IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

PARAGON TECHNOLOGIES, INC., )

)

Plaintiff, )

)

v. ) C.A. No. 2023-1013-LWW

)

TERENCE J. CRYAN, PHILIPP )

STRATMANN, PETER E. SLAIBY, )

CLYDE W. HEWLETT, NATALIE )

LORENZ-ANDERSON, DIANA G. )

PURCEL, and OCEAN POWER )

TECHNOLOGIES, INC., )

)

Defendants. )

MEMORANDUM OPINION

Date Submitted: November 28, 2023

Date Decided: November 30, 2023

Stephen E. Jenkins, Richard D. Heins, ASHBY & GEDDES, P.A., Wilmington, 

Delaware; Renee M. Zaytsev, Constance M. Boland, Ned Babbitt, THOMPSON 

HINE LLP, New York, New York; Thomas Palmer, THOMPSON HINE LLP, 

Columbus, Ohio; Ryan Blackney, THOMPSON HINE LLP, Chicago, Illinois; 

Counsel for Plaintiff Paragon Technologies, Inc.

Michael A. Pittenger, Christopher N. Kelly, Tyler J. Leavengood, David A. Seal, 

Callan R. Jackson, Christopher D. Renaud, Ryan M. Ellingson, POTTER 

ANDERSON & CORROON LLP, Wilmington, Delaware; Counsel for Defendants 

Terence J. Cryan, Philipp Stratmann, Peter E. Slaiby, Clyde W. Hewlett, Natalie 

Lorenz-Anderson, Diana G. Purcel, and Ocean Power Technologies, Inc.

WILL, Vice Chancellor
1

This action is brought by Paragon Technologies, Inc.—a stockholder of Ocean 

Powers Technology, Inc. Paragon wishes to nominate candidates to OPT’s board of 

directors. In August, it sent a notice of its intention to OPT. Five weeks later, the 

board rejected Paragon’s notice as noncompliant with OPT’s advance notice bylaws. 

Paragon also sought to purchase additional shares of OPT stock in furtherance 

of its proxy contest. But OPT has a rights plan for the stated purpose of protecting

its net operating losses. Paragon’s request for an exemption from the rights plan was 

denied.

Paragon moved for a preliminary injunction requiring the board to let 

Paragon’s candidates stand for election and grant Paragon’s exemption request. 

Since this is mandatory relief, Paragon took on a significant burden—one it did not 

carry.

I reach that conclusion with some trepidation. The board amended its bylaws 

and adopted the rights plan after Paragon emerged on the scene. The board spent 

weeks reviewing Paragon’s nomination notice for deficiencies, raised numerous 

issues of varying degrees of importance, rejected the notice at the end of the 

nomination window, and then raised more deficiencies in this litigation. Some of 

the bylaws Paragon purportedly violated are ambiguous or seem untethered from a 

legitimate corporate end. 
2

Still, there are countervailing facts. One of OPT’s bylaws requires a 

nominating stockholder to disclose its plans or proposals for the company. 

Contemporaneous communications suggest that Paragon may have had such plans 

if its proxy contest succeeded and it gained control of the board, including a stock 

for stock reverse merger. Absent credibility determinations (and given that 

Paragon’s principal deleted his text messages), I cannot say whether such 

undisclosed plans exist. More generally, there is evidence that the board enforced 

certain bylaws to uphold important corporate interests and rejected the exemption 

request to protect OPT’s valuable NOLs. Whether this is pretextual is another matter 

I am unable to resolve at this stage. 

It remains to be seen whether Paragon will ultimately prevail on its breach of 

fiduciary duty claims. For now, it chose to seek a preliminary mandatory injunction 

on fact-intensive matters and a limited record. To grant Paragon what amounts to 

final relief would be inequitable.
3

I. FACTUAL BACKGROUND

The following background is drawn from the undisputed facts in the plaintiff’s 

Verified Amended and Supplemental Complaint for Injunctive and Declaratory 

Relief and the record developed during discovery.1 This record, which was 

presented in connection with the plaintiff’s motion for a preliminary injunction, 

includes 127 exhibits and the deposition testimony of 13 witnesses.2 The facts 

summarized below are those likely to be found after trial.

A. OPT and Its Board

Ocean Power Technologies, Inc. (“OPT”) is a Delaware corporation providing 

maritime intelligence solutions based on renewable energy platforms and 

autonomous vehicles.3 Its current market capitalization is approximately $15 

million.4 OPT’s common stock is publicly traded and registered on the NYSE 

American exchange as “OPTT.” 

1 Verified Am. and Suppl. Compl. for Injunctive and Declaratory Relief (Dkt. 78) (“Am. 

Compl.”).

2 Citations in the form “PX__” refer to exhibits to the Transmittal Affidavit of Richard 

Heins in Support of Plaintiff Paragon Technologies, Inc.’s Opening Brief in Support of Its 

Motion for a Preliminary Injunction. Dkt. 112. Citations in the form “DX__” refer to 

exhibits to the Transmittal Affidavit of Ryan M. Ellingson in Support of Defendants’ 

Answering Brief in Opposition to Plaintiff’s Motion for a Preliminary Injunction. 

Dkt. 125. Where documents lack internal pagination, they are cited by the last four digits 

of their Bates stamps. Deposition transcripts are cited as “[Name] Dep.”

3 DX 1 at 2; see Am. Compl. ¶ 17.

4 PX 60 (“Weiser Dep.”) 167.
4

OPT has long faced financial struggles. OPT has never turned a profit since 

it began operations in 1994.

5

 In the last five years, OPT’s fiscal health has further 

deteriorated with its revenues unable to keep pace with increasing expenses.6 For 

instance, OPT’s cumulative net losses for the last three years have totaled 

approximately $60 million, compared to $5.7 million in cumulative revenues.7 

OPT’s net operating losses (NOLs) are its most valuable asset.8 Its stock price is 

currently under $0.30 per share.9

In recent years, OPT has shifted its business strategy to focus on optimizing 

data and sales from certain services and products, including autonomous surface 

vehicles.

10 OPT has also expanded its market reach to include the defense, security, 

and surveillance industries.11 Despite its relationships with government agencies, 

OPT presently has no contracts with the United States Department of Defense or the 

Department of Homeland Security.12 

5 Am. Compl. ¶ 19.

6

Id. ¶ 24.

7

Id.

8

See PX 52 (“Slaiby Dep.”) 164, 176; PX 56 (“Cryan Dep.”) 13, 44, 29-30.

9 Am. Compl. ¶ 12.

10 DX 1 at 2-6.

11 Id. at 11-13.

12 See id. at 8, 14-15, 26. There is nothing in the present record to indicate otherwise. 
5

As part of its revisioning, OPT refreshed its board of directors (the “Board”) 

and senior management. Between 2020 and 2021, OPT added five new directors to 

its six-member Board.13 The Board is currently composed of defendants Terence J. 

Cryan (Chairman), Philipp Stratmann, Clyde Hewlett, Natalie Lorenz-Anderson, 

Diana Purcel, and Peter Slaiby.14 Stratmann has served as OPT’s President and 

Chief Executive Officer since June 2021.15 

B. Paragon’s Investment and Outreach

Plaintiff Paragon Technologies, Inc. is a publicly traded Delaware corporation 

“that makes value-based investments in misunderstood businesses.”16 Paragon 

operates through various subsidiaries focused on sectors including automation 

solutions, technology hardware, and real estate.17 It owns approximately 3.9% of 

OPT’s outstanding stock, which Paragon believes makes it OPT’s single largest 

stockholder.18

13 DX 2 at 1-3.

14 Id.; Am. Compl. ¶¶ 18, 22. Only Cryan (who has been a director since 2012) was on the 

Board before December 2020. Id. ¶¶ 18, 22.

15 Am. Compl. ¶ 18.

16 Id. ¶ 16.

17 Id.

18 Id.
6

Paragon is led by Hesham Gad, who has served as Paragon’s Chairman since 

2012 and as its Chief Executive Officer since 2014.19 He serves alongside two other 

members of Paragon’s board of directors: Samuel Weiser and Col. Jack Jacobs.20

Paragon began acquiring OPT stock in July 2022.21 On December 15, 2022, 

Gad contacted OPT to express that Paragon—as a purported 2% owner of OTP’s 

stock—was interested in “providing additional capital to OPT.”22 

Gad and Stratmann eventually held a call on April 14, 2023.

23

 Gad suggested 

he might write to the Board about potential cost-cutting measures since he was 

concerned about OPT’s cash depletion.24 After the call, Stratmann told Cryan that 

Gad “thinks there is insufficient oversight” at OPT and “posted a letter demanding 

a board seat and outlining his concerns.”25 Stratmann noted that Gad “appears to 

like proxy fights” and had “used the same playbook back in 2010 . . . to take over 

Paragon.”

