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Brazen v. Bell Atlantic Corporation
Delaware Supreme Court
695 A.2d 43 (1997)
Bell Atlantic Corporation (Bell) (defendant) and NYNEX Corporation entered into a stock-for-stock merger agreement. A two-tiered reciprocal termination-fee provision required either party to pay $200 million if there were a competing acquisition offer and failure to obtain shareholder approval or agreement termination, and an additional $350 million if a competing transaction was consummated within 18 months of the agreement’s termination. The agreement stated that the termination fees were an integral part of the transaction and constituted liquidated damages and not a penalty. In negotiating the fees, Bell and NYNEX took into account various costs and concluded that 2 percent of Bell’s market capitalization reasonably represented losses if the merger terminated. Lionel Brazen (plaintiff), a Bell stockholder, filed a class action against Bell and its directors (defendants), claiming that the termination fees did not accurately estimate the expenses of preparing for the merger and were unconscionably high fees intended to coerce Bell’s board and shareholders to approve the merger. Brazen and Bell filed cross-motions for summary judgment. The chancery court held that the fees were protected by the business-judgment rule and denied Brazen’s motion. Brazen appealed.
Rule of Law
Holding and Reasoning (Veasey, C.J.)
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