I need a well written student case brief including the following:

Facts: statement of the facts of the case

General Analysis: the legal principles used to decide the case, including the

Issue and Holding: the primary question and answer of law

Applied Analysis: application of the General Analysis to the Facts, leading to the

Judgment: of the case For the following:

#1. Omnicare, Inc. v. NCS Healthcare, Inc. 818 A.2d 914 (Del. 2003)

#2. Coggins v. New England Patriots Football Club, Inc. 492 N.E.2d 1112 (Mass. 1986)

Please do #1 and #2 separately

The screenshots in white are notes to refer to.

FYI, i don't need any research from the internet, and the fact needs to be your own words, please. Thank you.

References:

#1. Omnicare, Inc. v. NCS Healthcare, Inc. 818 A.2d 914 (Del. 2003)

(o7 Business Law: The Ethical,... The Authors Preface Acknowledgments A Guided T Instructor Supplements IS Contents [EE e HeEEL > Part 1: Foundations of Ameri... Part 2: Crimes and Torts LEla gL hE S > Part 4: Sales Part 5: Property > Part 6: Credit Part 7: Commercial Paper Part 8: Agency Law VAP OIS T Part 10: Corporations > 41: History and Nature of... > 42: Organization and Fin v 43: Management of Corp... (e v Corporate Powers Purpose Clauses in.. Powers of Nonprofit Co... PR LCELEIG R I G CHAPTER 43 Management of Corporations lestra Corporation is a manufacturer of consumer products ranging from canned and packaged foods like spaghetti sauce and popcorn to over-the-counter health aids like toothpaste and mouthwash. Its 'annual worldwide revenues are just under $6 billion. Clestra brands are not among the top two in the industry in any of its product lines, each brand ranking from fourth to sixth in annual sales in countries in which it markets its products. Clestra's CEO has been discussing the company's future with its consultant, KRNP Con- sulting LLP. KRNP has suggested that Clestra consider acquiring Ballston Inc., a consumer products company with $2 billion in annual sales. Ballston's brands are complementary to Clestra's brands, and while smaller than Clestra, Ballston has a distribution system that will give Clestra access to markets in which Clestra is not cur- rently a significant seller. Clestra's CEQ also wants to improve consumer recognition of the Clestra brand. She suggests that Clestra acquire naming rights to a stadium being built for a bascball team in northern Virginia, the Virginia Hatchets. The CEQ thinks that Clestra has the inside track to acquire naming rights because the family of one of Clestra's board mem- bers owns the baseball team that will own and operate the stadium. * What legal standard will determine whether Clestra's board of directors has acted properly when approving Cles- tra's acquisition of Ballston? What role may KRNP Consulting take in helping Clestra's board of directors meet its duties under that legal standard? * What legal standard will judge whether Clestra's board of directors has acted properly when acquiring naming rights to the Virginia Hatchets's stadium? What role may KRNP Consulting take in helping Clestra's board of directors meet its duties under that legal standard? Suppose Clestra's CEO is concerned that Clestra may be a target for a takeover by one of the larger consumer goods companies. If Clestra wants to remain an independent company, what should Clestra's board of directors do now to increase the chances that it may fend off a hostile takeover? What legal standard will judge whether Clestra's board has acted properly in adopting defenses against a hostile takeover? What should Clestra's board do now to increase the likelihood that the board will comply with that legal standard when it opposes a hostile takeover? @ LearNING OBJECTIVES After studying this chapter, you should be able to: 431 Understand the limits on the objectives and powers of corporations, especially the pressures corporate managers face in satisfying the interests of shareholders and other constituents. 43-3 Describe recent developments in corporate governance. 43-4 Adapt the rules of corporate governance to the practical requirements of close corporations. 43-2 Appreciate the roles of the board of directors and its various committees. 43-5 Know the legal standards that judge actions of officers and directors and follow the steps required to comply with each standard. 43-6 List and describe tactics a board of directors may adopt to defend against hostile takeovers. PartTen Corporations 43-7 Explain the legal limits of corporate liability for officers' and directors' actions. ALTHOUGH SHAREHOLDERS OWN a corporation, they traditionally have possessed no right to manage the business of the corporation. Instead, shareholders elect individuals to a board of directors, to which management is entrusted. Often, the board delegates much of its manage- ment responsibilities to officers and other managers. 'This chapter explains the legal aspects of the board's and officers' management of the corporation. Their manage- 'ment of the corporation must be consistent with the objec- tives and powers of the corporation, and they owe duties to the corporation to manage it prudently and in the best inter- ests of the corporation and the shareholders as a whole. Corporate Objectives Understand the limits on the objectives and powers \\ of corporations, especially the pressures corporate ) managers face in satisfying the interests of shareholders and other constituents. The traditional objective of the business corporation has been to enhance corporate profits and shareholder gain. According to this objective, the managers of a corporation must seek the accomplishment of the profit objective to the exclusion of all inconsistent goals. Interests other than profit maximization may be considered, provided that they do not