      IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

PWP XERION HOLDINGS III LLC,                  )
                                              )
       Plaintiff,                             )
                                              )
       v.                                     )    C.A. No. 2017-0235-JTL
                                              )
RED LEAF RESOURCES, INC., a Delaware          )
corporation,                                  )
                                              )
       Defendant.                             )

                          MEMORANDUM OPINION

                        Date Submitted: September 18, 2019
                         Date Decided: October 23, 2019

S. Michael Sirkin, Benjamin Z. Grossberg, R. Garret Rice, ROSS ARONSTAM &
MORITZ LLP, Wilmington, Delaware; Jonathan D. Schiller, Christopher D. Belelieu,
Karen A. Chesley, Gary R. Studen, BOIES SCHILLER FLEXNER LLP, New York, New
York; Counsel for Plaintiff.

Michael A. Pittenger, Timothy R. Dudderar, Mathew A. Golden, David M. Hahn, POTTER
ANDERSON & CORROON LLP, Wilmington, Delaware; Kenneth B. Black, Lauren A.
Shurman, Wesley F. Harward, STOEL RIVES LLP, Salt Lake City, Utah; Counsel for
Defendant.

LASTER, V.C.
       Defendant Red Leaf Resources, Inc. (“Red Leaf” or the “Company”) is a Delaware

corporation seeking to develop technology to extract oil from shale. Under the certificate

of designations that governs its Series A Preferred Stock, the consent of holders of a

majority of the Series A shares is necessary for authorizing or effecting (i) any transaction

for the benefit of an affiliate of a director of the Company, (ii) any material change in the

Company’s business plan, and (iii) any purchase or redemption of any equity interest in

the Company. At all relevant times, plaintiff PWP Xerion Holdings III LLC (“Xerion”)

held a majority of the Series A shares, meaning that Xerion’s consent was required before

the Company could authorize or effect any of the foregoing actions.

       In 2012, the Company entered into a set of joint venture agreements with TOTAL

E&P USA Oil Shale, LLC (“TOTAL Sub”), an indirect, wholly owned subsidiary of

TOTAL S.A. (“TOTAL Parent”). TOTAL Parent is one of a handful of supermajor oil

companies in the world. For a company seeking to develop oil shale technology, an alliance

with a supermajor like TOTAL Parent was obviously a significant development. Not

surprisingly, the Company told its investors that the joint venture represented a material

change in its business plan. As part of the parties’ new relationship, TOTAL Sub purchased

an equity interest in the Company and received the right to designate a member of the

Company’s board of directors (the “Board”).

       In 2016, TOTAL Sub notified the Company that it was exiting from the joint

venture, before the planned completion date and without fulfilling all of its contractual

obligations. To settle the ensuing dispute, TOTAL Sub agreed to pay the Company $85
million and return its equity interest. When the Board authorized the settlement, an officer

of TOTAL Sub served as its director designee on the Board.

       The Company initially asked Xerion to consent to the settlement. After Xerion

declined, the Company and TOTAL Sub went forward without Xerion’s consent. In an

effort to sidestep the consent requirement, the Company obtained a non-reasoned,

conclusory opinion from its outside counsel stating that TOTAL Sub and the officer of

TOTAL Sub who served on the Board were not affiliates. The Company also tweaked the

settlement so that TOTAL Sub would remain the owner of its equity interests in the

Company unless and until Xerion consented to the settlement and released any claims it

might have under a stockholders agreement and an investors’ rights agreement.

       The unwinding of the joint venture represented a material change in the Company’s

business plan. Before the settlement, TOTAL Sub was supporting the Company with

financial, operational, and technological assistance. Together, the Company and TOTAL

were pursuing a pilot project in Seep Ridge, Utah, designed to demonstrate the viability of

extracting oil by heating shale in a single-use, earthenware capsule. After the settlement,

the Company no longer had the support of a supermajor oil company. Moreover, the

Company decided to pivot away from its pilot project in Utah and attempt instead to

commercialize a multi-use, steel capsule that could extract oil from a different form of

shale found in the middle eastern country of Jordan.

       Xerion filed this lawsuit for breach of its consent rights. This decision grants

Xerion’s motion for summary judgment on the question of breach. For the reasons set forth

herein, the Company breached Xerion’s consent rights by failing to obtain Xerion’s consent


                                             2
before (i) authorizing and later effecting a transaction for the benefit of an affiliate of a

director and (ii) authorizing and later effecting a material change in the Company’s

business plan. The Company did not breach its obligation to obtain Xerion’s consent before

authorizing a redemption.

                         I.       FACTUAL BACKGROUND

       The facts are drawn from the materials that the parties submitted in connection with

the motion for summary judgment.1 When considering Xerion’s motion, any conflicts in

the evidence are resolved in the Company’s favor, and the Company receives the benefit

of all reasonable inferences that can be drawn from the evidence. At this stage of the case,

the court cannot weigh the evidence, decide among competing inferences, or make factual

findings.

