Greenmont Capital Partners I, LP v. Mary's Gone Crackers, Inc.

2012 WL 4479999 (2012)

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Greenmont Capital Partners I, LP v. Mary’s Gone Crackers, Inc.

Delaware Court of Chancery
2012 WL 4479999 (2012)

Facts

Greenmont Capital Partners I, LP (Greenmont) (plaintiff) held more than seven million shares of Series B preferred stock in Mary’s Gone Crackers, Inc. (MGC) (defendant). Series B represented 45 percent of MGC’s preferred stock, with Series A accounting for 55 percent. MGC’s certificate of incorporation granted the Series B preferred stockholders the right to a majority vote on any change to any provision of the certificate and any action that would alter their privileges or rights under the certificate. The certificate contained a separate provision allowing for an automatic conversion of both Series A and Series B preferred stock into common stock upon the approval of 51 percent of the preferred stockholders. MGC sought to exercise the conversion provision, for which it obtained the approval of a majority of the preferred stockholders—a percentage that represented a majority of Series A stockholders but a minority of Series B stockholders. The MGC board then voted to amend the charter to eliminate the provisions that pertained to the preferred stock. Greenmont challenged the validity of the conversion in the Delaware Court of Chancery. MGC moved for judgment on the pleadings.

Rule of Law

Issue

Holding and Reasoning (Parsons, J.)

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