IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE SABA SOFTWARE, INC. : Consolidated STOCKHOLDER LITIGATION : C.A. No. 10697
- VCS

MEMORANDUM OPINION

Date Submitted: February 17, 2017 Date Decided: March 31, 2017 Revised: April 11, 2017

Peter B. Andrews, Esquire and Craig J. Springer, Esquire of Andrews & Springer LLC, Wilmington, Delaware; Seth D. Rigrodsky, Esquire, Brian D. Long, Esquire, Gina M. Serra, Esquire, and Jeremy J. Riley, Esquire of Rigrodsky & Long, P.A., Wilmington, Delawa re; and Brian J. Robbins, Esquire, Stephen J. Oddo, Esquire, and Nichole T. Browning, Esquire of Robbins Arroyo LLP, San Diego, California, Attorneys for Plaintiffs. Gregory V. Varallo, Esquire, Robert Burns, Esquire, and Sarah A. Galetta, Esquire of Rich ards, Layton & Finger, P.A., Wilmington, Delaware; Erik J. Olson, Esquire of Morrison & Foerster, LLP , Palo Alto, California ; and Robert W. May, Esquire of Morrison & Foerster LLP, San Francisco, California, Attorneys for Defendants Shawn Farshchi, William V. Russell, Dow R. Wil son, William M. Klein, William N. MacGowan, Michael Fawkes, and Nora Denzel. Brian C. Ralston, Esquire, Jordan A. Braunsberg, Esquire, and Christopher G. Browne, Esquire of Potter Anderson & Corroon LLP, Wilmington, Delaware; Alan S . Goudiss, Esquire of Shearman & Sterling LLP, New York, New York; Alethea Sargent, Esquire and Tiana Peterson, Esquire of Shearman & Sterling LLP, San Francisco, California, Attorneys for Defendants Vector Capital Manageme nt, L.P., Vec tor Talent II LLC, a nd Vector Talent Merger Sub, Inc.

SLIGHTS, Vice Chancellor1

This action arises out of the acquisition of Saba Software, Inc. (“Saba” or “the Company”) by entities affiliated with Vector Capital Management, L. P. in an all

cash merger in which stockholder s received $9 per share for their Saba stock (the “Merger”)

. T he Plaintiff’s Second Amended Verified Class Action Complaint (the “Complaint”) , and its description of the unfortunate series of events leading up to the Merger , calls out to Samuel Barber’s A d a gio for Strings to set the mood for the final scene. According to the Securities and Exchange Commission (“SEC”) , Saba, through two of its former ex ecutives, engaged in a fraudulent scheme from 2008 through 2012 to overstate its pre

- tax earnings by $70 million. Thereafter, Saba repeatedly promised regulators, its stockholders and the market that it would get its financial house in order . E ach promise included assurances to stockholders that Saba would restate its financial statements by a certain date . And each time Saba inexplicably failed to deliver the restatement by the promised deadline

. When it failed to meet a deadline for filing its restatement set by the SEC, the SEC revoked the registration of Saba’s common stock. Not surpri singly, the stock price suffered.
In the midst of th is chaos, the Company announced that “it was exploring strategic alternatives, including a sale of the Company.”
W hen Saba ’s board of directors ultimately sought sto ckholder approval of the Merger, aft er a months

- long sales process, the choice presented to stockholders was either to accept the $9 per share Merger consideration, well below its average trading2

price over the past two years , or continu e to hold their now - deregistered, illiquid stock. Not surprisingly, the majority of Saba’s stockholders voted to approve the Merger

. Plaintiff , a former Saba stockholder, brings two claims: Count I alleges breach of fiduciary duty against the members of Saba’s Board of Directors (the “Board”)
and Count II alleges aiding and abetting breach of fiduciary duty against the Vector

affiliated defendants

. In this opinion, I conclude the Board may not invoke the business judgment rule under the so

- called Corwin doctrine because the Complaint pleads facts that allo w a reasonable inference that the stockholder vote approving the transaction was neither fully informed nor uncoerced. I also conclude that Plaintiff has pled a non - exculpated claim of bad faith and breach of the duty of loyalty by stating facts that supp ort pleadings

- stage inference s that the Board knowingly failed to disclose material information to stockholders and was motivated

to approve the Merger so that it s members could cash

- in on equity options and restricted stock units that would otherwise have been illiquid as a consequence of
the de registration of the Company’s stock

. Plaintiff has failed , however, to state a claim for aiding and abetting breach of fiduciary duty against the Vector defendants because he has failed to allege sufficient facts t o support a reasonable inference that Vector knowingly participated in the breach of fiduciary duty.3 I. BACKGROUND In considering this motion to dismiss, I have drawn the facts from the well

pl ed allegations of the Complaint , d ocuments incorporated into the C omplaint by reference, and judicially noticeable facts. 1 As I must at this stage, I have accepted all well

- pled facts in the Complaint as true. 2
A. The Parties and Relevant Non
- Parties Plaintiff , Gary Poltash , was a stockholder of Saba at all relevant times who beneficially owned over 80,000 shares of Saba stock prior to the Merger. He was appointed lead plaintiff in this consolidated class action on or about April 8, 201 5

. Defendants , Nora Denzel, Shawn Far shchi, Michael Fawkes, William M. Klein, William N. MacGowan, William V. Russell and Dow R. Wilson (the “Individual Defendants”) all served on the Board during the time frames that give rise to Plaintiff’s breach of fiduciary duty claims

. Farshchi also ser ved as Saba’s President and CEO, beginning in August 2013, after previously serv ing as Saba’s Interim CEO from March 2013 to August 2013 and Executive Vice President and

1 Solomon v. Armstrong , 747 A.2d 1098, 1126 n.72 (Del. Ch. 1999), aff’d , 746 A.3d 277 (Del. 2000). Plaintiff referred to and relied upon Saba’s Proxy Statement throughout the Complaint. See e.g. , Compl. ¶¶ 45, 48 n.4, 90, 95 n.12, 99 n.13, 104. Therefore, I have considered facts in the Proxy in addition to those alleged in the Co mplaint. Transmittal Aff. of Robert L. Burns, Esq. in Supp. of Opening Br. in Supp. of Individual Defs.’ Mot. to Dismiss (“Burns Aff.”) Ex. 1 (“Proxy”).

2 Id.4

Chief Operating Officer from June 2011 to August 2013. Fawkes was the Chairman of the Board’s Corporate Governance and Nominating Committee and a member of the Strategic Committee. Klein also served on the Board’s Strategic Committee and the Ad Hoc Transaction Committee (the “Ad Hoc Committee”)

. MacGowan served as Chairman of the Board’s Compensation Committee. Russell was the non

executive Chairman of the Board , beginning in March 2013 , and served on the Ad Hoc and Strategic Committees. Wilson was a member of the Ad Hoc Committee. Defendant , Vector Capital Management, L.P. , a Delaware limited partnership , is a private equity firm that manages over $2 billion in equity capital and focuses on
value

- oriented investments in technology compan ies. Prior to the M erger, Vector Capital Management, L.P. was one of Saba’s lenders . De fendant , Vector Talent II
LLC , is a Delaware limited liability company and affiliate of Vector Capital Management, L.P. Defendant , Vector Talent Merger Sub, Inc. , a Delaware corporation , is wholly

- owned by Vector Talent II LLC and an affiliate of Vector
C apital Management, L.P. (collectively, with Vector Capital Management, L.P. and Vector Talent II LLC, “Vector” or the “Vector Defendants ” ). The Merger caused Saba to merge with Vector Talent Merger Sub, Inc. with Saba surviving as a wholly

owned subsidiar y of Vector Talent II LLC. Prior to the Merger, n on - party Saba Software, Inc. was a Delaware corporation with its principal executive offices in Redwood City, California. Saba5

provide d “ cloud

- based human resources solutions, such as products and services for employee training, performance evaluations, employee planning, collaboration tools, succession planning and recruiting.” 3 Saba’s stock trade d on the NASDAQ exchange until it was delisted on June 17, 2013 . Thereafter, it was traded over - the

counter ( “OTC”) until it was deregistered by the SEC on February 19, 2015

. B. The Financial F raud and Failed Attempts to Restate Financials As alleged in an SEC complaint filed against Saba and two of its former executives in September 2014 , Saba ’s Indian subsidiary engaged in millions of dollars of financial fraud beginning in 2008 and ending in the second half of 2012.
The fraud caused Saba to overstat e its pretax earnings by $70 millio n from 2007 to 2011. After the fraud was uncovered, Saba continually assured its stockholders, regulators and the market that it would complete a restate ment of its financial

statements by dates certain. In each instance, without explanation, the Company would fail to file the restatements as promised

. On April 9, 2013, NASDAQ suspended trading of Saba’s shares due to Saba’s ongoing failure to restate its financials. NASDAQ e ventually delisted Saba on June 17, 2013

. Saba’s common
stock the n began to trade OTC

.

3 Compl. ¶ 26.6

Saba announced that it had reached a settlement with the SE C regarding its financial fraud on September 24, 2014. The settlement provided that Saba would pay a $1.75 million civil penalty and “cease and desist from committing or causing
future violations of [] the securities laws.” 4 T he settlement also required Saba to complete a restatement of its financials and file its Comprehensive Annual Report by February 15, 2015 ( collectively, the “Restatement”) . If Saba failed to complete the Restatement, the settlement provided that t he SEC would deregister Saba’s

comm on stock pursuant to the Securities Exchange Act of 1934 § 12(j). When Saba announced the settlement , its then

- CFO Mark Robinson stated: “We continue to anticipate filing the restatement in the fourth quarter of this calendar year [ 2014 ] .” 5 A few days after the announcement of the SEC settlement , Saba’s stock was trad ing at $14.08 per share. In the wake of the settlement, an analyst at B. Riley &
Co. reported: “We continue to believe an acquisition of the company, which we acknowledge could garner a h ealthy premium to our price target of [$14], is the likely endgame. Even so, such a scenario is unlikely to transpire before Saba regains compliance with the SEC and puts its longstanding accounting restatement in the rearview mirror.” 6 Unfortunately, tr ue to past form, on De cember 15, 2014 , Saba

4 Compl. ¶ 30.

5 Compl. ¶ 32.

6 Compl. ¶ 39.7

announced that it wou ld not complete the R estatement by the February 15, 2015 deadline and thereby ensur ed that the SEC would deregister Saba’s stock in February
2015 . This , in turn, would render the stock untra deable and essentially illiquid

. C. Saba Pursues Strategic Alternatives Including a Sale At the same time Saba delivered the news that it would fail to comply with the SEC’s Restatement deadline, it also announced that it was “evaluating strategic alternatives, including a sale of the Company” and that it was engaging in “preliminary discussions with potential acquirers.” 7 By the end of t hat day, Saba’s stock price fell from $13.49 to $8.75 per share. Even so, on December 16, 2014, analysts at Cra ig

- Hallum Capital Group LLC set a price target for Saba stock at $17 per share and gave it a “Buy” rating.
Saba had been open to exploring strategic alternatives, including a possible sale, since at least February 2011, and had retained Morgan Stanley to facilitate that
process . Morgan Stanley ’s retention agreement was purely contingent; it provided that Morgan Stanley would be compensated $1,000,000 if Saba signed a merger agreement and 1.5% of the transac tion price if a transaction was completed. Othe rwise, there would be no compensation.

