Nature of the Case
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Facts
Ps, individually and as trustees, are the owners of 76 percent of the outstanding stock of D. The beneficial ownership of the stock interest is with Jack J. Grynberg (P) and members of his family, the majority shareholder group. On February 10, 1976, Ps entered into a written agreement whereby 51 percent of the company's stock was placed into a 'voting trust agreement' which gave their voting rights in the stock to others. The 'voting trust agreement' was to expire four years later on February 9, 1980. On June 2, 1976, the 'voting trust agreement' was 'amended', again by written instrument, as a result of which all of Ps' stock, 76 percent of the company's stock, totaling some 5,222,558 shares, was placed in this trust. The 'Amendment to Voting Trust Agreement and Purchase Option Agreement' took the form of an agreement between the depositing shareholders and D. It was not signed by the voting trustees. The June 2 instrument also added to the 'voting trust agreement' an option in favor of Dn which gave it the right for a period of 5 years to purchase 'all or any part' of Ps' stock. The term of the trust was amended to correspond with the option period ending 5 years from June 2, 1976. The purchase price under the option was fixed at $2.87 per share (or one-half of the then-current market price of the stock) for the first year, with this price increasing by 10 percent on each anniversary date thereafter for the term of the option. The agreement further provides that during the term of the option, Ps may not ''sell, hypothecate, pledge or otherwise encumber said shares. Grynberg (P) was required to resign as a Director and Chairman of the Board and from positions with subsidiaries, to release the company from an employment contract, and to agree not to compete with the company. The voting trustees were to possess and be entitled 'to exercise all stockholders' rights of every kind.' Ps' filed suit to have the 'voting trust agreement and purchase option agreement' declared void so as to regain control of the corporation. Ps claimed the June 2 agreement was invalid since it attempted, not within two years prior to the time of the expiration of the February agreement, to extend the duration of a voting trust in violation of 8 Del.C. § 218(b). They claim the agreement invalid as some shares were held by others as a pledge of security for debts of the corporation. Ps also claim they effectively terminated any voting trust by a letter of revocation sent by them to D and the defendant voting trustees on October 15, 1976. The Vice Chancellor found the 'voting trust' portion of the agreement was governed by 8 Del.C. § 218 and that the June 2 'extension' agreement was invalid in that it was executed in violation of extension restrictions of § 218(b) holding that extensions under the statute are only permitted within the last two years of the term of the voting trust. Also since the majority of the covered shares were pledged and thus were incapable of being deposited in the trust, the terms of the agreement violated the mandatory certificate deposit provisions of 8 Del.C. § 218(a). The Vice Chancellor stated, 'It would be improper to hold that Ps were entitled to revoke as a matter of law in the absence of a clear factual record that would negate the existence of any representations on their part as to the duration of the trust upon which others may have relied to their detriment.' D appealed claiming the June amendment was not a voting trust and not subject to Section 218.
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