From "Dead Hand" to "No Hand": Poison Pills After Carmody and Invacare

Slack, Richard W.

(October 1998, Business and Securities Litigator)

The Court of Chancery of the State of Delaware in Carmody v. Toll Brothers, Inc.,¹ recently refused to dismiss a complaint challenging a "continuing director" provision in a shareholder rights plan (sometimes referred to as a "poison pill") adopted by Toll Brothers, Inc., a Delaware corporation. The Carmody decision is the first decision to address the validity of a "continuing director" or "dead hand" provision in a shareholder rights plan under Delaware law and only the third decision overall to address the validity of such provisions. The two prior decisions, one by the U.S. District Court for the Northern District of Georgia last year in Invacare Corp. v. Healthdyne Technologies, Inc.,² and the other by the New York State Supreme Court in Bank of New York Co. v. Irving Bank Corp.,³ had reached different results. The Invacare decision upheld the validity of a "continuing director" provision under Georgia law based largely upon the adoption by the Georgia Legislature of a so-called "pill validation statute" while the Bank of New York decision enjoined enforcement of a "continuing director" provision under New York law.

"Continuing director" provisions commonly permit the redemption or amendment of the company's poison pill by one or more "continuing directors" - a term typically defined to include directors who were in office when the plan was adopted or who were subsequently elected to the board with the approval of the directors in office or directors who joined the board following a change of control but with the approval of continuing directors. "Continuing director" provisions are designed to prevent a hostile suitor from engaging in a proxy contest or consent solicitation to remove an incumbent board of directors and then have the new board amend or redeem the poison pill in order to permit the hostile acquisition to proceed. These provisions are frequently known as "dead hand" provisions because they prevent the redemption or amendment of poison pills where there are no continuing directors, and if valid, provide a powerful weapon for a company to fend off a hostile takeover.⁴

Background Of Continuing Director Provisions

Shareholder rights plans have been adopted by more than 1,800 corporations, making them one of the principal tools used by publicly held companies to deter coercive or unwanted takeover threats.⁵

Shareholder rights plans typically involve the issuance of "rights" that entitle their holders to purchase one share of the corporation's common stock at a designated exercise price. Once any person or group of persons acquires ownership of a specified "triggering" level of the company's voting stock (usually between 10 and 20 percent), rights holders other than the acquiring person or group may "flip-in" and purchase securities of the target corporation at a substantial discount (usually 50 percent) to the market value of those securities. If, on the other hand, a merger or other business combination occurs between the corporation and an acquiror, then any remaining holders of rights (other than the acquiror) may purchase common stock of the surviving corporation (i.e., the target corporation or the acquiror, depending upon which entity survives the merger or other business combination) at a substantial discount (again, usually 50 percent) to the stock's market value.⁶

Most shareholder rights plans, once the level of ownership necessary to trigger the flip-in provision has been reached by any person or group acting without board approval, permit the rights to be redeemed or the rights plan to be amended to prevent or delay the flip-in during a "window period" (which is often just ten days and subject to extension). During this "window period" the target's board of directors can negotiate with the bidder or look for better offers.

The adoption of a shareholder rights plan as a means of defending against an unsolicited takeover threat was first upheld in the Delaware Supreme Court's landmark decision in Moran v. Household International, Inc.⁷ In that case, the court concluded that the adoption of Household's poison pill was a reasonable response to the potential threat of a coercive tender offer.⁸ The Household court reached this conclusion because, among other things, it found that, notwithstanding the adoption of a rights plan, a bidder could "successfully launch a hostile tender offer" by, among other things, "tendering and soliciting consents to remove the Board and redeem the Rights."⁹

Accordingly, the court found that Household's adoption of its poison pill did not effect "a fundamental transfer of power from the stockholders to the directors." To the contrary, the court concluded, "[t]here is little change in the governance structure as a result of the adoption of the Rights Plan."¹⁰

Companies that have adopted "continuing director" provisions contend that they are a reasonable response to the possibility that a hostile bidder may attempt to circumvent a target's rights plan by conducting a proxy contest aimed at replacing the target's board with directors who will then redeem the rights in order to facilitate a self-dealing or unfair transaction. "Continuing director" provisions are especially useful when a corporation does not have a classified or staggered board or where the company's certificate of incorporation does not eliminate the statutory right of shareholders to remove directors through a consent solicitation since, in these instances, an acquiror could attempt to elect a new board or remove the entire board and replace it with a new board that immediately would redeem the rights. In these circumstances, companies further contend, the shareholders are without the usual protections afforded them by a rights plan since a disinterested board will not have the ability to negotiate with the bidder nor pursue, if appropriate, other alternatives to maximize shareholder value.

