Opinion ID: 1952721
Heading Depth: 1
Heading Rank: 27

Heading: Deal Protection Devices

Text: Defensive devices, as that term is used in this opinion, is a synonym for what are frequently referred to as deal protection devices. Both terms are used interchangeably to describe any measure or combination of measures that are intended to protect the consummation of a merger transaction. Defensive devices can be economic, structural, or both. Deal protection devices need not all be in the merger agreement itself. In this case, for example, the Section 251(c) provision in the merger agreement was combined with the separate voting agreements to provide a structural defense for the Genesis merger agreement against any subsequent superior transaction. Genesis made the NCS board's defense of its transaction absolute by insisting on the omission of any effective fiduciary out clause in the NCS merger agreement. Genesis argues that stockholder voting agreements cannot be construed as deal protection devices taken by a board of directors because stockholders are entitled to vote in their own interest. Genesis cites Williams v. Geier [57] and Stroud v. Grace [58] for the proposition that voting agreements are not subject to the Unocal standard of review. Neither of those cases, however, holds that the operative effect of a voting agreement must be disregarded per se when a Unocal analysis is applied to a comprehensive and combined merger defense plan. In this case, the stockholder voting agreements were inextricably intertwined with the defensive aspects of the Genesis merger agreement. In fact, the voting agreements with Shaw and Outcalt were the linchpin of Genesis' proposed tripartite defense. Therefore, Genesis made the execution of those voting agreements a nonnegotiable condition precedent to its execution of the merger agreement. In the case before us, the Court of Chancery held that the acts which locked-up the Genesis transaction were the Section 251(c) provision and the execution of the voting agreement by Outcalt and Shaw. With the assurance that Outcalt and Shaw would irrevocably agree to exercise their majority voting power in favor of its transaction, Genesis insisted that the merger agreement reflect the other two aspects of its concerted defense, i.e., the inclusion of a Section 251(c) provision and the omission of any effective fiduciary out clause. Those dual aspects of the merger agreement would not have provided Genesis with a complete defense in the absence of the voting agreements with Shaw and Outcalt.