hinder the ultimate profit objective. Nonetheless, some courts have permitted corporations to take socially responsible actions that are not strictly or obviously aimed at the profit maximization requirement. In addition, every state recognizes corporate powers that are not solely economi- cally inspired. For example, corporations may make contribu- tions to colleges, political campaigns, child abuse prevention centers, literary associations, and employee benefit plans, regardless of direct economic benefit to the corporation. Also, every state expressly recognizes the right of shareholders to choose freely the extent to which profit maximization captures all of their interests and all of their sense of responsibility. Most states have enacted corporate constituency statutes, which broaden the legal objectives of corporations. Such statutes permit or require directors to take into account the interests of constituencies other than shareholders, includ- ing employees, suppliers, and customers. These statutes direct the board to act in the best interests of the corpo- ration and its stakeholders, not just short-term interests of the shareholders, and to maximize corporate profits over the long term. Such laws promote the view that a corporation is a collection of interests working together for the purpose of producing goods and services at a profit, and that the goal of corporate profit maximization over the long term is not necessarily the same as the goal of stock price maximization over the short term. Even in the absence of a constituency statute, however, managers have wide latitude under the business judgment rule to maximize corporate value, which can include taking into account the interests of stakeholders. Ethics and Compliance in Action Corporate Constituency Statutes Over forty states have enacted corporate con- stituency stakeholder laws that explicitly permit directors to weigh the interests of constituencies other than shareholders, although no state reguires the consideration of other constitu- encies. Neither the MBCA nor the Delaware statute expressly authorizes corporate boards to consider the interests of any persons other than the shareholders. * Would you recommend that board members consider the interests of stakeholders other than shareholders when making a corporate decision? * Which ethical theories that we studied in Chapter 4 permit directors to consider the interests of constituencies other than shareholders? * Under profit maximization, what is the significance of non- shareholders' interests? Can a corporation maximize its profits without considering the interests of persons other than shareholders? (o7 Business Law: The Ethical,... The Authors Preface Acknowledgments A Guided T Instructor Supplements IS Contents [EE e HeEEL > Part 1: Foundations of Ameri... Part 2: Crimes and Torts LEla gL hE S EEHCE LY Part 5: Property > Part 6: Credit Part 7: Commercial Paper Part 8: Agency Law VAP OIS T Part 10: Corporations > 41: History and Nature of... > 42: Organization and Fin: v 43: Management of Corp... Corporate Objectives v Corporate Powers Purpose Clauses in.. Powers of Nonprofit Co... PR LCELEIG R I G Chapter Forty-Three - Management of Corporations 433 Corporate Powers The actions of management are limited not only by the objectives of business corporations but also by the powers granted to business corporations. Such limitations may appear in the state statute, the articles of incorporation, and the bylaws. The primary source of a corporation's powers is the cor- poration statute of the state in which it is incorporated. Some state corporation statutes expressly specify the pow- ers of corporations. These powers include making gifts for charitable and educational purposes, lending money to corporate officers and directors, and purchasing and dis- posing of the corporation's shares. Other state corporation statutes limit the powers of corporations, such as prohibit- ing the acquisition of agricultural land by corporations. Modern statutes attempt to authorize corporations to engage in any activity. The Model Business Corporation Act (MBCA) states that a corporation has the power to do anything that an individual may do. Purpose Clauses in Articles of Incorpo- ration Most corporations state their purposes in the articles of incorporation. The purpose is usually phrased in broad terms, even if the corporation has been formed with only one type of business in mind. Most corporations have purpose clauses stating that they may engage in any lawful business. Under the MBCA, the inclusion of a purpose clause in the articles is optional. Any corporation incorporated under the MBCA has the purpose of engaging in any lawful business, unless the articles state a more limited purpose. The Ultra Vires Doctrine Historically, an act of a corpo- ration beyond its powers was a nullity, as it was ultra vires, which is Latin for \"beyond the powers.\" Therefore, any act not permitted by the corporation statute or by the corporation's articles of incorporation was void due to lack of capacity. This lack of capacity or power of the corporation was a defense to a contract assertable either by the corporation or by the other party that dealt with the corporation. Often, ultra vires was merely a convenient justification for reneging on an agreement that was no longer considered desirable. 