: Beyond Berle and Means (41)
Section 6. Close Corporations: A Different Result?
Donahue v. Rodd Electrotype Co. (42)
Mitchell, Close Corporations Reconsidered (45)
CHAPTER 3—VALUATION
Introductory text (141-42)
Section 1. Introduction to Valuation (142-46)
Section 2. Introduction to Fundamental Valuation in Legal Context
Introductory text (147)
In Re Spang Industries, Inc. (147-52)
Note on Piemonte v. New Boston Garden Corporation (152-58)
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Syllabus, Corporate Finance
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Section 3. Risk and Return (158)
Introductory text (158-59)
a. Introduction to Risk and Return (159-60)
b. Return as a Function of Present Value
Discussion (160-67)
Problems (167-68)
Problem on Valuation and Discounting (website)
c. Risk as a Function of Probability (168-74)
Risk and Return: Bionics vs. Burgers (website)
d. Putting Risk and Return to Work
Introductory text (174-75)
Problem—Smith Drugstores, Part I (175)
Introductory text (175-76)
A Brief Introduction to Basic Accounting Principles (Supp 19-22)
Balance Sheet Based Valuation (176-81)
Income Statement-Based Valuation (181-84)
Cash Flow Based Valuation (184-93)
Note: Capital Budgeting (193-95)
Section 4. Fundamental Valuation in Legal Context Revisited
Introductory text (195)
Problem—Smith Drugstores, Part II (195)
Introductory text (195)
In re Spang Industries, Inc. (147-52) (review)
Note on Piemonte v. New Boston Garden Corporation (152-58) (review)
Note on the Delaware Block Method (196-99)
Cavalier Oil Corp. v. Hartnett (199-208)
Pueblo Bancorporation v. Lindoe, Inc. (Supp 22-31)
Le Beau v. M.G. Bancorporation, Inc. (Supp 31-40)
Problem—Smith Drugstores,Part III (208)
Introductory text (208)
Donahue v. Draper (209-14)
Nardini v. Nardini (214-22)
Problem—Valuing Preferred Stock [skip]
Section 5. Planning for Valuation (223) [skip]
Section 6. Portfolio Theory
Risk as a Function of Probability (168-74)
Risk and Return: Bionics vs. Burgers (website)
Introductory text (237-38)
Problem—Portfolio Theory and Corporate Governance (238-39)
Discussion (239-45)
Section 7. Capital Asset Pricing Model
Introductory text (245-46)
Problem—Smith Drugstores, Part V (246-47)
Discussion (247-55)
Cede & Co. v. Technicolor (255-59)
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Section 8. Efficient Capital Market Hypothesis (259)
Introductory text (259)
Basic, Inc. v. Levinson (259-69)
Kaufman v. I–Stat Corp. (Supp 40-49)
Cunningham, Behavioral Finance and Investor Governance (Supp 49-51, 51-59)
Discussion (269-80)
Problem on Implications of Valuation Theory for Corporate Law (website)
CHAPTER 2—LIMITED LIABILITY—A CENTRAL PROBLEM IN CORPORATE FINANCE
Section 1. The Basic Conflict Between Creditors and Stockholders (49)
Problem—The Term Sheet (49)
Manning and Hanks, A Concise Textbook on Legal Capital (49)
Section 2. The Origins and Purposes of Limited Liability (53)
Mitchell, Close Corporations Reconsidered (55)
Halpern, Trebilcock & Turnbull, An Economic Analysis of Limited Liability in
Corporate Law (62)
Easterbrook & Fischel, Limited Liability and the Corporation (67)
Stone, The Place of Enterprise Liability in the Control of Corporate Conduct (70)
CHAPTER 4—THE RIGHTS OF CONTRACT CLAIMANTS—PART 1: BONDHOLDERS
Section 1. The Rights of Debtholders
Introductory text (301-02)
a. The Characteristics of Debt
Klein & Coffee, Business Organization and Finance (302-05)
b. The Legal Treatment of Debtholders
Introductory Text (305)
Simons v. Cougan (305-11)
Bratton, The Economics and Jurisprudence of Convertible Bonds (311-13)
Katz v. Oak Industries, Inc. (314-23)
Metropolitan Life Ins. Co. v. RJR Nabisco, Inc. (337-77)
Problem—Negotiating and Drafting Event Risk Protection (377-78)
c. Fraudulent Conveyances
Leveraged Acquistions: Introductory Text (1032-36)
Problem—The LBO That Failed (1036-38)
Uniform Fraudulent Transfer Act (website)
United States v. Tabor Court Realty Corp. (1038-66)
Pay ‘N Pak Stores, Inc. v. Court Square Capital Ltd. (Supp 177-79)
ProtoComm Corp. v. Novell, Inc. (Supp 179-83)
d. The Right to Sue
Introductory text (426)
(i)
Derivative Suits
Hoff v. Sprayregan (426-30)
Harff v. Kerkorian (430-41)
American Law Institute Principles of Corporate Governance:
Analysis and Recommendations (441-43)
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(ii)
