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TENDER OFFER; TAKEOVER DEFENSE 89. Stahl v. Apple Bancorp., Inc. Fed. Sec. L. Rep.

(1990) Chancellor William Allen FACTS: 1. In 1986, Stahl buys 20% of outstanding Bancorp shares. Stahl reaches 30.3% ownership. 2. The majority shareholder, Stahl, wanted to expand his number of shares, so offers to buy out shares above the market price. There was a tender offer. Tender offer is a contractual offer to buy on certain conditions, such as reaching a certain percentage. 3. In November 22,1989, Stahl proposed to change the by laws and the board packing plan. 4. In March 19, 1990, out of fear Stahl would control everything, Board did not set a meeting date though it had already set a record date previously (the record date is April 17). 5. Stahl starts the tender offer at $38 cash but the board of directors held a special meeting, and found that offer was too low and unfair, so the board of directors withdrew record date to give themselves time to pursue other offers. 6. Hostile bidder: wants to buy lots of shares and then take control. 7. The board had solicited no proxies, and there was no meeting date actually set. 8. In May 14,1990, Stahl seeks preliminary injunction requiring Stock Holders meeting. ISSUE: Whether or not the board the may not set meeting even in case of insurgency/tender offer? HELD: Yes. The board may not set meeting even in case of insurgency/tender offer. RATIONALE: It is equitable for board to not set meeting date in face of insurgency/tender offer. Fiduciary duties constitute a network of responsibilities that overlay the exercise of even undoubted legal power. It cannot be included that defendants have taken action for the purpose of impairing or impeding the effective exercise of the corporate franchise. Deferring this companys annual meeting where no meeting date has yet been set and no proxies even solicited does not impair or impede the effective exercise of the franchise. Plaintiff has no legal right to compel the holding of

the companys annual meeting or right in equity to require the board to call a meeting now.