'This misuse of the doctrine has led to its near abandonment. Today, the ultra vires doctrine is of small importance for two reasons. First, nearly all corporations have broad pur- pose clauses, thereby preventing any ultra vires problem. Second, the MBCA and most other statutes do not permit a corporation or the other party to an agreement to avoid an obligation on the ground that the corporate action is ultra vires. Under the MBCA, ultra vires may be asserted by only three types of persons: (1) by a shareholder seeking to enjoin a corporation from executing a proposed action that is ultra vires; (2) by the corporation suing its management for damages caused by exceeding the corporation's powers; and (3) by the state's attorney general, who may have the power to enjoin an ultra vires act or to dissolve a corpora- tion that exceeds its powers. Powers of Nonprofit Corporations Nonprofit corporations, like for-profit corporations, have the power to transact business granted by the incorpora- tion statute, the articles, and the bylaws. The Model Non- profit Corporation Act (MNCA), like the MBCA, grants nonprofit corporations the power to engage in any lawful activity and to do anything an individual may do. Thus, a nonprofit corporation may sue and be sued, purchase, hold, and sell real property, lend and borrow money, and make charitable and other donations, among its many powers. Commonly, a nonprofit corporation's articles will limit its powers pursuant to a purpose clause. For example, a nonprofit corporation established to operate a junior baseball league may limit its powers to that business and matters reasonably connected to it. When a nonprofit cor- poration limits its powers, a risk arises that the corporation may commit an ultra vires act. The MNCA adopts the same rules for ulira vires contracts as does the MBCA: Generally, neither the corporation nor the other party may use ultra vires as a defense to a contract. The Board of Directors AW\\ Aopreciate the roles of the board of directors and its \\ various committees. Traditionally, the board of directors has had the authority and the duty to manage the corporation. Yet in a large publicly held corporation, it is impossible for the board to manage the corporation on a day-to-day basis because 'many of the directors are high-level executives in other cor- porations who devote most of their time to their other busi- ness interests. Therefore, the MBCA permits a corporation to be managed by or under the direction of the board of directors. Consequently, the board of directors delegates major responsibility for management to committees of the board such as an executive committee, to individual board members such as the board chairperson, and to the offi- cers and managers of the corporation, especially the chief 434 PartTen Corporations executive officer (CEO). In theory, the board supervises the actions of its committees, the chairperson, and the offi- cers and managers to ensure that the board's policies are being carried out and that the delegatees are managing the corporation prudently. Board Authority under Corporation Statutes A corporation's board of directors has the authority to do almost everything within the powers of the corporation. The board's authority includes not only the general power to manage or direct the corporation in the ordinary course of its business but also the power to issue shares of stock and to set the price of shares. Among its other powers, the board may repurchase shares, declare dividends, adopt and amend bylaws, elect and remove officers, and fill vacancies on the board. Some corporate actions require board initiative and shareholder approval. That is, board approval is necessary to propose such actions to the shareholders, who then must approve the action. Board initiative is required for import- ant changes in the corporation, such as amendment of the articles of incorporation, merger of the corporation, the sale of all or substantially all of the corporation's assets, and voluntary dissolution. Committees of the Board Most publicly held corporations have committees of the board of directors. These committees, which have fewer members than full board, can more efficiently handle management decisions and exercise board powers than can the entire board. Only directors may serve on board committees. Although many board powers may be delegated to com- mittees of the board, some decisions are so important that corporation statutes require their approval by the board as a whole. Under the MBCA, the powers that may not be delegated concern important corporate actions such as declaring dividends, filling vacancies on the board or its committees, adopting and amending bylaws, and approv- ing repurchases of the corporation's shares. The most common board committee is the executive committee. It is usually given authority to act for the board on most matters when the board is not in session. Gener- ally, it consists of the inside directors and perhaps one or two outside directors who can attend a meeting on short notice. An inside director is an officer of the corporation who devotes substantially full time to the corporation. Out- side directors have no such affiliation with the corporation. Audit committees are directly responsible for the appoint- ment, compensation, and oversight of independent public accountants. They supervise the public accountants' audit of the corporate financial records. In addition, many audit committees have oversight of regulatory compliance and risk management and mitigation activities. The Sarbanes-Oxley Act requires that all publicly held firms have audit commit- tees comprised of independent directors. Independent direc- tors, described more below, are those that do not accept any consulting or advisory fees from the company aside from what they are compensated as board members. That act was a response to allegations of unethical and criminal conduct by corporate CEOs and auditors at firms like Enron, World- Com, and Arthur Andersen in the 1990s and carly 2000s. Rules of the New York Stock Exchange (NYSE) and the NASDAQ, which apply to firms listed on those exchanges, also require that audit committees are independent. Nominating