On August 8, 2025, the Delaware Court of Chancery dismissed an action in which a stockholder challenged an amendment to a FemtoMetrix Inc. voting agreement as invalid because the amendment allegedly did not apply "in the same fashion" to other stockholders. In Kim v. FemtoMetrix, Inc., the voting agreement guaranteed a Series B preferred stockholder the right to appoint one member to FemtoMetrix's Board of Directors. A subsequent amendment precluded "Conflicted Directors" from serving on the Board, the practical effect of which was to remove just one director—the Series B stockholder's designee—from the Board. The court upheld the amendment because it applied "in the same fashion" to every stockholder, and "equal application . . . is not the same as equal effect."
Background
FemtoMetrix is a privately-held Delaware corporation that develops and calibrates metrology instruments for the chip industry. In 2020, FemtoMetrix and its stockholders entered into an amended and restated voting agreement as part of a Series B funding round. Section 1.2(a) of the voting agreement granted one of the Series B stockholders, Avaco Co. Ltd. (a publicly traded Korean company), the right to appoint a "Series B Designee" to the Board. Section 1.4(a) required Avaco's consent to remove its Series B Designee from the Board, unless the removal was "for cause."
Section 7.8 of the voting agreement addressed future amendments. It generally permitted amendments with the consent of (i) FemtoMetrix, (ii) certain "Key Holders" of common stock (which did not include Avaco) and (iii) a majority of the common stockholders. The voting agreement then listed five exceptions, two of which were relevant to the parties' dispute: (1) any amendment "with respect to any Investor [i.e., any preferred stockholder, including Avaco]" could not be made "without the written consent of such Investor . . . unless such amendment . . . applies to all Investors . . . in the same fashion," and (2) any amendment to Section 1.2(a) could not be made "without the written consent of Avaco."
In 2021, Avaco appointed Charles Kim, an employee of Avaco, as its Series B Designee to FemtoMetrix's Board. During the next few years, Avaco and FemtoMetrix's partnership soured. In 2024, Avaco and Kim brought multiple lawsuits against FemtoMetrix, including a lawsuit in Korea, a lawsuit in California federal court, and a DGCL Section 220 lawsuit in Delaware.
In October 2024, after those suits were filed, FemtoMetrix and certain of its stockholders amended the voting agreement's provisions concerning director appointment and removal: A newly defined category of "Conflicted Directors" could not be appointed to the Board, and if an existing director became a Conflicted Director, the stockholders were obligated to remove that director from the Board. The amendment defined a "Conflicted Director" as "a service provider or otherwise employed by or an Affiliate of any Person that is engaged in commercial litigation against [FemtoMetrix]." The stated reason for the amendment was to prevent Avaco from obtaining sensitive information during the litigation against FemtoMetrix. Avaco did not consent to the amendment, but other stockholders did. Shortly after the amendment went into effect, stockholders owning more than 51% of FemtoMetrix's Series B preferred stock and 70% of its common stock executed a written consent removing Kim from the Board as a Conflicted Director.
In January 2025, Avaco filed a lawsuit in the Court of Chancery alleging that (1) the amendment was invalid and unenforceable and (2) Kim was not validly removed from the Board. The parties stipulated to expedited cross-motions for summary judgment, and the court issued its ruling in August 2025.
Decision
Vice Chancellor Will of the Court of Chancery upheld the amendment, reasoning that the new provisions concerning Conflicted Directors applied to all stockholders "in the same fashion."
Avaco argued that the amendment was "with respect to any Investor" (i.e., Avaco itself), relying on the fact that, as a practical matter, the amendment singled out just one stockholder: Avaco. Avaco was the only stockholder with pending litigation against FemtoMetrix at the time and the only stockholder whose designee (Kim) was a Conflicted Director subject to removal.
The court disagreed, explaining that "equal application . . . is not the same as equal effect." Nothing in Section 7.8(a) "require[d] that an amendment always have an identical effect on each Investor." Rather, Section 7.8(a) "only requires an objective application to each Investor." The provisions concerning Conflicted Directors contained objective criteria and applied equally to all stockholders meeting those criteria—not just to particular stockholders. Thus, the amendment applied "in the same fashion" to all stockholders.
The court further explained that the amendment did not run afoul of Section 7.8(e), which requires Avaco's consent to amend its board designation right. The court observed that "Avaco could have bargained for a right to veto every amendment that affects its Board designees," but "it did not." Avaco bargained to protect the board-designation provision in Section 1.2(a) against amendment but obtained no such protection for the provisions concerning director removal (Section 1.4) and director qualifications. Because the "Conflicted Director" amendment was addressed to the latter provisions, it did not require Avaco's consent.
Takeaways
This case is a reinforcement of Delaware's objective theory of contract interpretation in the context of amendments to voting agreements. It illustrates that Delaware courts are unlikely to strike down such amendments to voting agreements even if they appear to be aimed at a single stockholder and affect only that stockholder at the time of the amendment.
If stockholders want to protect themselves against amendments that affect their interests, they should bargain for clear consent rights. Otherwise, companies can amend their voting agreements in ways that affect only a subset of stockholders, so long as the language of the amendment is facially neutral and the amendment applies to all stockholders "in the same fashion."
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