City Of Westland Police And Fire Retirement System v. Axcelis Technologies, Inc.

2009 WL 3086537 (Del. Ch. 2009)

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Nature of the Case

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Facts

Axcelis (D) is a Delaware corporation. City of Westland (P) is beneficial owner of shares of common stock of D since August 2007. D and SHI became equal partners in a joint venture called SEN. SHI made an unsolicited bid to acquire D for $5.20 per share. D closed at a price of $4.18 per share that day. D informed SHI that it would respond after completing discussions with certain advisors. D's board rejected SHI’s proposal. SHI upped the price to $6 per share. Shares of D closed at a price of $5.45 per share that day. D again rejected SHI’s overtures. D held its annual shareholders’ meeting. The terms of three directors were expiring, and each ran unopposed for reelection to the Board. Those directors were Hardis, Fletcher, and Thompson. D followed the plurality voting provisions of Delaware law, and a director may be elected without receiving a majority of the votes cast in a given election. Each received less than a majority of the votes cast in his reelection bid. Directors failing to receive a majority of the stockholder vote must submit their resignations to the Board’s Nominating and Corporate Governance Committee. The Committee must then consider and recommend to the Board whether to accept the resignations. The Board must then accept or reject. The board did not accept the resignations. The Board stated that the three directors were experienced and knowledgeable about the Company, and their resignations would leave only four remaining directors. Each served on key committees of the Company and losing this experience and knowledge would harm the Company. Retention was important if D was to be able to move forward on discussions with SHI. A month later D and SHI entered into a confidentiality agreement governing discussions between the parties. SHI requested additional time, seeking a seven-week extension for the performance of due diligence before submitting an acquisition proposal. SHI did not submit a revised acquisition proposal. D's shares closed at a price of $1.43 per share. P then delivered a demand, to inspect books and records related to the SHI adventure. D then missed an indenture payment and sold its stake in SEN to raise money. It received $136.6 million. D's shares closed at a price of $0.41 per share. D refused access to the records. P filed a complaint seeking to compel inspection.