that "all officers ... shall have such authority and perform such duties in the management of the corporation as may be provided in these By-Laws, or to the extent not so provided, by the Board of Directors." (Id. § 2) The president specifically is empowered to exercise "general and active management and control of the business and affairs of the Corporation, subject to the control of the Board of Directors." (Id. § 6)
According to the Form 10-KSB, Anthony J. Cataldo served as president of the company from December 1991 until June 1994, when he became chairman of the board and chief executive officer. A month later, S. Keith Williams became president and chief operating officer. Although there is no direct evidence of record as to how Messrs. Cataldo and Williams related to one another during their tenures as chief executive officer and president and chief operating officer, respectively, the logical inference to be drawn circumstantially is that MTi in mid-1995 adopted a form of management common to many publicly held companies. The chief executive officer, as the title implies, became the paramount executive official of the corporation, subject only to the direction of the board of directors. See 1 AMERICAN LAW INSTITUTE, PRINCIPLES OF CORPORATE GOVERNANCE: ANALYSIS AND RECOMMENDATIONS § 3.01, cmt. a (1994) (hereinafter "ALI"). The president and chief operating officer became responsible for day-to-day operations, subject to the superior authority of the chief executive officer and the board. The by-laws, however, never were formally amended, either to reflect the existence and powers of the chief executive officer or to modify the sweeping delegation of authority to the president.
Messrs. Cataldo and Williams did not last long, leaving in July and September 1995, respectively. Peter Svennilson succeeded Mr. Cataldo as board chairman in July 1995 and as chief executive officer in September 1995. He rapidly was succeeded as chief executive officer in October 1995 by Paul Ekon. Mr. Williams was replaced by defendant Peter Morris as president and chief operating officer in November 1995. Mr. Morris still holds these positions. Finally, in February 1997, Michael J. Edison was elected chief executive officer to succeed Mr. Ekon. Thus, at this writing, Edison is the chief executive officer and Morris the president and chief operating officer. The board consists of four persons -- Edison, Ekon, Morris and John Ridley.
The Background of the Present Dispute
Subsequent to Edison's appointment, there was a falling out between the defendants, on the one hand, and Edison and Ekon on the other. Edison claims that MTi is in dreadful financial condition, a plight he contends was concealed by Morris and Ridley. He asserts that the defendants improperly enriched themselves at the expense of MTi, engaged in inappropriate accounting practices, and otherwise failed to conduct themselves properly. In particular, he contends that Morris and Ridley have been engaged in a scheme to purchase for themselves, through intermediaries certain assets of MTi's UK subsidiaries at bargain prices and, in consequence, that they have resisted efforts to procure secured financing. Indeed, Edison claims that Morris and Ridley caused the UK subsidiaries to default on obligations to British Inland Revenue in order to precipitate a liquidation of those entities in the course of which they would seek to purchase the assets. According to Edison, MTi's very existence was in peril by early March. The creditors were at the door. Its ability to raise equity capital was at an end. Although it had a debt-free balance sheet, Morris and Ridley allegedly blocked efforts to raise secured debt in order to further their personal interests.
The defendants, for their part, stoutly deny Edison's charges and counter with charges of their own. They contend that Edison is attempting to gain control of MTi for himself, quite possibly through the vehicle of having an intermediary finance the purchase of debentures convertible into common stock.
It is neither necessary nor practicable to get to the bottom of the charges and counter charges in resolving these motions. The critical points are two, and they are undisputed. First, MTi, Holdings and Trading all were in serious financial difficulty in early March 1997. Second, the MTi board was deadlocked, as it is divided evenly between two hostile factions -- Edison and Ekon on one side and Morris and Ridley on the other.
On March 12, 1997, Edison took the following steps, purportedly pursuant to his authority as chief executive officer:
(a) He executed on behalf of MTi, as sole shareholder of Holdings, a written resolution adopting new articles of association.
The new articles permit a majority shareholder of Holdings to appoint and remove directors by written notice.
(b) Edison then gave notice to Holdings, on behalf of MTi, removing all of its directors -- including defendants Morris and Ridley -- from office and appointing himself as the sole director of Holdings.