committees choose management's slate of directors that is to be submitted to shareholders at the annual election of directors. Nominating committees also often plan for management succession. NYSE and NAS- DAQ rules require that only independent directors select or recommend director nominees. Compensation committees review and approve the sala- ries, bonuses, stock options, and other benefits of high-level corporate executives. Although compensation committees usually comprise directors who have no affiliation with the executives or directors whose compensation is being approved, compensation committees may also set the com- pensation of their members. In 2018, non-executive, directors of large public companies received annual compensation including retainers, meeting attendance fees, and stock optionsaveraging more than $300,000. That amount, which can be much higher at individual firmsfor example, Goldman Sachs' directors average almost $600,000is over 40% more than it was 10 years prior. The public and Congress have criticized board approv- als of large compensation packages to CEOs and other toplevel officers, including stock options and bonus plans that sometimes allowed individual officers to earn more than $100 million in a single year. In 2018, Elon Musk, Tesla's CEO, was awarded over $500 million in stock options. Disney's chairman and CEO, Bob Iger, was the third-highest-paid executive that year, earning $146 million in salary, bonus, stock, and additional com- pensation. Hoping that board independence would rein in such compensation, the Securities and Exchange Com- mission (SEC) has adopted NYSE and NASDAQ rules that require independent directors to approve executive compensation. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 also requires periodic shareholder approval of executive compensation. Despite this, CEO pay continues to rise, as does the difference between median CEO and worker pay. A shareholder litigation committee is given the task of determining whether a corporation should sue someone who has allegedly harmed the corporation. Usually, this (o7 Business Law: The Ethical,... The Authors Preface Acknowledgments A Guided T Instructor Supplements IS Contents [EE e HeEEL > Part 1: Foundations of Ameri... Part 2: Crimes and Torts LEla gL hE S EEHCE LY Part 5: Property > Part 6: Credit Part 7: Commercial Paper Part 8: Agency Law VAP OIS T Part 10: Corporations > 41: History and Nature of... > 42: Organization and Fin: v 43: Management of Corp... Corporate Objectives v Corporate Powers Purpose Clauses in.. Powers of Nonprofit Co... > The Board of Directors Chapter Forty-Three - Management of Corporations 435 committee of disinterested directors is formed when a shareholder asks the board of directors to cause the cor- poration to sue some or all of the directors for mismanag- ing the corporation. Because the committee is supposed to objectively evaluate the merits of such a claim, it must be formed with the utmost care so there is no appearance that it may not be acting in the company's best interests. Who Is an Independent Director? Listing requirements for both the NYSE and NASDAQ provide basic checklists for director independence. Generally, independent directors are not employed by the company, do not have fam- ily members who are employed by the company, and do not have a controlling interest in the company's substantial busi- ness partners. The NYSE's listing requirements also note that independent directors have \"no material relationship\" with the corporation. The NASDAQ's requirements state that independent directors have no relationship that \"would interfere with the exercise of independent judgment in car- rying out the responsibilities of a director.\" When evaluating director independence, the courts consider close business or personal ties with controlling shareholders, other directors, or third parties with which the company does business; owner- ship of the company's stock; service on multiple boards; per- sonal interests in past and current company business deals; and political affiliations. Powers, Rights, and Liabilities of Direc- tors as In uals A director is not an agent of the corporation merely by being a director. The directors may manage the corporation only when they act as a board, unless the board of directors grants agency powers to the directors individually. A director has the right to inspect corporate books and records that contain corporate information essential to the director's performance of her duties. The director's right of inspection is denied when the director has an interest adverse to the corporation, as in the case of a director who plans to sell a corporation's trade secrets to a competitor. Normally, a director does not have any personal liability for the contracts and torts of the corporation. Election of Directors Generally, any individual may serve as a director of a corporation. A director need not even be a shareholder. Nonetheless, a corporation is permitted to specify qualifications for directors in the arti- cles of incorporation. A corporation must have the number of directors required by the state corporation law. The MBCA and several state corporation statutes require a minimum of 1 director, recognizing that in close corporations With a single shareholdermanager, additional board members are superfluous. Several statutes, including the California statute, require at least 3 directors, unless there are fewer than three shareholders, in which case the corporation may have no fewer directors than it has shareholders. A corporation may have more than the minimum number of directors required by the corporation statute. The articles of incorporation or bylaws will state the number of direc- tors of the corporation. The size of the boards