A.     The Series A Issuance

       The Company is a privately held Delaware corporation formed in 2006. For over a

decade, the Company has sought to develop and commercialize technology for extracting




       1
         Citations in the form “[Name] Dep.” refer to witness testimony from a deposition
transcript. Citations in the form “OX –– at ––” refer to exhibits that Xerion submitted with
its opening brief. See Dkts. 145–46. Citations in the form “AX –– at ––” refer to exhibits
that the Company submitted with its answering brief. See Dkts. 151–59. Citations in the
form “RX –– at ––” refer to exhibits that Xerion submitted with its reply brief. See Dkt.
164. Pinpoint citations identify the internal page number of the exhibit or the last three
digits of a control number. If an exhibit contained paragraph or section numbers, then the
pinpoint citation uses the paragraph or section number. Citations to OX 25 and OX 26 refer
to the complete versions of the draft agreements. See Dkt. 169. Citations in the form “AB
__” refer to the Company’s answering brief in opposition to Xerion’s motion for summary
judgment. See Dkt. 150.



                                             3
oil from shale.

       In 2010, the Company raised capital by issuing shares of Series A Preferred Stock.

Xerion is a hedge fund that purchased and continues to own a majority of the issuance.2

       During the negotiations over the terms of the Series A Preferred Stock, Xerion

insisted on a “consent rights package” for “fundamental business events.” OX 2 at ‘748.

The final certificate of designations stated:

       For so long as shares of the Series A Preferred representing in aggregate more
       than 4.5% of the outstanding equity interests in the Corporation on a fully-
       diluted and as-if-converted basis are outstanding in addition to any other vote
       or consent required herein by law, the vote or written consent of the holders
       of more than 50% of the outstanding shares of Series A Preferred, voting
       together as a single class, shall be necessary for authorizing, effecting or
       validating the following actions (whether by merger, amendment,
       consolidation, reclassification, reorganization, recapitalization or otherwise)
       by the Corporation . . . .

OX 4 § 3(b)(i). The certificate of designations then listed thirteen different categories of

actions. See id. Three are relevant to this case:

      “Any purchase or redemption of, or payment of any dividend or other distribution
       on, any capital stock or any other equity interest in the [Company] . . . .” Id. §
       3(b)(i)(F) (the “Redemption Clause”).

      “Any material alteration to, or change of, the business or business plan of the
       [Company] or any of its subsidiaries.” Id. § 3(b)(i)(I) (the “Business Plan Clause”).

      “Any transaction with or for the benefit of any director or officer (or their respective
       affiliates).” Id. § 3(b)(i)(M) (the “Interested Party Clause”).




       2
         Xerion purchased the Series A shares through Xerion Master Fund Ltd., which
later transferred its shares to the plaintiff. The distinction between the entities is not
important for purposes of this decision, which refers simply to Xerion.


                                                4
Because Xerion purchased and has continued to hold a majority of the Series A shares,

Xerion’s consent was necessary for authorizing or effecting any transaction that fell within

the scope of the Redemption Clause, the Business Plan Clause, or the Interested Party

Clause.

B.       The Joint Venture

         In 2012, the Company entered into a set of joint venture agreements with TOTAL

Sub, a Delaware limited liability company.3 The sole member of TOTAL Sub was TOTAL

E&P USA, Inc. (“TOTAL USA”), which in turn was a wholly owned subsidiary of TOTAL

Parent. To reiterate, TOTAL Parent is one of the few supermajor oil companies in the

world.

         Under the terms of the Joint Venture Agreements, TOTAL Sub made an initial

investment of $25 million in the Company and committed to provide personnel

and advisory support for the Company’s laboratory and scientific work. In return, TOTAL

received (i) 16,667 shares of the Company’s common stock, reflecting a 3.5% ownership

stake in the Company, (ii) a warrant exercisable for additional shares of the Company’s

common stock, and (iii) a worldwide license to use the Company’s EcoShale Technology.

TOTAL Sub also received the right to designate a member of the Board.




         3
       The Company and TOTAL Sub entered into five major agreements—a Purchase
Agreement, a Joint Development Agreement, a Joint Operating Agreement, a Co-
Ownership Agreement, and a License Agreement—plus other ancillary agreements. See
AX 14; AX 20. The Company helpfully refers to them collectively as the “Joint Venture
Agreements.” See AB 9 n.3.


                                             5
       The Joint Venture Agreements provided that TOTAL Sub and the Company would

each own a 50% interest in certain oil shale assets and projects located in Utah. The Joint

Venture Agreements contemplated that the parties would develop the Utah projects in a

coordinated manner and identify and acquire additional oil shale assets for joint exploration

and development.

       Before entering into the Joint Venture Agreements, the Company “planned to

develop the EcoShale technology and move directly into commercial production.” AB 11.

Under the Joint Venture Agreements, the parties agreed first to pursue an “Early Production

System Phase” (the “EPS Phase”) during which the parties would develop and test the

EcoShale technology at a site in Seep Ridge, Utah. AX 21 at 47. The Seep Ridge project

sought to demonstrate the Company’s ability to extract oil from shale by heating the rock

inside a single-use, earthenware capsule. See generally AX 22, AX 23, AX 25, AX 26.