7 Compl. ¶ 34.8

T he Strategic Committee of the Board , comp rised of Russel l , Klein and Fawkes , was created in August 2013 to “evaluate strategic alternatives and [] conduct negotiations with potential investors or acquirers.” 8 From January to November 2014, Saba engaged in discussions with twelve parties regarding a possible sale , including private equity firms and other technology companies, but no deal came to fruition. 1. The Threat o f Dereg i stration Fuels the Sales Process By November 2014, Saba knew that it wou ld not complete the R estatement in time to a void deregistration. During a B oard meeting on November 12, the Board and Saba management “discussed the difficulties that the [Company] was having in regaining compliance with the SEC requirements to restate financial statements and the risks presented to the Corporation as a result of those challenges.” 9 On November 17, 2014, private equity firm Thoma Bravo, LLC, which had been engaged in nego ti ations with Farshchi about a possible acquisition of Saba since May 2014, submitted an oral indication of interest to acquir e Saba at $11 p er share

. O n November 19, 2014, the Board met with representatives from Mor gan Stanley and Morrison & Foer ster LLP, Sab a’s legal counsel, to d iscuss the

8 Compl. ¶ 36.

9 Compl. ¶ 42 (internal quotation marks omitted).9

R estatement and possible strategic alternatives. Morgan Stanley told the B oard that it had approached eleven potential buyers , six had signed non

- disclosure agreements , four had met with management but only Thoma Bravo had actually submitted an y indication of interest. Morgan Stanley also told the Board that many parties had submitted feedback regarding their “concerns about the impact of the restatement and SEC regulations on co nsummating a timely transaction, ” and explained that these concern s were discourag ing many potential buyers from submitting a bid. 10
At the conclusion of the November 19 meeting, t he Board formed the Ad Hoc Committee, with Russe l l, Klein and Wilson as members , to explore strategic alternatives , “provide additional oversight regarding the process of evaluating strategic alternatives” 11 and “ensur[e] that [the Company] ran a robust process.” 12 While the Ad Hoc Committee was supposed to direct the sales process, it allowed
F arshchi as CEO to commun icate directly with interested parties, even on the subject of “his future employment and comp ensation” with potential acquiro rs. 13
T he Ad Hoc Committee was advised during its meeting on December 3, 2014,
that the R estatement was unlikely to be completed in the first quarter of 2015. The

10 Compl. ¶ 44 (internal quotation marks omitted).

11 Compl. ¶ 45 (quoting Proxy at 26) (in ternal quotation marks omitted).

12 Compl. ¶ 45 (internal quotation marks omitted).

13 Compl. ¶ 48.10

consequences of the failure to complete the Restatement on time w ere well known to all concerned. At this meeting, Morgan Stanley indicated that , at the Board’s direction, Saba was “progressing toward a [] mid

- December t ransaction signin g with Thoma Bravo, ” 14 even though the deal l ikely would come in below the current OTC market price and eliminate the possibility of upside that stock holders might achieve
if Saba remain ed a standalone company. Morgan Stanley also advised the Ad Hoc Committee that by signing a deal before the deregistration date, Saba “would be able
to consummate a transaction

. . . [that] it may not normally be able to accomplish if it was still under the purview of the SEC.” 15 In early December, private equity firm Golden Gate Capital submitted its expression of interest in a cquiring Saba at a price of $11

– $ 12 per share. W hen t he Board met again with representatives from Morgan Stanley and Morrison & Fo erster on December 10, 20 14, however, Morgan Stanley advised that Thoma Bravo was the only party interested in acquiring Saba and that the consideration it would offer would be below $9 per share . This drop in price was attributed , at least in part, to
Sa ba’s inability to complet e the R estatement and concerns about the SEC’s reaction to an acquisition. According to Morgan Stanley, no other parties were interested as

14 Compl. ¶ 51.

15 Compl. ¶ 52 (internal quotation marks omitted).11

they would not be able to complete due diligence in the short time that remained before deregistration. Morgan Sta nley also told the Board that all price feedback it had received wa s below the current market price . Finally, Morgan Stanley informed the Board that Vector w ould be interested in engaging in a go

- shop if the Thoma
Bravo final offer came in at less than $1 5 per share.
After the a nnouncement on December 15, 2014 that Saba w ould be unable to complete the R estatement by the SEC’s deadline, the Board directed Morgan Stanley to contact additional parties who may be interested in acquiring Saba. 16 On December 17, 201 4 , the Ad Hoc Committee was informed that one of Saba’s current stockholders had indicated that it might be willing to provide additional funding to the Company on a standalone basis . The Ad Hoc Committee was also told that a group of Saba st ockholder s had expressed an interest in acquiring the Company at a price above $8

– $ 9 per share, the latest range indicated by Thoma Bravo. T here is no indication , however, that the Ad Hoc Committee followed up on either of these

overtures. In total, Morgan Stanley contacted t wenty

- six parties by the end of December 201 4 , but no indications of interest remained extant by year

- end other than Thoma Bravo ’s proposal at $8

– $9 per share

.

16 Proxy at 29

– 30.12

2. Vector Enters the Fray
Vector surfaced on January 15, 2015, with a written indication of interest to acquire Saba at $9 per share. As if on que, Saba then received written indications of interest from Golden Gate Capital, Sumeru Equity Partners L.P. and Silver Lake Partners working to gether and Thoma Bravo , as well as verbal indications of interest from H.I.G. Capital and Symphony Capital between January 15 and 16 , ranging from $5.25

– $9 per share

. Vector had a prior relationship with Saba as one of its lenders dating back to
2013. M ost recently, Vector had provided Saba $15 million in debt financing on September 23, 2014 , i n addition to the $30 million of debt previously outstanding. In 2013, Vector engaged in due diligence of Saba in relation to a possible further deb t financing tr ansaction and therefore had access to Saba’s recent and detailed
financial information through that process. Morgan Stanley also had a prior relationship with Vector, having previously provided financing services to a Vector affiliate for which it h ad received fees . Additionally, it was disclosed to the Board
that representatives of Morgan Stanley who were working with Saba on its sales process “may have committed and may commit in the future to invest in private equity funds managed by [Vector].” 17

17 Compl. ¶ 105 (quoting Proxy at 42).13

On January 20, 2015, Saba issued a press release announcing its intention to enter into a definitive acquisition agreement prior to the February 15, 2015
R estatement deadline if the Board determined that pursuing a sale was in the best interests of the Compan y . Outside counsel provided drafts of a merger agreement to Vector’s counsel on January 22, 2015. On January 23, 201 5 , however, Morgan Stanley informed the B oard that more potential bidders had just signed non

disclosure agreements and that it was receiv ing interest from additional parties. On February 2, 2015, Vector again submitted an indication of interest to acquire Saba at $9 per share. T he OTC closing price for Saba’s common stock on that day was $9.45 per share. Vector indicated that it would b e able to execute the transaction agreements by February 6, 2015 , and that it had completed its due diligence except for some confirmatory accounting and legal diligence. The proposal also indicated Vectors’ intent to retain CEO Farshchi and Williams , who

was Saba’s Executive Vice President, General Counsel and Corporate Development
officer , after the acquisition. The Ad Hoc Committee met with Morgan Stanley and Saba management on February 3, 2015 to discuss Vector’s offer. Beginning in October 2014 , as part of the process of exploring strategic alternatives, Saba management created four sets of projections incorporating various assumptions about whether an d when Saba would complete the R estatement and whether its stock would be deregistered. At its February 3, 2015 meeting, t he A d14

Hoc Committee ultimately adopted scenarios reflecting the negative impact of deregistration on S aba stock and assumed that the Company would complete the
R estatement in either August 2015 or December 2015

. The Board then i nstructed Morgan Stanley t o rely on this negative scenario for purposes of its fairness analysis. This, of course , resulted in the lowest valuation of Saba as among all of the scenarios created. 3. The Board Accepts Vector’s Proposal At the conclusion of the February 3 meeting, the Ad Hoc Committee decided to respond to Vector that day and ask for $9.25 per share. Vector responded that it would not pay more than $9 per share given the pending dereg istration of Saba’s shares. On February 4, 2015, the Ad Hoc Committee agreed to an exclusivity agreement with Vector at $9 per share , set to expire February 10, 2015. T he Ad Hoc Committee also discussed Vector’s desire to enter into new employment contracts with Farshchi and Williams as a condition of the M erger . During a February 6, 2015 meeting of the Board with representatives from Morgan Stanley and Mo rrison & Foerster, after determining that due diligence on the deal was “essentially complete, [the Board] authorized Farshchi and Wi lliams to negotiate w ith Vector with regards to their post

- merger employment. ” 18 Ultimately, the post

- Merger company

18 Compl. ¶ 7 1 (internal quotation marks omitted).15

employed Farshchi and Williams on an at

- will basis with a guarantee that their base salaries would not be reduced . They also retained “‘ the cash incentive compensation target amount opportunit[ies]’” and employee benefits “no less favorable” than those they had received from Saba prior to the Merger. 19
The Board received Morgan Stanley’s fairness opinion at a Board meeting on February 9, 2015

. At this meeting, t he Board also granted themselves equity awards that would be cashed

- out upon consummation of the merger in place of “unvested, suspended, lapsed and/or cance lled equity awards , ” including those suspended, lapsed and/or canceled due to the Company’s failure to complete the Restatement. 20 Having just approved cash consideration for their otherwise illiquid equity awards, the full Board then approved the M erger at $9.00 per share . That day, Saba stock closed at $8.94 per share.
On F ebruary 10, 2015 , only five days before the Restatement deadline , Saba and Vector executed the M erger agreement at $9 per share and Saba issued a press release announcing the Merger. The M erger consideration constituted a 2% discount to the average stock price for the week prior to the announcement. On February 19, 2015, the SEC issued an order to deregister Saba stock under the Securities

19 Compl. ¶ 99 (quoting Proxy).

20 Compl. ¶ 73.16

Exchange Act of 1934 § 12(g) , meaning that the stock was ineligible for trading using means of interstate commerce an d, therefore, essentially illiquid

. Because the stockholder vote was to take place after Saba’s stock was deregistered, Saba was not required to submit its Proxy or GAAP financials for SEC review and was able, therefore, to accelerate the time f rom signi ng, to mailing of the
P roxy, to stockholder vote. Saba mailed the Proxy to its stockholders on or about March 6, 2015, o nly twenty

- four days after announcing the Merger. T wenty days later, on March 26, 2015, the Saba stockholders voted to approve the Merger. When asked to vote on the Merger, in the wake of deregistration, Saba stockholders were left with a choice either to accept the $9 per share offered through the Merger or hold onto their illiquid stock with no real sense of when or if that circumstance might change . While projections in the Proxy indicated that Saba would complete the
Restatement in August of 2015 , the stockholders also knew that Saba had failed to

com plete restatements of its financials on several occasions in the past despite

assurances that v arious filing deadlines would be met. The Merger closed on March 30, 2015.17

D. The Equity Awards a re Converted to Cash The ongoing failure to restate its fi nancials left Saba unable to award equity compensation to Board members , executives and employees

. As noted, t h at changed

on February 9, 2015, the day before the Company executed the Merger Agreement, when t he Board approved changes to the compensation plan that a llow ed executives
and Board members to receive cash payments in the form of synthetic options and synthetic Restricted Stock Units (“ RSUs ”) , equal to the amount of their suspended equity awards. These cash payments were “contingen t on the consummation of the [Merger] and certain other conditions.” 21 In addition to the cash payments in lieu of suspended equity awards, the Saba Board also approved cash payments to executives whose equity awards were canceled or lapsed during the rest atement process. Through this process , Denzel, Fawkes, Klein, MacGowan, Russe l l and Wilson each were granted 10,000 RSUs and W illiams was granted 63,000 RSUs

. Further, the expiration of 15,000 stock options held by Wilson and 50,000 stock options held b y Williams was rescinded , thereby allowing them to receive cash compensation in lieu of these awards upon consummation of the Merger

. In addition to the gra nt of new options, all Saba options and RSUs that were vested and outstanding prior to the Merger ( including those vested through acceleration or

21 Compl. ¶ 90 (quoting Proxy).18

otherwise due to the Merger) would be canceled and converted to cash payments upon completion of the Merger

. Based on these revisions to the compensation plan, the following payments were due to Board members and Saba executives as a result of the Merger :

Name Total Merger
- Related Compensation Shawn Farshchi $2,828,050 Peter Williams $908,194 William Russell $270,000 William Klein $270,000 William MacGowan $270,000 Nora Denzel $270,000 Michael Fawkes $270,000 Dow Wilson $270,000

II. PROCEDURAL STANDARD When considering a motion to dismiss: (i) all well

- pleaded factual allegations are accepted as true; ( ii) even vague allegations are ‘ well

- pleaded ’ if they give the opposing party notice of the claim; (iii) the Court must draw all reasonable inferences in favor of the non

- moving party; and (i v ) dismiss al is inappropriate unless the ‘ plaintiff would not be entitled to recover under any reasonably conc eivable set of circumstances susceptible of proof. ’ 22
III. ANALYSIS As noted, the Complaint is comprised of two counts: Count I alleges breach of fiduciary duty against the Individual Defendants and Count II alleges aiding and

22 Savor, Inc. v. FMR Corp. , 8 12 A.2d 894, 896

– 97 (Del. 2002) (citations omitted).19

abetting that breach of fiduciary duty against the Vector Defendants. The Individual Defendants have moved to dismiss on t hree grounds

. First , they contend that the
M erger has been “cleansed” by a fully informed, un coerced stockholder vote and therefore is subject to the business judgment rule . If the Court agrees, then the Merger would be assailable only for waste, which Plaintiff has not pled here. Second, the y argue that Plaintiff’s allegations regardi ng the failure to complete the
R estatement state derivative claims that were extinguished in the M erger . Third, they maintain that any direct claims that might remain are exculpated by the Section 102(b)(7) provision in Saba’s certificate of incorporation . Vector join s the Individual Defendants in these arguments, and assert s (c orrectly) that if there is no underlying breach, then Vector cannot be liable for aiding and abetting. Further, Vector argues that the aiding and abetting claim must be dismissed in any event
because Plaintiff has not ade quately pled a necessary element o f the claim

–– knowing participation in the underlying breach of fiduciary duty

. I begin my analysis with the Individual Defendants’ argument that a fully informed, uncoerced stockholder vote has cleansed any claim for breach of fiduciary duty stated in the Complaint. Because I have concluded that a cleansing vote did not occur here, I next take up the argument that Plaintiff’s claims are derivative and therefore he lost standing to assert them after the Merger. Because I have concluded that P laintiff has asserted direct , not derivative , claims that survive the Merger , I turn20

next to the Individual Defendant’s argument that Plaintiff has failed to plead non

exculpated claims against the Individual Defendants . Here again, I disagree and
therefo re deny the Individual Defendants’ motion to dismiss

. F inally, I address the aiding and abetting claim and conclude that Plaintiff has failed to state that claim as a matter of law. A. The Corwin Analysis
I n Corwin v. KKR Financial Holdings LLC , 23 our S upreme Court held that when a “transaction not subject to the entire fairness standard is approved by a fully informed, uncoerced vote of the disinterested stockholders, the business judgment rule applies.” 24 This reasoning flows from Delaware’s “long

- stan ding policy . . . to avoid the uncertainties and costs of judicial second

- guessing when the disinterested stockholders have had the free and informed chan c e to decide on the economic merits of a transaction for themselves.” 25 The so

- called Corwin doctrine , however, only applies “to fully informed, uncoerced stockholder votes, and if troubling facts regarding director behavior were not disclosed that would have been material to a voting stockholder, then the business judgment rule is not invoked.” 26

23 125 A.3d 304 (Del. 2015).

