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Judge Paul Wallace of the Delaware Superior Court has held that a bump-up provision did not operate to preclude coverage for a settlement of a Section 14(a) cause of action.
Two defense contracting firms agreed to enter into a self-described “merger,” in which one contractor merged into a subsidiary of the second contractor. After the transaction, stockholders filed a class action, alleging violations of Sections 10(b) and 14(a) of the Securities Exchange Act of 1934. One set of stockholders alleged that, following the merger, the firm violated Section 10(b) when its executives disseminated false data about the firm’s financial health to mislead stockholders regarding the value of their investments. A second set of stockholders alleged that, prior to the merger, one of the firms violated Section 14(a) when its executives made false and misleading statements in proxy solicitation materials distributed before the