       TOTAL Sub committed to invest $160 million towards developing the EcoShale

Technology, representing 80% of the project budget. OX 9 at ‘367. If the technology

proved commercially viable, then the parties would move on to a production phase. See

OX 1 at ‘462; AX 10 at ‘739; AX 13 at ‘298.

       The Company asked Xerion for its consent before entering into the Joint Venture

Agreements. Xerion provided it.

C.     The Company’s Pursuit Of The Joint Venture

       During the next four years, the Company’s business plan consisted of pursuing the

joint venture with TOTAL Sub. In 2013, a Board member suggested relocating the EPS

Phase from Utah to Jordan, arguing that it would save the Company money. OX 10 at ‘056.


                                             6
The Company’s CEO opposed the idea, stressing that the Company needed to remain

focused on “execut[ing] our business plan as defined by the Board and our JV Partner.”

OX 10 at ‘057.

      In 2014, after the price of oil dropped significantly, the Company and TOTAL Sub

agreed to reduce the size of the capsule and to extend the anticipated completion date of

the EPS Phase by eighteen months. In May 2015, the Company and TOTAL Sub agreed to

suspend all work for a period of two years to give the Company an opportunity to re-

engineer a more cost-effective capsule. See AB 13; AX 23 at ‘179, ‘185; AX 28 at ‘730;

AX 29 § 2; DeRidder Dep. 123–25. The re-engineered capsule would still be earthenware

and single-use, but it would have a partially re-designed heating system. AX 23 at ‘185.

D.    The Agreement In Principle

      In May 2016, TOTAL Sub informed the Company that it wanted to exit the joint

venture, citing concerns over the Company’s technology, declining oil prices, and

environmental issues. See AX 33 at ‘533 to ‘535; DeRidder Dep. at 138, 143, 147–48, 150–

52, 154. The Company estimated that TOTAL Sub still owed $150 million in commitments

to the joint venture through 2020. OX 11 at ‘712.

      The Company decided to negotiate a settlement with TOTAL Sub. See OX 13 at

‘159. Around the time that negotiations began, TOTAL Sub replaced its Board designee

with Pierre Germain, an officer of TOTAL Sub who was employed as Vice President for

Business Development at TOTAL USA, the immediate parent of TOTAL Sub.

Recognizing the conflicts of interest that would arise from Germain’s affiliation with




                                            7
TOTAL Sub, the Company asked Germain to recuse himself from any board discussions

regarding the settlement negotiations. Germain agreed.

       By January 2017, the parties had reached an agreement in principle that

contemplated the Company releasing TOTAL Sub from all of its obligations under the

Joint Venture Agreements in return for TOTAL Sub (i) paying the Company $85 million,

(ii) forgoing all right, title, and interest in any assets related to the joint venture, and (iii)

returning its 16,667 shares of common stock and the warrant to the Company (collectively

the “Equity Interests”). See AX 39 at ‘695 to ‘696. During the settlement negotiations, both

the Company’s General Counsel and its outside counsel concluded that Germain’s

affiliations with TOTAL Sub meant that Xerion’s consent would be required under the

Interested Party Clause. See OX 16. The Company’s General Counsel prepared a “voting

matrix” for the Board, which noted that Xerion would need to approve the settlement. OX

17 at ‘094. When the Board met to approve the agreement in principle, the Company’s

General Counsel advised the Board that the Company “will need to obtain approval from

[Xerion] . . . because Pierre [Germain] is serving as Director so the transaction may be

considered to be a transaction for the benefit of an affiliate of a Director.” AX 39 at ‘695.

       The Board approved the agreement in principle subject to “receiving an affirmative

vote in favor of the . . . settlement from [Xerion].” Id. at ‘696. Xerion’s designee to the

Board voted in favor of the resolution. Id. at ‘697.

E.     Xerion Objects To The Post-TOTAL Business Plan.

       Also during January 2017, the Board considered what the Company’s business plan

should be after the termination of the joint venture. Without TOTAL Sub, the Company


                                                8
lacked the funds to finish the EPS Phase. The Company’s CEO believed that pursuing the

EPS Phase was the Company’s “only approved business plan.” OX 34; see OX 23 at ‘554.

Put differently, the Company had no “approved plan forward other than to advance the

EPS.” OX 35.

       On January 28, 2017, the Company’s CEO advised the Board that “hav[ing]

completed a successful negotiation with TOTAL, . . . the [Company] management team is

turning our full attention back to the task of executing our business plan to advance the

Ecoshale technology.” OX 23 at ‘555. Xerion’s director designee objected, asserting that

this course of action was not “funded, wise, or authorized by the board or the shareholders.”

OX 23 at ‘555. As he saw it, TOTAL Sub’s exit meant there was “no funding or approved

business plan.” OX 23 at ‘255.

F.     Xerion Withholds Consent.

       On January 31, 2017, the Company formally asked Xerion for consent to the

agreement in principle, explaining that its consent was required “[b]ecause a TOTAL

representative is currently serving on the Board.” OX 21 at ‘594. Xerion declined.

