## Facts

- Time sought to acquire Warner through a two-step transaction: a cash tender offer for 51% of Warner’s common stock followed by a back-end merger.
- In the back-end merger, Time’s wholly owned subsidiary would merge into Warner, and Time would acquire Warner’s remaining common stock.
- Warner’s Series B Variable Rate Cumulative Convertible Preferred stock was held substantially by Chris-Craft and its controlled subsidiary, BHC.
- The merger agreement provided that the Series B Preferred would be converted into a newly issued Time preferred security (Time Series BB Preferred), except for shares as to which appraisal rights were properly perfected.
- The Series B Preferred’s rights were set out in a certificate of designation that formed part of Warner’s certificate of incorporation.
- The certificate of designation granted class voting rights for certain actions, including charter amendments that would “adversely affect” the Series B Preferred’s powers, preferences, or special rights, and other specified actions that would “alter or change” those rights.
- A separate provision addressed mergers only in limited, specified circumstances.
- Warner filed a declaratory judgment action seeking a ruling that Series B holders were not entitled to a separate class vote on the merger.
- The case was presented on a Rule 12(c) motion for judgment on the pleadings, with no material factual disputes; Warner conceded for purposes of the motion that the conversion would adversely affect Series B holders economically.

## Issues

1. Whether the Series B Preferred’s class-vote provisions, including “alter or change” and “adversely affect” language, entitled Series B holders to a separate class vote on a merger that converts their shares into a different preferred security.
2. Whether a broad merger class-vote right may be implied from charter-amendment-style protective language when the governing instruments do not expressly grant a merger vote.

## Decision

- The Court of Chancery granted judgment on the pleadings for Warner, Time, and the merger subsidiary.
- The court declared that Series B Preferred holders were not entitled to vote as a separate class on the proposed merger.
- The court held that any class vote right had to be clearly expressed in the certificate of incorporation or certificate of designation and could not be implied from general protective provisions.
- The court concluded the alleged adverse effects flowed from the merger transaction itself, not from the type of charter amendment or specified action triggering a class vote under the governing documents.

## Legal Principles

- Preferred stockholder rights are contractual and are limited to those clearly set out in the certificate of incorporation and any certificate of designation.
- Protective provisions tracking 8 Del. C. § 242(b)(2) are construed as addressing class votes on charter amendments that adversely affect a class, not as conferring a general veto over mergers.
- General “alter or change” or “adversely affect” language does not, by itself, create a merger class-vote right when the governing instruments do not expressly provide one.
- Where a certificate of designation includes a narrow, merger-specific voting provision, courts may draw a negative implication against broader, unstated merger voting rights.
- Delaware law distinguishes between statutory merger-related protections (including appraisal rights) and class voting rights on charter amendments; merger voting rights for a class must be expressly granted in the charter instruments.

## Conclusion

The court held that the Series B Preferred holders had no separate class vote on the back-end merger converting their shares into a Time preferred security because the governing certificate provisions granted class votes for charter-amendment-type actions and only limited merger scenarios, and Delaware law does not imply a broad merger veto absent clear, explicit language.


Warner Commc’ns Inc. v. Chris-Craft Indus., Inc., 583 A.2d 962 (Del. Ch. 1989)