Benchmark Capital Partners IV, L.P. v. Vague

Benchmark Capital Partners IV, L.P. (Benchmark) (plaintiff) was the initial investor in Juniper Financial Corp. (Juniper) (defendant). Benchmark received Series A Preferred Shares. Juniper then raised additional capital by issuing Series B Preferred Shares, including some to Benchmark. Both Series A and Series B Preferred Shares were protected by provisions in Juniper’s certificate of incorporation, sometimes referred to as a charter. Relevant here, there was a protective provision saying the holders of Series A and B stock were entitled to a vote as a class before Juniper could issue any equity senior to or equal with Series A or B stock. Juniper then negotiated an additional investment from Canadian Imperial Bank of Commerce (CIBC) (defendant) in exchange for Series C Preferred Shares. As part of this investment, CIBC obtained the right to waive the protective provision for the Series A and B stock – unless CIBC’s waiver would diminish the financial rights of the Series A and B stockholders. Then Juniper needed yet more capital funding. CIBC and Juniper agreed to a transaction that would mean: (1) merging Juniper into a subsidiary corporation, (2) adopting a new certificate of incorporation for the newly merged company, and (3) then issuing Series D Preferred Stock in exchange for an additional investment from CIBC under the new certificate of incorporation. The new, post-merger certificate of incorporation would make the Series D stock senior to both the Series A and Series B Preferred Shares and otherwise significantly devalue the Series A and Series B shares. Benchmark sued Juniper and CIBC, seeking to prevent the transaction.