       The next day, the Company’s General Counsel asked its outside counsel to “provide

a legal memo or opinion (if possible) for our Board on the issue [sic] Series A not having

a consent right for approval of the TOTAL deal if Pierre [Germain] resigns?” OX 23 at

‘552. Outside counsel agreed to provide the memorandum and suggested also analyzing

whether the settlement was a “transaction” and whether TOTAL Sub was an “affiliate” of

Germain. Id.




                                             9
       The Company’s General Counsel also became concerned about whether the return

of the Equity Interests triggered the Redemption Clause. He asked the Company’s outside

counsel to develop “a plan to get the TOTAL deal closed which assumes that we don’t get

Series A consent.” OX 24 at ‘963. He suggested that to address the Redemption Clause,

“we will simply carve the stock out of the deal.” Id. at ‘964. Outside counsel agreed with

this strategy and suggested that the Company could “carve it out and even deal with it as a

separate redemption agreement.” Id. at ‘963. Outside counsel viewed the Interested Party

Clause as a “harder issue,” noting that the firm could “come up with some arguments as to

why [the Interested Party Clause] shouldn’t apply, but the best one is still having [Germain]

resign, which [TOTAL Sub] seem[s] unwilling to do.” OX 24 at ‘963; see Waltman Dep.

at 310–11.

       Xerion offered to consent to the agreement in principle if the Company returned a

negotiated amount of capital to its investors through a tender offer. AX 46 at ‘359; see AX

47 at ‘016; Kitchen Dep. 97–98. In response, the Board formed a committee consisting of

all of the directors other than the designees of Xerion and TOTAL Sub (the “Committee”)

and gave it exclusive authority to negotiate with Xerion. AX 62 at ‘186. Xerion and the

Committee failed to reach agreement because of objections from Questerre Energy

Corporation (“Questerre”), a licensee of the Company’s technology that was also the

Company’s largest common stockholder.4




       See OX 13 at ‘159 to ‘160; OX 41 at ‘001 to ‘002; AX 49 at ‘162; AX 51 at ‘167;
       4

AX 52; AX 53; AX 54; AX 55; AX 56; AX 57; AX 58; AX 59; Hood Dep. 183.


                                             10
G.     The Drafting Of The Settlement Agreement

       On February 7, 2017, TOTAL Sub sent the Company a draft settlement agreement.

See OX 25. It called for TOTAL Sub to transfer various “Transferred Interests,” including

the Equity Interests, from TOTAL Sub to the Company. See id. § 2.2, Ex. A at 1, 6, 8. It

also contemplated that the Company would deliver an opinion of counsel at closing stating

that the Company had taken all corporate action necessary to effectuate the transaction,

including obtaining any necessary stockholder approvals. See id. §§ 2.3(f), 3.1.

       On February 21, 2017, the Company sent back a revised draft that removed the

obligation to deliver an opinion of counsel. See OX 26 § 2.3. The Company’s General

Counsel asked in-house counsel for TOTAL Sub to “give some thought to whether and

how [TOTAL Sub] may get comfortable closing this deal with no [Xerion] consent.” OX

27 at ‘818.

       The final version of the settlement agreement removed the Equity Interests from the

definition of “Transferred Interests,” meaning that the Equity Interests would not be

transferred at closing. See OX 28, Ex. A at 1, 6, 8. The parties added a new Section 2.5,

which states:

       As soon as reasonably practicable after receipt by Red Leaf of any required
       consent or approval, and conditioned upon the execution and delivery of the
       [Stockholders Agreement] Amendment and Release Agreement and the
       [Investors’ Rights Agreement] Amendment and Release Agreement by
       [TOTAL Sub], Red Leaf, and all other parties required to execute such
       agreements, [TOTAL Sub] shall transfer and convey to Red Leaf, and Red
       Leaf shall accept, the Equity Interests pursuant to an assignment agreement
       substantially in the form of the Assignment.




                                            11
Id. § 2.5. The final version of the settlement agreement restored the language requiring the

Company to deliver a legal opinion at closing, but modified the requirement to address due

authorization “[e]xcept for any stockholder approval required to complete the transactions

contemplated by Section 2.5 of the Settlement Agreement.” Id. at ‘017; see id. § 2.3(e).

H.     The Company And TOTAL Sub Enter Into The Settlement Agreement.

       On March 13, 2017, the Committee considered whether to proceed with the

settlement without Xerion’s consent or pursue claims against TOTAL Sub. The directors

decided to proceed with the settlement. See AX 63.

       After the Committee met, the Company formally took the position that Xerion’s

consent was not necessary to proceed with the settlement. OX 30 at ‘742. The Company’s

outside counsel subsequently delivered a non-reasoned legal opinion which stated, without

analysis, that the settlement did not violate any provision in the certificate of designations

for the Series A Preferred Stock. See OX 28 at ‘014.

       On March 22, 2017, the Board approved the settlement. The transaction was signed

and closed on March 28. See id. at ‘949 (the “Settlement Agreement”). Xerion never gave

its consent.

