503_F.3d_913,_2007_U.S._App._LEXIS_21717,_ - 1 of 1...

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1 of 1 DOCUMENT ALBERT D. BOLT, Plaintiff-Appellee, v. MERRIMACK PHARMACEUTICALS, INC., Defendant-Appellant. No. 05-16282 UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT 503 F.3d 913 ; 2007 U.S. App. LEXIS 21717 May 18, 2007, Argued and Submitted, San Francisco, California September 11, 2007, Filed PRIOR HISTORY: [**1] Appeal from the United States District Court for the Eastern District of California. D.C. No. CV-04-00893-WBS. Willi- am B. Shubb, Chief District Judge, Presiding. Bolt v. Merrimack Pharms. Inc., 2005 U.S. Dist. LEXIS 46591 (E.D. Cal., Sept. 20, 2005) DISPOSITION: AFFIRMED. CASE SUMMARY: PROCEDURAL POSTURE: Plaintiff investor sued defendant pharmaceutical company in which he sought a declarat- ory judgment that the company's net worth exceeded $ 5 million as of December 31, 2001. The United States District Court for the Eastern District of California granted summary judgment in favor of the investor and concluded that the company's net work exceed $ 5 million as of that date. The company appealed. OVERVIEW: The investor owned 52,488 shares of series A redeemable preferred stock issued by the company. The company had an obligation to redeem the series A stock if its net worth equaled or exceeded $ 5 million. The investor sought to redeem those shares, but the company rejected the investor's demands for redemption. The dispositive issue was whether the company's net worth, determined in accordance with generally accepted accounting principles (GAAP) and as shown on the balance sheet, equaled or exceeded $ 5 million as of December 31, 2001. The appellate court found that the common and well-established meaning of the term "net worth" was the difference between a corporation's total assets and its total liabilities. The company's balance sheet showed the company's net worth equaled $ 10,060,840, well in excess of the $ 5 million threshold. No GAAP authority required classifying the company's series B stock as part of total liabilities, therefore, the court defer to the auditor's conclusion that the company's balance sheet presented fairly the financial position of the company in conformity with accounting principles generally accepted in the United States of America. OUTCOME: The judgment was affirmed. CORE TERMS: stock, balance sheet, net worth, accounting, redeemable, preferred stock, stockholder's, accounting principles, total assets, classified, redemption, convertible, deficit, redeem, mezzanine, determinable, holder, financial instrument, entity, accountant, issuer, financial position, conditional, conformity, financial statements, common stocks, presentation, conceptual, defer, material respects LexisNexis(R) Headnotes Business & Corporate Law > Corporations > Governing Documents & Procedures > Articles of Incorporation & Bylaws > Interpretation of Articles of Incorporation
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[HN1] Because articles of organization are contractual in nature, courts look to the incorporating state's general contract principles. Where the language of a contract is not ambiguous, courts are instructed to give words their plain meaning,
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