Assume that after the news of CC's conversations leaks, Whata-Chunka-Chocolate, Inc.

(WCC), a closely held multinational corporation headed by Charlie Chunky, its 80%

shareholder, approaches CC's CEO, Crocker Jackie who, along with her family, owns 32% of

CC's shares, with an offer to buy all shares of CC for $45 per share made up of $25 dollars cash

and $20 worth of WCC's common stock. Any deal would be conditioned on the removal of the

poison pill and the negotiation of a satisfactory merger agreement. Jackie tells Chunky that CC

is not for sale and, in addition, it is worth much more than $45 per share despite its market price

at the time being $33 per share. When Jackie reports the Chunky conversation to CC's board,

the board seeks advice from its financial advisor, Dewey Cheatem & Howe who tells the board

that CC's value is upwards of $50 per share. After a long discussion and presentation Dewey

suggests that the board add as an additional defense an open market share repurchase program.

The board considers the presentation and continues that consideration at its next meeting at

which time it approves the open market repurchase for 10% (about 5 million shares) of CC's

stock.

Seltzer consults with you again to get your views on the additional defense and the

combination of defenses. This time you tell him that the court would review the defenses

pursuant to:

a.

enhanced scrutiny

b.

the business judgment rule.

c.

the business purpose test.

d.

none of the above. If you choose this answer, explain why in no more than 45

words.