of large pub- lic corporations average just over 9 directors but can vary widely. For example, Google has 15 directors; Facebook 10; US. Bank, 17; Salesforce, 19; and Johnson & Johnson, 13. Directors are elected by the shareholders at the annual shareholder meeting. Usually, each shareholder is permit- ted to vote for as many nominees as there are directors to be elected. The shareholder may cast as many votes for each nominee as he has shares. The top vote-getters among the nominees are elected as directors. This voting pro- cess, called straight voting, permits a holder of more than 50 percent of the shares of a corporation to dominate the corporation by electing a board of directors that will man- age the corporation as he wants it to be managed. To avoid domination by a large shareholder, some corpo- rations allow class voting or cumulative voting. Class voting may give certain classes of shareholders the right to elect a specified number of directors. Cumulative voting permits shareholders to multiply the number of their shares by the number of directors to be elected and to cast the resulting total of votes for one or more directors. As a result, cumu- lative voting may permit minority shareholders to obtain representation on the board of directors. Directors usually hold office for only one year, but they may have longer terms. The MBCA permits staggered terms for directors. A corporation may establish either two or three approximately equal classes of directors, with only one class of directors coming up for election at each annual shareholders' meeting. If there are two classes of directors, the directors serve two-year terms; if there are three classes, they serve threeyear terms. The original purpose of staggered terms was to permit continuity of management. Staggered terms also frustrate the ability of minority shareholders to use cumulative vot- ing to elect their representatives to the board of directors. The Proxy Solicitation Process Mostindividualinvestors purchase corporate shares in the public market to increase their wealth, not to elect or to influence the directors of corporations. Nearly all institutional investorssuch as pension funds, mutual funds, and bank trust departments have the same profit motive. Generally, they are passive investors with little interest in exercising their shareholder right to elect directors by attending shareholder meetings. Once publicownership of the corporation's shares exceeds 50 percent, the corporation cannot conduct any business at 436 PartTen Corporations its shareholder meetings unless some of the shares of these passive investors are voted. This is because the corporation will have a shareholder quorum requirement, which usually requires that 50 percent or more of the shares be voted for a shareholder vote to be valid. Because passive investors rarely attend shareholder meetings, the management of the corpo- ration must solicit proxies if it wishes to have a valid share- holder vote. Shareholders who will not attend a shareholder 'meeting must be asked to appoint someone else to vote their shares for them. This is done by furnishing each such share- holder with a proxy form to sign. The proxy designates a per- son who may vote the shares for the shareholder. Management Solicitation of Proxies To ensure its per- petuation in office and the approval of other matters submit- ted for a sharcholder vote, the corporation's management solicits proxies from shareholders for directors' elections and other important matters on which shareholders vote, such as mergers. The management designates an officer, a director, or some other person to vote the proxies received. The person who is designated to vote for the shareholder is also called a proxy. Typically, the chief executive officer (CEO) of the corporation, the president, or the chairperson of the board of directors names the person who serves as the proxy. Usually, the proxies are merely signed and returned by the public shareholders, including the institutional shareholders. Passive investors follow the Wall Street rule: Either support management or sell the shares. As a result, management almost always receives enough votes from its proxy solicita- tion to ensure the reelection of directors and the approval of other matters submitted to the shareholders, even when other parties solicit proxies in opposition to management. Management's solicitation of proxies may produce a result quite different from the theory of corporate management that directors serve as representatives of the shareholders. The CEO usually nominates directors of her choice, and they are almost always elected. The directors appoint officers chosen by the CEO. The CEO's nominees for director are not unduly critical of her programs or of her methods for carrying them out. This s particularly true if a large proportion of the direc- tors are officers of the company and thus are more likely to be dominated by the CEO. In such situations, the board of directors may not function effectively as a representative of the shareholders in supervising and evaluating the CEO and the other officers of the corporation. The board members and the other officers are subordinates of the CEO, even though the CEO is not amajor shareholder of the corporation. 