To address this concern, companies have adopted a number of different varieties of "continuing director" provisions. One type of provision - such as the one adopted by Toll Brothers - provides an absolute prohibition against a newly elected board redeeming the rights without the consent of the requisite number of the continuing directors. Such a provision can be a showstopper; even if a hostile bidder succeeds in a proxy contest to unseat the existing board members, the new board would be unable to redeem the rights because they are not "continuing directors."

A second variation is a "deferred redemption" provision which provides an absolute prohibition on the newly-elected, non-continuing directors from redeeming the target's rights, but only for a limited period of time (typically 180 days) after their election.¹¹ Companies adopting such a "deferred redemption" provision argue that it permits a window during which the new directors can make a careful, advised study of the company and its alternatives and also during which additional competing offers and value-enhancing alternatives may arise to the benefit of the company and its shareholders.¹²

A third type of "continuing director" provision allows both "continuing directors" and new directors elected by a supermajority of all the existing and issued shares to redeem the pill. For example, the poison pill rejected by the Court in the Bank of New York decision allowed the rights to be redeemed by both "continuing directors" and the non-continuing directors elected by an affirmative vote of the holders of at least two-thirds of the issued and outstanding shares of the company.¹³

Companies have now developed strategies in an effort to thwart the effects of these "continuing director" provisions. For example, in conjunction with the recent unsolicited offer by AlliedSignal, Inc. to purchase AMP, Inc., AlliedSignal commenced a tender offer at the same time it sought to expand the size of AMP's board from 11 to 28 members, adding 17 directors chosen by AlliedSignal. The apparent theory behind this strategy rests on the assumption that the "continuing directors" that remained on the board after the consent solicitation could have been persuaded by the shareholders and the new directors to redeem the rights.

In response to AlliedSignal's strategy, AMP amended its rights plan to provide that upon a change in control of the board, the rights are no longer redeemable, even by the company's "continuing directors." This provision, which has been euphemistically referred to as a "no-hand" provision,¹⁴ would, if upheld by the courts, effectively prevent a bidder from engaging in a proxy contest to gain control of the board.

The Bank Of New York Decision

The first court to address the validity of a "continuing director" provision was the New York Supreme Court in Bank of New York Co. v. Irving Bank Corp.¹⁵ which, construing New York law, enjoined enforcement of a such a provision. The case arose out of a tender offer by The Bank of New York (BNY) for all of the outstanding shares of Irving Bank Corp. (IBC). In response to the tender offer, IBC's board of directors adopted a shareholder rights plan which provided that the rights could be redeemed by the board prior to the time the acquiring person or entity obtained ownership or control of 10% or more of IBC's stock.

BNY responded to IBC's rights plan by commencing a proxy contest seeking to replace the IBC board with directors who, if elected, would redeem the rights.¹⁶ To counter that response, IBC adopted an amendment to its shareholder rights plan containing a "continuing director" provision.¹⁷ The amendment defined the term "Continuing Director" as a director who either was a member of the Board of Directors of IBC prior to the date the amendment was adopted or who subsequently became a director of IBC and whose election, or nomination for election by IBC's shareholders, was approved by a vote of a majority of the Continuing Directors then on the Board of Directors of IBC.¹⁸ If valid, this provision would have likely prevented the newly elected board members from voting to redeem the rights plan; BNY sought to enjoin the enforcement of the "continuing director" provision.¹⁹