I.     The Company’s Business Plan

       Meanwhile, in early March 2017, Company management met “to review the draft

of the [Red Leaf] Business Plan” that they had prepared in anticipation of the termination

of the joint venture. OX 36. The EPS Phase that the Company had been pursuing with

TOTAL Sub in Seep Ridge, Utah, sought to demonstrate the commercial viability of

extracting oil from shale by heating the rock inside a single-use, earthenware capsule.


                                             12
Questerre wanted management to “pivot” to an oil shale resource that Questerre owned in

Jordan. OX 37 at ‘823. The single-use, earthenware capsule would not work with the

Jordanian oil shale, and Questerre wanted management to develop a reusable steel capsule

for commercial use in Jordan. See OX 38 at ‘116; OX 39 at ‘886; OX 42 at ‘002.

       On March 20, 2017, two days before the Board voted on the Settlement Agreement,

management circulated a presentation titled “Business Plan” to the Board. OX 40 at ‘558,

‘560. The presentation included an analysis of the oil industry, company-level forecasts,

and a proposed budget and schedule for a hypothetical $56 million demonstration project.

See id. at ‘558 to ‘562. The presentation also described the option of pursuing “a

commercial project in a lower labor cost environment” such as Jordan, China, or Mongolia.

Id. at ‘562 to ‘563.

       Questerre and Company management “jointly outlined a plan to proceed with a

focus on developing the EcoShale process for Questerre’s Jordan project.” OX 43 at ‘003.

A week after the Board approved the Settlement Agreement, the Company’s Vice President

of Business Development and Investor Relations informed Questerre that Red Leaf was

“ready to pivot to a Jordan focused game plan with the idea that the Jordan approach may

be the best for Utah as well.” OX 44.

       On March 31, 2017, the Company sent a letter to its investors explaining that it had

devoted time during the previous months “toward modifying our basic capsule design to

work on very different oil shale resources in Jordan.” AX 79 at ‘881. The letter identified

problems with using the Company’s previous design on the Jordanian resource and stated

that in light of these problems, “our engineering team began to develop concepts for a


                                            13
reusable capsule.” Id. The Company added that “[s]everal promising design concepts for

reusable capsules are working their way through early economic and engineering analysis.”

Id.

J.     The Committee’s Expanded Role

       On March 30, 2017, Xerion filed this action. In response, the Board expanded the

Committee’s authority to include overseeing the litigation “and any other matters that may

involve or implicate a conflict or potential conflict between the Company and [Xerion]” or

matters for which “it is in the best interests of the Company and its stockholders other than

[Xerion] that deliberations, discussions or decisions be kept confidential from [Xerion].”

AX 73 at ‘141.

       The Company’s General Counsel recommended that the Committee take charge of

“certain discussions related to the Company’s business plan.” OX 29 at ‘772. On April 19,

2017, Company management presented the Committee with five “business plan options”

that the Company could pursue following TOTAL Sub’s exit from the joint venture. OX

49 at ‘177 to ‘178, ‘184 to ‘191; see also OX 50 at ‘001, ‘004 to ‘009. The members of the

Committee were instructed to keep “the direction of the Company’s business and business

plan” confidential from Xerion’s board designee. OX 49 at ‘177.

       Company management recommended a business plan with the following

components:

           “Suspend the EPS design work pending development of reusable
            containment concept,”

           “Test reusable containment concept for [Utah] commercial project,”



                                             14
           “Support project development in Jordan,”

           “Pursue additional licensees in Jordan and elsewhere,”

           “Pursue new partners for Utah and international projects,” and

           “Potential future tender agreements will be negotiated between
            shareholders.”

Id. at ‘190 to ‘191. The Committee adopted management’s recommendation. Id. at ‘178. A

Company senior officer recorded the vote as, “Plan + Budget all in favor.” OX 52 at ‘809

(formatting altered). He noted that a Committee member advised his fellow directors not

to say that they had suspended the EPS Phase, but rather that they were “just moving

forward” and “focusing on specific elements of plan.” Id.

       Since this meeting, the Company has not pursued any further development of the

single-use, earthenware capsule that was the focus of the joint venture with TOTAL Sub.

The Company instead has focused on commercializing a reusable steel capsule. See OX 53

at ‘067 to ‘069; Waltman Dep. 288–89. In June 2017, management recommended to the

Board that the Company (i) use a reusable steel capsule at its Utah site and (ii) support

licensees’ projects in Jordan through lab tests, feasibility studies, and engineering design.

AX 75 at ‘365. The presentation omitted any use of the term “business plan,” and the Board

did not vote on whether to adopt the recommendations.

                            II.       LEGAL ANALYSIS

       Xerion seeks partial summary judgment determining that the Company breached

the Interested Party Clause, the Business Plan Clause, and the Redemption Clause.

Summary judgment may be granted only when “there is no genuine issue as to any material

fact” and the “moving party is entitled to judgment as a matter of law.” Ct. Ch. R. 56(c).

