## Facts

- Westech Capital Corporation had two classes of voting stock: common and Series A Preferred.
- John J. Gorman IV held roughly 60% of the common and 51% of the Series A Preferred, giving him a majority of total voting power.
- In connection with a 2011 capital raise, certain investors entered into a Voting Agreement governing the composition and election of a seven-member board.
- The agreement allocated board seats by category, including an “Independent Director” to be designated by a majority of Series A Preferred holders and two directors to be designated by “Key Holders” (initially Gorman and Robert W. Halder).
- A dispute arose over whether the agreement required per-share voting (votes proportional to shares) or per-capita voting (one vote per holder/person) for designating and removing directors in these categories.
- In 2013, Gorman attempted to remove certain directors and appoint replacements under the Voting Agreement; the Management Group (Gary Salamone, Mike Dura, and Halder) contended the actions were invalid without approval by a majority of the individual preferred holders.
- Both sides filed competing actions in the Delaware Court of Chancery under 8 Del. C. § 225 seeking a declaration of the valid board slate.
- After trial, the Court of Chancery found ambiguity, construed the independent-director designation as per share and the Key Holder designation as per capita, and concluded the resulting board was partially valid with several vacancies.
- Both sides appealed.

## Issues

1. Whether the Voting Agreement’s independent-director designation provision required per-share or per-capita approval.
2. Whether the Voting Agreement’s Key Holder designation provision required per-share or per-capita approval.
3. Whether the agreement’s removal provision gave removal power to the same “Person(s)” who held the corresponding designation power, and by what voting method.

## Decision

- The Delaware Supreme Court affirmed in part and reversed in part.
- It affirmed that the independent-director designation provision established a per-share scheme.
- It affirmed that the Key Holder designation provision established a per-capita scheme.
- It reversed the Court of Chancery’s interpretation of removal for Key Holder designees, holding that removal authority belonged to the Key Holders themselves (the “Person(s)” with designation power), not to a majority of Key Holder shares.
- It held the agreement’s structure reflected symmetry between designation and removal for each director category.

## Legal Principles

- Stockholder voting agreements are interpreted as contracts, primarily by enforcing their text read as a whole; extrinsic evidence may be considered to resolve genuine ambiguity.
- Delaware disfavors interpretations that disenfranchise stockholders, particularly majority stockholders, absent clear contractual language.
- Parties may contract for governance arrangements that depart from default share-proportional voting, including per-capita allocation of control over specified board seats.
- When an agreement links designation and removal to specified “Person(s)” or constituencies, removal power ordinarily tracks designation power for the same director category.

## Conclusion

The court enforced a mixed governance design under the Voting Agreement—per-share voting for the independent-director seat and per-capita control for Key Holder seats—and construed the removal provision to mirror the designation provisions so that the same persons who appoint a category of directors control that category’s removal.


Salamone v. Gorman, 106 A.3d 354 (Del. 2014)