24 Id. at 309.

25 Id. at 313.

26 Id. at 312.21

Here , Pla intiff does not dispute that the majority of Saba ’s disinterested stockholders approved the Merger

. 27 The inquiry, then, turns to w hether the Plaintiff has pled facts from which one might reasonably conceive that the vote was not fully informed or wa s c oer ced. 28 If yes, then Corwin will not apply , the business judgment rule will not be available to the Individual Defendants at the pleadings stage and enhanced scrutiny will be the standard of review; if no, then the motion to dismiss must be granted because Plaintiffs have not alleged waste. 29
1. Plaintiff h as Adequately Pled that the S tockholder V ote was not F ully I nformed
As noted, to overcome a Corwin defense , the “plaintiff challenging the decision to approve a transaction must first identify a deficiency in the operative disclosure document, at which point the burden would fall to defendants to establish

27 See Compl . ¶ 109.

28 See In re Solera Hldgs., Inc. S’holder Litig. , 2017 WL 57839, at *7 (Del. Ch. Jan. 5, 2017) (holding that, in the Corwin context, the plaintiff must plead facts that allow a reasonable inference that the stockholder vote was not informed).

29 See Singh v. Attenborough , 137 A.3d 151, 151

– 52 (Del. 2016) (“When the business judgment rule standard of review is invoked because of a vote, dismissal is typically the result. That is because the vestigial waste exception has long h ad little real

- world relevance, because it has been understood that stockholders would be unlikely to approve a transaction that is wasteful.”) (citations omitted). See also In re Volcano Corp. S’holder Litig. , 143 A.3d 727, 750 (Del. Ch. 2016), aff’d , 20 17 WL 563187 (Del. Feb. 9, 2017) (after finding that the tender offer was subject to the cleansing effect of Corwin and was therefore subject to the business judgment rule standard of review, the court held that the transaction could “therefore only can be challenged on the basis that it constituted waste ”).22

that the alleged deficiency fails as a matter of law i n order to secure the cleansing effect of that vote.” 30 Delaware law requires directors to “disclose fully and fairly all material information within the board’s control” when soliciting stockholder
action. 31 This obligation of disclosure extends only to i nformation that is material , 32
and in formation is material when “there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote.” 33 Stated different ly , a disclosure is material only if it “significantly alter[s] the ‘total mix ’ of information made available ” to the stockholders. 34 Plaintiff has alleged four areas where t he Proxy omitted material facts : “(i ) the reasons why Saba was unable to complete the restatement; (ii) Saba management’s financial projections; (iii) Morgan Stanley’s financial analyses supporting its fairness opinion and potential conflicts of interest; and (iv) the process

30 In re Solera Hldgs

. , 2017 WL 57839, at *7

– 8.

31 Stroud v. Grace , 606 A.2d 75, 84 (Del. 1992).

32 In re Cogent, Inc. S’holder Litig. , 7 A.3d 487, 511 (Del. Ch. 2010) (holding that s tockholders are not entitled to every fact and figure that a shareholder might theoretically want or might find helpful ). See also In re Merge Healthcare Inc. S’holders Litig. , 2017 WL 395981, at *9 (Del. Ch. Jan. 30, 2017) (“‘ Fully informed’ does not mean infinitely informe d, however.”).

33 Rosenblatt v. Getty Oil Co. , 493 A.2d 929, 944 (Del. 1985).

34 Arnold v. Soc’y for Sav. Bancorp , 650 A.2d 1270, 1277 (Del. 1994).23

leading up to t he execution of the Merger Agreement.” 35 Two of the four categories of disclosure deficiencies identified by the Plaintiff, relating to the management projections and the work of Morgan Stanley, recast disclosure allegations that this court repeatedly has rejected under similar circumstances

. I address these first. I then address Plaintiff’s allegations in support of the other two material omissions identified in the Complaint relating to the failure to explain the circumstances surrounding the Company’s failure to complete the Restatement and the events leading up to the Merger . For reasons explained below , applying a reasonably conceivable standard to these allegations, I conclude that Plaintiff has identified material omissions from the Proxy that unde rmined the stockholder approval of the Merger. 36 ( a ) The Omitted Management Projections Plaintiff has alleged a litany of alleged omissions regarding the financial projections prepared by Saba’s management which Morgan Stanley relied upon for its fairne ss opinion. Specifically, Plaintiff finds fault with the Proxy’s failure to disclose management’s financial projections for “(i) revenue; (ii) EBITDA (2020

–

35 Compl. ¶ 110.

36 I am mindful that Plaintiff could have (but did not) seek to enjoin the Merger which is a preferred means to address serious disclosure claims in connection with a proposed transaction. See In re Transkaryotic Ther apies, Inc. , 954 A.2d 346, 360 (Del. 2008). Failing to pursue that remedy, however, does not deprive the Plaintiff of a righ t to press disclosure claims post

- closing. Id.24

2024); (iii) EBIT (or depreciation and amortization); (iv) restatement expenses (2020

– 2024); (v) ta xes (2020

– 2024); (vi) capital expenditures (2020

– 2024); (vii) changes in net working capital (2020

– 2024); (viii) stock

- b ased compensation expense (2020

– 2024); and (ix) unlevered free cash flow (2020

– 2024).” 37 Management projections are clearly material to stockholders when deciding whether to vote for a merger. 38 Plaintiff has focused his criticisms on management projections for years 2020

– 2024. The Proxy disclosed the management projections for 2015

– 2019. 39 The only indication th at projections existed for 2020

– 2024 is in Morgan Stanley’s description of its discounted cash flow analysis (“DCF”) , where the Proxy states that Morgan Stanley developed the numbers for 2020

– 2024 used in its DCF “by an extrapolation of the 2019 estimates in the management projecti ons based on 2019 growth and margin performance in the Management Case to reach a steady state margin and growth profiled by 2024.” 40

37 Compl. ¶ 113.

38 In re PNB Hldg. Co. S’holders Litig. , 2006 WL 2403999, at *15 (Del. Ch. Aug. 18, 2006).

39 Proxy at 40, 44.

40 Proxy at 40.25

“I reiterate this Court’s consistent position that ‘management cannot disclose projections that do not exist.’” 41 T he Prox y’s failure to disclose management projections for 2020

– 2024 cannot constitute a material omission because Plaintiff has failed to plead facts that would allow an inference that such projections even existed

. And the omission from a proxy statement of pro jections prepared by a financial advisor for a sales process rarely will give rise to an actionable disclosure claim. 42
T urning next to Plaintiff’s cl aim that the Proxy should have disclosed management projections for revenue and EBIT (or depreciation an d amortization) , I note that the Proxy clearly disclosed r evenue for fiscal years ending May 31, 2016, 2017 and 2018. 43 To the extent Plaintiff quibbles with the omission of projections for later years, once again, Plaintiff has failed to allege that these projections exist. With regard to the omission EBIT

- related data , the Proxy dis closes adjusted EBITDA for 2015

– 2019, which is what Morgan Stanley relied upon when

41 In re BioClinica, Inc. S’holder Litig. , 2013 WL 673736, at *5 (Del. Ch. Feb. 25, 2013) (quoting In re CNX Gas Corp. S’holders Litig. , 4 A.3d 397, 419 (Del. Ch. 2010)).

42 See , e.g., In re Plains Exploration & Prod. Co. S’holder Litig. , 2013 WL 1909124, at *8 (Del. Ch. May 9, 2013) (refusing to recognize as material th e omission in the proxy of cash flow numbers derived by the investment banker from projections prepared by the company which were included in the proxy).

43 Proxy at 44.26

conducting its DCF

. 44 Plaintiff fails to explain why the disclosure of EBIT (or depreciatio n and amortization, from which a stockholder presumably could calculate
EBIT from the disclosed EBITDA ) , would be an y thing more than merely “helpful

. ” 45 Plaintiff also contends that “even more importantly, the Proxy does not adequately disclose the justif ications for the modifications to the Company’s forecasts throughout the process and, in particular, following receipt of Vector’s offer.” 46 T his c ourt typically is not receptive to these kinds of “why” or “tell me more” disclosure claims that c riticize th e board for failing to explain its motives when making transaction

- related decisions. 47 Yet this is precisely what the Plaintiff

44 Proxy at 40.

45 In re Cogent , 7 A.3d at 509

– 10.

46 Compl. ¶ 114.

47 See In re Sauer

- Danfoss Inc. S’holders Litig. , 65 A.3d 1116, 1131 (Del. Ch. 2011) (holding that the omission of information as to why the board of directors negotiated to remove a condition from the tender offer did not state a valid disclosure claim). See also In re Sol era Hldgs. , 2017 WL 57839, at *12 (holding that the omission of the reasons behind a supposed shift in compensation strategy did not state a valid disclosure claim); Dent v. Ramtron Int’l Corp. , 2014 WL 2931180, at *14 (Del. Ch. June 30, 2014) (holding tha t the omission of why a financial advisor applied certain multiples in its analysis did not state a valid disclosure claim). See also Se. Pa. Transp. Auth. v. Volgenau , 2013 WL 4009193, at *20 (Del. Ch. Aug. 5, 2013) (refusing to recognize “tell me more” disclosure claims seeking additional minor details as material given extensive disclosure provided in the proxy) , aff’d , 91 A.3d 562 (Del. 2014) (TABLE) ; In re Plains Exploration , 2013 WL 1909124, at *10 (same); Freedman v. Adams , 2012 WL 1345638, at *17 (Del. Ch. Mar. 30, 2012) (same), aff’d , 58 A.3d 414 (Del. 2013).27

is seeking here: a further disclosure as to why management and the Board elected to make modifications to the Company’s financial projections

. The Proxy discloses the assumptions and data upon which management created the various scenarios that were set forth in the forecasts

. 48 By comparing the changing assumptions that went into the various scenarios, a stockholder could readily track the changes and reasonably infer the rationale that went into the changes from one scenario to another. Plaintiff does not allege any facts or assumption s regarding the modifications that were omitted or misleading

. He fails, t herefore, to state a viable disclosure claim regarding the Saba management projections included in the Proxy

. ( b ) The Omitted Information R egarding Morgan Stanley ’s Valuation Analysis and Conflicts Plaintiff identifies two categories of omissions in the Proxy in connection with Morgan Stanley’s work: (1) omissions regarding Morgan Stanley’s valuation of Saba and (2) omissions regarding Morgan Stanley’s conflicts of interest arising from its prior relationship with Vector. Neither reflect material omissions. First, Plaintiff alleges that Morgan Stanley did not adequately disclose various facts , in four different categories, related to its valuation of Saba. For the first category

— information pertaining to Morgan Stanley’s Public Trading Comparables Analysis

— Plaintiff alleges that the Proxy failed to disclose the “2014

– 2016

48 Proxy at 43.28

aggregate value/revenue and AV/EBITDA multiples for each of the selected public companies analyzed , ” the revenue growth rates, gross margin and EBIT margin and “why Morgan Stanley relied on the multiples from the Enterprise Software peers instead of the Human Capital Management peers.” 49 For Morgan Stanley’s Precedent Transactions Analysis, Plaintiff claims that the Proxy failed to disclose the AV/last twelve months revenue, the AV/next twel ve months revenue ( and the

one - day unaffected price premium multiples for ea ch of the transactions analyzed) and “the specific subset of transactions that were analyzed with respect to the application of one

- day unaffected premium paid analysis.” 50 Plainti ff further alleges that the Proxy failed to disclose, with regard to Morgan Stanley’s DCF a nalysis, “the implied terminal EBITDA multiple range and the implied terminal revenue multiple range,” various “individual inputs and assumptions utilized by Morgan Stanley to
der ive the discount range of 7.1%

– 8.1%,” “that Morgan Stanley incorporate d Saba’s net operating losses (‘NOLs’ ) in its analysis and assumed a present value of approximately $25 million, per management, from the total $274.1 million of NOLs
avail able to the Company,” “the inputs and assumptions utilized by management to determine the $25 million present value of Saba’s NOLs,” and “the specific

49 Compl. ¶¶ 115(a)(i)

– (iii).