                                             15
Summary judgment “must be denied if there is any reasonable hypothesis by which the

opposing party may recover, or if there is a dispute as to a material fact or the inferences

to be drawn therefrom.” Vanaman v. Milford Mem’l Hosp., Inc., 272 A.2d 718, 720 (Del.

1970).

         Summary judgment may be “appropriately granted even where ‘colorable . . . or

[in]significantly probative [evidence]’ is present in the record, if no reasonable trier of fact

could find for the [non-movant] on that evidence.” Haft v. Haft, 671 A.2d 413, 419 (Del.

Ch. 1995) (final alteration added) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

249–50 (1986)). “The ‘mere existence of a scintilla of evidence in support of the [non-

movant]’s position’ is not sufficient.” Haft, 671 A.2d at 419 (quoting Anderson, 477 U.S.

at 252).

A.       Principles Of Contract Interpretation

         The Interested Party Clause, the Business Plan Clause, and the Redemption Clause

appear in the certificate of designations that governs the Series A Preferred Stock. “The

rules of construction which are used to interpret contracts and other written instruments are

applicable to corporate charters and certificates of designation.” Matulich v. Aegis

Commc’ns Gp., Inc., 942 A.2d 596, 600 (Del. 2008). “Thus, if the charter language is clear

and unambiguous, it must be given its plain meaning.” Benihana of Tokyo, Inc. v.

Benihana, Inc., 906 A.2d 114, 120 (Del. 2006). “[A] court interpreting any contractual

provision, including preferred stock provisions, must give effect to all terms of the

instrument, must read the instrument as a whole, and, if possible, reconcile all the




                                              16
provisions of the instrument.” Elliott Assocs., L.P. v. Avatex Corp., 715 A.2d 843, 854

(Del. 1998).

       “Absent some ambiguity, Delaware courts will not destroy or twist [contract]

language under the guise of construing it.” Rhone-Poulenc Basic Chems. Co. v. Am.

Motorists Ins. Co., 616 A.2d 1192, 1195 (Del. 1992). “If a writing is plain and clear on its

face, i.e., its language conveys an unmistakable meaning, the writing itself is the sole

source for gaining an understanding of intent.” City Investing Co. Liquidating Tr. v. Cont’l

Cas. Co., 624 A.2d 1191, 1198 (Del. 1993). “Contract language is not ambiguous merely

because the parties dispute what it means. To be ambiguous, a disputed contract term must

be fairly or reasonably susceptible to more than one meaning.” Alta Berkeley VI C.V. v.

Omneon, Inc., 41 A.3d 381, 385 (Del. 2012) (footnote omitted).

B.     The Interested Party Clause

       The Interested Party Clause makes Xerion’s consent “necessary for authorizing [or]

effecting” any transaction for the benefit of any affiliate of a Company director without

Xerion’s consent. The Company breached the Interested Party Clause by both authorizing

and effecting the Settlement Agreement.

       Under the plain meaning of the term, someone “affiliated” with a person or

organization is “closely associated with” the person or organization, “typically in a

dependent or subordinate position.” Affiliated, Merriam Webster, https://www.merriam-




                                            17
webster.com/dictionary/affiliated (last visited Oct. 14, 2019). As customarily interpreted,

an officer or director of an entity is affiliated with that entity.5

       Other definitions of affiliate reach the same endpoint by more explicitly

incorporating the concept of control. Under Section 203 of the Delaware General

Corporation Law, “‘[a]ffiliate’ means a person that directly, or indirectly through 1 or more

intermediaries, controls, or is controlled by, or is under common control with, another

person.” 8 Del. C. § 203(c)(1). The term “‘control, including the terms ‘controlling,’

‘controlled by’ and ‘under common control with,’ means the possession, directly or

indirectly, of the power to direct or cause the direction of the management and policies of

a person, whether through the ownership of voting stock, by contract or otherwise. . . .” 8

Del. C. § 203(c)(4). A stockholders’ agreement that was one of the Joint Venture

Agreements defined an “affiliate” as “any other Person that, directly or indirectly, through

one or more intermediaries, controls, is controlled by, or is under common control with,

such Person, as such terms are used and construed under Rule 144 [of the Securities Act].”




       5
         See Sec. & Exch. Comm’n v. Longfin Corp., 316 F. Supp. 3d 743, 759 (S.D.N.Y.
May 1, 2018) (describing a person’s status as an “officer, director, or 10% shareholder” as
“hallmarks of an affiliate status”); SMSW Enters., LLC v. Halberd Corp., 2015 WL
1457605, at *10 (C.D. Cal. Mar. 30, 2015) (“Generally, an affiliate [under Rule 144] is
either an officer or director of the company or someone who owns 10% of the issued and
outstanding shares of stock.”); Trustcash Hldgs., Inc. v. Moss, 668 F. Supp. 2d 650, 660
(D.N.J. 2009) (“Affiliates are most often officers, directors, or majority shareholders—
people who exercise control and influence over the company’s policies or finances.”)
(internal quotation marks omitted); see also Revision of Rule 144, Rule 145, and Form
144, Securities Act Release No. 7391, 1997 WL 70601, at *4–5 (Feb. 20, 1997) (observing
that “[m]any practitioners . . . use [these] criteria as a guide”).