26

19 Id. ¶ 64; DX 4; DX 6; PX 33 at ‘3254.

20 DXs 5-6; see Am. Compl. ¶ 64.

21 PX 33 at ‘4256-72.

22 DX 7.

23 See DX 8 at ‘2278.

24 Id.; see also PX 57 (“Gad Dep.”) 66; PX 51 (“Stratmann Dep.”) 58.

25 PX 71 at ‘0193.

26 Id. at ‘0192 (expressing that Gad “isn’t shy about publicly denouncing CEOs, chairmen, 

and anyone else he sees as not fit to his ideas”).
7

C. Gottfried’s Retention and Paragon’s May 19 Letter

Meanwhile, the Board began to consider updating Paragon’s bylaws, which 

had last been amended in June 2016.27 On May 17, the Board retained attorney Keith 

Gottfried to review OPT’s “preparedness for a possible activist investor campaign 

and/or an unsolicited takeover offer.”28 Gottfried specializes in “shareholder 

activism defense.”29

On May 19, Gad sent a letter to Stratmann and Cryan, representing that 

Paragon owned 3.3% of OPT’s stock.

30

 Gad expressed concern with OPT’s cash 

depletion and lack of a viable business plan.31 He also “formally request[ed]” the 

“timely appointment of Paragon’s three directors [i.e., Gad, Weiser, and Jacobs] to 

the Board of OPT.”32 

On May 22, Cryan circulated Paragon’s May 19 letter to the Board, announced 

the retention of Gottfried, and called a “non-minuted board call” the next day to 

discuss these developments.33 On May 25, Stratmann requested that OPT’s current 

27 DX 18 at 1; Cryan Dep. 22-23, 29-30 (testifying that he considered whether OPT’s 

bylaws should be updated to reflect the new universal proxy rules).

28 PX 69 at ‘5223. 

29 PX 72.

30 PX 3 at ‘2245.

31 Id.

32 Id. at ‘2247. 

33 PX 4 at ‘0285.
8

bylaws be sent to Gottfried and used the subject line “Project Echo”—OPT’s code 

name for its response to Paragon.34 Gottfried also began work on an “NOL Rights 

Plan.”35

D. The Amended Bylaws

On June 5, the Board met “to discuss the [May 19] letter received from 

Paragon.”36 Gottfried presented a “proposed amendment to [OPT’s] bylaws related 

to its advanced notice provisions” and discussed potential activist defense 

strategies.37 He also provided an overview of Paragon, its corporate structure, and 

its history as an activist stockholder.38 The Board “discussed the amendments” to 

the bylaws Gottfried proposed and “decided to postpone final approval” to allow 

time for further review.39

After the meeting, Stratmann sent Gad a letter offering to have the Board’s 

Nominating and Corporate Governance Committee consider Paragon’s candidates.40 

34 PX 5 at ‘0346; see PX 50 (“Hewlett Dep.”) 159-60.

35 PX 12; PX 6.

36 PX 9 at 1; see also PX 8.

37 PX 9 at 2.

38 Id.

39 Id. at 4.

40 DX 15.
9

Stratmann’s letter enclosed a copy of a directors’ questionnaire for Paragon’s 

proposed candidates to complete.41 Paragon declined this offer.

42

On June 8, the Board unanimously approved the proposed bylaw amendments 

(the “Amended Bylaws”).43 The changes were primarily to Section 1.10, which 

addresses “Advanced Notice of Stockholder Nominations for Directors and Other 

Stockholder Proposals.”44 The Amended Bylaws require a stockholder seeking to 

nominate a director candidate to disclose, among other things, a description of: 

• any “plans or proposals” of the nominating stockholder relating to OPT 

“that would be required to be disclosed” under Item 4 of Schedule 

13D;

45

• “events, occurrences, and/or circumstances . . . that could impact, 

impede, and/or delay” the proposed nominees’ “ability to receive a 

security clearance”;

46

• “any business or personal interests” that could create “a potential 

conflict of interest” between OPT and the proposed nominee;

47

41 See id. at ‘0659.

42 DX 17 (Gad expressing disappointment with Stratmann’s June 6 letter and rejecting the 

“song and dance interview process” involving the Nomination and Governance 

Committee); see also DX 16 at ‘1464 (Jacobs describing the Board’s “insistence on a 

bureaucratic process as a means to avoid talks”).

43 DX 18 at 1.

44 Id. Ex. A (“Bylaws”) § 1.10.

45 Id. § 1.10(a)(3)(iv)(B).

46 Id. § 1.10(a)(3)(i)(K).

47 Id. § 1.10(a)(3)(i)(I).
10

• information about the proposed nominees (and, as amended, the 

noticing stockholder) required to be included in a proxy statement 

under Regulation 14A;

48 and

• a completed questionnaire with a written representation and agreement

in the form provided by OPT.49

The Amended Bylaws also provide that “[i]f any information in a Stockholder 

Notice submitted pursuant to [] Section 1.10 is determined to be inaccurate in any 

respect,” the notice “may be deemed not to have been provided in accordance with 

[] Section 1.10.”50

E. The Section 382 Plan

On June 29, the Board adopted a Section 382 Tax Benefits Preservation

Plan (“Section 382 Plan”).51 OPT’s announcement of the Section 382 Plan said that 

the Board was attempting to “diminish the risk that [OPT’s] ability to utilize its 

[NOL] carryovers . . . to reduce potential future federal income tax obligation may 

become substantially limited.”52 The Section 382 Plan “is intended to act as a 

deterrent to any person or group acquiring beneficial ownership of 4.99% or more” 

48 Id. §§ 1.10(a)(3)(i)(M), (iv)(E). According to the Board, this requirement was included 

in the 2016 bylaws. See Defs.’ Answering Br. in Opp’n to Pl.’s Mot. for a Preliminary 

Injunction (Dkt. 125) (“Defs.’ Answering Br.”) 33.

49 Bylaws § 1.10(a)(4)(A).

50 Id. § 1.10(c)(1).

51 PX 16.

52 Id. at 2.
11

of OPT’s outstanding common stock “without the approval of the Board.”53 

Purchasing more than 4.99% of OPT’s common stock would trigger significant 

dilution.54

Section 382 of the Internal Revenue Code restricts a company’s use of NOLs 

if it has undergone an “ownership change,” which occurs when over 50% of a 

company’s ownership changes over a rolling three-year period (counting 

stockholders who hold or obtain a 5% or greater block).55 OPT has approximately 

$220 million in NOLs available for carryover.56 Due to “ownership changes” in 

October 2016, April 2019, and January 2021, only $94 million is currently available 

for preservation and free from limitation.57

F. Paragon’s Proxy Contest

On July 7, Paragon filed a Schedule 13D with the Securities and Exchange 

Commission (SEC).58 Paragon disclosed its 3.9% ownership of OPT’s outstanding 

shares and stated that ”intend[ed] to provide a slate of director nominees” for the 

53 Id. at 3. 

54 Id. at 2-3.

55 28 U.S.C. § 382; see PX 16 at 2.

56 DX 10.

57 Id.

58 PX 18 at ‘2588, ‘2590.
12

OPT Board.

59

 The Schedule 13D attached a letter to OPT stockholders criticizing

OPT’s management and financial performance and stating that Paragon had “a plan 

to fix OPT.”60 On July 11, Paragon re-issued the letter as a press release.61 In a July 

26 text message, Weiser informed Jacobs that Paragon had “agreed to move forward 

with a slate of directors” for OPT.62

G. Paragon’s Exemption Request

Amid its preparations for a proxy contest, Paragon sought an exemption from 

the Section 382 Plan so that it could buy up to 19.9% of OPT’s outstanding shares 

(the “Exemption Request”).63 The Board discussed the Exemption Request with 

counsel and OPT’s tax advisor, EisnerAmper LLP, which had been retained in 2021

to assess the application of Section 382 to OPT.64 After a regularly scheduled Board 

meeting on October 11, the Board denied Paragon’s Exemption Request on October 

12.65

59 Id. at ‘2590; see Am. Compl. ¶ 62.

60 PX 18 at ‘2588-91.

61 PX 19.

62 DX 23 at ‘2491.

63 PX 25.

64 PX 42; PX 1 (retaining EisnerAmper “to analyze changes in the ownership of the stock 

of [OPT] for purposes of determining the application of [IRC] Section 382 to OPT”); see 

also PX 13; DX 3.

65 PX 42.
13

H. Paragon’s Nomination Notice

On August 25, Paragon submitted a notice of its intent to nominate director 

candidates for election to the Board at OPT’s next annual meeting (the “Notice”).66 

Paragon sought to nominate five individuals: Gad, Jacobs, Weiser, Shawn M. 