The Bank of New York court began its analysis by indicating that "at issue here is not the propriety of the adoption of the plan, but rather the legality of . . . the provision restricting the power of duly elected directors to conduct business of the corporation otherwise conductible by directors elected in a specific manner."²⁰ In this regard, the court acknowledged that the "continuing director" provision created the potential for election of two types of directors: those who have the power to redeem the rights and those that do not have the power to redeem the rights.²¹

The court then addressed the validity of the "dead hand" provision under the New York Business Corporation Law, Section 620(b), which provides that any restriction on the powers of the board of directors to manage the corporation must be set forth in the company's certificate of incorporation.²² IBC's shareholders had not approved a "continuing director" provision and therefore the court held that IBC's board of directors was without statutory authority to adopt such a provision.²³

The court reasoned that the existence of the "dead hand" provision was likely to cause BNY irreparable harm as the mere existence of the "continuing director" provision would likely taint the outcome of the proxy contest.²⁴ The court recognized that shareholders might well decline to vote for the insurgent slate knowing that, if elected, it would not (if it did not receive more than 66% of the shareholder vote) have the power to redeem the rights (and perhaps make it impossible to accept any offer to sell the company).²⁵

The Invacare Decision

Invacare arose out of the attempt by Invacare Corporation ("Invacare") to acquire Healthdyne Technologies, Inc. ("Healthdyne"), a Georgia corporation.²⁶ In its attempt to acquire Healthdyne, Invacare commenced an all-cash tender offer for all of Healthdyne's outstanding common stock and gave Healthdyne notice that it would propose a slate of directors at Healthdyne's next annual meeting.²⁷

In contrast to IBC's board which adopted a "dead hand" provision in direct response to a hostile suitor, Healthdyne's board of directors had adopted its shareholder rights plan prior to Invacare's bid. The "dead hand" provision contained in Healthdyne's rights plan required "that any redemption or amendment of the rights plan be approved by "the continuing directors.²⁸

Invacare sought a preliminary injunction in the United States District Court for the Northern District of Georgia arguing that the "continuing director" provision was invalid. Invacare argued that - consistent with the Bank of New York decision - the "continuing director" provision violated Section 14-2-801(b) of the Georgia Business Corporation Code as an illegal limitation on the board of directors' powers.²⁹

The Invacare court heavily relied on Georgia's pill validation statute - Section 14-2-624. Section 14-2-624(c) provides, in relevant part, that
"[n]othing contained in Code Section 14-2-601 shall be deemed to limit the board of directors authority to determine, in its sole discretion, the terms and conditions of the rights, options, or warrants issuable pursuant to this Code section."

In light of this language, the Court refused to read Section 801(b) as limiting a board's power to set the terms of a shareholder rights plan, even if that meant imposing certain restrictions on the powers of subsequently elected board members.

The Georgia court distinguished Bank of New York on the ground that the New York statute provided that "[a] restriction on the board's power to manage the business of the corporation is invalid unless . . . all of the incorporators or all of the shareholders of record have authorized such provision in the certificate of incorporation. . ." and Georgia's statute (Section 801(b)) contained no such express limitation.³⁰

In addition, the court, citing provisions of the Georgia Fair Price and Business Combination statutes, remarked that Georgia law "embraces the concept of "continuing directors" as part of a defense against hostile takeovers" and therefore the use of this provision in rights plans was not contrary to Georgia's public policy.³¹

Invacare's final argument was that the "continuing director" provision interfered with the exercise of the right of Healthdyne shareholders to vote at the annual meeting of directors and that the Healthdyne directors should have to show a "compelling justification" for adopting the "continuing director" provision.³² Unlike the Bank of New York court which found that the existence of a "continuing director" provision might have an effect on the outcome of the contested election, the court in Invacare, without elaboration, found that the "continuing director" provision did not interfere with shareholder voting rights and was not coercive. The court therefore denied Invacare's motion for a preliminary injunction.³³

It is noteworthy that the Invacare court relied in large part on the pill validation provisions of the Georgia statute - the very provisions enacted by the Georgia legislature to purportedly bring Georgia law in line with Delaware law as set forth in Moran v. Household Int'l Inc.³⁴ The Invacare court, however, did not discuss Delaware law.

