Delaware Supreme Court Sanctions Use of 4.99 Percent NOL Poison Pill Using ‘Unocal’ Analysis, as Modified by ‘Unitrin’
October 13, 2010
On Monday Oct. 4, 2010, the Delaware Supreme Court affirmed the Court of Chancery’s decision to sanction the use of a poison pill with a 4.99 percent trigger to protect a company’s net operating losses (“NOLs”).
Respecting a familiar Unocal maxim, the court made clear: “[Delaware] corporate law is not static [and] must grow and develop in response to, indeed in anticipation of, evolving concepts and needs.”
In analyzing the first poison pill triggered in modern memory, the Court upheld the Selectica Board’s decisions to adopt the 4.99 percent pill aimed at protecting $165 million in NOLs, to decline to exempt the triggering party from its effects, to utilize the exchange feature of the pill, and to adopt a reloaded pill to replace the triggered one.