Harpen, and Robert J. Tannor.67 The Notice itself is nine pages long, but spans over

1,000 pages with attachments—including various SEC filings and completed 

director questionnaires from the proposed candidates.68 

OPT acknowledged receipt of the Notice on August 28 and began reviewing 

it for completeness.69 Approximately three weeks remained in the nomination 

window, which was set to close on September 15.70

I. The Board’s Response

In a September 6 letter to Paragon, OPT complained that the Notice had 

“relatively few cross-references to any of the advance notice requirements in the 

[Amended] Bylaws.”71 OPT explained that the Board’s “review of the Purported 

Nominating Notice [wa]s continuing and no decision ha[d] been made by OPT, the 

66 PX 33.

67 Id. at ‘3254-59. Tannor withdrew as a nominee on November 12. PX 54.

68 PX 54; see also Am. Compl. ¶ 65.

69 See PX 34 at 1.

70 See Am. Compl. ¶ 3.

71 PX 34 at 1-2.
14

OPT Board, or any committee thereof with respect to the Purported Nominating 

Notice.”72

OPT subsequently issued two deficiency letters. In a September 8 letter (the 

“First Deficiency Letter”), OPT raised multiple purported faults in the Notice under 

eight sections of the Amended Bylaws.73 These included Paragon’s purported 

failure to disclose its plans and proposals for OPT, information that could impede 

Paragon’s nominees from obtaining a government security clearance, and Paragon’s

“substantial interest” in seeking control of the Board through a proxy contest.

74

 The 

Board also stated that the Notice violated the Amended Bylaws because it contained 

“inaccurate” information.75

On September 12, Paragon amended its Schedule 13D filing and disclosed its 

intent to take control of OPT’s Board.76 The Schedule 13D also explained that if its 

nominees were elected, Paragon would take “immediate steps” to reduce expenses, 

“develop a measurable plan that will bring [OPT] to cash flow break even,” and 

focus on potential industry growth.77 The same day, Paragon submitted another 

72 Id. at 2.

73 PX 36.

74 Id. at ‘1350-53. 

75 Id.

76 PX 39 at ‘4506-08.

77 Id. at ‘4508.
15

letter to OPT supplementing the Notice and attempting to address certain issues 

raised in the First Deficiency Letter.78 Paragon’s letter requested that OPT 

“promptly provide a complete list of any and all deficiencies claimed by [OPT] to 

exist in the Notice so that Paragon c[ould] take timely steps to address and, if needed, 

cure any issues.”79

On September 14, OPT sent Paragon a letter detailing additional deficiencies 

(the “Second Deficiency Letter”).80 OPT noted that there were still issues with the 

accuracy of the Notice and the September 12 supplement.81 With one day left before 

the nomination deadline, OPT said that its letter did “not contain a complete listing 

of all of the deficiencies.”82 Paragon again supplemented the Notice on September 

15.83

On October 12, OPT formally rejected the Notice.84

78 Id. at ‘4501-05.

79 Id. at ‘4504. 

80 PX 40.

81 Id. at 2.

82 Id. at 4.

83 PX 41.

84 PX 43.
16

J. This Litigation

Paragon commenced this action on October 10.85 Its complaint advanced two 

counts for breach of fiduciary duty.86 Count I concerns the Board’s review and 

(then-presumed) rejection of the Notice.87 Count II pertains to the Board’s rejection 

of the Exemption Request.88

Discovery commenced soon after the complaint was filed, and an expedited 

schedule was set. On October 27, the defendants served interrogatory responses that 

detailed numerous purported deficiencies in the Notice.89 On October 31, Paragon 

responded to issues raised by the defendants by submitting another supplement to 

the Notice.90 The Board rejected this supplement as untimely and ineffective.91

On November 2—one day before the substantial completion deadline for 

document production—Paragon sought leave to amend its complaint and add claims 

related to the adoption of the Amended Bylaws.92 On November 9, I granted 

85 Dkt. 1. This lawsuit followed a books and records action, in which Magistrate Molina 

granted Paragon’s demand for certain materials. PX 44; Paragon Techs., Inc. v. Ocean 

Power Techs., Inc., C.A. No. 2023-0770-SEM (Del. Ch. Oct. 20, 2023) (TRANSCRIPT). 

86 Am. Compl. ¶¶ 131-67.

87 Id. ¶¶ 134-36, 138.

88 Id. ¶¶ 154-56.

89 PX 45.

90 PX 46.

91 PX 49.

92 Dkt. 47.
17

Paragon’s motion for leave to amend with a “significant caveat”: due to Paragon’s 

delay and to prevent prejudice to the defendants given the highly-expedited 

schedule, the preliminary injunction hearing would only concern Paragon’s original 

claims.93

On November 17, Paragon filed its motion for a preliminary injunction and

opening brief in support.

94

 Paragon asked that I enjoin the defendants from 

enforcing Section 1.10 of the Amended Bylaws and from taking actions that would 

prevent Paragon’s nominees from standing for election at OPT’s upcoming annual 

meeting. It also asked that I direct the defendants to grant the Exemption Request.95

The defendants filed an answering brief on November 22, and Paragon’s reply brief 

was filed on November 27.96 Oral argument on the motion was held on November 

28.97 At that argument, the parties also addressed the defendants’ motion for 

sanctions due to Gad’s purported spoliation of text messages.98 

93 Dkt. 76.

94 Dkt. 111.

95 Id.

96 Dkts. 125, 129.

97 See Dkt. 128.

98 Dkts. 127, 133, 135.
18

II. LEGAL ANALYSIS

“The extraordinary remedy of a preliminary injunction ‘is granted sparingly 

and only upon a persuasive showing that it is urgently necessary, that it will result 

in comparatively less harm to the adverse party, and that, in the end, it is unlikely to 

be shown to have been issued improvidently.’”

99

 To obtain preliminary injunctive 

relief, a plaintiff must demonstrate: “(1) a reasonable probability of ultimate success 

on the merits at trial; (2) that the failure to issue a preliminary injunction will result 

in immediate and irreparable injury . . . ; and (3) that the balance of hardships weighs 

in the movant’s favor.”100 Although there “is no fixed approach to how the court 

should weigh these elements relative to one another,” the “failure to prove any of 

the three [] defeats the application.”101

As Paragon acknowledges, a “higher mandatory injunction standard” applies 

here.102 Paragon requests an order requiring the defendants to allow its nominees to 

stand for election and to grant its Exemption Request.103 Paragon therefore must 

99 Cantor Fitzgerald, L.P. v. Cantor, 724 A.2d 571, 579 (Del. Ch. 1998).

100 La. Mun. Police Emps.’ Ret. Sys. v. Crawford, 918 A.2d 1172, 1185 (Del. Ch. 2007).

101 Jorgl v. AIM Immunotech Inc., 2022 WL 16543834, at *9 (Del. Ch. Oct. 28, 2022) 

(citing Cantor Fitzgerald, 724 A.2d at 579).

102 Pl.’s Opening Br. in Supp. of Its Mot. for a Prelim. Inj. (Dkt. 111) (“Pl.’s Opening Br.”)

21.

103 [Proposed] Order Granting Pl.’s Mot. for a Prelim. Inj. (Dkt. 111); see Union Pac. Corp. 

v. Santa Fe Pac. Corp., 1995 WL 54428, at *2 (Del. Ch. Jan. 30, 1995) (explaining that a 

preliminary injunction motion seeking an order directing the board to redeem a pill or grant 

an exemption involves mandatory relief); Jorgl, 2022 WL 16543834, at *9 (“[A]sking the 
19

demonstrate its entitlement “as a matter of law to the relief [it] seeks based on 

undisputed facts.”104 That is, Paragon must “make a showing sufficient to support a 

grant of summary judgment.”105

Paragon might have proven a reasonable probability of success on certain 

aspects of its claims. The Board adopted sprawling advance notice bylaws after 

Paragon’s outreach, seemingly delayed and obfuscated in rejecting Paragon’s notice, 

and then produced a laundry list of deficiencies. But Paragon opted to pursue 

mandatory injunctive relief on a preliminary record—one rife with factual disputes. 

Gad’s apparent deletion of text messages makes matters worse. Mandatory relief is 

unavailable in these circumstances.

A. The Nomination Notice Claim

Advance notice bylaws are “commonplace” and can serve important corporate 

purposes.106 They “are designed and function to permit orderly meetings and 

court to order the defendants to acknowledge his nominees as valid, permit his nominees 

to stand for election, and include his nominees on a universal proxy card . . . amounts to a 

request for mandatory injunctive relief.”).

104 Jorgl, 2022 WL 16543834, at *10; see also BlackRock Credit Allocation Income Tr. v. 

Saba Cap. Master Fund, Ltd., 224 A.3d 964, 976-77 (Del. 2020).