Contractual Limitations
American Bar Foundation Commentaries on Model Debenture Indenture
Provisions (444-45)
Simons v. Cogan (445-46)
Rabinowitz v. Kaiser-Frazer Corp. (446-53)
Note on Bondholders' Rights in Civil Law Countries (453-55)
Problem—Collective Action by Bondholders (455-56)
e. The Changing Nature of Corporate Debt [skip]
f. Problem—Balancing the Rights of Debtholders and Stockholders in the Bond
Indenture [skip]
Section 2. The Rights of Convertible Security Holders
Introductory text (475)
a. The Characteristics of Convertible Securities
Bratton, The Economics and Jurisprudence of Convertible Bonds (311-13)
Klein, The Convertible Bond: A Peculiar Package (476-79))
Problem—Financing With Convertible Bonds (479)
b. Obligation of the Corporation to Protect the Conversion Feature
Simons v. Cogan (305-11, 445-46)
Van Gemert v. Boeing Co. (480-93)
Section 3. The Obligations of The Indenture Trustee
Introductory text (493-95)
Morris v. Cantor (496-501)
Broad v. Rockwell International Corp. (501-02)
Elliot Assoc. v. J. Henry Schroeder Bank & Trust Co. (502-10)
United States Trust Co. v. First National City Bank (510-13)
Harriet & Henderson Yarns, Inc. v. Castle (Supp 105-10)
Problem—The Duties of the Indenture Trustee (513)
Section 4. Interpreting the Bond Contract
Introductory text (513)
Metropolitan Life Insurance Co. v. RJR Nabisco, Inc. (337-77)
Sharon Steel Corporation v. The Chase Manhattan Bank, N.A. (514-25)
Rudbart v. North Jersey District Water Supply Commission (525-40)
Morgan Stanley & Co., Incorporated v. Archer Daniels Midland Company (540-54)
Problem—Interpreting the Bond Contract (554-56)
Section 5. The Extra-Contractual Rights of Bondholders [skip]
CHAPTER 5—THE RIGHTS OF CONTRACT CLAIMANTS—PART 2: PREFERRED STOCK
Introductory text (567)
Problem — Drafting and Negotiating the Preferred Stock Contract (567-70)
Section 1. The Characteristics of Preferred Stock
Klein & Coffee, Business Organization and Finance (570-74)
Section 2. Dividends and Preferred Stock
Gutmann v. Illinois Central R. Co. (574-80)
Baron v. Allied Artists Pictures Corp. (580-86)
Burton v. Exxon Corp. (586-96)
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Section 3. Convertible Preferred Stock
Wood v. Coastal States Gas Corp. (596-605)
Benton & Gunderson, Hi-Tech Corporation Restated Certificate of
Incorporation (605-17)
Reiss v. Financial Performance Corp. (Supp 111-17)
Section 4. Repurchases, Redemptions, Liquidations and Recapitalizations
Problem—Recapitalizing a Distressed Corporation (617-18)
The De Facto Merger Doctrine (618)
Hariton v. Arco Electronics, Inc. (619-20)
Rath v. Rath Packing Company (620-29)
In re Sunstates Corp. Shareholders’ Litigation (Supp 117-21)
Pasternak v. Galzer (Supp 121-24)
Rauch v. RCA Corp. (629-44)
HB Korenvaes Investments, L.P. v. Marriott Corporation (644-63)
Section 5. The Extra-Contractual Rights of Preferred Stockholders
Problem—Structuring a Merger (663)
Elliot Associates. L.P. v. Avatex (Supp 124-32)
Dalton v. American Investment Co. (663-78)
Jedwab v. MGM Grand Hotels, Inc. (678-92)
In re FLS Holdings, Inc. Shareholders Litigation (692-99)
Section 6. Form versus Substance
Eliasen v. Green Bay & Western Railroad Co. (324-35)
Form of Class B Debenture of Green Bay & Western Railroad Co. (website)
Additional Materials on Control Premiums (website)
Problem—Valuing Preferred Stock (222-23)
Cavalier Oil Corp. v. Hartnett (199-208)
Pueblo Bancorporation v. Lindoe, Inc. (Supp 22-31)
Le Beau v. M.G. Bancorporation, Inc. (Supp 31-40)
CHAPTER 6—THE RIGHTS OF OWNERSHIP CLAIMANTS (649-954)
Section 10. Freeze-outs in General
Problem—Freezing—out the Dissenting Shareholder (989)
Weinberger v. UOP, Inc. (991)
Kahn v. Lynch Communications, Inc. (website)
Problem: Parent-Public Subsidiary Stock Merger (website)
Section 7. Mergers and Acquisitions
Introductory Text (814)
Problem—Defensive Repurchases (814-15)
Unocal Corp. v. Mesa Petroleum Co. (816-29)
Heckmann v. Ahmanson (829-33)
Problem—Repelling the Hostile Tender Offer (899-902)
Unocal Corp. v. Mesa Petroleum Co. (902)
Paramount Communications, Inc. v. Time Inc. (902-30)
Omnicare, Inc. v. NCS Healthcare, Inc. (Supp 160-71)
Paramount Communications, Inc. v. QVC Network, Inc. (930-51)
McMullin v. Beran (website)
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