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Steel Partners II, L.P. v. Point Blank Solutions, Inc., C.A. No. 3695-CC (Del. Ch. Aug. 12, 2008)

August 12, 2008

In this letter opinion, Chancellor Chandler denied the defendant corporation’s motion to postpone its annual meeting of stockholders. Following defendant’s postponement of its first annual meeting since 2005, plaintiff stockholder, who was a potential buyer of the company, brought a Section 211 action to compel defendant to hold an annual meeting of stockholders. The parties subsequently entered into a stipulation and order requiring the defendant to hold a meeting on or before August 19, 2008, and the annual stockholder meeting was scheduled for August 19. Defendant thereafter sought a 90-day postponement in order to complete its exploration of strategic alternatives. In support of its request, defendant reasoned that plaintiff’s proposed slate of directors, if elected, will be subject to a conflict of interest and will seek to purchase the company for plaintiff’s investors at the lowest possible price. Moreover, defendant alleged that plaintiff’s former CEO (“Brooks”), who, together with plaintiff, controls 40% of the vote, has a personal interest that is adverse to the majority of the defendant’s stockholders in light of Brooks’ current advancement suit against defendant. Citing Blasius Indus., Inc. v. Atlas Corp., 564 A.2d 651 (Del. Ch. 1988), the Court found that the directors’desire to finish exploring strategic alternatives failed to “provide a basis upon which the shareholder franchise may be further impinged by any additional delay of the exercise of that fundamental right.” While acknowledging that plaintiff and Brooks may influence the outcome of the stockholder vote, Chancellor Chandler observed that defendant’s proper recourse is through communication directly to its stockholders - “it is up to the stockholders to vote their prerogative” and the Court could not find good cause to further delay the stockholders ability to do so. Accordingly, the Court ordered defendant to hold the annual meeting of stockholders on August 19, as previously scheduled.

The full opinion is available here