Dart also hopes that adding Propp to the management team in a kind of heir-apparent role would give Walsh a message and lead him to turn his attention elsewhere. Needless to say, Walsh has been very cool to the notion of having Propp and his business combine with Fashion, and on one occasion suggested that he might at tempt to line up stockholder opposition to the move. Dart worries about the stockholders getting involved, because there is some disgruntlement among them as a result of the recent decline in earnings. Dart is confident that Fashion can handle the financing for such a transaction, especially with the expected upturn in profitability from the addition of Propp and his business. Dart because it would make Propp the largest shareholder, with more than Dart's 28,000 shares.
Fashion already has outstanding, with an eight- year duration and annual interest of nine percent.
During the two-year period, at least 5,000 of Propp's shares would be subject to a strong restriction on transfer, such as a prohibition against any assignment without the consent of Fashion. One of the senior partners in the law firm with which you are associated has a solid reputation for putting deals together, and Propp has consulted her with respect to this proposed transaction. Senior has in turn asked you for a memo analyzing the various issues presented in this matter, and adding any suggestions you may have, together with your recommendations and supporting reasons. You may ignore any federal or state securities law problems. If any aspect of the question is unclear, or you think something may have been misprinted, omitted, or the like, refer to the difficulty in your answer, and, where possible, make some appropriate assumption.