105 Saba Cap., 224 A.3d at 977; see also Sparton v. O’Neil, 2018 WL 3025470, at *3 (Del. 

Ch. June 18, 2018) (“In order for a movant to be entitled to a mandatory injunction, the 

movant must show ‘(1) actual success on the merits; (2) irreparable harm; and (3) the harm 

resulting from failure to issue an injunction outweighs the harm befalling the opposing 

party if the injunction is issued.’” (quoting ID Biomed. Corp. v. TM Techs., Inc., 1995 WL 

130743, at *15 (Del. Ch. Mar. 16, 1995))).

106 Saba Cap., 224 A.3d at 980.
20

election contests and to provide fair warning to the corporation so that it may have 

sufficient time to respond to shareholder nominations.”107 They also serve 

“information-gathering and disclosure functions,” “allowing boards of directors to 

knowledgably make recommendations about nominees and ensuring that 

stockholders cast well-informed votes.”108 

These goals must be carefully balanced against stockholders’ “fundamental 

governance right” of voting for directors.109 In weighing these interests, Delaware 

courts are often guided by the principle that “inequitable action does not become 

permissible simply because it is legally possible.”110 

My analysis of Paragon’s claim takes two forms. I first consider whether 

Paragon has demonstrated that it complied with OPT’s Amended Bylaws. I then 

consider whether the Board’s rejection of the Notice was unreasonable under the 

enhanced scrutiny standard of review.

111

107 Openwave Sys. Inc. v. Harbinger Cap. P’rs Master Fund I, Ltd., 924 A.2d 228, 239-40 

(Del. Ch. 2007).

108 Strategic Inv. Opportunities LLC v. Lee Enters., Inc., 2022 WL 453607, at *9, *18 (Del. 

Ch. Feb. 14, 2022).

109 EMAK Worldwide, Inc. v. Kurz, 50 A.3d 429, 433 (Del. 2012).

110 Schnell v. Chris-Craft Indus., Inc., 285 A.2d 437, 439 (Del. 1971); see also Sternlicht 

v. Hernandez, 2023 WL 3991642, at *15 (Del. Ch. June 14, 2023) (“Cases challenging the 

application of an otherwise valid advance notice bylaw present a context-specific 

application of Schnell.”) (citations omitted).

111 See Coster v. UIP Cos., Inc., 300 A.3d 656, 671-72 (Del. 2023).
21

1. Whether the Notice Complied with the Amended Bylaws

A corporation’s bylaws are “interpreted using contractual principles.”112 The 

bylaw’s terms are “given their commonly accepted meaning.”113 “[I]f the bylaw’s 

language is unambiguous, the court need not interpret it or search for the parties’

intent.”114 If an advance notice bylaw provision is “unclear” or ambiguous, “any 

doubt” is resolved “in favor of the stockholder’s electoral rights.”115

Paragon asserts that its Notice complied with the Amended Bylaws. The 

defendants disagree, arguing that the Notice suffered from numerous failings. For 

purposes of my analysis, I focus primarily on the issues identified in the First and 

Second Deficiency Letters rather than those raised for the first time in discovery.

116

Some of the purported deficiencies are substantive; others are more trivial. I 

start with the former—specifically, whether Paragon disclosed its plans or proposals 

for OPT and related conflicts of interest as required by the Amended Bylaws. At a 

minimum, factual disputes exist concerning Paragon’s compliance with these 

112 Saba Cap., 224 A.3d at 980.

113 Hill Int’l, Inc. v. Opportunity P’rs L.P., 119 A.3d 30, 38 (Del. 2015).

114 Id.

115 Id.

116 Multiple alleged deficiencies were raised for the first time in the defendants’ 

interrogatory responses. Given the timing, these issues seem more like litigation constructs 

than decisions underpinning the Board’s rejection of the Notice. Perhaps a better

developed record will show otherwise. For now, I consider the late-raised issues insofar 

as they provide context for matters mentioned in the First and Second Deficiency Letters. 
22

provisions. Although other alleged deficiencies are less compelling (even meritless), 

I cannot find as a matter of law that the Notice satisfied the Amended Bylaws’ 

requirements. 

a. Disclosure of Paragon’s Plans or Proposals

Section 1.10(a)(3)(iv)(B) of the Amended Bylaws requires a nominating 

stockholder to disclose any “plans or proposals . . . that would be required to be 

disclosed by such stockholder . . . pursuant to Item 4 of Schedule 13D.”117 In a letter 

to OPT stockholders filed with the SEC on July 7, 2023, Paragon declared that it had 

“a plan to fix OPT” and that it was “supremely confident [it] can execute that 

plan.”118 Although Paragon attached this letter to its Notice, it did not describe any 

“plan.”119 The Board cited this alleged omission as grounds for rejecting the Notice

in the First Deficiency Letter.120 

In responding to the First Deficiency Letter on September 12, Paragon told 

the Board that “[a]ll of Paragon’s current plans and proposals for [OPT] and its 

business [we]re contained in the Notice, including without limitation in its letter to 

117 PX 10 at ‘0018.

118 PX 18 at ‘2590; see also PX 23.

119 See PX 33.

120 PX 36 at 3-4. Paragon asserts that this issue was “abandoned” in the Second Deficiency 

Letter. Pl.’s Opening Br. 52. But the Second Deficiency Letter stated that the Board “did 

not believe Paragon” addressed the concerns in the First Deficiency Letter and “refer[red]

back” to the First Deficiency Letter. PX 40 at 2.
23

shareholders, press releases, and Schedule 13Ds.”121 At the same time, the 

September 12 letter attached a new Schedule 13D as a “supplement” to the Notice 

that explained Paragon’s general intentions for OPT.122 Now, Paragon argues that 

any further plans for OPT were “vaguely formed thoughts for the future” and that it 

was not required to disclose anything more because Item 4 only concerns definite 

plans.123 

I cannot, however, conclusively find that Paragon complied with Section 

1.10(a)(3)(iv)(B). Item 4 of Schedule 13D would require the disclosure of an 

extraordinary corporate transaction, a sale or transfer of a material amount of assets, 

a change to the board of directors or management, and similar types of 

transactions.124 Paragon’s internal communications mention these sorts of plans, 

which were unmentioned in the Notice and Paragon’s Schedule 13D filings.

121 PX 39 at ‘4502.

122 Id. at ‘4508 (“[I]f the Reporting Person’s nominees are elected to the Company’s board 

of directors, the Reporting Person intends to take immediate steps to: significantly reduce 

the expenses of the Company; develop a measurable plan that will bring the Company to 

cash flow break even; implement a disciplined and focused capital allocation strategy; and 

focus on the potential growth of the Company’s intelligence data and leverage the possible 

market opportunities of Marine Advanced Robotics.”); see Pl.’s Opening Br. 53.

123 See Azurite Corp. Ltd. v. Amster & Co., 52 F.3d 15, 18 (2d Cir. 1995) (explaining that 

Item 4 calls for disclosure of “certain enumerated types of plans or proposals”); 17 C.F.R. 

§ 240.13d-101.

124 See 17 C.F.R. § 240.13d-101.
24

For example, in a July 26 text message exchange between Jacobs and Weiser, 

Weiser described Gad’s “approach” as a “risky” one to “shut [OPT] down” that 

Weiser was “not comfortable” with.125 The next day, Weiser texted Gad saying: 

“you need a plan for the company – just cutting expenses and hoarding cash for 

Paragon to deploy won’t work and will get us and OPT sued.”

126

 Weiser told Gad 

that he and Jacobs were “reconsider[ing]” their support if they “d[id]n’t have a plan 

soon.”127 Gad then explained to Weiser that he saw “a path” for Paragon to “acquire

the entire company stock for stock.”

128

 It would “essentially [be] OPT acquiring 

[Paragon],” but Paragon would “control the terms and get control of the 

company.”129 “One way or another,” Gad said, it “has to be a win for Paragon.”130

Paragon maintains that I should overlook these contemporaneous 

communications and conclude that no undisclosed plans existed by crediting the 

deposition testimony of Gad, Jacobs, and Weiser. Setting aside the difficulty in 

125 DX 23 at ‘2489.

126 DX 24 at ‘2510

127 Id. at ‘2511.

128 Id. at ‘2496.

129 Id.; see also DX 34 at ‘1402 (Tannor to Gad: “I would like to help you winning control 

of the board, and then depending on plans – going long.”); DX 31 at ‘2285 (Gad to Tannor: 

“I believe we are aligned with the restructuring strategy.”); DX 33 at ‘2397 (Gad telling 

Paragon’s proxy solicitor that he had “identified potential acquisition candidates that 

deliver immediate revenues and profits to [OPT]”).

130 DX 24 at ‘2506.
25

doing so on a paper record, the three confusingly testified that—though Paragon’s 

Schedule 13D disclosed a “plan to fix OPT”—they lacked any plan at all.

