Elliott Associates, L.P. v. Avatex Corp.
Delaware Supreme Court
715 A.2d 843 (1998)
The Avatex Corporation (defendant) created Xeteva Corporation as a wholly owned subsidiary. A merger was planned in which Xeteva would be the surviving entity, Avatex’s certificate of incorporation would effectively be nullified, and Avatex preferred stock would be converted to Xeteva common stock. The terms of the merger did not call for a class vote of the Avatex preferred stockholders. However, Avatex’s certificate of incorporation provided that holders of Avatex first-series preferred stock had a vote in the event of an amendment, alteration, or repeal—whether by merger, consolidation, or otherwise—that would materially and adversely affect the rights of those shareholders. Elliott Associates, L.P., and other Avatex preferred stockholders (the preferred stockholders) (plaintiffs) brought suit in the Delaware Chancery Court to enjoin the merger. The court found in favor of Avatex, holding that it was the conversion of their stock—not an amendment, alteration, or repeal—that adversely affected the rights of the preferred shareholders. The preferred shareholders appealed. The Delaware Supreme Court granted certiorari.
Rule of Law
Holding and Reasoning (Veasey, C.J.)
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