Stock Terms

Covers corporate law issues related to terms, rights and preferences of stock

Including for preferred stock

Delaware GCL § 151
Classes and series of stock; redemption; rights

Shintom v Audiovox (Del 2005)

Claimed that DGCL § 151(c) requires that holders of preferred stock must receive dividend rights
So that issuance of "no dividend preferred" in merger was void
Rejected by Delaware Chancery (Chandler J)
Affirmed by Delaware Supreme (10.31.05)

DGCL "provides great flexibility for creating the capital structure of a Delaware corporation"
Dividend preference statutorily optional

FGC Holdings v Teltronics (Del Ch 2005)

Series B Preferred had right to nominate director
New holder of Series B wanted to enforce this right immediately even though board already had full number of directors provided by charter

Interpreting a certificate of designations

Court granted new holder its request for declaratory relief

NBC Univeral / Paxson Communications (Del Ch 2005)

NBC bought $415 million of Paxson 8% preferred
Dividend was to be reset after five years
NBC argued for a reset rate of 30.4%
Factual background

Interpreting a certificate of designations
Court rejects NBC's argument that liquidation preference includes accrued but unpaid dividends
Court rejected NBC's argument that CIBC wasn't a "nationally recognized independent investment banking firm" because of prior business dealings with Paxson

Benchmark Capital v Vague (Del Ch 2002)

Venture capital-backed company needed additional capital
Used a merger to avoid terms of preferred stock that would have given VC firm a veto over proposed financing
Court denied VC firm's request for a preliminary injunction to block the merger and subsequent financing

Telcom-SNI Investors v Sorrento Networks (Del Ch 2001)

Delaware Chancery decision (2001)
Delaware Supreme Court order (2002) (delsup19038)
Holders of preferred stock won preliminary injunction
Enjoined company from selling stock or issuing debt
Certificate of incorporation prohibited such action without consent of preferred holders

Plechner v Widener College (ED PA 1976)

Aff'd 569 F 2d 1250 (3^rd Circuit 1977)

Baker v Providence & Worcester (Del Ch 1976)

Rev'd 378 A 2d 121 (Del 1977)

Lacos Land v Arden Group (Del Ch 1986)

Lehrman v Cohen (Del 1966)

DuPont v duPont (Del 1965)

Staar Surgical v Waggoner (Del 1991)

Moran v Household International (Del Ch 1985)

Treves v Menzies (Del Ch 1958)

Finance & Investment v Burnet (DC 1932)

Moore v American Finance & Securities (Del Ch 1950)

In re Hawkeye Oil (D Del 1927)

Rothschild International v Liggett Group (Del 1984)

Shanghai Power v DelawareTrust (Del Ch 1974)

Aff'd in part, rev'd in part Judah v Delaware Trust (Del 1977)

SEC v Transamerica (D Del 1946)

Modified 163 F.2d 511 (3^rd Circuit 1947)

Campbell v Loew's (Del Ch 1957)

Unilever Acquisition v Richardson-Vicks (SD NY 1985)

Lacos Land v Arden Group (Del Ch 1986)

Providence & Worcester v Baker (Del 1977)

Rev'g 364 A 2d 838 (Del Ch 1976)

Weiss v Rockwell International (Del 1990)

Schnell v Chris-Craft (Del 1971)

Williams v Geier (Del 1996)

In re Pioneer Drilling (Del Ch 1957)

Hall v John S Isaacs & Sons Farms (Del Ch 1958)

Aff'd in part, rev'd in part 163 A 2d 288 (Del 1960)

Giuricich v Emtrol (Del 1982)

In re Farm Industries (Del Ch 1963)

Waggoner v Laster (Del 1990)

Jedwab v MGM Grand Hotels (Del Ch 1986)

Shanghai Power v Delaware Trust (Del Ch 1974)

Aff'd in part, rev'd in part Judah v Delaware Trust (Del 1977)

Rothschild International v Liggett Group (Del 1984)

In re Bicoastal (Del 1991)

Elliott Associates v Avatex (Del 1998)

Wood v Coastal States Gas (Del 1979)

Cohn v Crocker National (Del Ch 1985)

Hodgman v Atlantic Refining (D. Del 1924)

Managers Securities v Mallery (3^rd Circuit 1935)

Wilgus v Salt Pond Investment (Del Ch 1985)

Winston v Mandor (Del Ch 1997)

Shields v Shields (Del Ch 1985)

Appeal refused 497 A 2d 791 (Del 1985)

Rauch v RCA (2^nd Circuit 1988)

Baron v Allied Artists Pictures (Del Ch 1975)

Liese v Jupiter (Del Ch 1968)

Chris-Craft v Warner Communications (Del 1989)

Sullivan Money Management v FLS Holdings (Del 1989)

Petty v Penntech Papers (Del Ch 1975)

Weinberg v Baltimore Brick (Del 1955)

In re Louisville Gas & Electric (D Del 1948)

Goldman v Postal Telegraph (D Del 1943)

Mohawk Carpet Mills v Delaware Rayon (Del Ch 1954)

Cannon v Denver Tramway (Del Ch 1977)

Rothschild International v Liggett Group (Del 1984)

Plechner v Widener College (ED PA 1976)

Aff'd 569 F 2d 1250 (3^rd Circuit 1977)

Moran v Household International (Del Ch 1985)

Sundlun v Executive Jet Aviation (Del Ch 1970)

In re Tri-Star Pictures Litigation (Del 1993)

Foltz v US News & World Report (DC 1987)

Aff'd 865 F 2d 364 (United States Court of Appeals,
DC Circuit 1989)

Oberly v Kirby (Del 1991)

Ivanhoe Partners v Newmont Mining (Del 1987)

Kaplan v Centex (Del Ch 1971)

Priddy v Edelman (ED MI 1988)

Fry v Trump (D NJ 1988)

Polk v Good (Del 1986)

Mendel v Carroll (Del Ch 1994)

Bershad v Curtiss-Wright (Del 1987)

Thorpe v CERBCO (Del 1996)

Cinerama v Technicolor (Del 1995)

Blasius Industries v Atlas (Del Ch 1988)

Riblet Products v Nagy (Del 1996)

Nixon v Blackwell (Del 1993)

Shamrock Holdings v Polaroid (Del Ch 1989)

Preferred Stock Issues

Independent legal sigificance

Merger can be used to avoid preferred stock terms
Merger mechanics

Related Topics

Delaware General Corporation Law

Clear Gif