Page 52: of Maritime Reporter Magazine (November 1998)

WORKBOAT ANNUAL interests, the sons of Anthony Sr. would own more stock than the sons of J.P. Tb accommodate the wishes of J.P., James and Neill each received an extra 49 shares, making their combined stockhold- ings equal to the sons of Anthony

Sr. However, MT&T had an option to repurchase the shares without the consent of Neill and/or James.

Tax aspects of the buyout pre- cipitated what would later cause the company to be torn apart.

Anthony Sr. could not accept the deal unless his proceeds from the sale of McAllister Brothers were treated as capital gains, as com- pared to ordinary income - a dif- ference of 40 percent, lb accom- plish that, his sons could not own 50 percent or more of the corpora- tion, and one share needed to be assigned. Due to the feud between

J.P. and Anthony Sr., an extra share issued to Neill or James was out of the question. Instead, it was issued to Kallop, the only non-fam- ily member. In 1974, MT&T pur- chased McAllister Brothers for approximately $15 million. Kallop held 100 shares; Bruce, Tony and

Brian each held 99 shares and

James and Neill each held 148 shares.

The Lawsuit

In early 1979, Bruce announced his intention to leave MT&T - he had accepted a position as deputy assistant secretary of commerce for

Maritime Affairs. The company repurchased his stock; and his shares were not redistributed.

Brian attempted to equalize the shares of all the stockholders, fol- lowing Bruce's departure. The uneven ownership bothered him.

In the words of Kallop, Brian "went on a crusade" to equalize the shares in 1979. An agreement was drafted, by which Kallop would turn in his one extra share, and

Neill and James would turn in their extra 49 shares. Neill and

James rejected the agreement; which was bothersome, but not fatal, since their shares could be repurchased by the company with- out their consent.

Kallop's share became more important. In August, 1979, an agreement was drafted, which

Kallop and Brian both signed, transferring a single share of

Kallop's stock back to MT&T. This agreement would become the cen- tral issue of the lawsuit years later; stating, "I hereby give, trans- fer and deliver to the Company one share of Common Stock as a con- tribution capital. At the request of the Company, I shall execute such further documentation, if any, as may be necessary or desirable to folly effectuate such transfer."

According to court testimony,

Kallop intended to transfer his share back to MT&T, but had a change of heart approximately one month later. He stated during tes- timony he felt concern about a pos- sible investigation by the IRS into a tax fraud conspiracy; yet at the time, he told no one of his decision to rescind. Nevertheless, the trans- fer agreement had been signed.

Over the next seven years, Neill,

James and Anthony all retired from the company, leaving Kallop and Brian as sole stockholders. In 1986, after Anthony retired, the stockholders agreement, in place since 1974, expired, since there were fewer than three sharehold- ers. A new agreement was drafted, once again reaffirming Kallop's contribution of his additional share to the company, providing a guar- antee each shareholder would remain a director as long as he remained a stockholder, and pro- viding a third director would be elected jointly by the two stock- holders. That third director was

Lawrence Chan.

From 1986 to 1991, Kallop and

Brian saved the company from bankruptcy, and turned it into a successful enterprise. However, by 1990, Kallop was reevaluating

MT&T's heavy investment in tug- boats. He determined the tugboat operations were chronically losing money, and would never be prof- itable. He also realized that Brian, president of MT&T and supervisor of the tugboat operations, was unlikely to support reducing

MT&T's role in the tugboat indus- try.

A formal director's meeting was scheduled for October, 1991. Brian feared Kallop and Chan planned to remove him as an officer of MT&T, and checked the company's finan- cial statements. He found 199 (Continued on page 55)

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