50 Compl. ¶¶ 115(b)(i)

– (ii).29

arithmetic errors with respect to the treatment of certain stock based compensation and restatement expen ses within Morgan Stanley’s analysis.” 51 Finally, Plaintiff alleges that the Proxy failed to disclose, with regard to Morgan Stanley’s Discounted Equity Value Anal ysis , the “2018 estimated cash and estimated debt utilized by Morgan Stanley in its analysis” and “ that Morgan Stanley utilized a r evenue multiple range of 1.2x

– 2.4x a s opposed to the range of 1.5x

– 2.5x referred to in the Proxy.” 52 When voting on a merger, “ stockholders are entitled to a fair summary of the substantive work performed by the investm ent bankers upon whose advice the recommendations of their board as to how to vote on a merger or tender offer rely .” 53 “A fair summary, however, is a summary .” 54 The rel evant disclosure document must disclose “the valuation methods used to arrive at that opinion as well as the key inputs and the range of ultimate values generated by those analyses.” 55 “ W hether a particular piece of an investment bank’s analysis needs to be disclosed, however, depends on whethe r it is material, on the one hand, or immaterial minutia, on the

51 Compl. ¶¶ 115(c)(i)

– (v).

52 Compl. ¶¶ 115(d)(i)

– (ii).

53 In re Pure Res., Inc., S’holders Litig. , 808 A.2d 421, 449 ( Del. Ch. 2002).

54 In re Trulia S’holder Litig. , 129 A.3d 884, 900 (Del. Ch. 2016) (emphasis in original).

55 In re Netsmart Techs., Inc. S’holders Litig. , 924 A.2d 171, 203

– 04 (Del. Ch. 2007).30

other.” 56 In this regard, t h e summary of the banker’s work need only “be sufficient for the stockholders to usefully comprehend, not recreate, the analysis.” 57 Here, the Proxy, over the cour se of nine single

- spaced pages, described Morgan Stanley’s analyses, including the methodology and projections used, the lists of comparable companies and transactions consider ed, and the valuation range resulting from these analyses. 58 Plaintiff has faile d to well

- plead any facts, or provide any explanation , as to why any of the minutia he says should have been in the Proxy would have significantly alter ed the “total mix” of information Saba shareholders received. 59 The Proxy provided Saba stockholders wit h a fair summary of the Morgan Stanley valuation analysis including its key inputs , and th e “additional

56 Id.

57 In re Merge Healthcare , 2017 WL 395981, at *10.

58 Proxy at 36

– 44.

59 The Complaint recites these many alleged material omissions at some length, but when the Individual Defendants challenged the materiality of these omissions in their motion to dismiss, Plaintiff’s answering brief offers little resistance in a single sentence: “[t]he Proxy also omits material information regarding Morgan Stanley’s financial analyses supporting its fairness opinion.” Pl. Gary Poltash’s Answering Br. in Opp’n to the Individual Defs.’ and the Vector Defs.’ Mot. to Dismiss th e Second Am. Verified Class Action Compl. (“Answering Br.”) 54.31

granularity” Plaintiff has pointed to would be nothing “more than helpful or cumulative to the information already disclosed.” 60
In addition to these cla ssic “tell me more” disclosure claims, Plaintiff alleges that the Proxy did not adequately disclose the “specific services Morgan Stanley provided to [Vector], and/or any of its affiliates in the past two years and the amount of compensation received for s uch services rendered.” 61 That the Board was obliged to disclose “potential conflicts of interest of [its] financial advisors ” so that “stockholders [could ] decide for themselves what weight to place on a conflict faced by the financial advisor” has not been, and cannot be , disputed. 62 Whether the Proxy fulfilled this obligation, however, is very much contested. On this point, the Individual Defendants have the better of the argument. T he Proxy disclosed that , in the two previous years , “Morgan Stanley or its affiliates have provided financing services to a Vector Capital affiliate and received customary fees of approximate[ly] $1 million in connection with those services.” 63 This disclosure address es precisely

60 Dent , 2014 WL 2931180, at *12. See also id. at *14 (explaining that the issue of whether the financial advisor’s analysis was correct is distinct from whether all material facts relating to the analysis were disclosed).

61 Compl. ¶ 117.

62 In re John Q. Hammons Hotels Inc. S’holder Litig. , 2009 WL 3165 613, at *16 (Del. Ch. Oct. 2, 2009).

63 Proxy at 42.32

what Plaintiff claims is missing , e xcept that it does not detail the specific services rendered. Here again, Plaintiff offers no explanation of how t he specific services Morgan Stanley provided to Vector affiliates in the past would materially alter the total mix of information that Saba s tockholders would find important when deciding how to v ote . W hat was material, and disclosed, was the prior working relationship
and the amount of fees

. (c) The Omitted Inf

ormation Regarding the Failure to Complete the Restatement Plaintiff points to the failure to describe the circumstances surrounding the Company’s failure to complete the Restatement by the deadline set by the SEC as “the most glaring information missing from the Proxy.” 64 According to the Plaintiff,

t his informat ion is material because the deregistration clearly depressed the amount potential buyers were willing to pay for Saba and stockholders needed to understand whether the Company’s stat e of deregistration was likely to continue or whether the Company had a legitimate prospect of completing the Restatement and regaining registered status with the SEC. Plaintiff also contends that the explanation of why the Company missed the SEC’s deadline was material to stockholders as they

64 Compl. ¶ 111.33

assessed “the reliability of the financial projections relied on by Morgan Stanley in rendering its fairness opinion.” 65 As already noted, t his court repeatedly has held that “asking ‘why’ does not
state a meritorious disclosure claim.” 66 But in each of those cases, the “why” involved a decision made either by the board of directors, an officer or a company advisor. That is not what the Plaintiff alleges was omitted here. Rather, he alleges that the Board failed to d isclose the factual circumstances regarding its failure, yet again, to complete the restatement of its financials. This was not a purposeful decision of the Board (at least it was not disclosed as such); it was a factual development that spurred the sales process and, if not likely correctible, would materially affect the standalone value of Saba going forward. To be sure, the Proxy was by no means silent with respect to the Restat e ment. It disclosed details regarding the events that led up to Saba’s ne ed to restate its financials, 67 explained the consequences of the deregistration

— that Saba stock would no longer be freely tradeable, 68 provided the best estimate of Saba’s

65 Answering Br. 50.

66 In re Sauer

- Danfoss , 65 A.3d at 1131; In re Solera Hldgs. , 2017 WL 57839, at *12; Dent , 2014 WL 2931180, at *14

. 67 Proxy at 78.

68 Proxy at 23, 79.34

management and Board of when the Restatement would be completed if Saba was not sold ( August 2015 ) , 69 and provided the projected value of Saba as a standalone company if the Restatement was completed in August 2015 or if it was not completed until December 2015. 70 Given its past history, however, u nless the stockholders were armed with info rmation that would allow them to assess the likelihood that Saba would ever complete a restatement of its financials, they would have no means to evaluate the choice they were being asked to make

— accept merger consideration that reflected the depressed val ue caused by the Company’s regulatory

non - compliance or stay the course in hopes that the Company might return to the good graces of the SEC

. 71
Plain tiff has also earned a pleading

- stage inference that the stockholders would need all material informatio n regarding the likelihood that the Company could ever complete the Restatement in order meaningfully to assess the credibility of the

69 Proxy at 43.

70 Pr oxy at 43

– 44.

71 Cf. In re MONY G

p. Inc. S’holder Litig. , 852 A.2d 9, 24

– 25 (Del. Ch. 2004) ( “[O] nce a c ompany travel s down the road of partial disclosure of the his tory leading up to the Merger

. . . [it has] an obligation to provide the stockholders with an accurate, full and fair characterization of those historic events

. ”) (citations and internal quotations omitted). Specifically, Plaintiff argues that “[w]hile the Company had repeatedly promised Saba stockholders for nearly three years that the Company would file restated financial results, the Proxy was silent on why the investigation was never completed, despite the fact that the Company expended three years and more than $37 million on expenses related to the investigation.” Ans wering Br

. 49

– 50 (citations omitted).35

management projections. The Company had repeatedly failed to meet deadlines to restate its financials. The management p rojections assumed the Company would complete the Restatement at some point in the future. Without the means to test that assumption by drilling down on the circumstances surrounding the Company’s past and latest failure to deliver its restated financials , stockholders had no basis to conclude whether or not the projections made sense. 72 ( d ) The Omitted Information Re garding the Sales Process Finally , Plaintiff alleges that the Proxy omitted material information regarding the sales process. The Proxy, over the course of nine single

- spaced pages, detailed the “Background of the Merger,” including the lengthy sales process and all contacts with parties that were potentially interested in acquiring Saba. 73 Nevertheless, Plaintiff alleges that t h e Proxy failed adequately to describe the events leading up to the Merger in several respects. While most of these criticisms fall well short of identifying material omissions or misstatements, Plaintiff has identified one omission within the Proxy’s desc ription of the events leading up to the Merger that a reasonable shareholder likely would have deemed important when deciding

72 I acknowledge that directors are not obliged to engage in “self

- flagellation” in their disclosures to stockholders. Khanna v. McMinn , 2006 WL 1388744, at *29, 34 (Del. Ch. May 9, 2006). That is not what the Plaintiff says is miss ing here. Rather, he alleges that the Proxy failed to disclose the facts surrounding the Company’s failure to meet the SEC deadline, whether benign or otherwise.

73 Proxy at 24

– 33.36

whether to approve the Merger. 74 Specifically, Plaintiff’s allegations with respect to the omission of the post

- deregistration opt ions available to Saba , as discussed by the Ad Hoc Committee on December 3, 2014 , make a compelling case for materiality. It is true, as the Individual Defendants trumpet, that Delaware law “does not require management ‘to discuss the panoply of possible alternatives to the course of action it is proposing . . . . ’ ” 75 As then

- Chancellor Chandler explained, this settled guidance with respect to disclosure is justified because “stockholders have a veto power over fundamental corporate changes (such as a merg er) but entrust management with evaluating the alternatives and deciding which fundamental changes to propose.” 76

74 Plaintiff’s other criticisms, including the omission of information re garding financing options available to Saba in 2013, the terms of an expression of interest from “PE Firm D” in 2013, details relating to the formation of the Ad Hoc Committee, details relating to the financial models considered by the Ad Hoc Committee in 2014, details relating to Farshchi’s discussions with other suitors regarding employment, all miss the mark. After carefully reviewing the Proxy, I am satisfied either that the Proxy discloses what Plaintiff alleges is omitted (e.g. material information r egarding the Ad Hoc Committee or Farshchi’ s motivations as a negotiator, as found in the Proxy at 26, 32, 48

– 50), or that the alleged omissions, if included in the Proxy, would have provided nothing more than immaterial “additional granularity.” See In re Lear Corp. S’ holder Litig. , 926 A.2d 94, 114 (Del. Ch. 2007) (holding that “a reasonable stockholder would want to know an important economic motivation of the negotiator singularly employed by a board to obtain the best price for the stockholders, when th at motivation could rationally lead that negotiator to favor a deal at a less than optimal price, because the overall procession of a deal was more important to him, given his overall economic interest, than only doing a deal at the right price . . .”); De nt , 2014 WL 2931180, at *12 (proxy need not disclose unnecessarily “granular” information).

75 In re 3Com S’holders Litig. , 2009 WL 5173804, at *6 (Del. Ch. Dec. 18, 2009) (quoting Seibert v. Harper & Row, Publ’rs, Inc. , 1984 WL 21874, at *5 (Del. Ch. Dec. 5, 1984)).