131 Further, 

Weiser testified that Gad “might propose” a stock for stock merger between OPT 

and Paragon if Gad were elected to the Board.132

Resolving whether Paragon is merely exploring loose goals for OPT or has 

definitive plans falling within Item 4 (and thus Section 1.10(a)(3)(iv)(B) of the 

Amended Bylaws) requires credibility determinations I cannot presently make.133 

Gad’s deletion of evidence widens the gaps in the record.

134

 Despite receiving a 

litigation hold reminder from counsel on October 13, Gad “clear[ed] out the text 

131 Gad Dep. 107 (testifying that he has ideas “based on what [he’s] analyzed and seen 

from” OPT’s public filings and that he wanted to learn information he is “unable to see as 

[a] nondirector[]” before “mak[ing] the appropriate business decision”); Weiser Dep. 93-

95 (Q: “Can you please describe what the plan to fix OPT is that’s referenced in the letter?” 

A: “We really don’t have a plan.”); DX 22 (“Jacobs Dep.”) 164-67 (Q: “Colonel, based on 

what you just described, would you say that Paragon has no plan for OPT?” A: “Well in 

the way that you used the word ‘plan,’ we don’t have a plan.”). At times, the witnesses

were instructed by counsel not to answer questions about undisclosed plans on business 

strategy immunity grounds. See, e.g., Jacobs Dep. 97, 108.

132 Weiser Dep. 215-16.

133 Paragon insists that Gad only has “plans” in the colloquial sense. See Pl.’s Opening Br. 

52-53; see also Plan, Merriam-Webster, www.merriam-webster.com/dictionary/plan 

(defining “plan” to include a “goal” or an “aim”). I cannot speculate about what was in 

Gad’s mind.

134 Paragon’s failure to produce any Paragon board materials does not help. See Defs.’ 

Answering Br. 30 n.104 (citing Weiser Dep. 89-90; Jacobs Dep. 156; Gad Dep. 15-16).
26

threads that appear lower down on [his] iPhone message list.”135 Curiously, he did 

not “clear” messages with counsel.

136

If Gad had a plan to pursue a transaction benefitting Paragon at OPT’s 

expense, the Notice might violate other provisions of the Amended Bylaws.137 

Section 1.10(a)(3)(i)(I) of the Amended Bylaws requires a “description in reasonable 

detail of any business or personal interests that could place [a] [p]roposed [n]ominee 

135 Aff. of H. Gad in Opp’n to Defs.’ Mot. for Sanctions (Dkt. 133) (“Gad Aff.”) ¶ 12. 

According to the defendants, Jacobs also produced no texts, and Weiser produced 

screenshots with little metadata. See Defs.’ Answering Br. 30. Gad’s deletion of text 

messages was only revealed after, in ruling on a motion to compel, I ordered Paragon’s

counsel to provide the defendants’ counsel with an explanation for the missing texts. See 

Dkt. 109. After learning that Gad deleted his texts, the defendants moved for sanctions. 

Defs.’ Mot. for Sanctions (Dkt. 127). On the current record, I cannot say with confidence 

whether Gad recklessly or intentionally spoliated evidence—a state of mind determination

necessary for the adverse inference the defendants seek. See Beard Rsch., Inc. v. Kates, 

981 A.2d 1175, 1192 (Del. Ch. 2009) (“[D]rawing an adverse inference is appropriate when 

an actor is under a duty to preserve evidence and takes part in the destruction of evidence 

while being consciously aware of a risk that he or she will cause or allow evidence to be 

spoiled by action or inaction . . . .”). The request for dispositive sanctions is therefore

denied, without prejudice to the defendants’ ability to renew the motion later in this case. 

The motion for sanctions is granted insofar as Paragon must pay the reasonable fees and 

costs incurred by the defendants in filing the motion for sanctions. See Beard Rsch., 981 

A.2d at 1194 (“To impose monetary sanctions, this Court need only find that a party had a 

duty to preserve evidence and breached that duty . . . .”).

136 Gad Aff. ¶ 12 (explaining that he did not “clear” messages with counsel at Thompson 

Hine because he and counsel “communicate on an ongoing basis” such that their text thread 

“appears at the top of [his] list of messages” that he generally does not “clear”); see DX 35 

at 4 (“We inquired as to why Mr. Gad’s iPhone did not contain OPT-related texts with 

anyone other than counsel at Thompson Hine. Mr. Gad did not recall specifically why this 

would be the case but thought it might be because at some point he had cleared his phone 

of messages, as is his periodic practice.”).

137 See Weiser Dep. 37, 168-69 (testifying that OPT’s value was and is greater than 

Paragon’s value).
27

in a potential conflict of interest with [OPT] or any of its subsidiaries.”138 The Notice 

provided no responsive disclosure about whether the proposed nominees serving as 

directors of Paragon might have a conflict of interest in choosing between Paragon 

and OPT if they were elected to the Board.

139

 

Section 1.10(a)(3)(i)(M) also mandates the disclosure of “all other 

information relating to such Proposed Nominee that would be required to be 

disclosed” in a contested meeting proxy statement “pursuant to Regulation 14A.”140 

Regulation 14A would, among other things, require Paragon to disclose “any 

substantial interest, direct or indirect” that Paragon has in seeking control of the 

Board.141 But the Notice stated: “None of Paragon, its controlling persons, or the 

138 PX 10 at ‘0016. The First Deficiency Letter cited the lack of disclosure about potential 

conflicts of interest as grounds for rejection. PX 36 at 4. Paragon responded on September 

12: “Paragon does not believe there would be a conflict between the fiduciary duties owed 

by the Paragon directors to Paragon and the fiduciary duties owed to the Company if they 

are elected to the Company's board; therefore, no disclosure is required.” PX 39 at ‘4503. 

The Second Deficiency Letter stated that the Board “continue[d] to believe” Paragon did 

not comply with the Amended Bylaws, “refer[red] back” to the First Deficiency Letter, and 

said that Paragon had not “adequately addressed” the issues raised in the First Deficiency 

Letter. PX 40 at 2.

139 In its First Deficiency Letter, the Board asked for Paragon to provide OPT with a 

discussion of how the Paragon directors would reconcile any potential conflicts. PX 36 at 

4. Paragon provided nothing in response.

140 PX 10 at ‘0017.

141 17 C.F.R § 240.14a-101.
28

Nominees has any interest in the nomination of the Nominee at the Annual Meeting 

other than the protection and advancement of Paragon’s investment in [OPT].”142

b. Other Alleged Violations

The Board raised numerous other deficiencies in rejecting the Notice.143 

Several turn on disputed facts. Others are minor compared to those addressed above. 

And some appear meritless. Rather than sort through them all, I will focus on two 

of note.

One alleged deficiency concerns Section 1.10(a)(3)(i)(K) of the Amended 

Bylaws, which requires disclosure of all “events, occurrences, and/or circumstances

involving or relating to the Proposed Nominee that could impact, impede, and/or 

delay” the candidate’s ability to obtain a federal security clearance.144 The 

defendants argue that Paragon flouted this bylaw by failing to disclose that Gad and 

his father are citizens of another country and hold foreign passports, and that Weiser 

is “financially overextended.”

145

 Their position is based on lengthy federal 

guidelines that are nowhere mentioned in the bylaw provision and on an expert 

142 PX 33 at ‘3249.

143 See PX 36; PX 40.

144 PX 10 at ‘0016.

145 DX 36 ¶¶ 31-32; PX 46 at ‘2044-45.
29

opinion about the sort of matters that would affect the attainment of a security 

clearance.

146

 

Paragon avers that this bylaw is ambiguous since stockholders are left to guess 

about the sorts of “events, occurrences, and/or circumstances” that “could impact” 

attaining a security clearance.147 I tend to agree. It is unclear how a stockholder 

could predict if, for example, a nominee’s credit card debt might impede this 

process.

148

 Even so, Gad—who is not a United States citizen—stated that there were 

“no facts that would prevent” him from obtaining a security clearance despite 

consulting with “legal counsel with extensive experience with U.S. government 

security clearances.”149 On this record, I cannot say with any degree of certainty 

146 PX 45 at 13 (stating that the Notice violated “Section 1.10(a)(3)(i)(K) of the Amended 

Bylaws” because the “Notice does not disclose in reasonable detail the events, 

occurrences, and/or circumstances involving or relating to the Purported Nominees that 

could impact, impede, and/or delay the Purported Nominees’ ability to receive a security 

clearance from the United States Government that would allow them access to classified 

information” and citing 32 C.F.R. § 147); see also DX 36.

147 Pl.’s Opening Br. 45. Paragon also asserts that this issue was “abandoned” in the 

Second Deficiency Letter. Id.; see supra note 120 (explaining that the Second Deficiency 

Letter incorporated the First Deficiency Letter).