                                                18
OX 18 § 1. Like Section 203, Rule 144 defines “control” to mean “the possession, direct

or indirect, of the power to direct or cause the direction of the management and policies of

a person, whether through the ownership of voting securities, by contract, or otherwise.”

17 C.F.R. § 230.405.

       Under these control-based definitions, an officer or employee of an entity is

affiliated with that entity. An officer meets the definition because he is under the control

of and accountable to the governing body of the entity he serves. See Amalgamated Bank

v. Yahoo! Inc., 132 A.3d 752, 780 (Del. Ch. 2016) (“Officers . . . are agents who report to

the board of directors in its capacity as the governing body for the corporation. . . .

[O]fficers have a duty to comply with the board’s directives.”), abrogated on other grounds

by Tiger v. Boast Apparel, Inc., --- A.3d ---, 2019 WL 3683525 (Del. Aug. 7, 2019). An

employee is similarly under the control of and accountable to the entity that employs him.

See TD Ameritrade, Inc. v. McLaughlin, Piven, Vogel Sec., Inc., 953 A.2d 726, 736 n.37

(Del. Ch. 2008) (citing RESTATEMENT (THIRD) OF AGENCY § 7.07).

       When the Board approved the Settlement Agreement, Germain served as an officer

of TOTAL Sub, as Vice President for Business Development of TOTAL USA, and as a

member of the board of directors of TOTAL USA. Through these positions, Germain was

affiliated with TOTAL Sub and TOTAL USA under the commonly understood meaning

of the term, which recognizes that an officer or director of an entity is affiliated with that

entity. Germain was also affiliated with TOTAL Sub, TOTAL USA, and TOTAL Parent

under the control-based understanding of the term. As an officer of TOTAL Sub, Germain

reported to Jose Ignacio Sanz, the President and CEO of TOTAL USA and TOTAL Sub,


                                             19
and German was under the control of Sanz for purposes taking action as an officer of

TOTAL Sub. TOTAL USA was the sole member of TOTAL Sub, and as an officer of

TOTAL Sub, Germain and TOTAL Sub were under the common control of TOTAL USA.

As a result, (i) Germain was under the control of and affiliated with TOTAL Sub, (ii) both

TOTAL Sub and Germain were under common control of TOTAL USA, and (iii) TOTAL

USA, TOTAL Sub, and German were under the common control of TOTAL Parent. Under

the control-based approach to affiliate status, Germain was an affiliate of TOTAL Sub,

TOTAL USA, and TOTAL Parent.

       Before it became advantageous to argue otherwise, both the Company’s General

Counsel and its outside counsel regarded Germain as an affiliate of TOTAL Sub and

believed that Xerion’s approval was necessary under the Interested Party Clause. See OX

16; OX 17 at ‘094; OX 20 at ‘695. After Xerion declined to consent, the Company’s

General Counsel asked its outside counsel to develop “a plan to get the TOTAL deal closed

which assumes that we don’t get Series A consent.” OX 24 at ‘963. The Company’s outside

counsel responded that they could “come up with some arguments as to why [the Interested

Party Clause] shouldn’t apply,” but the best solution was to have Germain resign before

the vote on the Settlement Agreement. Id. Germain did not resign before the vote.

       The Company now contends that because Germain did not participate in the day-to-

day activities of TOTAL Sub and because he largely did not participate in the settlement

negotiations, he should not be considered an affiliate of TOTAL Sub. The extent of

Germain’s participation is irrelevant to the affiliate inquiry. The Interested Party Clause

establishes a bright-line rule that requires Xerion’s consent for any transaction with an


                                            20
affiliate of a director, whether that director participated in the transaction or the day-to-day

activities of the affiliate.

       The Company also contends that Germain did not receive instructions from TOTAL

Sub on how to vote, so he could not be under TOTAL Sub’s control for purposes of

determining affiliate status. There is evidence that TOTAL Sub did provide Germain with

instructions about how to vote. See Germain Dep. 44. But whether Germain actually

received instructions is immaterial. Germain was an officer of TOTAL Sub and an

employee and officer of TOTAL USA who served on the Board at their pleasure. If TOTAL

Sub or TOTAL USA disagreed with Germain’s decisions, he could be removed.

       The Company breached the Interested Party Clause because when the Settlement

Agreement was approved and virtually all of the transactions it contemplated were

completed, Germain was both a director of the Company and an affiliate of TOTAL Sub

(as well as TOTAL USA and TOTAL Parent), and because the settlement benefitted

TOTAL Sub (as well as TOTAL USA and TOTAL Parent) by allowing TOTAL Sub to

exit from the Joint Venture Agreements on negotiated terms. Xerion separately argued that

the Company breached the Interested Party Clause when approving the Settlement

Agreement because it had provided deferred compensation to two officers under

arrangements where their compensation would increase if the Company and TOTAL Sub

reached agreement on a settlement. This decision need not reach that issue. The Company

breached the Interested Party Clause by authorizing and later effecting the settlement

without Xerion’s consent while Germain served on the Board.