76 Id.37

While this holds true in a typical case, this is hardly a typical case given the deregistration of Saba’s shares by the SEC just prior to the time th e stockholder vote on the Merger was t o occur. 77 This caused a fundamental change to the nature and value of the stockholder’s equity stake in Saba over which the stock holders had no control . Th e deregistration also dramatically affected the environment in which the Board conducted the sales process and in which stockholders w ere asked to exercise their franchise

. The Board needed to take extra care to account for this dynamic in its disclosures to stockholders.
In considering whether or not Saba was viable as a going

- concern without the Merger, a reasonable stockholder would have needed to understand w hat alternatives to the Merger existed. Plaintiff alleges that Morgan Stanley advised the Ad Hoc Committee during its meeting on December 3, 2014, that the Thoma Bravo proposal was a “discount to current market prices” of Saba stock and, importantly, that a transaction with Thoma Bravo “would ‘eliminate[] further upside for investors from standalone value creation. ’ ” 78 Morgan Stanley cautioned that further pursuit of the

77 See In re Answers Corp. S’holder Litig. , 2012 WL 3045678, at *2 (Del Ch. July 19, 2012) (in noting that the “case [was] not typical,” the court observed: “Most cases do not involve a company’s board speeding up the sales process to get a deal done” after the company’s financial advisor told the board that “a failure to act quickly” might result in “the market learn[ing] the company is worth more than the deal price and the deal will be scuttled”).

78 Compl. ¶ 51.38

Thoma Bravo deal “could trigger ‘[l]ikely shareholder litigation ... due to price
below market. ’ ” 79 It is reasonably conceivable that Plaintiff will be able to
demonstrate a substantial likelihood that a reasonable Saba stockholders would have found this information to be important when deciding how to vote on the Merger. The failure to disclose it in the Proxy undermines the cleansing effect of the stockholder vote under Corwin. 2. Plaintiff Has Adequately Pled that the S tockholder V ote Was C oerced In addition to requiring a fully informed stockholder vote as a predicate to cleansing, Corwin also directs that the court consider whether the Complaint supports a reasonable inference that the stockholder vote was coerced. 80 It is settled in our law that a stockholder vote may be invalidated “by a showing that the structure or circumstances of the vote were impermissibly coercive.” 81 The court will find wrongful coercion where stockholders are induced to vote “in favor of the proposed transaction for some reason other than the economic merits of that transaction.” 82 It

79 Id.

80 Corwin , 125 A.3d at 312.

81 Williams v. Geier , 671 A.2d 1368, 1382 (Del. 1996).

82 Williams , 671 A.2d at 1382

– 83. See also Eisenberg v. Chi. Milwaukee Corp. , 537 A.2d 1051, 1061 (Del. 1996) (“The standard applicable to the plaintiff’s claim of inequitable coerc ion is whether the defendants have taken actions that operate inequitably to induce the [] shareholders to tender their shares for reasons unrelated to the economic merits of the offer.”); Gradient OC Master, Ltd. v. NBC Univ., Inc. , 930 A.2d 104, 119 (Del . Ch. 2007) (“[A] shareholder is actionably coerced when he is forced into ‘a choice between a39

is not enough for an offer to be “economically ‘too good to resist’” to constitute wrongful coercion. 83 Rather, in determining whether vel non stockholders were inequitably coerced, the court must be mindful that for purposes of legal analysis, the term ‘coercion’ itself

— covering a multitude of situations

— is not very meaningful. For the word to have much meaning for purposes of legal ana lysis, it is necessary in each case that a normative judgment be attached to the concept (‘inappropriately coercive’ or ‘wrongfully coercive’, etc.). But, it is then readily seen that what is legally relevant is not the conclusory term ‘coercion’ itself b ut rather the norm that leads to the adverb modifying it. 84

new position and a compromised position’ for reasons other than those related to the economic merits of the decision.”) (quoting In re Gen. Motors Class H S’hold ers Litig. , 734 A.2d 61 1, 621 (Del. Ch. 1999) ); In re Siliconix Inc. S’holder Litig. , 2001 WL 716787, at * 15 (Del. Ch. June 19, 2001) (“A tender offer is wrongfully coercive if the tendering shareholders are ‘wrongfully induced by some act of the defendan t to sell their shares for reasons unrelated to the economic merits of the sale.’”) (quoting Ivanhoe P’rs v. Newmont Mining Corp. , 533 A.2d 585, 605 (Del

. Ch.), aff’d , 535 A.2d 1334 (Del. 1987)).

83 Newmont , 533 A.2d at 605 (quoting Lieb v. Clark , 1987 WL 1 1903, at *4 (Del. Ch. June 1, 1987)).

84 Katz v. Oak Indus. Inc. , 508 A.2d 873, 880 (Del. Ch. 1986). See also Gradient , 930 A.2d at 117 (“[T]he ordinary definition of ‘coercion,’ something akin to intentionally persuading someone to prefer one option over another, is not the same as saying that the persuasion would so impair the person’s ability to choose as to be legally actionable. The challenged conduct must be ‘wrongfully’ or ‘actionably’ coercive for a legal remedy to ensue.”) (citations omitted); Sol omon , 747 A.2d at 1131 (“All disclosure of material information may cause shareholders to vote in a particular way, and so is, in some general sense, ‘coercive.’ Considering the legal imperative that all shareholders be armed with all material information , it cannot be that the mere potential to influence a shareholder’s vote renders disclosed information actionable.”); Next Level Commc’ns v. Motorola, Inc. , 834 A.2d 828, 853 (Del. Ch. 2003) (“Generally, reports of factual matters that are neutrally stated and not threatening do not amount to wrongful coercion.”).40

Whether a particular vote was inequitably coerced and therefore “robbed of its effectiveness . . . depends on the facts of the case.” 85 The determination of whether coercion was inequitable in a particular circumstance is a relationship

- driven inquiry. 86 A corporation’s directors are fiduciaries of their stockholders “whose interests they have a duty to safeguard.” 87 Therefore, when addressing a potentially coercive interaction between a board of directors and the stockholders it serves, the relevant legal norms stem from the law of fiduciary duty. And, in this regard, whether the fiduciary’s motives were benign or unfaithful when creating the circumstances that cause coercion is not dispositive

o f the determination of whether the coercion was inequitable. 88 The coercion

85 Williams , 671 A.2d at 1383. See also Brazen v. Bell Atl. Corp. , 1997 WL 1538 10 at *5 (Del. Ch. Mar. 19 ) (“Whether coercion is inequitable depends on the particular facts and circumstances of the case. What might be inequitably coercive in one situation, might be coercive, but not inappropriately so, in another.”) (citations omitted), aff’d on other grounds , 695 A.2d 43 (Del. 1997).

86 Cf. Katz. , 508 A.3d at 880 (looking to the law of contracts to determine whether inequitable coercion occurred where the relevant relationship was contractual

–– between a corporation and the holders of its debt securities).

87 Eisenberg , 537 A.2d at 1062.

88 Lacos La nd Co. v. Arden Gp., Inc. , 517 A.2d 271, 278 (Del. Ch. 1986) (holding that motivation behind the challenged vote was not relevant to the determination that the vote was coerced because “[a]s a corporate fiduciary, [the CEO] has no right to take such a posi tion, even if benevolently motivated in doing so”). Cf. Chesapeake Corp. v. Shore , 771 A.2d 293, 318 (Del. Ch. 2000) (discussing Chancellor Allen’s decision in Blasius in determining whether the board’s action impeding stockholder franchise was inequitabl e as one where the “real question was ‘whether, in these circumstances, the board, even if it is acting with subjective good faith . . . may validly act for the principal purpose of preventing the shareholders from electing a majority of new directors. Th e question thus posed is not41

inquiry, instead, focuses on whether the stockholders have been permitted to exercise their franchise free of undue external pressure created by the fiduciary that
distracts them f

rom the merits of the decision under consideration. 89 In the deal context, the vote must be structured in such a way that allows shareholders a “free choice between maintaining their current status [or] taking advantage of the new status offered by” the pr oposed deal. 90 Here, in voting on the Merger, Saba stockholders were given a choice between keeping their recently

- deregistered, illiquid stock or accepting the Merger price of $9 per share, consideration that was depressed by the Company’s nearly contempo raneous failure once again to complete the restatement of its financials. 91

one of intentional wrong (or even negligence), but one of authority as between the fiduciary and the beneficiary . . . ’”) (quoting Blasius Indus. , Inc. v. Atlas Corp. , 564 A.2d 651, 658 (Del. Ch. 1988)).

89 Williams , 671 A.2d a t 1382

– 83. See also Gradient , 930 A.2d at 117

– 121 (collecting coercion cases).

90 Gen. Motors , 734 A.2d at 621. See also AC Acq s . Corp. v. Anderson, Clayton & Co. , 519 A.2d 103, 113 (Del. Ch. 1986) (inequitable coercion occurs when the board create s circum stances that surround the stockholder vote where “no rational shareholder could afford not to [vote in favor of the board proposal] . . . at least if that transaction is viewed in isolation.” ).

91 The Proxy advised stockholders that because the Company had failed to complete the Restatement by the time agreed to in its settlement with the SEC, and because the SEC had deregistered the stock as a consequence, “until [Saba] has regained compliance and filed a registration statement . . . and such registration s tatement has become effective, shares of [Saba] stock [could not] be traded on the OTC or any other market and broker dealers [were] prevented from effecting transactions involving [Saba] securities using means of interstate commerce.” Proxy at 2, 13, 23. See also Proxy at 78 (“As a result of the deregistration of our common stock, there is no longer any active trading market for shares42

This Hobson’s choice was hoisted upon the stockholders because the Board was hell

bent on selling Saba in the midst of its regulatory chaos. Yet the Board elected to
send stockhol ders a Proxy that said nothing about the circumstances that were preventing the Comp any from filing its restatement s and therefore offered no basis for stockholders to assess whether the choice of rejecting the Merger and staying the course made any sense. 92 The forced timing of the Merger and the Proxy’s failure to disclose why the Restatement had not been completed and what financing alternatives might be available to Saba if it remained a standalone company left the Saba stockholders staring into a black box as they attempted to ascertain Saba’s future prospects as a standalone company. This left them with no practical alternative but to vote in favor of the Merger. The Individual Defendants argue that to find “actionable coercion” the court
must identif

y “some affirmative action by the fiduciary in connection with the vote [] that reflect[s] some structural or other mechanism for or promise of retribution

of our common stock.”). The Proxy then reiterated, repeatedly, that “any resulting ‘market’ for shares of our common stoc k would be extremely limited and illiquid until such time as we complete the restatement and regain eligibility for trading on the OTC or another active securities market.” Proxy at 2, 13, 23. See Eisenberg , 537 A.2d at 1062 (stating the obvious: an abili ty to trade represents a large component of a stock’s market value ).

92 While the Proxy disclosed that the Company anticipated it could complete the Restatement by August 2015 , Saba had known about the need to restate its financials since at least June 2012, and yet over two years later it still had not delivered on its repeated assurances that it would get the job done. See Proxy at 24, 43.43

that would place the stockholders who reject the proposal in a worse position than they occupied bef

ore the vote.” 93 While I disagree that the Complaint has failed to allege wrongful affirmative action by the Board, I also disagree that affirmative action is a predicate to wrongful coercion. Inequitable coercion can exist as well when the fiduciary fail s to act when he knows he has a duty to act and thereby coerces stockholder action. 94 Plaintiff’s case for inequitable coercion, as alleged in the Complaint, tells a compelling story of Board action and inaction in the face of a duty to act. Saba engaged in financial fraud with its Indian subsidiary. To account for this fraud, the Company was required to restate its financials. When it inexplicably and repeatedly failed to do so, its stock was delisted from NASDAQ. Saba then settled an enforcement actio n with the SEC and promised to complete the Restatement by a date certain. When it failed to act, again inexplicably, the SEC deregistered its stock. The subsequent events unfolded like a tragic requiem. The stock price fell; the Board

93 Letter to The Honorable Joseph R. Slights, III dated February 17, 2017 from Gregory V. Varallo in response to th e Court’s January 31, 2017 request for supplemental letter memoranda (“Individual Defs.’ Supplemental Letter Br.”) 5, citing, inter alia , Gradient , 930 A.2d at 117; Gen. Motor s , 734 A.2d at 621.

94 Cf. In re Walt Disney Co. Deriv. Litig. , 906 A.2d 27, 67 (D el. 2006) (holding that a director acts in bad faith when he “intentionally fails to act in the face of a known duty to act”); NHB Advisors, Inc. v. Monroe Cap ital LLC , 2013 WL 3790745, at *2 (Del. Ch. July 19, 2013) (“If a fiduciary has a duty to act, and fails to act, the failure to act is a breach of duty

. ”).44

rushed the sales process while the Company was in turmoil and then lost all negotiating leverage; the Proxy left stockholders in the dark regarding the circumstances surrounding the Company’s incomprehensible failure to file its Restatement and whether it could ever prepar e proper financial statements , leaving them unable meaningfully to assess the value of Saba on a standalone basis; the deregistration allowed the Company to avoid SEC review of the Proxy and to rush the stockholder vote; and then, in this environment, the Board forced stockholders

to choose between a no

- premium sale or holding potentially worthless stock. 95 Under these circumstances, I am satisfied that the Plaintiff has well

- pled that, at the time of the stockholder vote, “situationally coercive factors” 96 may have wrongfully induced the Saba stockholders to vote in favor of the Merger for reasons other than the economic merits of the transaction. I acknowledge, as the Individual Defendants note, 97 that the Proxy stated the facts neutrally and in a non

- threat ening manner and that this is often a telltale

95 The Individual Defendants argue that the deregistration of Saba stock “was a matter of history, not a threat for the future.” Individual Defs.’ Supplemental Letter Br. 6. That is not how Plaintif

f has pled his breach of fiduciary duty claim. Rather, he has alleged that the stockholder vote was tainted by the uncertainty created by the Company’s ongoing failure to complete restatements of its financials and the stockholders’ inability meaningfully to assess whether the Company would ever return to a state of compliance. Compl. ¶¶ 13, 33, 110, 111

– 19.

