DealLawyers.com Blog

We have posted the transcript for the webcast: “Projections, Prospects & Other Crystal Ball Provisions: Colliding with 20/20 Hindsight.”

This March-April issue of the Deal Lawyers print newsletter was just sent to the printer and includes articles on:

– Checklist: Deal Confidentiality Pledges & Reminders
– Be Careful What You Wish For: When Drafting Indemnification Clauses, You May Get Exactly (and Only) What You Ask For
– Divisional Acquisitions: A Clean Break?
– “Short Slate” Rules: A Recap
– Crown Jewels: Restoring the Luster to Creative Deal Lock-Ups?

If you’re not yet a subscriber, try a 2013 no-risk trial to get a non-blurred version of this issue on a complimentary basis.

John Grossbauer of Potter Anderson notes: In In re Bioclinica, Delaware Vice Chancellor Glasscock denied expedition in a challenge to the proposed sale of Bioclinica. The Vice Chancellor commented on the deal protections at issue here, finding not colorable a claim that standstills that permitted a topping tender offer after an announced deal were preclusive when combined with a poison pill and customary match rights and termination fees, noting the board retained the right to accept a superior proposal and to redeem the pill in that context.

Here’s news from Greenberg Traurig’s Cliff Neimeth: Notwithstanding the procedural – and to a lesser extent, fact-specific – context of the preliminary injunction decision in the recently decided Kallick v. Sandridge Energy, this is an impact case which, read in conjunction with the Chancery Court’s Amylin Pharmaceuticals decision, counsels that, under certain circumstances, an incumbent board’s failure to prevent the consequences of a “poison put” covenant in an indenture (i.e., by “approving” a majority opposition slate of directors in a pending election contest for purposes of such covenant) could constitute a breach of loyalty.

Chancellor Strine applied Unocal rather than Blasius as the judicial review standard in this context (because it wasn’t apparent that the sole or primary purpose of such provision – which often is inserted at the lenders’ insistence in a credit agreement or arms’-length bargaining with the placement agent/underwriter for note purchasers – was pure entrenchment and the frustration of voting rights) and he makes an interesting distinction between the “poison put'” at issue vis-a-vis change-in-control acceleration provisions in other contexts (e.g., executive parachutes, equity plans and other such provisions in instruments triggered in a hostile acquisition not involving an election contest). The incumbent board’s disclosure ‘flip-flopping” certainly did not help their defense.

From a policy perspective – and in line with precedent decisions – this is not necessarily a surprising result in view of the Delaware judiciary’s respect for the sanctity of the proxy machinery and the uncoerced ability of non-affiliate stockholders to vote their will. The right to vote freely for director candidates is a raw nerve that should be touched rarely, and only with an abundance of novocain, a sharp drill and in a procedure of expedited duration. Interesting lesson when negotiating these provisions in the future.

Recently, Delaware Chancellor Strine made this ruling in Corwin v. MAPP Pharma on plaintiffs’ motion for expedited proceedings regarding certain disclosure claims that are becoming increasingly more common. While this ruling may reflect a further softening in the Chancellor ‘s views regarding the per se materiality of free cash flows (compare Maric v Plato to Transatlantic to Cox v Guzy), it may more generally be seen as further evidence that members of the Court of Chancery are less inclined to expedite proceedings or grant injunctions regarding “third party transaction in which the plaintiffs make no plausible allegation that the board’s decision to enter the transaction resulted from any favoritism toward the contractual buyer” and where “the plaintiffs’ own allegations admit that other logical buyers were given the chance to buy and make a bid without facing the barriers of deal protections in a signed up deal. . .”

Tune in tomorrow for the webcast – “Growing Controversies Over Company Valuations Under Delaware Law” – to hear Kevin Miller of Alston & Bird, Jennifer Muller of Houlihan Lokey and Kevin Shannon of Potter Anderson discuss whether – despite case law to the contrary – fair value (in appraisal) and fair price (under entire fairness) shouldn’t be viewed as identical. Please print off these two sets of Course Materials in advance – fair value and control premiums.

From Mark Poerio’s “ExecutiveLoyalty.org“: The IRS has published generic legal advice with respect to stock options and SARs that a target company cashes-out within several days after an acquisition closes (using its own funds or those received from the acquiring company). The IRS advises that “these deductions are governed by the end-of-the-day rule [under Treas. Reg. 1.1502-76(b)(1)(ii)(A)] and are properly reported on Target’s short-year return for the taxable year.”

We have posted the transcript of our recent webcast: “Activist Profiles and Playbooks.” Great program, with lots of kudos from members…

John Grossbauer of Potter Anderson notes: In Meso Scale Diagnostics v. Roche Diagnostics, Delaware Vice Chancellor Parsons granted summary judgment in favor of defendants on the question whether a reverse triangular merger could be an “assignment by operation of law” of a license agreement. The Court declined to follow the decision of the Northern District of California in SQL Solutions v. Oracle, which had reached the opposite conclusion.

The summary judgment opinion should provide comfort on the issue the Vice Chancellor had raised in his motion to dismiss opinion, in which he found it possible at that stage that an assignment could have occurred. The Vice Chancellor refused to grant summary judgment on the issue whether plaintiffs could enforce a license agreement to which they were not parties but to which they both consented and “joined in,” finding the contracts at issue ambiguous on this point.

One of my favorite blogs is Mark Suster’s “Both Sides of the Table,” even though Mark is a venture capitalist and that’s not really my thing. One of his most interesting blogs is entitled “How to Work with Lawyers at a Startup.” Check it out. It could give lawyers ideas about how they should market themselves…