The Carmody Decision

Carmody arose out of theadoption by Toll Brothers, Inc., a Delaware corporation engaged in the business of building single family homes, of a shareholder rights plan which included an absolute "continuing director" provision providing that only "continuing directors" could redeem the rights. A shareholder brought suit challenging the validity of the adoption of this "continuing director" provision under Delaware Law.³⁵ Toll Brothers moved to dismiss the complaint on the grounds that, among other things, the adoption of the "continuing director" provision did not violate either Delaware's statutory law or its directors' duty to the corporation as a matter of law.³⁶

The court first found that the complaint stated legally sufficient claims that the "continuing director" provision violated Delaware statutory law. The court held that, under 8 Del. C. § 141(d), if one group of directors is to be given distinctive voting rights, not shared by other directors, "those distinctive voting rights must be set forth in the certificate of incorporation."³⁷ As it was undisputed that the "dead hand" provision adopted by Toll Brothers would give "continuing directors" voting rights different from those granted to directors who were not "continuing directors", and it was alleged that Toll Brothers' certificate of incorporation did not permit such distinctive voting rights, the "plain, unambiguous" language of the statute mandated that the plaintiff's claim be allowed to proceed.³⁸

The Carmody court also found that the "continuing director" provision could be challenged under 8 Del. C. § 141(d) which provides that the right to elect directors with greater voting power than other directors "is reserved to the stockholders" and may not be done "by unilateral board action."³⁹ As it was alleged that the "continuing director" provision was only authorized by the Board and was not approved by the shareholders or otherwise authorized by the certificate of incorporation, the complaint stated a claim that the "continuing director" provision was ultra vires.⁴⁰ Finally, the court held that the adoption of the "continuing director" provision might violate that part of 8 Del. C. § 141(a) which provides that:

The business and affairs of every corporation organized under this chapter shall be managed by or under the direction of a board of directors, except as may be otherwise provided in this chapter or in its certificate of incorporation . . . . (emphasis added).

The court found that the "continuing director" provision of the rights plan which invested the "continuing directors" - and not the Board - with redemption power over the rights plan would therefore be statutorily invalid if not authorized in the corporation's certificate of incorporation.⁴¹

The court's statutory analysis closely tracked the reasoning in Bank of New York. Although New York's and Delaware's statutory provisions have significant differences, they each require that restrictions on board of directors' powers must be set forth in a corporation's certificate of incorporation. The Carmody court also distinguished Invacare and pointed out that Georgia's Business Corporation Code - unlike Delaware's statutory framework - expressly contained a pill validation statute and embraced the concept of "continuing directors."⁴²

Although the Carmody court cautioned that its opinion was only on whether the complaint stated a claim upon which relief could be granted and did not rule on the validity of the "continuing director" provision as a matter of law, the only alleged "fact" that the court identified as being determinative was whether Toll Brothers' certificate of incorporation contained authorization for the "dead hand" provision.⁴³ Based on the Carmody court's analysis of the applicable Delaware statutory provisions, it appears that a court following Carmody's reasoning would conclude that any "continuing director" provision in a rights plan adopted by a Delaware corporation which has not been authorized in the corporation's certificate of incorporation would be invalid.

The court next addressed the claim that the adoption of the "continuing director" provision was a violation of the Toll Brothers directors' fiduciary duty of loyalty. The court analyzed plaintiff's duty of loyalty claim under both the standard adopted in Blasius Industries, Inc. v. Atlas Corp. - that the "dead hand" provision disenfranchised the shareholders without a "compelling justification"⁴⁴ - and under the standard adopted in Unocal Corp. v. Mesa Petroleum Co. - that the "dead hand" provision was an unreasonable and preclusive defensive measure.⁴⁵ The court found that the fiduciary duty claim was viable under both a Blasius and Unocal analysis.⁴⁶

