## Facts

- Arnold Pasternak, a Zapata Corporation stockholder, challenged a proposed acquisition of Houlihan’s Restaurant Group, Inc., a company controlled by Zapata’s chairman, Malcolm I. Glazer.
- Zapata’s board formed a special committee in September 1995 to evaluate the potential acquisition.
- In June 1996, the parties executed a merger agreement providing that Houlihan’s stockholders would receive Zapata stock and that Zapata stockholder approval would be by simple majority.
- The transaction was structured as a triangular merger involving a newly formed, wholly owned Zapata subsidiary (“Zapata Sub”) rather than a direct merger between Houlihan’s and Zapata.
- Zapata’s certificate of incorporation contained an 80% supermajority requirement for “a merger or consolidation with or into any other corporation.”
- The parties agreed that a direct merger of Houlihan’s into Zapata would trigger the 80% requirement; the dispute was whether interposing Zapata Sub avoided that requirement.

## Issues

1. Whether Zapata’s charter provision requiring an 80% stockholder vote for a “merger or consolidation with or into any other corporation” applied when the counterparty merged with Zapata’s wholly owned subsidiary rather than with Zapata itself.
2. Whether the corporation could proceed under the merger agreement’s simple-majority vote term notwithstanding the charter’s supermajority language.

## Decision

- The Court of Chancery held that the charter’s 80% supermajority requirement applied to the subsidiary-structured merger.
- The court enjoined consummation of the merger based on failure to obtain the required supermajority vote.
- After an appeal was filed, Zapata’s special committee terminated the merger agreement.
- The Delaware Supreme Court dismissed the appeal as moot and vacated the Court of Chancery’s judgment to prevent it from having precedential effect.

## Legal Principles

- A certificate of incorporation’s supermajority voting requirement may be enforced against transaction structures that would defeat the provision through form alone, where the transaction is substantively a merger within the charter’s scope.
- Stockholder voting rights established in a charter are treated as substantive constraints on board action, and equitable relief may issue to prevent consummation of a transaction that would contravene those rights.
- When a challenged transaction is terminated during appeal, the appeal is generally moot absent a recognized exception; appellate vacatur may be ordered to eliminate the effect of a moot trial-level decision.

## Conclusion

The Court of Chancery enjoined a triangular merger after construing Zapata’s charter to require an 80% stockholder vote despite the use of a wholly owned subsidiary, but the decision was later vacated on mootness grounds after the merger agreement was terminated.


Pasternak v. Glazer, No. 15026, 1996 WL 549960 (Del. Ch. Sept. 24, 1996)