FRANCOTYP-POSTALIA AG & CO., a German corporation, Plaintiff, v. ON TARGET TECHNOLOGY, INC., a California corporation, PRAKASH DESAI, JOSEPH R. WERNING, Defendants. INK JET TECHNOLOGY, INC., a Delaware corporation, Nominal Defendant., 1998 Del. Ch. LEXIS 234

Summary

Plaintiff stockholder and defendant stockholder each owned half of nominal defendant corporation's stock, and controlled half of its directors. Plaintiff and defendant agreed that each would provide half of any capital required to prevent insolvency. If a deficiency resulted from sales by nominal defendant to plaintiff at less than cost, plaintiff would lend the differential to nominal defendant, which nominal defendant would repay from profits on sales to third parties. Plaintiff purchased nominal defendant's product at less than cost, there were no third-party sales, and the resulting deficiency left nominal defendant with insufficient funds. A deadlock arose over plaintiff's proposal for a capital call to cure the alleged insolvency, and plaintiff petitioned for the appointment of a receiver under Del. Code Ann. tit. 8, § 226(a)(2). The court denied the petition. Nominal defendant was not insolvent because its cash flow deficiency was caused by below-cost sales to plaintiff, and the...