In Alliant Techsystems, Inc. v. MidOcean Bushnell Holdings, L.P., C.A. No. 9813-CB (Del. Ch. April 27, 2015), the Court of Chancery, in a Memorandum Opinion, granted Alliant’s motion for judgment on the pleadings.  Alliant sought specific performance of a stock purchase agreement that required the parties to submit a dispute over the calculation of net working capital to an accountant pursuant to the purchase price adjustment procedure provided in the agreement.

The dispute centered around which provision in the stock purchase agreement controlled.  The first provision required an independent accounting firm to resolve disputes concerning adjustments to the estimated purchase price, including disagreements over the calculation of net working capital.  The second provision required the purchaser to indemnify the buyer for, among other things, breaches of representations or warranties.

The Court relied on the plain terms of the agreement to resolve the dispute.  The definition of “net working capital”  in the agreement required the net working capital to be calculated in accordance not only with the company’s historical accounting practices, but also in accordance with GAAP.  The court noted that the defendant’s interpretation of the contract, which read out that provision, would “contravene basic principles of contract construction requiring that contracts be read as a whole and that meaning be given to all the provisions of the contract whenever possible.”  It accordingly concluded that the provision requiring an independent accounting firm to resolve the dispute controlled and ordered the Defendant to submit the dispute over net working capital to an independent accounting firm for resolution.