Opinion ID: 1548673
Heading Depth: 1
Heading Rank: 3

Heading: TBE Consent Solicitation And Exchange Transaction

Text: On Monday, October 12, 2009, TBE delivered an initial consent to EMAK, thereby launching its consent solicitation (the TBE Consent Solicitation). Under Section 2.13(c) of EMAK's bylaws (the Bylaws), the Board had the power to set a record date for the TBE Consent Solicitation. During a meeting held on October 19, the Board set October 22 as the record date. Had the Board not exercised its authority, the record date would have been October 12, the date of delivery of the initial TBE Consent. At the October 19 meeting, the Board also approved a transaction in which Crown exchanged its Series AA Preferred for new Series B Preferred Stock (the Exchange Transaction). Unlike the Series AA Preferred, the Series B Preferred voted on an as-converted basis with the common stock on all matters, including the election of directors. The Exchange Transaction thus conferred on Crown the right to wield 27.6% of the total voting power in an election of directors. The October 22 record date enabled EMAK to place the new Series B Preferred into Crown's hands for the TBE Consent Solicitation. On October 26, 2009, the plaintiffs filed suit challenging the Exchange Transaction and sought an expedited hearing on an application for preliminary injunction. During the scheduling conference, the parties agreed that the deadline for delivering consents in the TBE Consent Solicitation would be December 21, and the Court of Chancery entered an order implementing that agreement. The Court of Chancery granted the motion to expedite and scheduled a hearing on the plaintiffs' injunction application for December 4. To bolster the defendants' litigation position, EMAK solicited consents to ratify the Exchange Transaction (the Ratification Solicitation). Ultimately, however, the Court of Chancery did not have to rule on either the Exchange Transaction or the ratification strategy because on December 3, 2009, the day before the hearing, EMAK and Crown rescinded the Exchange Transaction. The plaintiffs responded to the rescission of the Exchange Transaction by filing an amended complaint challenging the disclosures made in the Ratification Solicitation. On December 7, 2009, the individual defendants and EMAK filed counterclaims and a third party complaint challenging the disclosures made in the TBE Consent Solicitation. On December 8, the parties agreed to defer litigating their disclosures and fight it out at the ballot box. They agreed to resume any litigation on December 22, after the deadline for the TBE Consent Solicitation.