1. You have three (3) hours to complete this exam.

2. This is a closed book exam.

3. This exam consists of three (3) parts. Please note the relative weight of the questions. This is a relatively short examination, and you ought to have adequate time in which to complete it and do a good job. Please remember that I want and value short, not long, answers. Please just answer the call of the question; do not give me anything that I have not asked for. If there is any fact that you believe is either missing or ambiguous, and without which you cannot answer the question, please assume whatever you believe is necessary, tell me what your assumption is, and answer the question.

Part I (15% of Exam): Short Answer
Part II (40% of Exam): Short Answer
Part III (45% of Exam): Essay

4. Please answer these questions in the blue books provided to you. Write only on the right hand side of the page (skipping a page each time) and double-space your work. Please write legibly.

5. Write your exam number on your exam envelope. Put student exam # at the top of this page, each page of questions, and each blue book. Do not use your name, student ID number, Social Security Number, or in any other way identify yourself on any exam materials.

6. At the conclusion of the exam, return all exam materials to the exam envelope and submit it to the proctor. Do not seal the envelope. Students who do not return all exam materials at the end of the exam may not be graded.

Good luck!

PART III (45%): ESSAY

Mabel is the president of MRJ, Inc. (“MRJ”), a small corporation that owns a fading mall just north of Gustine, California. MRJ has a total of 55 shareholders who in the aggregate own 1,000 shares of stock. Mabel owns 400 of those, and her husband (who is retired and spends most of his time playing golf) owns 110 shares. The shares are thinly traded; their price on the exchange they are traded on has historically varied between $3.50 and $8.00. In early 2004, Mabel was approached by Osmond who, unbeknownst to Mabel, was acting on behalf of Big Bucks, Inc., a diversified land holding Company. Big Bucks had discovered that the proposed route for the SF – LA bullet train was right through MRJ’s mall, and that the property the mall was built on would, as a result, become of enormous value. Big Bucks set out to capitalize on its knowledge by hiring Osmond to try to acquire the controlling interest held by Mabel and her husband in MRJ; Big Bucks plan was to then use the control it thus acquired to dissolve MRJ and distribute as part of the dissolution to its shareholders the then book value of their shares (based on what the value of the land was then believed to be), which was $6.50 per share. Big Bucks calculated that, based on what it believed the value of the land would become once the bullet train route was announced, the value of the land would increase ten fold. Accordingly, Big Bucks took the following actions:

1. It caused Osmond to purchase the shares of Mabel and her Husband for $32 per share;

2. It used the control thus acquired to elect a majority of the board of directors;

3. It caused the Board to dissolve the corporation and in the process to sell the land to Big Bucks for its balance sheet value, pay off its liabilities, and distribute the resulting cash to all shareholders pro rata.

Having acquired the land, Big Bucks did nothing for a year; at that juncture the bullet train route was announced and, within 60 days after that, Big Bucks sold the land for a healthy profit.

You are now consulted by a disgruntled ex-shareholder who tells you that she feels as though she has been taken advantage of and wants to sue anyone who might be liable in connection with the dissolution of MRJ and the ultimate sale of the land by Big Bucks. What do you tell her?

END OF EXAM