This section contains the nature of the case and procedural background.

A solvent corporation has a single asset, a judgment for $51 million against a solvent debtor. The judgment is on appeal and is subject to modification or reversal. The only liability the company has is to the bondholders in the amount of $12 million. The best valuation of the company is that the current value is $3.55 million with an expected value of judgment on appeal of $15.5 million. An offer to settle comes in at $17.55 million. By what standard do directors evaluate the fairness of the offer. The creditors want to settle, and the stockholders want to gamble on a successful appeal where the residual value might go to $9.75 million substantially greater than the $5.5 million they would get on settlement.

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