Opinion ID: 291677
Heading Depth: 2
Heading Rank: 2

Heading: The Harris Transaction

Text: 8 The facts alleged by plaintiffs are as follows: When the Arizona Group acquired control of National American in January 1968, they caused the corporation to continue to honor its obligations under an agreement it made with Harris on February 24, 1967. Under this agreement, National American was to purchase 12,947 shares of First Colonial common stock from Harris, then a National American director, for the excessive price of $100,000. This stock was then worthless. Documents were drawn to indicate that the transaction was a loan by National American to Harris which was secured by a pledge of Harris' stock. The principal amount of the purported loan was to be paid to Harris at the rate of $2,500 a month. In the event Harris defaulted, National American agreed that it would not assert a deficiency against the director regardless of the value of the pledged stock at the time of the default. The Arizona Group continues to cause the corporation to disburse $2,500 to Harris each month, thereby causing the corporation to purchase worthless stock. It does not appear that Harris is in default on the purported loan.