96 Brazen , 695 A.2d at 50.

97 Individual Defs.’ Supplemental Letter Br. 7.45

indicator of a non

- coercive proxy statement. 98 In this case, however, it was not the Proxy’s words or even its tone that created the coercion; the inequitable coercion
flowed from the situation in which the Bo ard placed its stockholders as a consequence of its allegedly wrongful action and inaction. Stated succinctly, the Board created a “circumstance[] [that was] impermissibly coercive.” 99

98 Williams , 671 A.2d at 1383 (finding that a proxy was not inequitably coerc ive when it “merely stat[ed] facts which were required to be disclosed” and where the required disclosures were “neutrally stated and not threatening in any respect ”)

. 99 Id. at 1382. The Individual Defendants seize on the language in General Motors where the court observed that, in cases that have found actionable coercion, “the electorate was told that retribution would follow if the proposed transaction was defeated.” Gen. Motors , 734 A.2d at 621. While it is true that the Board stopped short of threatening retribution, the implicit threat was no less compelling. The stockholders cast their votes in favor of the Merger under the threat that their only alternative was to hold onto deregistered stock with the knowledge that the Company may continue indefinitely to ignore its obligation to restate its financial statements and thereby foreclose any possibility that the stock might ever be registered and freely tradable again. I note that General Motors is distinguishable in other ways as well. Unlik e the stockholders in General Motors , the Saba stockholders were not afforded the “free choice” to select between the M erger and a settled status quo

. T he Saba Board had already impaired the status quo by causing the stock to be deregistered just prior to the vote , rushing the sales process and then failing to provide stockholders with adequate information to evaluate the new, impaired status quo. According to the Individual Defendants, as of the date of the vote, “Saba’s stockholders had two options: (1) merge with Vector (the ‘new status’); or (2) hold Saba’s stock and let the Company pursue efforts to re

- register (which was ‘precisely the same position they were in before the vote.’).” Individual Defs.’ Supplemental Letter Br. 9 (quoting Gen

. Motors , 7 34 A.2d at 620). This characterization minimizes if not ignores the fact that the Board had already put the stockholders into a “compromised position” by failing to complete the Restatement and thereby causing the stock to be deregistered. Against this b ackdrop , the Saba stockholders were forced to choose between the “new position” of relinquishing their shares in exchange for $9 in consideration , or the “compromised position” of holding onto illiquid shares for the foreseeable and perhaps indefinite futu re. As Plaintiff observes , “[a] ‘no’ vote would have left Saba stockholders with illiquid stock and, on the heels of three years of unexplained delays in completing the restatement, with no clue as to if and/or when the Company’s financials would be brough t current and the de

- registration reversed.”46

3. Revlon Enhanced Scrutiny Will Apply Plaintiff urges the Court to review the transaction under Revlon enhanced scrutiny. 100 Since Corwin does not apply, I agree that the Merger is subject to enhanced scrutiny. 101 Having now fully addressed the gating issue of standard of review, I turn next to the contention that Plaintiff cannot state a breach of fiduciary duty claim against the Individual Defendants

. B. The Complaint States a Direct, Non
- Exclupated Claim for Breach of Fiduciary Duty Against the Individual Defendants Plaintiff a lleges that the Individual Defendants breached their fiduciary duties of care and loyalty in connection with the Merger by “fail[ing] to negotiate a full and

Letter to Vice Chancellor Slights from Peter B. Andrews, Esq. in response to January 31, 2017 Letter requesting supplemental briefing 5. To make matters worse , the “compromised position” was one that stockholde rs could not fully comprehend given the failure of the Proxy to disclose why the Restatement had not been completed and what other post

- deregistration options might be available to Saba as discussed by the Board on December 3, 2014 . And, of course, becaus e the stock was deregistered, the Board was able to hurry the vote since SEC review of the Proxy materials and GAAP financials was no longer required. If Plaintiff can prove that this, in fact, was the choice Saba stockholders were given, then they will p rove that the stockholders were given no real choice at all.

100 Answering Br. 34 (citing Paramount Commc’ns

. Inc. v. QVC Network Inc. , 637 A.2d 34, 42 (Del. 1994); In re Toys “R” Us, Inc. S’holder Litig. , 877 A.2d 975, 1000 (Del. Ch. 2005)).

101 Id. Which party will bear what burden in the context of this post

- close Revlon claim, and the impact of the e xculpatory provision in Saba’s c harter on the burden of proof, are issues that the parties have not had an opportunity to address and which the Court w ill address as a ppropriate later in this litigation. Page 46 revised on 4/11/1747

fair price for Saba’s public shares following a process riddled with missteps and
conflicts of int erest.” 102 The Individual Defendants dispute these claims on the merits but also raise two predicate defenses that they argue require the Court to dismiss the claims as a matter of law. First , the Individual Defendants characterize the gravamen of Plaintiff’s Complaint as alleging that t he Board mismanaged Saba during its Restatement process in a manner that caused the stock price to fall. This claim , according to the Individual Defendants, is a derivative claim that wa s extinguished in the Merger. Second , the Individual Defendants contend that even if the claims are direct claims, the Complaint fails to state any non

- exculpated claims that can pass through the Section 102(b)(7) exculpatory clause in Saba’s certificate of incorporation. 103 I will address each argument in turn. 1. Plaintiff h as Pled Direct Claims The Individual Defendants argue that at the core of Plaintiff’s breach of fiduciary duty claim is the allegation that the Board failed adequately to oversee or otherwise manage the Company’s effort to restate its financials, especially in connection with the SEC

- mandated Restatement . According to the Individual Defendants , this is a classic derivative claim that the Plai ntiff no longer has standing

102 Id. at 7.

103 8 Del. C. § 102(b)(7).48

to pursue in the wake of the Merger. “Under Delaware law, it is well established that a merger which eliminates a derivative plaintiff’s ownership of shares of the corporation for whose benefit she has sued terminates her stan ding to pursue those derivative claims.” 104 In determining whether a claim is derivative or direct, the court will consider “(1) who suffered the alleged harm (the corporation or the suing stockholders , individually); and (2) who would receive the benefit of any recovery or other remedy (the corporation or the stockholders, individually).” 105 Claims of corporate mismanagement are classically derivative claims because , if proven, they represent “direct wrong to the corporation that is indirectly experienced b y all shareholders.” 106 While claims that challenge directors’ conduct during a merger

104 Lewis v. Ward , 852 A.2d 896, 900

– 01 (Del. 2004).

105 Tooley v. Donaldson, Lufkin & Jenrette, Inc. , 845 A.2d 1031, 1033 (Del. 2004).

106 Kramer v. W. Pac. Indus., Inc. , 546 A .2d 348, 353 (Del. 1998) (“[W]here a plaintiff shareholder claims that the value of his stock will deteriorate and that the value of his proportionate share of the stock will be decreased as a result of alleged director mismanagement, his cause of action i s derivative in nature.”). See also Alb ert v. Alex. Brown Mgmt. Serv s . , Inc. , 2005 WL 2130607, at *13 (Del. Ch. Aug. 26, 2005) (“The gravamen of these claims is that the Managers devoted inadequate time and effort to the management of the Funds, thereby c ausing their large losses. Essentially this [is] a claim for mismanagement, a paradigmatic derivative claim.”); Agostino v. Hicks , 845 A.2d 1110, 1123 (Del. Ch. 2004) (holding a claim that a company impeded the pursuit of a value

maximizing transaction wa s a claim of mismanagement and therefore derivative); In re Syncor Int’l Corp. S’holders Litig. , 857 A.2d 994, 997

– 98 (Del. Ch. 2004) (same).49

process are direct claims, 107 claims that corporate fiduciaries mismanage d th e enterprise in a manner that lowered t he price an acquiror is willing to pay in connection wit h a merger are derivative claim s belonging to the corporation

. 108 Here, Plaintiff ’s claim against the Individual Defendants for breach of fiduciary duty aris es from their conduct during the sales process and in recommending the Merger to stockholders. Speci fically, Plaintiff a lleges that the Individual Defendants initiated a process to sell Saba that undervalued the Company and vested them with benefits that were not shared equally by Saba’s public stockholders. In addition, by agreeing to the Merger, the Individual Defendants capped the price of Saba stock at a price that does not adequately reflect the Company’s true value. Moreover, the Individual Defendants disregarded the true value of the Company, in an effort to benefit themselves. The Individual D efendants made materially inadequate disclosures and material disclosure omissions in the Proxy disseminated to Company stockholders and completed the Merger pursuant to an uninformed vote of Saba’s stockholders. 109
As reflected in this summary of the Pla intiff ’s allegations , and as reiterated in Plaintiff’s response to the motions to dismiss, the essence of the breach of fiduciary claim is “ that the sales process was flawed, controlled by a conflicted insider, and that the price Saba stockholders received in the Merger was unfair.” 110 While

107 See, e.g. Parnes v. Bally Entm’t Corp. , 722 A.2d 1243, 1245 (Del. 1999).

108 Feldman v. Cutaia , 951 A.2d 727, 734

– 35 (Del. 2008).

109 Compl. ¶ 125.

110 Answering Br. 23.50

Caremark or Kramer

- like claim s might reside somewhere within the pled facts, Plaintiff has not made th ose claim s and acknowledges that he would face a nearly vertical climb to establish his standing to do so now that the Merger has closed. 111 Instead, Plaintiff has endeavored to state a direct claim for breach of fiduciary duty relating to the Board’s conduct of an allegedly flawed sales process , its role in approving a transaction that deliver ed unique benefits to managem ent and members of the Board to the detriment of the stockholders and its failure to make complete disclosures in the Proxy. T hese are direct claims that “constitute a direct challenge to the fairness of the merger itself” ; “[t]hey are not extinguished by the merger.” 112 Plaintiff undeniably has recited facts that spell out the Company’s tortured history, including the financial fraud and repeated failures to restate its financial statements notwithstanding assurances to the market, regulators and stockhol ders that it would complete the task. Plaintiff has also related these facts to adverse consequences to the Company and its stockholders. These facts provide the

111 In re Caremark Int’l Inc

. Deriv. Litig. , 698 A.2d 959 (Del. Ch. 1996) (addressing the derivative claim of breach of the directors’ duty of corporate oversight); Kramer , 546 A.2d at 353 (addressing the derivative claim of mismanagement that causes an acquiror to offer less in an acquisition). See Tr. of Oral Arg. on Mots

. to Dismiss Dec

. 8, 2016 at 64.

112 Crescent/Mach I P’rs, L.P. v. Turner , 846 A.2d 963, 973 (Del. Ch. 2000). See Chen v. Howard

- Anderson , 87 A.3d 648, 672

– 73 (Del. Ch. 2014) (holding that “enhanced scrutiny requires that the defendant fiduciaries show that they acted reasonably to seek the transaction offering the best value reasonably available to the st ockholders, which could be remaining independent and not engaging in any transaction at all”) ( citations and internal quotation marks omitted ).51

b ackground that animates the Plaintiff’s theory that the Board timed the Merger to
advance s elfish objectives, including the desire to avoid further regulatory scrutiny and the push to monetize otherwise illiquid equity awards that had been suspended or canceled due to the failu re to complete the Restatement . The fact that Plaintiff highlights m ismanagement to enrich his breach of fiduciary duty narrative does not convert the claim from direct to derivative. He has standing to pursue Merger

related claims directly against the Individual Defendants and their effort to dismiss the claim s on that b asis is rejected. 113
2. Plaintiff h as Pled Non
- Exculpated Claims Saba’s certificate of incorporation, of which I take judicial notice, 114 contains an exculpatory provision in Article IX which provides: The personal liability of the directors of the corporation is hereby eliminated to the fullest extent permitted by the provision of paragraph

113 In the briefing, the parties addressed whether claims of mismanagement might survive the Merger under the so

- called “fraud exception” to the continuous ownership requirement for derivative suits as recognized in Ark. Teacher Ret. Sys. v. Countrywide Fin. Corp. , 75 A.3d 888 (Del. 2013) (“ Countrywide II ”). U nder Countrywide II , a former stockholder will not lose standing to pursue a derivative claim if she can establish that the merger “was the final step of a conspiracy to accomplish an unlawful end by unl awful means.” Id. at 896. Plaintiff has not pled any such conspiracy here. While the Complaint alleges that the “Merger allowed Defendants to sweep their wrongdoing under the rug,” Compl. ¶ 88, it nowhere alleges that the purpose of the Merger was to ext inguish stockholders’ derivative standing to challenge the mismanagement as required by Countrywide II

. 114 See McMillan v. Intercargo Corp. , 768 A.2d 492, 501 n.40 (Del. Ch. 2000).52

(7) subsection (b) of Section 102 of the General Corporation Law of the State of Delaware, as the same may be amen ded and supplemented. 115 “[A] plaintiff[] must plead a non

- exculpated claim for breach of fiduciary duty against an independent director protected by an exculpatory charter provision, or that director will be entitled to dismissal from the suit.” 116 Regardless of the standard of review that applies to the transaction, t he charter’s exculpatory provision insulates the Individual Defendants from claims they violated their duty of care in their capacity as directors

. 117 I t does not , however, insulate the Individual Defendants from alleged acts of bad faith or other breaches of the duty of loyalty. 118 In this regard, the Plaintiff must well

- plead the loyalty breach or other non

- exculpated claim against each individual director; group pleading will not suffic e in the face of an exculpatory provision. 119

115 Burns Aff. Ex. 2 (Saba Software, Inc. Amended and Restated Certificate of Incorporation, dated April 12, 2000 (and subsequent amendments thereto)), Art. IX.

