Archive:March 18, 2016

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Delaware Chancery Court Rules Seller is Entitled to Tax Savings by Applying Extrinsic Evidence of the Parties’ Negotiations and Interpretation of the Redemption and Stock Purchase Agreement in Question

Delaware Chancery Court Rules Seller is Entitled to Tax Savings by Applying Extrinsic Evidence of the Parties’ Negotiations and Interpretation of the Redemption and Stock Purchase Agreement in Question

By: Cartwright Bibee and Trevor Belton

In Cyber Holding LLC v. CyberCore Holding, Inc. (C.A. No. 7369-VCN), the Delaware Court of Chancery (Noble, J.) ruled on a contract dispute over which party is entitled to tax savings in the amount of $1,557,171, resulting from deductions of various transaction expenses during the stub year. In its opinion, the Court reached its conclusion by applying the objective theory of contract construction combined with the consideration of extrinsic evidence in an effort “to ascertain the shared intentions of the parties.”  After considering the limited extrinsic evidence available and conducting its analysis of the Agreement, the Court ruled in favor of the seller and held that the Buyer would have to remit the tax savings plus post-judgment interest.  The Court rejected the seller’s request for prejudgment interest as the Agreement’s exclusive remedy provision controlled over the default of awarding prejudgment interest.

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