The Delaware Court of Chancery has ruled that when measures such as dead-hand proxy operations are taken in response to a takeover bid or in the shadow of a threat, the Unocal test is the appropriate standard of verification.17 The Court of Chancery, however, ruled in the Doskocil Cos case. v. Since the respondent directors neither requested nor intended the provision at issue in the case, the Unocal standard does not apply and the company judgment should instead be used to assess the respondent`s acceptance of the provision.18 In the Unocal case, the Tribunal stated in the Unocal case that the analysis would only apply at that time. when a board of directors “responds to an ongoing offer to purchase…”19 Therefore, as the Court of Chancery of Shamrock Holdings, Inc. against Polaroid Corp. stated, the Unocal analysis “assumes that the action of the board of directors in question was defensive.” 20 Legal admissibility of Dead Hand Proxy Puts. Despite recent developments and confusion, we believe that proxy-puts – including Proxy Puts Dead Hand – appear to be legally permitted as long as (i) the motivation for including the provision is primarily related to the protection of the bank`s legitimate interests and not to an anchor effect for the company`s directors and (ii) the process supports this conclusion. (Nevertheless, it is important that the inclusion of the provision creates a potential process risk, as noted above.) In the end, the Tribunal was satisfied that the applicant had asserted a right to aid based on allegations that the borrower did not need the additional credit and that the directors wished to modify and use their dead hand function, in particular because it would tend to protect their remoteness in the context of imminent proxy competition. Campaign of legal uncertainty and litigation. Justice`s concern about proxy operations in debt rests on its inherent potential anchoring effect, as a put trigger could make it more costly to change board control – since the debt (and possibly all of the company`s debts) could be redone if the put was triggered. Proxy puts with a dead hand function are inherently firmer than non-dead hand proxy puts because they prevent a board from approving a dissident slate to prevent the put from triggering. In Healthways, the company`s credit agreement first contained a basic “Proxy Put” provision that allowed the established board of directors to approve proxy candidates and avoid a default.

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