148 See DX 36 (opining that financial irresponsibility would impair or delay the ability to 

obtain a security clearance); see also infra note 174 (discussing the other information that 

the defendants believe would need to be disclosed in addressing this bylaw). The Board 

members could not even agree on what one needed to disclose to satisfy the bylaw. PX 58 

(“Lorenz-Anderson Dep.”) 128-30, 133, 143-44, 146; PX 55 (“Purcel Dep.”) 88; Slaiby 

Dep. 98-106.

149 PX 39 at ‘4503. Gad did, however, answer “No” in response to a director questionnaire 

inquiry asking: “Are you a citizen of the United States of America?” PX 33 at ‘3411-12. 
30

whether Gad was confused about what the bylaw required or made no attempt to 

comply.150

The Board also rejected the Notice as “inaccurate” under Section 1.01(c)(1) 

of the Amended Bylaws.151 The purported inaccuracies involve Paragon’s 

statements that OPT’s current Board members have “grossly neglected and violated 

their fiduciary obligation[s],” have engaged in “self-serving entrenchment actions,” 

and are “unfit to serve OPT stockholders.”152 Whether true or not, these seem to be 

the sort of opinions often voiced in heated proxy contests—not statements of fact

that could be called objectively wrong.

153

 

150 See Openwave Sys., 924 A.2d at 240-41 (holding, after trial, that alleged confusion did 

not excuse a stockholder’s failure to comply with an advance notice bylaw given the lack 

of evidence supporting this contention). As discussed below, the bylaw is suspicious. See 

infra notes 173-78 and accompanying text.

151 PX 10 at ‘0022 (“If any information contained in a Stockholder Notice submitted 

pursuant to this Section 1.10 is determined to be inaccurate in any respect, such 

Stockholder Notice may be deemed not to have been provided in accordance with this 

Section 1.10.”); see PX 36; PX 40; see also PX 45 at 9-10, 17.

152 PX 45 at 9-10, 17; see PX 33 at ‘4194-97.

153 See Agar v. Judy, 151 A.3d 456, 485-86 (Del. Ch. 2017) (concluding that allegations in 

a fight letter sent during a proxy contest that directors “loot[ed] the Company” were 

“personal opinion[s]” and not statements of fact); see also Cummins v. Suntrust Cap. Mkts., 

Inc., 649 F. Supp. 2d 224, 256 (S.D.N.Y. 2009) (holding that a defendant’s statement 

“accus[ing] the plaintiff of breaching his fiduciary duty . . . was plainly an opinion based 

on the disclosed factual circumstances . . . rather than an actionable assertion of a materially 

false fact”). Gad testified that he personally holds the beliefs expressed in the Notice. Gad 

Dep. 129-30. The Board cited the same allegations of mismanagement as violating Rule 

14a-9. See PX 45 at 16-17. “Rule 14a-9 in no way prohibits the expression of an honest 

opinion” regarding the capabilities of incumbents. Kennecott Copper Corp. v. CurtissWright Corp., 449 F. Supp. 951, 960 (S.D.N.Y. 1978), rev’d on other grounds, 584 F. 2d 

1195 (2d Cir. 1978); see also Proxy Voting Advice, Exchange Act Release No. 34-95266, 
31

Had Paragon not sought mandatory relief, I might have concluded that it was 

reasonably likely to prevail on some of these interpretative challenges.

154

 I decline 

to complete that needless exercise. Given the higher standard that applies and my 

conclusion above regarding the plans and proposals disclosure provision (and 

potentially others), Paragon cannot prove as a matter of law that it complied with the 

Amended Bylaws. I go on to consider reasonableness of the Board’s actions, which 

I turn to next.

2. Whether the Rejection Can Withstand Enhanced Scrutiny

Paragon claims that the Board breached its fiduciary duties by impairing 

Paragon’s right to freely vote for director candidates.

155

 A “context-specific” form 

of the Unocal enhanced scrutiny standard guides my review of this claim.

156

 The 

standard is “one of reasonableness” with the directors bearing the burden of proof.157 

at 51 (July 13, 2022) (available at www.sec.gov/files/rules/final/2022/34-95266.pdf) 

(“Rule 14a-9 liability does not extend to mere differences of opinion.”). The SEC has not 

indicated to Paragon that it believes there has been a violation in Paragon’s public filings. 

See PX 22; PX 48 at 12, 22.

154 The above analysis is not exhaustive. Given the procedural posture of the motion and 

the exceedingly limited time to rule, I have not addressed every purported deficiency.

155 See Totta v. CCSB Fin. Corp., 2022 WL 1751741, at *12 (Del. Ch. May 31, 2022), 

aff’d, 302 A.3d 387 (Del. 2023); see also Sternlicht, 2023 WL 3991642, at *14 (asking 

whether there is “some basis in equity to excuse strict compliance” with an advance notice 

bylaw).

156 Lee Enters., 2022 WL 453607, at *16; see also Coster, 300 A.3d at 671-72; Pell v. Kill, 

135 A.3d 764, 787 (Del. Ch. 2016).

157 Coster, 300 A.3d at 671-72 (citation omitted); see also Mercier v. Inter-Tel. (Del.), Inc., 

929 A.2d 786, 810 (Del. Ch. 2007).
32

The court first reviews “whether the board faced a threat ‘to an important 

corporate interest or to the achievement of a significant corporate benefit.’”158 “The 

threat must be real and not pretextual, and the board’s motivations must be proper 

and not selfish or disloyal.”159 The court then assesses “whether the board’s response 

to the threat was reasonable in relation to the threat posed and was not preclusive or 

coercive to the stockholder franchise.”160

The Board contends that the rejection of the Notice “served valid corporate 

objectives of ensuring orderly director elections and accurate and complete 

disclosure by a nominating stockholder and its nominees.”161 Paragon insists that 

this is a pretense. In Paragon’s view, the Board acted with the goal of entrenching 

itself and thwarting stockholders’ voting rights.

The Amended Bylaws were approved after Paragon emerged as a significant 

stockholder and the potential for a proxy contest was known to the Board.162 Yet

158 Coster, 300 A.3d at 672; see also Lee Enters., 2022 WL 453607, at *15-16 (explaining 

that the defendants must “identify the proper corporate objectives served by their actions” 

and “justify their actions as reasonable in relation to those objectives” (citation omitted)).

159 Coster, 300 A.3d at 672.

160 Id. at 672-73.

161 Defs.’ Answering Br. 48.

162 See PX 70 at No. 24; PX 71 (Stratmann emailing Cryan on April 14 that Gad “posted a 

letter demanding a board seat”). Paragon believes that the Amended Bylaws were not 

adopted on a clear day. See Pl.’s Opening Br. 25-27. Although Paragon has pleaded a 

claim challenging the adoption of the bylaws, it is not before me on the present motion. 

See Order Granting with Modifications Pl.’s Mot. for Leave to File Am. and Suppl. Compl. 

(Dkt. 76) (“To address prejudice to the defendants . . . the preliminary injunction hearing 
33

the defendants presented some evidence that the Board decided to amend OPT’s 

bylaws to align with the universal proxy rules recently adopted by the SEC.163 In 

addition to incorporating provisions related to the universal proxy rules, the bylaws 

were amended to include additional disclosure requirements.164 Several of the 

Amended Bylaws enforced by the Board are consistent with these purposes.

Rejecting a nomination notice for failing to disclose plans or proposals falling 

within Item 4 promotes the disclosure function of advance notice bylaws.165 If 

Paragon sought to undertake a stock for stock transaction with OPT, the Delaware 

General Corporation Law might not require stockholder approval.166 “The prospect 

set for November 28 will only concern the plaintiff’s original claims (Counts I and II).”). 

I consider the Board’s adoption of the Amended Bylaws to the extent it is relevant to my 

assessment of the Board’s response to Paragon’s Notice.

163 See Cryan Dep. 23 (“I reached out to Mr. Gottfried . . . because I wanted to consider 

engaging him to do a review and potential update of the bylaws . . . At no time during that 

conversation did I mention Paragon or the conversation that had taken place between Mr. 

Gad and Dr. Stratmann.”); id. at 29-30; Stratmann Dep. 123 (Q: “And I think you said these 

bylaws really were unconnected to my client [Paragon] coming forward and sending you a 

letter, right? A: “Correct.” Q: “And unconnected to the phone call you had with my client?” 

A: “That’s correct. Yes.”); DX 14.

164 Paragon asks me to reject the Board members’ testimony and find that the Board 

amended the bylaws with the goal of impairing its ability to run a proxy contest. To do so 

would require me to make credibility assessments, which I am not equipped in this 

procedural posture. For now, there is a genuine factual dispute about whether the Board 

perceived Paragon as a threat at the time that it approved the Amended Bylaws. 