116 In re Cornerstone Ther apeutics Inc. S’holder Litig. , 115 A.3d 1173, 1179 (Del. 2015).

117 Malpiede v. Townson , 780 A.2d 1075, 1093

– 94 (Del. 2001). The exculpatory provision does not apply to Farshchi to the extent he was acting in his capacity as an officer. See Gantler v. Stephens , 965 A.2d 695, 709 n.37 (Del. 2009).

118 See Emerald P’rs v. Berlin , 787 A.2d 85, 90 (Del. 2001) (“The purpose of Section 102(b)(7) was to permit shareholders . . . to adopt a provision in the certificate of incorporation to exculpate directors from any personal liability for the payment of monetary damages for breaches of their duty of care, but not for duty of loyalty violations, good faith violat ions, and certain other conduct.”).

119 In re Cornerstone Ther apeutics , 115 A.3d at 1179.53

Plaintiff argues that he has pled both director bad faith and breaches of the duty of loyalty. I address his arguments in that order. ( a ) Plaintiff h as Alleged Actionable Bad Faith Plaintiff alleges in various ways that the process by which the Board sold Saba was defective, in that the Board (1) abdicated oversight and control of the process to Farshchi and Morgan Stanley, (2) relied on a financial advisor with material conflicts, and (3 ) failed prop erly to ascertain Saba’s value and growth prospect s or fully consider alternatives to a sale. Under Revlon v. MacAndrews & Forbes Holdings, Inc. , 120 directors must engage in a sales process designed to maximize the price for its stockholders when there is a change of control. 121 T he process need only be a reasonable process , however, not a perfect process , and there is no particular path the board must take to discharge its mandate

. 122 In light of the exculpatory provision, to state a n actionable Revlon clai m, P laintiff must plead that the Individual Defendants consciously disregarded their duties, “knowingly and completely failed to undertake their responsibilities,” and “utterly failed to attempt to obtain the best sale price.” 123 Plaintiff’s argument with

120 506 A.2d 173 (Del. 1986).

121 Id. at 182.

122 Lyondell Chem. Co. v. Ryan , 970 A.2d 235, 242 (Del. 2009).

123 Id. at 243

– 44. See also In re Chelsea Ther apeutics Int’l Ltd. S’holders Litig. , 2016 WL 3044721, at *7 (Del. Ch. May 20, 2016) (holding that “ to state a bad

- faith claim, a plaintiff54

r espect to bad faith is that the Complaint’s “allegations are sufficient to infer that the Board breached their fiduciary duties in accepting a Merger value which, under any reasonable analysis and by Defendants’ own admission, was at best a small fraction of what Saba was truly worth.” 124 The bad faith, according to Plaintiff, is revealed by the fact that the Board rushed to complete the tr ansaction prior to the February 15, 2015 deadline for the Restatement set by the SEC , inter alia , to enable the Board

an d members of management to ca sh

- in on their equity awards knowing that the deregistration would otherwise render the awards practically worthless. Vice Chancellor Glasscock aptly described a finding of bad faith as “a rara avis ” (rare bird) in the fiduciary duty context

. 125 In cases where “ there is no indication of conflicted interests or lack of independence on the part of the directors, ” a finding of bad faith should be reserved for situations where “ the nature
of [the director’s] action can in no way be understood as in the corporate interest .” 126 With this in mind, the question of whether the Complaint pleads prima facie bad

must show either an extreme set of facts to establish that disinterested directors were intentionally disregarding their duties, or that t he decision under attack is so far beyond the bounds of reasonable judgment that it seems essentially inexplicable on any ground other than bad faith ”) (citations and internal quotation marks omitted).

124 Answering Br. 46.

125 In re Chelsea Therapeutics , 2016 WL 3044721, at *1.

126 Id. I address Plaintiff’s allegation that the Board acted with “conflicted interests” below.55

faith is a close call. The Complaint acknowledges that the B oard began meeting with Morgan Stanley in 2012 regarding possibl e strategic alternatives and formed a Strategic Committee of three independent directors in August 2013 to focus specifically on strategic alternatives. Saba then engaged in sale discussions with at least twelve parties from January to November 2014, and f ormed the Ad Hoc Committee of independent directors in November 2014 to provide additional oversight of the sales process

. In December 2014, at the request of the Ad Hoc Committee and the Board, management developed projections for the Company to

ascerta in the impact of the likely deregistration on t he Company . The Board considered those projections and from them determined the scenario it deemed most reasonable for Morgan Stanley to use in evaluating bids for the Company. The Board continued to evaluate the Company’s options throughout January, when it
received several new indications of interest, including Vector’s. When Vector’s proposal was the highest, the Board tried but failed to negotiate a price increase from Vector. Then, after receivi ng a fairness opinion from Morgan Stanley, the Board approved the Merger with Vector. At first glance, it is difficult to discern bad faith from this narrative. But there was an elephant in the board room from 2012 forward. The Company had engaged in frau d. It needed to restate its financial statements to account for that fraud. When it repeatedly failed to do so, the exchange on which its56

stock was listed, th e SEC and the market reacted

–– in each instance badly for the Company. The SEC said “enough is e nough” in September 2014 and set a deadline by which the Restatement had to be filed in order for the Company to avoid deregistration. This looming consequence became a foregone conclusion on December 15, 2014, when the Company announced that i t would not complete the
R estatement on time. Why the Company yet again could not complete the

r estatement of its financials remains a mystery. But the impact of this failure, according to the Complaint, is readily apparent. It is alleged that t he members of the
B oard , collectively, rushed the sales process, refused to consider alternatives to a sale, cashed

- in significant , otherwise worthless equity awards before the Merger , directed Morgan Stanley to rely upon the most pessimistic projections when considering the fairness of the transaction and then rushed the stockholder vote after supplying inadequate disclosures regarding the circumstances surrounding the failure to complete the Restatement

. 127 Whet her Plaintiff can develop proof to

127 In re PLX Tech. Inc. S’holders Litig. , C.A. No. 9880

- VCL, at *9

– 10 (Del. Ch. Sept. 3, 2015) (TRANSCRIPT) (holding that plaintiff’s bad faith allegations survive a motion a dismiss, even though bad faith was not the only possible inference, where the plaintiffs alleged that the board “did not decide to sell and did not engage in the sale process entirely because it was in the best interes ts of the stockholders but rather did so, in part, [for reasons contrary to those interests]”); In re Answers , 2012 WL 1253072, at *4 (holding that plaintiffs stated a claim for bad faith that would overcome a 102(b)(7) exculpatory clause by pleading facts that the board consciously violated its duties under Revlon by rushing a sales process to closing before the stockholders “could appreciate the Company’s favorable prospects”); Parnes , 722 A.2d at 1246 n.12 (holding that the court need not reach the issue57

sustain these alle gations rem ains to be seen, but for now, the Complaint alleges facts from which it is reasonably conceivable that the Board’s conduct with regard to the sales process and approval of the Merger “ can in no way be understood as in the corporate interest .” 128 Stated differently, Plaintiff has pled adequate facts to justify a pleading

- stage inference of bad faith. 129

of individual director independence “as our holding is based upon the entire board’s apparent failure to exercise its business judgment in good faith”).

128 In re Chelsea Ther

apeutics , 2016 WL 3044721, at *1.

129 Plaintiff has also argued that the Indiv idual Defendants breached their fiduciary duties by ceding control of the negotiations to Farshchi and Morgan Stanley, by engaging a banker with conflicts and by engaging in a structurally flawed sales process. These allegations do not pass through the ex culpatory provision as they state, at best, duty of care violations. See In re NYMEX S’holder Litig. , 2009 WL 3206051 , at *7 (Del. Ch. Sept. 30, 2009) (“It is well within the business judgment of the Board to determine how merger negotiations will be cond ucted, and to delegate the task of negotiating to the Chairman and Chief Executive Officer.”); Lyondell , 970 A.2d at 243 (“[T]here are no legally prescribed steps that directors must follow to satisfy their Revlon duties”); In re Smurfit

- Stone Container Co rp. S’holder Litig. , 2011 WL 2028076, at *23 (Del. Ch. May 20, 2011, revised May 24, 2011) (holding that contingent fees charged by investment bankers do not create inherent conflicts). Of these allegations, the closest to state a non

- exculpated claim is the allegation that the Board consciously disregarded its fiduciary duty by engaging Morgan Stanley knowing that it had previously done work for Vector. Specifically, the Complaint alleges (and the Proxy disclosed) that after receiving Vector’s indication of interest in January 2015, years after Morgan Stanley’s engagement with Saba began, the Board was apprised of Morgan Stanley’s prior relationship with Vector, where it and its affiliates had provided financing services to a Vector affiliate in exchange for customary fees of approximately $1 million. There is no per se rule that a fter learning of this past relationship, the Board was obliged to terminate Morgan Stanley and engage a new advisor. And t he Complaint does not support a reasonable inference that Morgan Stanley’s past relationship with Vector was of such significance tha t it could not fairly and impartially advise the Board.5 8

( b ) Plaintiff has Alleged an Actionable Breach of the Duty of L oyalty To plead a claim for breach of the duty of loyalty that will overcome a mot ion
to dismiss , a plaintiff must plead sufficient facts to support a rational inference that the corporate fiduciary acted out of material self

- interest that diverg ed from the interests of the shareholders

. 130 Plaintiff has alleged that the Individual Defen dants breached their duty of loyalty by (1) securing for themselves mat erial personal benefits in connection with the Merger and (2) consciously allowing Farshchi to negotiate for his own interests during the sale process at the expense of the stockholders

.

(i) The Material Personal Benefits Conferred to the Board Plaintiff asserts that each member of the Board breached its fiduciary duty of loyalty by endorsing a less than value

- maximizing transaction so that they could achieve material personal benefits in the form of cash for their otherwise illiquid equity awards

. As pled in the Complaint, Saba had been unable to award equity compensation to its directors for an extended time due to its need to restate its financials. Then, on the day before the Merger Agreement was signed, the Board awarded cash payments equal to the amount of their suspended equity awards, including those that had either not been settled, had expired, lapsed or even been

130 Cede & Co v. Technicolor, Inc. , 634 A.2d 345, 363

– 64 (Del. 1993).59

canceled during the Restatement proc ess. Awards that had not yet vested were accelerated. The timing of the equity awards bolsters Plaintiff’s self

- interest theory. The Board approved an equity award to all independent directors on January 7, 2015 , in the midst of Saba’s sales process, upo n the “recommendation of the Compensation Committee regarding the annual grant of 10,000 Restricted Stock Units to each independent Director serving on the Board.” 131 The change of control payments , which converted equity awards into the right to cash payme nts upon a change of control, were then approved the day before the Merger Agreement was signed. In the ordinary course, as the Individual Defendants point out, 132 this timing would hardly support an inference of self

- interest . Indeed, it is not at all unc ommon for companies to address outstanding executive compensation on the eve of a merger. 133 But, again, this is not the typical case. The looming deregistration neutralized the equity awards; the prospect of a merger with Vector was the only means to revi ve

131 Compl. ¶ 93.

132 See Opening Br. in Supp. of the Individual Defs.’ Mot. to Dismiss the Second Am. Verified Class Action Compl. (“Individual Defs.’ Opening Br.”) 30 (arguing that neither “[t]he substitution of cash compensation for pre

- existing, vested compensation obligations” nor “[t]he acceleration of equity compensation is . . . a breach of fiduciary duty.”).

