HOUSE OF REPRESENTATIVES

153rd GENERAL ASSEMBLY

HOUSE AMENDMENT NO. 7

TO

SENATE SUBSTITUTE NO. 1

FOR

SENATE BILL NO. 21

AMEND Senate Substitute No. 1 for Senate Bill No. 21 by deleting line 19 in its entirety and inserting in lieu thereof the following:

“ directors, and the board or committee in good faith committee, uncoerced, in good faith, and without gross negligence, authorizes the contract act or”.

FURTHER AMEND Senate Substitute No. 1 for Senate Bill No. 21 on line 24 by deleting " the board of directors has determined to be " and inserting in lieu thereof “ is ”.

FURTHER AMEND Senate Substitute No. 1 for Senate Bill No. 21 on line 38 by deleting " (or oversee the negotiation of) " as it appears therein.

FURTHER AMEND Senate Substitute No. 1 for Senate Bill No. 21 on line 40 by deleting " a majority " and inserting in lieu thereof " an uncoerced majority ".

FURTHER AMEND Senate Substitute No. 1 for Senate Bill No. 21 on lines 41 and 42 by deleting “ the board of directors has determined to be ” and inserting in lieu thereof “ is ”.

FURTHER AMEND Senate Substitute No. 1 for Senate Bill No. 21 by deleting line 64 and inserting in lieu thereof the following:

“ presumption may be rebutted by particularized facts that such director has ”.

FURTHER AMEND Senate Substitute No. 1 for Senate Bill No. 21 on line 68 by deleting “ shall not, of itself, be evidence ” and inserting in lieu thereof “ shall not, by itself, establish ”.

SYNOPSIS

This amendment clarifies that approval by a disinterested board or committee may have cleansing effect only if the board or committee's approval is uncoerced. This codifies the approach in, among other cases, In re Dell Techs. Inc. Class V Stockholders Litig., 2020 WL 3096748, at *34 (Del. Ch. June 11, 2020), Sciabacucchi v. Liberty Broadband Corp., 2018 WL 3599997, at *16 (Del. Ch. July 26, 2018), and Kahn v. Lynch Commc'n Sys., Inc., 638 A.2d 1110, 1120 (Del. 1994).

Second, the amendment clarifies that for a committee's approval to have cleansing effect when a majority of the board is conflicted or the transaction is a controlling stockholder transaction, the Court must determine that each member of the committee is disinterested.

Third, the amendment clarifies that in order for a disinterested committee to cleanse a controlling stockholder transaction, the committee must negotiate on behalf of the company or minority stockholders, not merely oversee negotiations run by another person or entity (who might themselves be conflicted).

Fourth, the amendment deletes vague and undefined phrasing in SS1 to SB21 regarding a "heightened" presumption and a requirement that facts rebutting such presumption be "substantial" as these terms are unknown to current Delaware case law and would heighten uncertainty and unpredictability. As modified, the bill would still impose a rebuttable presumption of disinterestedness for directors who satisfy the exchange listing standards and would require particularized facts to rebut that presumption.