In refusing to dismiss the Blasius claim (alleging that the "dead hand" provision disenfranchised shareholders without compelling justification), the court recognized that when the Delaware Supreme Court decided the seminal Household⁴⁷ opinion - which validated a board's adoption of a shareholder rights plan - it did so, in part, because the shareholders could exercise their prerogative to replace the board and the poison pill would have only a minimal effect on a proxy contest.⁴⁸ The court found that based on the allegations in the complaint, the "continuing director" provision adopted by Toll Brothers would render the shareholders "powerless to elect a board that is both willing and able" to accept an offer.⁴⁹ The court also reasoned that the "continuing director" provision might coerce shareholders who desired an offer to succeed to vote for the incumbent or "continuing directors" because they would be the only directors capable of accepting an offer.⁵⁰

The court also permitted plaintiff's Unocal claim to go forward. Under Unocal, a defensive board action is not protected under of the business judgment rule unless the action is taken (1) in response to a perceived threat to the corporation and (2) the action is reasonable in relation to the threat posed. The court found that the "continuing director" provision might well have been an unreasonable and disproportionate response to the perceived threat as alleged in the complaint.⁵¹

The court recognized the possibility that a more temporally limited "deferred redemption" provision might be treated differently under Delaware law than the "continuing director" provision adopted by Toll Brothers. The Court stated that its opinion should not "be read as expressing a view or pronouncement on that subject."⁵² Based on this language, and the fact that neither the Delaware Supreme Court nor the other Chancery courts have issued opinions on this subject, Delaware companies may continue to adopt "continuing director" provisions. However, these companies should remain aware of Carmody's analysis.

The "No Hand" Poison Pill

Although reaching different results under the laws of different states, the Invacare and Carmody decisions provide significant guidance concerning the validity of "continuing director" provisions. Both the Invacare and Carmody courts recognize the importance of analyzing the statutory framework of the state of the corporation's incorporation in determining the validity of "dead hand" provisions. The lesson may well be that corporations incorporated in states which have adopted pill validation statutes similar to that adopted in Georgia may be emboldened to continue to adopt "continuing director" or even more aggressive provisions in their rights plans. In contrast, corporations of states which do not have pill validation statutes and have statutory laws requiring that any greater voting power vested in certain directors be authorized in a corporation's certificate of incorporation may refrain from adopting "continuing director" provisions at least in their most aggressive form.

The Pennsylvania courts are currently being asked to consider the validity of a new variation of the "dead hand" - a so-called "no hand" poison pill adopted by AMP, Inc., a Pennsylvania corporation. Pennsylvania, like Georgia, has adopted a pill validation statute which allows the board of directors of a Pennsylvania corporation significant latitude in fixing the terms of a poison pill. Pennsylvania Business Corporations Laws § 1525 and 2513, jointly validate the use of "poison pills." Section 1525 provides, in part, the following:

The securities, contracts, warrants or other instruments evidencing any shares, option rights, securities having conversion or option rights, or obligations of a corporation may contain such terms as are fixed by the board of directors, including, without limiting the generality of such authority . . . Provisions concerning rights or adjustments in the event or reorganization, merger, consolidation, sale or assets, exchange of shares or other fundamental changes. (emphasis added).

The Committee Comment to the Pennsylvania statute states that its statute was intended to validate "the type of provision common in shareholder rights plans that requires the approval of directors not affiliated with a major shareholder before certain actions can be taken under, or charges made in, the rights plan."⁵³

The adoption by AMP of its "no hand" poison pill was a direct response to the announcement by AlliedSignal, Inc. that it intended to commence an unsolicited tender offer for all the outstanding shares of AMP for $44.50 per share. AlliedSignal, aware that AMP had already adopted a shareholder rights plan containing a "continuing director" provision, announced that in conjunction with its tender offer it would conduct a consent solicitation seeking to increase the size of AMP's board from 11 to 28 by adding 17 new board members nominated by AlliedSignal. The addition of 17 new directors was apparently designed to put maximum pressure on the "continuing directors" to redeem the rights and approve a merger.

To counter this maneuver, AMP amended its poison pill adding a "nonredemption" or "no hand" provision. The "no hand" provision provides that in the event that the "continuing directors" no longer constitute a majority of the AMP board of directors (at a time after the receipt of an unsolicited offer), the rights become nonredeemable; even the "continuing directors" are stripped of their power to redeem. AlliedSignal filed suit in the United States District Court for the Eastern District of Pennsylvania seeking a declaration that the "no hand" provision was invalid under Pennsylvania law.