133 See, e.g., In r e OPENLANE, Inc. S’holders Litig. , 2011 WL 4599662, at *5 (Del. Ch. Sept. 30, 2011); Globis P’rs, L.P. v. Plumtree Software, Inc. , 2007 WL 4292024, at *8 (Del. Ch. Nov. 30, 2007); Krim v. ProNet, Inc. , 744 A.2d 523, 528 (Del. Ch. 1999).60

them and convert them to cash . It is reasonably conceivable that this would steer the Individua l Directors away from the stand alone option, even if that option was in the best interests of stockholders. 134
The Individual Defendants argue that “[a]t the Merger, Saba was contractually obligated to make good on its prior compensation commitments. ” 135 That may well
be true but t here is no reference to this alleged contractual obligation anywhere in the Complaint or in the documents incorporated ther ein by reference

. Instead, the Complaint states that equity awards were likely illiquid due to the Company’s ongoing failure to restate its financials and that there was no firm prospect that the awards would ever be made

. While the timing of the equity compensation grants may not be quite as suspicious as those awarded in K

- Sea , the fact that the Board received this cash compensation in lieu of suspended equity grants in connection with the Merger , given the uncertainty surrounding the Restatement , suppo rts a reasonable inference that the Board approved the Merger in order to receive that

134 See Globis , 2007 WL 4292024, at *9 (noting that “the acceleration of unvested options could be viewed as an inducement to effectuate” a merger, but determining the acceleration of options in that case was not significant enough to infer that the directors were interested i n the transaction); In re K

- Sea Trans

. P ’ rs L.P. Unitholders Litig

. , 2011 WL 2410395, at *7 (Del. Ch. June 10, 2011) (noting that significant options granted to members of the committee tasked with evaluating a transaction close in time to the commencement of negotiations supported an inference that the members were interested in the transaction).

135 Individual Defs.’ Opening Br. 30.61

compensation

. 136 Therefore, I find that the Complaint adequately states a claim that the Board was interested in and approved the transaction due to the material personal
benefits the directors would receive through cash compensation in lieu of equity grants in connection with the Merger.

(ii) Farshchi’s Employment and Compensation Plaintiff also contends that Farshchi was motivated by self

- interest in pursuing and negoti ating the transaction with Vector , and that he dominated the Board throughout the sales process

. 137 Specifically, Plaintiff contends that Farshchi was

136 This argument applies with equal force to Farshchi, who received even greater merger

related cash compensation for his equit y. As noted earlier, the section 102(b)(7) provision does not serve to exculpate Farshchi to the extent he was acting in his capacity as an officer. While not contested by the Individual Defendants, I find that the benefits received by each of the Indivi dual Defendants were material in that “the alleged benefit was significant enough ‘ in the context of the director’s economic circumstances , as to have made it improbable that the director could perform her fiduciary duties to the . . . shareholders without being influenced by her overriding personal interest.’” Orman v. Cullman , 794 A.2d 5, 23 (Del. Ch. 2002) (quoting Gen. Motors , 734 A.2d at 617 (emphasis added) (citations omitted)). Denzel, Fawkes, Klein, MacGowan , Russell, and Wilson each received $270,000 in merger

- related compensation through the immediate vesting of their equity awards while Farshchi received $2,828,050. These pled facts support a reasonable inference of materiality since the synthetic options and synthetic RSUs for which the Individual Defendants received cash compensation in connection with the Merger constituted the only holdings that they had in the Company. Compare Globis , 2007 WL 4292024, at *9 (noting the importance of the fact that onl y a minimal portion of the directors’ overall holdings were accelerated due to the merger in the court’s determination that the directors were not conflicted in evaluating the merger) with K

- Sea , 2011 W L 2410395, at *7 (finding that the complaint stated a colorable claim that an independent committee was tainted in evaluating a merger by recent equity grants representing a significant portion of those directors’ holdings in the company).

137 See Orma n , 794 A.2d at 19

– 20.62

driven to negotiate a deal with Vector, and then to push the Board to approve the transaction, so that he could secure employment with new

- Saba after the Merger. Farshchi was an at

- will employee at Vector after the Merger with the same base salary he had receive d prior to the Merger and a guarantee that the salary would never be reduced. 138
T he first meeting Farshchi had with Vector to negotiate his continued employment occurred on February 4, 2015, five days before the Merger Agreement was signed and after the e conomic terms and nearly all due diligence on the deal

were finalized . The Complaint also acknowledges that Vector demanded that it be permitted to negotiate a new employment contract with Farshchi as a condition to entering into the transaction. The Com plaint lacks any allegations that Farshchi engaged in any employment negotiations prior to this demand with any of the potential acquir o rs or that he was driven to take certain positions during the negotiations by a desire to be retained at the surviving c ompany. This is unlike In re Answers Corporation Shareholders Litigation , 139 where plaintiffs alleged that the CEO would lose his jo b unless he sold the company, 140 or In re Lear Corporation

138 Notably, Farshchi left the post

- Merger company in July 2015, just months after the completion of the Merger.

139 2012 WL 1253072 (Del. Ch. Apr. 11, 2012).

140 Id. at *7.63

Shareholder Litigation , 141 where the CEO negotiating the transaction h ad a unique and personal need for liquidity that was not shared by all stockholders. 142 Farshchi shared the liquidity predicament caused by the pending deregistration of Saba’s stock with all of Saba’s stockholders. Therefore, I find that the Complaint doe s not support a reasonable inference that Farshchi was interested in the transaction for any reason other than the equity

- related c ash

- out he received in connection with the Merger along with all other members of the Board.

*************
H aving found that the Complaint supports a reasonable inference that the
Board acted in bad faith and w as interested in the transaction due to its extraction of
merger - related compensation, the Individual Defendants’ motion to dismiss Count I
must be denied as the Complaint adequately states a claim for breach of the fiduciary duty of loyalty

. C. Plaintiff Has Failed to Plead Aiding and Abetting A gainst Vector The Vector Defendants move to dismiss Plaintiff’s aiding and abetting claim both for failure to pl ead an underlying breach of fiduciary duty and for failing adequately to plead that Vector knowingly aided the Individual Defendants in any

141 926 A.2d 94 (Del. Ch. 2007).

142 Id. at 100.64

breach they may have committed, i.e., scienter. I reject the first argument for the reasons stated above. I addres s the second argument below.
To state a claim for aiding and abetting a breach of fiduciary duty, the plaintiff must plead : “(1) the existence of a fiduciary relationship, (2) the fiduciary breached its duty, (3) a defendant, who is not a fiduciary, knowin gly pa rticipated in a breach, and (4) damages to the plaintiff resulted from the concerted action of the fiduciary and the non

- fiduciary.” 143 In order for a third party’s actions to constitute knowing participation in a breach of fiduciary duty , that third party must “act with the knowledge that the conduct advocated or assisted constitutes such a breach.” 144
The Complaint alleges that the Vector Defendants knowingly aided and abetted the Board’s breach of fiduciary duty by acquiring Saba at a price it knew

wa s unfair and by unfairly leverag ing its position as a Saba lender armed with
confidential information that other Saba stockholders did not possess

. 145 Plaintiff

143 Gotham P’rs, L.P. v. Hallwood Realty P’rs, L.P. , 817 A.2d 16 0, 172 (Del. 2002) (quoting Fitzgerald v. Cantor , 1999 WL 182573, at *1 (Del. Ch. Mar. 25, 1999)). See also Malpiede , 780 A.2d at 1096 (same).

144 Id. at 1097

– 98 (explaining that “[u]nder this standard, a bidder’s attempts to reduce the sale price through a rm’s

- length negotiations cannot give rise to liability for aiding and abetting, whereas a bidder may be liable to the target’s stockholders if the bidder attempts to create or exploit conflicts of interest in the board. Similarly, a bidder may be liable t o a target’s stockholders for aiding a nd abetting a fiduciary breach by the target’s board where the bidder and the board conspire in or agree to the fiduciary breach.”) (citations omitted).

145 See Compl. ¶ 129 (“Vector has worked with Saba since 2013, and is therefore, familiar with the Company’s true value. . . . Accordingly, Vector had access to Saba’s most recent and detailed financial information, information ordinary stockholders were unable to65

correctly posits that an acquiror “may not knowingly participate in the target board’s breach of fiduciary duty by extracting terms which require the opposite party to prefer its interests at the expense of its shareholders.” 146 The rationale for this settled rule is that a bidder may not knowingly “[c]reat [e] or exploit [e] a fiduciary breach

. ” 147 Plaintiff has pled no facts that would support a reasonable inference that Vector did anything of the sort here. And , while Plaintiff now argues that Vector used the confidential information it po ssessed to “push the Board to end the sales process quickly to assure the Merger Agreement would be executed before Saba’s stockholders learned of the Company’s favorable prospects , ” 148 the Complaint is devoid of any such factual allegations. 149 Plaintiff can not defeat a n argument raised

access. Vector took advantage of the Individual Defendan ts’ breaches to extract terms locking up the deal for itself and in order to acquire the Company at an unfair price.”). See also Ans wering Br. 55

– 58.

146 Gilbert v. El Paso Co. , 490 A.2d 1050, 1058 (Del. Ch. 1984), aff’d , 575 A.2d 1131 (Del. 1990).

147 In re Del Monte Foods Co. S’holders Litig. , 25 A.3d 813, 837 (Del. Ch. 2011).

148 Ans wering Br. 56

– 57.

149 See Compl. ¶¶ 23, 60, 67, 129. I note as well that Plaintiff has not identified specifically what these “favorable prospects” were, and that nothing in the Co mplaint or the Proxy identifies any favorable new developments with Saba’s business or anticipated growth. Rather, Plaintiff seems to be attempting to invoke In re Answers , where the court refused to dismiss an aiding and abetting claim for failure to sta te a claim where the acquirors “used [confidential] information to push the Board to end the sales process quickly to assure the Merger Agreement would be executed before Answers’ shareholders learned of the Company’s favorable prospects

. ” In that case, h owever, the acquirors had access to confidential information that allegedly showed an increase in operating and financial66

in a motion to dismiss by proffering an after

- the

- fact theory for this first time in his answering brief. 150 Moreover, “the receipt of confidential information, without more, will not usually be enough to plead a claim for aid ing and abetting.” 151 Likewise, conclusory allegations that a third party received “too good of a deal,” without more, will also
be insufficient to state a claim for aiding and abetting the breach of fiduciary duties. 152 Yet t hat is exactly what Plaintiff ha s pled here. Since the Complaint contains no well

- pled allegations from which I can reasonably infer that the Vector Defendants “act[ed] with the knowledge ” that their conduct during the sales process

performance that would likely increase the market price for the target company’s stock above the acquirors’ offer price. In re Answer s , 2012 WL 1253072, at *9

– 10.

150 See OLL Ventures, Inc. v. Woodland Mills Assocs., L.P. , 2001 WL 312452, at *1

– 2 (Del. Ch. Mar. 8, 2001) (refusing to consider an allegation not found in the complaint when addressing plaintiff’s response to a motion to dismi ss); Dolphin Ltd. P’ship I, L.P. v. Gupta , 2007 WL 315864, at *1 (Del. Ch. Jan. 22, 2007) (same); Orman , 794 A.2d at 28 n.59 (“Briefs relating to a motion to dismiss are not part of the record and any attempt contained within such documents to plead new fa cts or expand those contained in the complaint will not be considered

. ”).

151 In re Answers , 2012 WL 1253072, at *10

. 152 Dent , 2014 WL 2931180, at *18. See also Morgan v. Cash , 2010 WL 2803746, at *8 (Del. Ch. July 16, 2010) ( “Under our law, both the bidder’s board and the target’s board have a duty to seek the best deal terms for their own corporations when they enter a merger agreement. To allow a plaintiff to state an aiding and abetting claim against a bidder simply by mak ing a cursory allegation that the bidder got too good a deal is fundamentally inconsistent with the market principles with which our corporate law is designed to operate in tandem.”); In re Lukens Inc. S’holders Litig. , 757 A.2d 720, 735 (Del. Ch. 1999) (“ [I]t should be obvious that ‘an offeror may attempt to obtain the lowest possible price for stock throug h arm’s

- length negotiations.’”), aff’d , 757 A.2d 1278 (Del. 2000) (TABLE).67

aided and abetted the Individual Defendants in any bre ach of fiduciary duty, 153 Count II of the Complaint must be dismissed

. IV. CONCLUSION For the foregoing reasons, the Individual Defendants’ motion to dismiss is DENIED, and the Vector Defendants’ motion to dismiss is GRANTED. IT IS SO ORDERED.

153 Malpie de , 780 A.2d at 1097

– 98.