4\\ Describe recent developments in corporate @/ sovemance. Proposals for improving corporate governance in pub- lic-issue corporations seek to develop a board that is capa- ble of functioning independently of the CEO by changing the composition or operation of the board of directors. Some corporate governance critics propose that a federal agency such as the SEC appoint one or more directors to serve as watchdogs of the public interest. Other critics would require that shareholders elect at least a majority of directors without prior ties to the corporation, thus exclud- ing shareholders, suppliers, and customers from the board. Other proposals recommend changing the method by which directors are nominated for election. One proposal would encourage shareholders to make nominations for directors. Supporters of this proposal argue that in addi- tion to reducing the influence of the CEO, it would also broaden the range of backgrounds represented on the board. The SEC recommends that publicly held corpo- rations establish a nominating committee composed of outside directors. Many publicly held corporations have nomination committees. Due to pressure from the public and Congress after the corporate scandals of the 1990s and early 20005, the SEC approved NYSE and NASDAQ corporate governance rules that make corporate boards more nearly indepen- dent of the CEO in structure, if not in action. One rule requires boards be comprised of only independent direc- tors. Equally important, the independent directors must meet from time to time by themselves in executive session independent of the CEO. In addition, institutional inves- torsincluding mutual funds and hedge fundsare taking increasingly active roles in director elections. This is par- ticularly important as large index funds continue to grow, increasing the influence of a small number of fund manag- ers over many companies' governance. QTN www.issgovernance.com/ Check out the Institutional Shareholder Services website to find resources on current corporate governance issues. In the following case, Omnicare, Inc. v. NCS Healthcare, Inc., the court considered whether a merger agreement and voting agreements were valid and enforceable. In applying the business judgment rule (discussed in detail later in this chapter), the court ultimately held that the agreements were not valid and enforceable because reasonable doubt was raised as to whether the directors acted in good faith. Omnicare, Inc. v. NCS Healthcare, Inc. 818 A.2d 914 (Del. 2003) Genesis Health Ventures Inc. (Genesis) (defendant) entered into negotiations to acquire NCS Healthcare, Inc. (NCS) (defendant). At the urging of Genesis, the parties entered into an exclusivity agreement, which prevented NCS from engaging in any negotiations in regard to a competing acquisition or transaction. Subsequently, Omnicare, Inc. (Omnicare) (plaintiff) reached out to NCS regarding a proposed transaction; however, pursuant to the exclusivity agreement with Genesis, NCS did not respond. Complementary to Genesis's merger proposal was a voting agreement and an agreement to omit a 'fiduciary out\" clause. Specifi- cally, the proposal included a voting trust in which the two major shareholders (Jon Qutcalt, chairman of the NCS board, and Kevin Shaw, NCS president and CEQ) agreed to vote for the merger. In other words, this voting agreement effectively meant that NCS share- holder approval of the merger was guaranteed even if the NCS board did not recommend its approval. The agreement to omit a \"fiduciary out\" clause meant that the board agreed not to consider other merger offers, would put the merger to a shareholder vote, and would allow minority shareholders to have appraisal rights. If the merger agreement had contained a fiduciary out clause, it would have given the NCS board the opportunity to opt out of the agreement if it needed to do so to discharge its fiduciary duties to the corporation. Meanwhile, before the official, although futile, NCS shareholder vote on the Genesis merger proposal, Omnicare submitted a merger proposal that was superior to that of Genesis. It was at this point that the NCS board then withdrew its recommenda- tion that the shareholders vote in favor of the Genesis merger agreement. However, the Genesis merger agreement provided that the proposal still must be submitted to a shareholder vote and, because of the Quicalt/Shaw voting agreement and the omission of a fiduciary out clause, that meant that the merger agreement was going to be approved no matter what. Omnicare brought suit. The Court of Chancery, New Castle County, Delaware, denied the injunction. Holland, Judge \"The business judgment rule, as a standard of judicial review, is a common-aw recognition of the statutory authority to manage a cor- poration that is vested in the board of directors.\" The business judg- ment rule is a \"presumption that in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company.\" \"An application of the traditional business judgment rule places the burden on the 'party challenging the board's decision to establish facts rebutting the presumption.'\" The effect of a proper invocation of the business judgment rule, as a standard of judicial review, is powerful because it operates deferentially. Unless the proce- dural presumption of the business judgment rule is rebutted, a \"court will not substitute its judgment for that of the board if the board's deci- sion can be 'attributed to any rational business purpose.\"\" The business judgment rule embodies the deference that is accorded to managerial decisions of a board of directors. \"Under normal circumstances, neither the courts nor the stockholders should interfere with the managerial decision of the directors.\" There are certain circumstances, however, \"which mandate that a court take a more direct and active role in overseeing the deci- sions made and actions taken by directors. In these situations, a court subjects the directors' conduct to enhanced scrutiny to ensure that it is reasonable,\" \"before the protections of the busi- ness judgment rule may be conferred.