Two weeks after Vice Chancellor Laster’s bench ruling in In re Complete Genomics enjoining the enforcement of a so-called “Don’t Ask, Don’t Waive” provision in a confidentiality agreement, Chancellor Leo E. Strine, Jr. of the Delaware Court of Chancery made clear in a transcript bench ruling in In re Ancestry.com that there is no per se rule in Delaware against the use of “Don’t Ask, Don’t Waive” provisions. I recently received a memo from Sullivan & Cromwell Partner and Practice Center Contributor Frank Aquila discussing the ruling and its ramifications. Here is an excerpt:
In its bench ruling, which the Court stressed “are limited rulings,” necessarily “time-pressured,” and therefore “shouldn’t make broad law,” the Court:
- Emphasized that because of the potency of “Don’t Ask, Don’t Waive” provisions, a target board would need to establish a clear record that it consciously and carefully employed the provision to maximize the target’s sale price; and
- Ruled that the use and effect of “Don’t Ask, Don’t Waive” provisions are material to shareholders in determining how to vote on a proposed merger and thus should be publicly disclosed, especially where the restrictions potentially account for why no superior offers have been made.
In its bench ruling, the Court also held that the financial advisor’s expression of doubt in its ability to provide a fairness opinion based on management’s projections prepared in anticipation of a sale process, which arguably precipitated revisions to those projections, was a material fact that should be disclosed to shareholders.
Click here for the complete S&C publication.