AMP will likely argue that the nonredemption or "no hand" provision is a valid exercise of the directors' discretion to set the terms of its shareholder rights plan under Pennsylvania's pill validation statute. AMP is also likely to contend that the nonredemption provision is, in effect, no different than other "dead hand" provisions insofar as under a "dead hand" the rights also become nonredeemable if the entire old board is replaced in a proxy contest by a slate proposed by an acquiring person.

AlliedSignal will counter that a board's discretion to set terms of a shareholder rights plan does not extend to "no hand" poison pills that effectively eliminate a board's responsibility to weigh the merits of an offer to purchase the Company. AlliedSignal will argue that the nonredemption provision prevents even the "continuing directors" from considering or accepting any offer no matter how high.⁵⁴ In addition AlliedSignal may argue that even if the Committee Comment to the Pennsylvania statute appears to embrace provisions that "require the approval of directors not affiliated with a major shareholder"⁵⁵ to redeem the rights, the reasoning of the Comment would be inapplicable to a "no hand" provision which would not permit any director, including "continuing directors" to redeem the rights.⁵⁶ The District Court's decision in AlliedSignal, Inc. v. AMP Inc. may determine whether there are limits to a director's discretion in setting the terms of a shareholder rights plan, including "continuing director" provisions, in states with pill validation statutes.

As a result of the Invacare decision (and depending on the outcome of the dispute over the AMP "no hand" poison pill), companies incorporated in jurisdictions that (1) have embraced the concept of continuing directors as part of a defense against hostile takeovers, (2) have adopted poison pill validation statutes or (3) whose corporate laws do not expressly restrict directors from creating limitations on the powers of future directors, will almost certainly continue to adopt dead hand "continuing director" provisions and other variations such as the "no hand" rights plan adopted by AMP. In those states, "dead hand" and "no hand" provisions are likel y to play a larger role - perhaps taking the center stage - in future hostile takeover battles as in the current AlliedSignal/AMP contest for control.