\" The prior decisions of this Court have identified the circum- stances where board action must be subjected to enhanced judi- cial scrutiny before the presumptive protection of the business judgment rule can be invoked. One of those circumstances was described in Unocal: when a board adopts defensive measures in response to a hostile takeover proposal that the board reasonably determines is a threat to corporate policy and effectiveness. In Moran v. Household, we explained why a Unocal analysis is also applied to the adoption of a stockholder's rights plan, even in the absence of an immediate threat. Other circumstances requiring enhanced judicial scrutiny give rise to what are known as Rey- lon duties, such as when the board enters into a merger trans- action that will cause a change in corporate control, initiates an active bidding process seeking to sell the corporation, or makes a breakup of the corporate entity inevitable. Given the facts in this case, the board's action is subjected to enhanced judicial scrutiny. In applying enhanced judicial scrutiny to defensive devices designed to protect a merger agreement, a court must first determine that those measures are not preclusive or coercive before its focus shifts to the \"range of reasonableness\" in making a proportionality determination. The board must dem- onstrate that it has reasonable grounds for believing that a danger to the corporation and its stockholders exists if the merger trans- action is not consummated. Defensive measures cannot limit or circumscribe the directors' fiduciary duties. Notwithstanding a corporation's insolvent condi- tion, the corporation's board has no authority to execute a merger agreement that subsequently prevents it from effectively discharging its ongoing fiduciary responsibilities. The NCS board was required to contract for an effective fiduciary out clause to exercise its continuing fiduciary responsibilities to the minority stockholders. In this case, the NCS board combined two otherwise valid actions (the stockholder voting agreement and the fiduciary out clause) and caused them to operate in concert as an absolute lock up in the Genesis merger agreement. In the context of this pre- clusive and coercive lock up case, the protection of Genesis' con- tractual expectations must yield to the supervening responsibility of the directors to discharge their fiduciary duties on a continu- ing basis. The merger agreement and voting agreements, as they were combined to operate in concert in this case, are inconsistent with the NCS directors' fiduciary duties. To that extent, the Court holds that they are invalid and unenforceable. With respect to the Fiduciary Duty Decision, the order of the Court of Chancery, denying plaintiffs' application for a prelimin- ary injunction is reversed. Judgment REVERSED Oppression of Minority Shareholders Directors and officers owe a duty to manage a corporation in the best interests of the corporation and the sharehold- ers as a whole. When, however, a group of shareholders has been isolated for beneficial treatment to the detriment of another isolated group of shareholders, the disadvantaged group may complain of oppression. For example, oppression may occur when directors of a close corporation who are also the majority shareholders pay themselves high salaries yet refuse to pay dividends or to hire minority shareholders as employees of the corporation. Because there is no market for the shares of a close corpo- ration (apart from selling to the other shareholders), these oppressed minority shareholders have investments that pro- vide them no return. They receive no dividends or salaries, and they can sell their shares only to the other shareholders, who are usually unwilling to pay the true value of the shares. Generally, courts treat oppression of minority share- holders the same way courts treat director self-dealing: The transaction must be intrinsically fair to the corporation and the minority shareholders. A special form of oppression is the freeze-out. A freeze- out is usually accomplished by merging a corporation with a newly formed corporation under terms by which the minority shareholders do not receive shares of the new corporation but instead receive only cash or other securi- ties. The minority shareholders are thereby frozen out as shareholders. Going private is a special term for a freeze-out of share- holders of publicly owned corporations. Some public cor- porations discover that the burdens of public ownership exceed the benefits of being public. For example, the SEC requires public companies to provide to shareholders annual reports that include audited financial statements. The Sarbanes-Oxley Act has increased the cost of being public by requiring, in section 404, that annual reports include an internal control report acknowledging manage- ment's responsibility to maintain \"an adequate internal control structure and procedures for financial reports.\" For some small public companies (annual revenue less than $100 million), section 404 compliance consumes more than 1 percent of their revenue. Therefore, some pub- licly owned companies choose to freeze out their minority shareholders to avoid such burdens. Legal Standard Often, going private transactions appear abusive because the corporation goes public at a high price and goes private at a much lower price. Some courts have adopted a fairness test and a business purpose test for freeze-outs. Most states, including Delaware, apply the total fairness test to freeze-outs. In the freeze-out context, total fairness has two basic aspects: fair dealing and fair price. Fair dealing requires disclosing material information to directors and shareholders and providing an opportu- nity for negotiation. A determination of fair value requires the consideration of all the factors relevant to the value of the shares, except speculative projections. Some states apply the business purpose test to freeze- outs. This test requires that the freeze-out