165 Bylaws § 1.10(a)(3)(iv)(B); see Lee Enters., 2022 WL 453607, at *18.

166 See Rosenbaum v. CytoDyn Inc., 2021 WL 4775140, at *20 (Del. Ch. Oct. 13, 2021) 

(describing a bylaw requiring the disclosure of a past acquisition proposal as essential since 

any future acquisition could be approved unilaterally by the board).
34

that a nominee may seek to facilitate an insider transaction is the type of potential 

conflict that stockholders are entitled to know about when voting for directors” in a 

contested election.167 The Board’s enforcement of provisions requiring the 

disclosure of potential conflicts and “substantial interests” pursuant to Regulation 

14D is also related to this end.168

I could stop there, but fear that I would leave the reader with an impression 

that nothing appears amiss. The preliminary record prompts me to look skeptically 

at the Board’s response to the Notice. The goalposts were never fixed. Paragon 

submitted its Notice with three weeks left in the nomination window, which would 

give it time to cure any deficiencies. In response, though, the Board chastised 

Paragon for “inexplicably rush[ing].”169 The Board continuously declined to provide 

a complete list of deficiencies when it rejected the Notice—nearly five weeks after 

167 Id. at *17; see id. at *20.

168 Bylaws § 1.10(a)(3)(i)(I), (M); see also van der Fluit v. Yates, 2017 WL 5953514, at *8 

(Del. Ch. Nov. 30, 2017) (“[S]tockholders are ‘entitled to know that certain of their 

fiduciaries ha[ve] a self-interest that [is] arguably in conflict with their own.’”) (citation 

omitted). 

169 PX 34.
35

receiving it.170 A litany of new deficiencies were then identified in the defendants’ 

written discovery responses.171 

The defendants argue that their delay was the result of Paragon submitting a 

confusing Notice that attached hundreds of pages of documents without crossreferencing the relevant Amended Bylaw provisions. Maybe so. Or perhaps the 

Board was sifting through the Notice to dig up deficiencies. Some of the 

shortcomings identified by the Board are nitpicky.

172

 Others are suspect.

170 See PX 36 (First Deficiency Letter; “OPT notes that this letter does not contain a 

complete listing of all the deficiencies in the Purported Nomination Notice.”); PX 39 

(Paragon asking OPT on September 12 to inform it of any deficiencies so it could “cure” 

them); PX 40 (Second Deficiency Letter; “OPT notes that this letter, together with our 

September 8 letter, does not contain a complete listing of all the deficiencies in, and our 

concerns with respect to, the Purported Nomination Notice.”).

171 PX 45.

172 For example, the Board said that the Notice was deficient because Paragon filed a July 

7 stockholder letter under the cover of Schedule 13D rather than as proxy soliciting 

materials, in purported violation of Rule 14a-12 and Section 1.10(c)(8) of the Amended 

Bylaws. See PX 36 at 2-3. The SEC did not share the defendants’ view. PX 22; PX 48 at 

No. 5. As another example, the defendants cited the failure to disclose that Gad and Harpen 

served on a Las Vegas condominium board together as a deficiency “call[ing] into 

question” Harpen’s independence of Gad. PX 45 at 18. The defendants also highlighted

Jacobs’ failure to disclose two prior lawsuits from 2005 and 2009 as violating Section 

1.10(a)(3)(i)(F), which requires a “description in reasonable detail of any and all litigation” 

relating to prior board service. See PX 46 (disclosing litigation on October 31, 2023). Cf.

CytoDyn, 2021 WL 4775140, at *19 (confirming that the board acted appropriately where 

it rejected a notice for failure to disclose “vitally important information” and explaining 

that “the Board was not nitpicking when it flagged the omission as material and ultimately 

disqualifying”).
36

The security clearance bylaw stands out.173 I could see utility in a bylaw 

requiring a nominee to disclose known barriers to obtaining a security clearance if 

the Board needed to oversee matters involving classified information. The Board 

required much more and rejected the Notice because Paragon could not divine 

whether its candidates had personal issues that might touch on federal guidelines 

unreferenced in the bylaw.174 None of the country’s three largest defense contractors 

have a bylaw resembling that of OPT.175 And none of the current Board members 

have a security clearance; only Stratmann (as CEO) is working to obtain one.176 In 

fact, OPT has no contracts at this time that would require a security clearance.

177

 

Given this context, I must wonder about the Board’s intentions in adopting and 

enforcing this bylaw. The Board apparently considered that Paragon’s nominees 

173 Bylaws § 1.10(a)(3)(i)(K).

174 The defendants say that the Notice violated Section 1.10(a)(3)(i)(K) of the Amended 

Bylaws because it did not disclose information that might affect the candidates’ ability to 

receive a security clearance from the federal government pursuant to 32 C.F.R. § 147.4. 

PX 45 at 13-14. But the Part 147 guidelines contain multiple subsections that involve

everything from “foreign influence” to “sexual behavior” and “alcohol consumption.” 32 

C.F.R. § 147(c)(2), (4), (7). 

175 Lockheed Martin and RTX (Raytheon) have no security clearance provision in their 

bylaws. PXs 64-65. Boeing has a provision that requires disclosure “of any instance in 

which such nominee was denied (and not subsequently granted) or has applied for and not 

been granted, a security clearance.” PX 66 at 8.

176 See Hewlett Dep. 51-56; Lorenz-Anderson Dep. 99; Slaiby Dep. 82.

177 See Hewlett Dep. 51; Lorenz-Anderson Dep. 102. Again, there is nothing in the record 

to the contrary. 
37

might have difficulty obtaining a security clearance before it approved the Amended 

Bylaws.

178

 

Additionally, a bylaw mandating the accuracy of a nomination notice bears a 

facial link to the goals of maintaining orderly elections and ensuring appropriate 

disclosure. But Section 1.10(c)(1), which allows the Board to reject an “inaccurate” 

notice, was adopted after the directors discussed that Paragon’s May 18 letter 

contained “incorrect” statements that were “critical” of OPT.179 The Board cited this 

bylaw in finding the Notice noncompliant because it deemed Paragon’s criticisms of 

the OPT’s directors and management to be inaccurate. If a board could call a 

nomination notice deficient simply because it disagreed with opinions voiced by the 

nominating stockholder, rejection would be a foregone conclusion.180 Irrespective 

of any good intentions in ensuring that notices are accurate, the Board’s dismissal of

the Notice based on Paragon’s opinion statements appears preclusive in effect. 

178 Hewlett Dep. 130 (Q: “It was discussed at the June 5, 2023 board meeting that these 

individuals may have difficulty obtaining a security clearance, correct?” A: “To the best of 

my recall.”); see also PX 9 at 3 (June 5 minutes: “The Board moved on to a discussion on 

the appropriate profile of Board candidates . . . and the need for security clearances at the 

Board and senior management levels.”); id. at 2 (“Mr. Gottfried presented the Board with 

the publicly available background with respect to Paragon, and its key personnel . . . and 

its history as an activist shareholder with other companies.”).

179 PX 9 at ‘2941.

180 Cf. Agar, 151 A.3d at 485 (noting that a stockholder reading a fight letter sent during a 

proxy contest would anticipate exaggerated characterizations of the incumbent directors 

and would not reasonably conceive of allegedly false statements as being “anything other 

than an expression of [the stockholder’s] opinion”).
38

* * *

Paragon is (perhaps rightly) frustrated by aspects of the Board’s denial of the 

Notice. Rather than focus on disqualifying matters, the Board slowly rolled out evergrowing lists of deficiencies with varying degrees of significance. Nevertheless, 

equity does not compel me to grant the motion. Paragon has not asked for a 

prohibitive injunction, such as one preventing the annual meeting from going 

forward until a trial could occur. It asks me to force the Board to accept its 

nomination and include its director candidates on OPT’s universal proxy card. 

On this preliminary record—and particularly given Gad’s curious deletion of 

texts—it would be irresponsible to hold that the Board breached its fiduciary duties 

in rejecting the Notice.181 Factual disputes abound. Critically, there are indications 

that Gad had undisclosed plans for OPT’s business, leaving me unable to conclude 

that Paragon fully complied with the Amended Bylaws.

182

 If Paragon were hiding 

181 See C&J Energy Servs., Inc. v. City of Miami Gen. Empls.’ & Sanitation Empls.’ Ret. 

Tr., 107 A.3d 1049, 1053-54 (Del. 2014) (“Mandatory injunctions should only issue with 

the confidence of findings made after a trial or on undisputed facts.”); Richard Paul, Inc. 

v. Union Improvement Co., 86 A.2d 744, 748 (Del. Ch. 1952) (“Relief by mandatory 

injunction should only be awarded in a clear case, free from doubt, and when necessary to 

prevent irreparable harm.”).

