Care Cont.

Question 1

Loyalty not at issue in Van Gorkom because

Answer 1

not clear approaching retirement the only motivation and made decision with BOD

Question 2

Issue in Van Gorkom

Answer 2

whether made an informed business decision and if not did they cure it

Question 3

What is a leveraged buyout

Answer 3

getting debt from outside financiers to pay out shares and then using assets of the company to pay down that debt

Question 4

What should BOD in Van Gorkom have done

Answer 4

• ask Q about how calculated $55 per share
• ask about other transactions considered
• ask why not discuss this transaction before
• why with Pritzker
• read the merger agreement

Question 5

Van Gorkom court says that to make decision about ___ must be ___

Answer 5

forced sale of shares, sufficiently informed

Question 6

Key Van Gorkom facts

Answer 6

one day notice, just oral presentation (no numbers or reports), push for fast transaction

Question 7

What would be two ways to heal Van Gorkom transaction

Answer 7

• market test
• fully informed SH vote

Question 8

Why didn’t market test work in Van Gorkom?

Answer 8

deal made it unattractive for other buyers

Question 9

__ was passed after Van Gorkom

Answer 9

102(b)(7)

Question 10

Van Gorkom plantiffs brought __

Answer 10

direct class action

Question 11

Van Gorkom issue

Answer 11

can plaintiffs rebut presumption that BOD decision was informed

Question 12

Van Gorkom says standard to rebut BJR is __

Answer 12

gross negligence

Question 13

141(e) says that directors are __

Answer 13

fully protected in relying in good faith on reports made by officers

Question 14

141(e) didn’t apply in Van Gorkom because __

Answer 14

info-sharing presentation was not a report

Question 15

Under BJR, no protection for directors who ___

Answer 15

take action without being sufficiently informed (before 102(b)(7))

Question 16

BOD can’t just take word of CEO in merger ___

Answer 16

because merger life/death for company, must understand core features of that K

Question 17

Rationale for 102(b)(7)

Answer 17

• reduces risk of litigation
• reputational costs of airing dirty laundry in court
• indemnification means directors rarely personally pay anything

Question 18

DCGL 220

Answer 18

SH can access books and records of company during normal business hours

Question 19

220 is important because __

Answer 19

courts expect plaintiffs to have done homework at pleading stage

Question 20

Marchand facts

Answer 20

Only make ice cream and problems with listeria that started years ago lead to full product recall and liquidity crisis.

Question 21

Marchand holding

Answer 21

facts plead with particularity suggesting failure to monitor

Question 22

Marchand says that DGCL 141 requires that a company is ___

Answer 22

managed by BOD (more than just finances)

Question 23

Marchand said that food safety was mission critical because __

Answer 23

ice cream only thing company makes so finances hinge on ability to safely deliver products

Question 24

What was the evidence of failure to monitor in Marchand

Answer 24

• no committee on food safety
• virtually no discussion of it in BOD meetings
• management knew but no incentive to report

Question 25

Marchand court says BOD should

Answer 25

• ensure get info about production facilities
• devote some of mental energy to the process
• know potential pitfalls of operation
• ensure management reports to them a couple times a year (need not be every meeting) AND that they ask questions
• make business judgment about fixing problem

Question 26

If BOD asks Q and officers say don’t worry in a report ___

Answer 26

can rely on report 141(e)

Question 27

If BOD asks Q and officers say don’t worry but info not in a report, ___

Answer 27

BOD can’t just not read the K BUT can say asked questions as defense if 102(b)(7) and plan not totally contrary to the answers