accomplish some legitimate business purpose and not serve the special inter- ests of the majority shareholders or the managers. Other courts apply the business judgment rule when a committee of independent directors approves the freeze- out. In Delaware, the test is more severe. In a 2014 deci- sion, the Supreme Court of Delaware held that the business judgment rule applies only if the transaction is approved by both a special board committee and a major- ity of the minority stockholders, the special committee is independent, the committee is empowered to select freely its own advisors and to say no definitively to the freeze-out, the committee meets its duty of care in negotiating a fair price, the vote of the minority shareholders is informed, and there is no coercion of the minority shareholders." Other states place no restrictions on freeze-outs pro- vided a shareholder has a right of appraisal, which permits "Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014) (overruled on other grounds). a shareholder to require the corporation to purchase his shares at a fair price. In Delaware, for short-form merg- ers (when a parent corporation owns 90 percent or more of the shares of the subsidiary with which it is merging), appraisal is the exclusive remedy available to a minority stockholder who objects to the short-form merger, unless there is fraud or illegality."\" 2Glassman v. Unocal Exploration Corporation, 777 A.2d. 242 (Del. 2001). In addition, the SEC requires a publicly held company to make a statement on the fairness of its proposed going pri- vate transaction and to discuss in detail the material facts on which the statement is based. In the Coggins case, the court required that a freeze- out of minority shareholders of the New England Patriots football team meet both the business purpose and intrinsic fairness tests. The court held that freezing out the minor- ity shareholders merely to allow the corporation to repay the majority shareholder's personal debts was not a proper business purpose. Coggins v. New England Patriots Football Club, Inc. 492 N.E.2d 1112 (Mass. 1986) In 1959, the New England Patriots Football Club, Inc. (Old Patriots) was formed with one class of voting shares and one class of nonvoting shares. Each of the original 10 voting shareholders, including William H. Sullivan, purchased 10,000 voting shares for $2.50 per share. The 120,000 nonvoting shares were sold for 85 per share to the general public in order to generate loyalty to the Patriots football team. In 1974, Sullivan was ousted as president of Old Patriots. In November 1975, Sullivan succeeded in regain- ing control of Old Patriots by purchasing all 100,000 voting shares for $102 per share. He again became a director and president of Old Patriots. To finance his purchase of the voting shares, Sullivan borrowed $5,350,000 from two banks. The banks insisted that Sullivan reorganize Old Patriots so that its income could be used to repay the loans made to Sullivan and its assets used to secure the loans. To make the use of Old Patriots's income and assets legal, it was necessary to freeze out the nonvoting shareholders. In November 1976, Sullivan organized a new corporation called the New Patriots Football Club Inc. (New Patriots). Sullivan was the sole share- holder of New Patriots. In December 1976, the shareholders of Old Patriots approved a merger of Old Patriots and New Patriots. Under the terms of the merger, Old Patriots went out of business, New Patriots assumed the business of Old Patriots, Sullivan became the only owner of New Patriots, and the nonvoting shareholders of Old Patriots received $15 for each share they owned. David A. Coggins, a Patriots fan from the time of its formation and owner of 10 Old Patriots nonvoting shares, objected to the merger and refused to accept the $15 per share payment for his shares. Coggins sued Sullivan and Old Patriots to obtain rescission of the merger. The trial judge found the merger to be illegal and ordered the payment of damages to Coggins and all other Old Patriots shareholders who voted against the merger and had not accepted the $15 per share merger payment. Sullivan and Old Patriots appealed to the Mas- sachusetts Supreme Judicial Court. Liacos, Justice Patriots bear the burden of proving, first, that the merger was for a legitimate business purpose, and second, that, considering the totality of circumstances, it was fair to the minority. Sullivan and Old Patriots have failed to demonstrate that the merger served any valid corporate objective unrelated to the personal interests of Sullivan, the majority shareholder. The sole reason for the merger was to effectuate a restructuring of Old Patriots that would enable the repayment of the personal indebt- edness incurred by Sullivan. Under the approach we set forth above, there is no need to consider further the elements of fairness of a transaction that is not related to a valid corporate purpose. When the director's duty of loyalty to the corporation is in con- flict with his self-interest, the court will vigorously scrutinize the situation. The dangers of self-dealing and abuse of fiduciary duty are greatest in freeze-out situations like the Patriots merger, when a controlling shareholder and corporate director chooses to elimi- nate public ownership. Because the danger of abuse of fiduciary duty is especially great in a freeze-out merger, the court must be satisfied that the freeze-out was for the advancement of a legiti- mate corporate purpose. If satisfied that elimination of public ownership is in furtherance of a business purpose, the court should then proceed to determine if the transaction was fair by examining the totality of the circumstances. Consequently, Sullivan and Old Judgment for Coggins affirmed as modified