1. 1998 WL 418896 (Del. Ch. July 24, 1998).
2. 968 F. Supp. 1578 (N.D. Ga. 1997).
3. 139 Misc. 2d 665, 528 N.Y.S.2d 482 (N.Y. Sup. Ct. 1988).
4.  See Kenneth J. Bialkin & Robert G. Wray, Legal Developments: Poison Pills, 2 The M & A Lawyer, May 1998 at 12-13; Shawn C. Lese, Preventing Control From The Grave: A Proposal For Judicial Treatment Of Dead Hand Provisions In Poison Pills, 96 Colum. L. Rev. 2175, 2191 (1996).
5. See generally Joy M. Bryan, Corporate Anti-Takeover Defenses: The Poison Pill Device, App. A-1-22, App. B-1-218 & App. C-1-43 (containing listings of corporations that have adopted poison pills) (1997).
6. See generally Dennis J. Block, Nancy E. Barton and Stephen A. Radin, The Business Judgment Rule: Fiduciary Duties of Corporate Directors (5th ed. 1998). Portions of this article previously appeared in Dennis J. Block, Richard W. Slack and Howard L. Kneller, Georgia Court's Refusal to Enjoin Healthdyne's 'Dead Hand' Poison Pill Conflicts with the Only Other Decision on the Subject, A 1988 Ruling by a New York Judge, Nat. L.J., Nov. 3, 1997.
7. 500 A.2d 1346 (Del. 1985).
8. Id. at 1354-56.
9. Id. at 1354-55.
10. Id. at 1354.
11. In Davis Acquisition, Inc. v. NWA Inc., [1990 Transfer Binder] Fed. Sec. L. Rep. (CCH) 95,434 (Del Ch. April 25, 1989) Chancellor Allen was confronted with a 180 day "deferred redemption" poison pill but declined to rule on the validity of the provision prior to the results of an impending proxy contest.
12. Id.
13. 139 Misc. 2d at 667, 528 N.Y.S.2d at 483.
14. Karen Donovan, Bid for AMP Spawns New "No-Hand" Pill Stronger Than The Dead-Hand Pill; Will It Be Allowed?, Nat. L.J., Sept. 7, 1998, at B1.
15. 139 Misc. 2d 665, 528 N.Y.S.2d 482.
16. Id. at 667, 528 N.Y.S.2d at 483.
17. Id. at 667, 528 N.Y.S.2d at 483.
18. Id.
19. Id. at 667-68, 528 N.Y.S.2d at 483-84.
20. Id. at 670, 528 N.Y.S.2d at 485.
21. Id. at 668, 528 N.Y.S.2d at 484.
22. Id. at 670-71, 528 N.Y.S.2d at 485 (citing N.Y. Bus. Corp. Law §§ 620, 701, and 708).
23. Id. at 671, 528 N.Y.S.2dat 485-86.
24. Id. at 669, 528 N.Y.S.2d at 484.
25. Id. at 668-69, 528 N.Y.S.2d at 484.
26. 968 F. Supp. 1578, 1579 (N.D. Ga. 1997).
27. Id.
28. Id.
29. Id. at 1580.
30. Id.
31. Id. at 1580-1581.
32. Id. at 1581.
33. Id. at 1581-82.
34. According to the official comment of the Georgia Business Corporation Act, this pill validation statute was designed to "permit the approach of courts interpreting Delaware law, including the Delaware Supreme Court in [Moran v. Household Int'l, Inc.]." Ga. Bus. Corp. Act 14-2-624, Note to 1989 Amendment (citing Moran v. Household Int'l, Inc., 500 A.2d 1346 (Del. 1985)).
35. 1998 WL 418896 at *1 (Del. Ch. July 24, 1998).
36. Id. at *5-*6. Toll Brothers also argued that the challenge to the "dead hand" pill should have been dismissed (1) as not ripe, and (2) as not fulfilling the "demand requirement" of Chancery Court Rule 23.1. The Court rejected both defenses finding the claim both ripe for adjudication and either non-derivative in nature and that if the claim was derivative then demand was deemed excused.
37. Id. at *9.
38. Id.
39. Id.
40. Id.
41. Id. at *10.
42. Id. at *11 n. 38.
43. Id. at *11-*14.
44. Blasius Industries, Inc. v. Atlas Corp., 564 A.2d 651, 661-63 (Del. Ch. 1988) ("Blasius").
45. Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985) ("Unocal").
46. 1998 WL 418896 at *11.
47. Moran v. Household Int'l, Inc., 500 A.2d 1346 (Del. 1985)
48. 1998 WL 418896 at *12 (Del. Ch. July 24, 1998).
49. Id. at *12.
50. Id. at *12 - *13.
51. Id. at *13.
52. Id. at *14 n. 52.
53. See Pa. Bus. Corp. L. §§ 1525(b), 2513 and Amended Committee Comment to § 1525.
54. Memorandum In Support Of AlliedSignal's Motion For Summary Judgment, and for an Immediate Declaratory Judgement and Preliminary Injunction, filed September 14, 1998 in AlliedSignal, Inc. v. AMP Incorporated, C.A. 98-CV-4058 in the United States District Court for the Eastern District of Pennsylvania - located at AlliedSignal Schedule 14D-1, Amendment No. 16, Exh. (a)(37).
55.  Pa. Bus. Corp. L. Amended Committee Comment to § 1525.
56. AlliedSignal has argued, in part, citing Pa. Bus. Corp. L. §§ 1525(c), 1721, 2513 and Amended Committee Comment to § 2513, that the non-redemption feature of the AMP poison pill is an illegal restriction on the Board's discretion. See Memorandum in Support of AlliedSignal's Motion For Summary Judgment, and for an Immediate Declaratory Judgment and Preliminary Injunction, filed Sept. 14, 1998 in AlliedSignal, Inc. v. AMP Incorporated, C.A. 98-CV-4058 in the United States District Court for the Eastern District of Pennsylvania - located at AlliedSignal Schedule 14D-1, Amendment No. 16, Exh. (a)(37).

• Securities Litigation