Randy J. Holland

“ The Court of Chancery's broad special role contrasts sharply with this Court's own limited one. Because the Court of Chancery's decision constitutes an exercise of discretion, this Court reviews the record simply to determine whether that discretion has been abused. Polk v. Good, 507 A.2d at 536. "We do not exercise our own business judgment in an effort to evaluate independently the intrinsic fairness of the settlement." ”

“ The Court of Chancery, in the case sub judice, was obviously cognizant that the emergence of the "poison pill" as an effective takeover device has resulted in such a remarkable transformation in the market for corporate control that hostile bidders who proceed when such defenses are in place will usually "have to couple proxy contests with tender offers." ”

“ I have no doubt that a hostile acquiror can make an offer high enough to entice at least some of the directors that own stock to break ranks and sell their shares. Yet, these directors undoubtedly place a value, probably a substantial one, on their management of Unitrin, and will, at least subconsciously, reject an offer that does not compensate them for that value. ”

“ We begin, therefore, by ascertaining whether the Repurchase Program, as an addition to the poison pill, was draconian by being either coercive or preclusive.
A limited nondiscriminatory self-tender, like some other defensive measures, may thwart a current hostile bid, but is not inherently coercive. Moreover, it does not necessarily preclude future bids or proxy contests by stockholders who decline to participate in the repurchase. ”

“ Draconian Defenses Coercive or Preclusive Range of Reasonableness In assessing a challenge to defensive actions by a target corporation's board of directors in a takeover context, this Court has held that the Court of Chancery should [p1387] evaluate the board's overall response, including the justification for each contested defensive measure, and the results achieved thereby. Where all of the target board's defensive actions are inextricably related, the principles of Unocal require that such actions be scrutinized collectively as a unitary response to the perceived threat. ”

“ Subjective Determination The subjective premise was the Court of Chancery's sua sponte determination that Unitrin's outside directors, who are also substantial stockholders, would not vote like other stockholders in a proxy contest, i.e., in their own best economic interests. At American General's Offer price, the outside directors held Unitrin shares worth more than $ 450 million. Consequently, Unitrin argues the stockholder directors had the same interest as other Unitrin stockholders generally, when voting in a proxy contest, to wit: the maximization of the value of their investments. ”

“ Internal Revenue Service correspondence; [18] opinion letters in draft form from Skadden Arps and Dilworth (later supplemented) ; a draft lease and option agreement; the Memorandum of Understanding in the Sullivan action; a list of the art works being transferred; and a proposed agreement for the transfer of the Collection to the Museum ("Transfer Agreement") . After reviewing the aforementioned documents and revising the Transfer Agreement, the Special Committee unanimously resolved that the conditions for approval, which it had imposed at their February 16, 1989 meeting, had been satisfied. ”

“ American General Threat Reasonableness Burden Sustained The first aspect of the Unocal burden, the reasonableness test, required the Unitrin Board to demonstrate that, after a reasonable investigation, it determined in good faith, that American General's Offer presented a threat to Unitrin that warranted a defensive response. This Court has held that the presence of a majority of outside independent directors will materially enhance such evidence. ”

“ Although the applicable standard of appellate review requires this Court to consider the entire record, "if the findings and conclusions of the trial judge are supported by the record and [are] the product of an orderly and logical deductive process, they will be accepted." ”

“ If a defensive measure is not draconian, however, because it is not either coercive [p1388] or preclusive, the Unocal proportionality test requires the focus of enhanced judicial scrutiny to shift to "the range of reasonableness." Paramount Communications, Inc. v. QVC Network, Inc., Del. Supr., 637 A.2d 34, 45-46 (1994) . Proper and proportionate defensive responses are intended and permitted to thwart perceived threats. When a corporation is not for sale, the board of directors is the defender of the metaphorical medieval corporate bastion and the protector of the corporation's shareholders. ”

“ It contained a definition of the Museum proposal and the anticipated magnitude of the proposed charitable donation by Occidental. It reviewed the authority of the Board to approve such a donation [p53] and the reasonableness of the proposed donation. The Dilworth memorandum included an analysis of the donation's effect on Occidental's financial condition, the potential for good will and other benefits to Occidental, and a comparison of the proposed charitable contribution by Occidental to the charitable contributions of other corporations. ”

“ Because the effect of the proper invocation of the business judgment rule is so powerful and the standard of entire fairness so exacting, the determination of the appropriate standard of judicial review frequently is determinative of the outcome of [the] litigation. ”

“ Hammer's death; (5) restored to Occidental an equitable portion of any appreciation of the properties in the event the Museum exercised its option and disposed of the properties or transferred its option for value; and (6) guaranteed that the Art Collection would continue to be located in the Los Angeles area and remain available for the enjoyment of the American public rather than dissipated into private collections or sold abroad. ”

“ After acknowledging that the adoption of the rights plan was within the directors' statutory authority, this Court determined that the implementation of the rights plan was a proportionate response to the theoretical threat of a hostile takeover, in part, because it did not "strip" the stockholders of their right to receive tender offers and did not fundamentally restrict proxy contests, i.e., was not preclusive. ”

“ A selective repurchase of shares in a public corporation on the market, such as Unitrin's Repurchase Program, generally does not discriminate because all shareholders can voluntarily realize the same benefit by selling. ”

“ Grace, 606 A.2d at 92.
This Court also specifically noted that boards of directors often interfere with the exercise of shareholder voting when an acquiror launches both a proxy fight and a tender offer. Id. at 92 n.3. [22] We then stated that such action "necessarily invoked both Unocal and Blasius" because "both [tests] recognize the inherent conflicts of interest that arise when shareholders are not permitted free exercise of their franchise." ”