182 See Jorgl, 2022 WL 16543834, at *17 (denying a motion for a mandatory preliminary 

injunction where the plaintiff purportedly concealed “information [that] would have been 

necessary for stockholders to make an informed choice”).
39

such crucial information, the Board’s decision to reject the Notice would be 

reasonable.183 Whether this was pretextual will be resolved after trial.

B. The Exemption Request Claim

An “NOL poison pill’s principal intent . . . is to prevent the inadvertent 

forfeiture of potentially valuable assets, not to protect against hostile takeover 

attempts.”184 “Notwithstanding its primary purpose, an NOL poison pill must also 

be analyzed under Unocal because of its effect and its direct implications for hostile 

takeovers.”185 Accordingly, I first consider whether the Board had “reasonable 

grounds for concluding that a threat to the corporate enterprise existed.”186 I then 

assess whether the Board’s “response was reasonable in relation to the threat 

identified.”187 

1. Whether the Board Reasonably Identified a Threat

To determine if the Board identified a legitimate threat, the court undertakes 

“a process-based review.”

188

 In doing so, the court considers whether the Board 

183 See CytoDyn, 2021 WL 4775140, at *21 (explaining that the board’s rejection of the 

notice was appropriate where it “legitimately suspected” that undisclosed motivations were 

behind a nomination and evidence discovered in litigation corroborated those suspicions).

184 Versata Enters., Inc. v. Selectica, Inc., 5 A.3d 586, 599 (Del. 2010) (“Selectica II”).

185 Id. 

186 Id.

187 Id. at 601 (citation omitted).

188 Air Prods. & Chems., Inc. v. Airgas, Inc., 16 A.3d 48, 92 (Del. Ch. Feb. 15, 2011).
40

engaged in a “good faith and reasonable investigation.”189 “Proof of a good faith 

and reasonable investigation is ‘materially enhanced . . . by the approval of a board

comprised of a majority of outside independent directors.’”

190

 Independent board 

approval, “coupled with the advice rendered by [outside advisors] and legal counsel, 

constitute[s] a prima facie showing of [a] good faith and reasonable 

investigation.”191

Paragon does not assert that preserving the value of OPT’s NOLs is an 

illegitimate corporate objective.192 It argues that this purpose is pretextual, with the 

only “threat” being to the Board’s incumbency.193 Some facts support Paragon’s 

position. For example, the Board appears to have developed a heightened concern 

with protecting its NOLs after the April 14 call between Gad and Stratmann.194 This 

189 Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946, 955 (Del. 1985).

190 Airgas, 16 A.3d at 92 (quoting Unocal, 493 A.2d at 955); see also Selectica, Inc. v. 

Versata Enters., Inc., 2010 WL 703062, at *12 (Del. Ch. Feb. 26, 2010) (“Selectica I”), 

aff’d, 5 A.3d 586 (Del. 2010).

191 Polk v. Good, 507 A.2d 531, 537 (Del. 1986) (citing Moran v. Household Int’l, Inc., 

500 A.2d 1346, 1356 (Del. 1986)); see also Selectica I, 2010 WL 703062, at *12.

192 See Selectica I, 2010 WL 703062, at *15 (confirming that “the protection of company 

NOLs may be an appropriate corporate policy meriting a defensive response when 

threatened”).

193 Pl.’s Reply Br. in Supp. of its Mot. for a Prelim. Inj. (Dkt. 129) (“Pl.’s Reply Br.”) 31.

194 PX 70 at No. 29; PX 71.
41

is bolstered by the subsequent adoption of the Section 382 Plan as part of “Project 

Echo” along with the Amended Bylaws.195

There is, however, evidence that the Board undertook a good faith and 

reasonable investigation. The Section 382 Plan was adopted after the Board received 

a report from OPT’s Chief Financial Officer that reflected an outside accounting 

firm’s analysis. This report stated that OPT’s NOLs were of substantial value and 

worth preserving.196 When evaluating the Exemption Request, the Board held two 

meetings where it received a presentation from EisnerAmper and guidance from 

counsel.197 The record also indicates the Board believed that the NOLs have 

“significant” value exceeding OPT’s market capitalization,198 that OPT sees a path 

195 See PX 6; PX 12.

196 DX 9; PX 14 at ‘4704-05; DX 10; see also DX 11; DX 12. Paragon argues that the 

Board acted unreasonably because it “failed to obtain any analysis of the net present value 

of its NOLs.” Pl.’s Reply Br. 32. As the court explained in Selectica I, however, the board 

was not required to conduct “formal analysis of when the Company could reasonably 

expect to receive tax savings from the use of its NOLs, as well as the amount of tax savings 

it could reasonably expect to obtain.” 2010 WL 703062, at *16. It was enough that the 

Board had “ample reason” to conclude that “the NOLs were an asset worth protecting and 

[] that their preservation was an important corporate asset.” Id.

197 PX 38 at ‘5199-200; PX 67 at ‘5209-14; see Williams Cos. S’holder Litig., 2021 WL 

754593, at *29 (Del. Ch. Feb. 26, 2021) (concluding that a board, comprised of “nearly all 

independent, outside directors,” which considered rights plan at two meetings and were 

advised by legal and financial advisors, conducted a good-faith, reasonable investigation).

198 Cryan Dep. 13; see also id. at 48-49, 70.
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to profitability within two years, and that OPT expects to use its NOLs to offset 

taxable income.199

Paragon asserts that its Exemption Request did not pose a threat to OPT’s 

NOLs because even if it acquired 19.9% of OPT’s stock, “there would still be a 

significant buffer before the 50% threshold was reached.”200 The Board has, 

however, presented evidence that granting the Exemption Request would pose a risk 

to OPT’s ability to utilize the NOLs. According to Cryan, Paragon increasing its 

ownership to 19.9% “would place some significant limitations on the amount of 

stock [OPT] could issue to raise capital . . . without triggering the change-of-control 

limitation on the NOLs.”201 EisnerAmper advised that an investment of 19.9% 

“would effectively cut the buffer in half” and take three years for the effect to drop 

off.202

2. Whether the Board Acted Reasonably in Relation to the Threat

The second part of a Unocal review considers the proportionality of the

board’s response to a threat.203 The court must consider whether the Board’s actions 

199 See DX 47; Cryan Dep. 48.

200 Pl.’s Opening Br. 59.

201 Cryan Dep. 315; see also Purcel Dep. 108-09, 201-02.

202 DX 48 at ‘4671.

203 See, e.g., Williams, 2021 WL 754593, at *35; Unitrin, Inc. v. Am. Gen. Corp., 651 A.2d 

1361, 1373 (Del. 1995).
43

were “draconian, by being either preclusive or coercive,” and fall “within a range of 

reasonable responses.”204 “Unocal and its progeny require that the defensive 

response employed be a proportionate response, not the most narrowly or precisely 

tailored one.”205

Paragon asserts that “[i]f the Exemption Request is not granted,” it “will be 

deprived of the opportunity to purchase additional shares that it can vote at the 

Annual Meeting.”206 But that is not the standard. Rather, “[f]or a measure to be 

preclusive, it must render a successful proxy contest realistically unattainable given 

the specific factual context.”207 I have no reason to believe that Paragon (had it 

submitted a compliant Notice) would have been prevented from “marshal[ing] 

enough shareholder votes to win a proxy contest.”208

In addition, the threat posed by Paragon’s acquisition of OPT shares is 

“qualitatively different from the normal corporate control dispute that leads to the 

adoption of a shareholder rights plan.”209 It would be reasonable for the Board to 

204 Unitrin, 651 A.2d at 1367; see also id. at 1388 (recognizing the “need of the board of 

directors for latitude in discharging its fiduciary duties to the corporation and its 

shareholders when defending against perceived threats”).

205 Selectica I, 2010 WL 703062, at *24.

206 Pl.’s Opening Br. 60.

207 Selectica II, 5 A.3d at 603.

208 Id. By comparison, the incumbent Board members own less than 0.7% of OPT’s 

stock—less than a fifth of that held by Paragon. PX 18 at ‘2588; DX 49.

209 See Selectica I, 2010 WL 703062, at *24.
44

conclude, in reliance on advice from tax and legal advisors, that granting the 

Exemption Request could threaten OPT’s ability to raise capital (even in the absence 

of NOL limitations). 

On these facts, mandatory relief ordering the Board to grant the Exemption 

Request would be inequitable. The Board was not required to gamble with its most 

valuable corporate asset to satisfy Paragon. The motivations driving the Board to 

reject the Exemption Request will be properly measured with the benefit of a trial.

III. CONCLUSION

Paragon has not succeeded on the merits of its claims. Therefore, I need not 

consider whether it has demonstrated irreparable harm or if the balance of hardships 

tips in its favor. Paragon’s motion for a preliminary injunction is denied.