                                              21
C.     The Business Plan Clause

       The Business Plan Clause makes Xerion’s consent “necessary for authorizing [or]

effecting” any “material alteration to, or change of” the Company’s “business or business

plan.” OX 4 § 3(b)(i)(I). The plain meaning of a “business plan” is “[a] document that

explains what a company wants to do in the future and how it plans to accomplish those

goals; specif[ically], a written proposal explaining a new business or business idea and

usu[ally] covering financial, marketing, and operational plans.”6

       During the time that the Company and TOTAL Sub were parties to the Joint Venture

Agreements, the Company’s business plan consisted of pursuing the steps specified in

those agreements, starting with the EPS Phase. OX 10 at ‘057. That phase involved

pursuing a pilot project in Seep Ridge, Utah, for the extraction of oil from shale by heating

it inside a single-use, earthenware capsule. TOTAL Sub committed to support the project

with $160 million, representing 80% of the project budget. OX 9 at ‘367. TOTAL Sub also

provided personnel, technological support, and operational assistance.

       Before entering into the Joint Venture Agreements, the Company had been




       6
         Business Plan, BLACK’S LAW DICTIONARY (11th ed. 2019); see Business Plan,
Cambridge Dictionary (“a detailed plan describing the future plans of a business”),
https://dictionary.cambridge.org/dictionary/english/business-plan (last visited Oct. 14,
2019); Business Plan, Lexico (“A document setting out a business’s future objectives and
strategies                    for                    achieving                      them.”),
https://en.oxforddictionaries.com/definition/business_plan (last visited Oct. 14, 2019);
Business Plan, Collins Dictionary (“a detailed plan for setting up or developing a business,
especially     one     that    is   written     in    order      to    borrow      money”),
https://www.collinsdictionary.com/dictionary/english/business-plan (last visited Oct. 14,
2019).


                                             22
attempting to commercialize its technology immediately and on its own. Not surprisingly,

the Company described its entry into the Joint Venture Agreements as a “significant

change[]” in “the business plans of the Corporation.” OX 8 at ‘764. By entering into the

Settlement Agreement, unwinding the Joint Venture Agreements, and exiting from the joint

venture, the Company materially changed its business plan.

       The Company’s conduct underscores its material change in direction. While the

parties were negotiating the Settlement Agreement, Company management recognized the

need to prepare a new business plan that accounted for TOTAL Sub’s departure. See OX

34. As part of that effort, the Company’s CEO developed and distributed a nineteen-page

presentation entitled “Business Plan” that contemplated developing a smaller steel capsule

and potentially pursuing a project in Jordan. See OX 40 at ‘558 to ‘562.

       In April 2017, the Committee met to vote on several “business plan options”

developed by management. See OX 49 at ‘477 to ‘478; see also OX 50. The Committee

was voting on these items, instead of the Board, because the Board empowered the

Committee to address matters where Xerion had conflicting interests. If the Company was

simply continuing to pursue its existing business plan, there would have been no reason to

route the discussions and decision to the Committee. Only a change in direction created a

potential conflict with Xerion. The minutes of the Committee meeting reflect that the

Committee decided to pursue a new business plan involving the commercial development

of a reusable steel capsule that potentially could be deployed in Jordan, along with the

suspension of the Company’s prior EPS project in Utah. See OX 49 at ‘177 to ‘178, ‘190

to ‘191, ‘196 to ‘199. The change in technology and the potential change in project location


                                            23
affected the Company’s budget, technology development timeline, staffing needs,

contracting needs, and day-to-day operations. As one member of the Board testified, “[I]f

the business plan is the steps that you need to execute a particular outcome, yes,

obviously . . . you are going to approach a reusable capsule in Jordan development

different than continue with the current EPS project.” Street Dep. 393–94.

       In an effort to defeat summary judgment, the Company has claimed that its business

plan “was and continues to be to develop, commercialize, and license its oil shale

technology.” AB 6. During discovery, the Company’s directors and officers testified in

lockstep about the Company’s business plan, describing it at a similar level of generality

using effectively the same nine words.7 Based on this testimony, the Company argues that

it has never changed its business plan.

       The Company’s argument confuses its “business” with its “business plan.” The

Business Plan Clause requires Xerion’s consent for a material change to the Company’s

“business or business plan.” OX 4 § 3(b)(i)(I) (emphasis added). The plain meaning of the

term “business” is the “commercial enterprise” or the activity that the Company conducts.8

A business plan is more than a headline-level description of the company’s business. It




       7
       See Bailey Dep. 86–87; Binnion Dep. 53, 100; Bocock Dep. 86–87; Lechtenberger
Dep. 177; Lehnhof Dep. 142–44; Vogel Dep. 89; Waltman Dep. 63.
       8
         Business, BLACK’S LAW DICTIONARY (11th ed. 2019); see Business, Merriam-
Webster (“a usually commercial or mercantile activity engaged in as a means of
livelihood”), https://www.merriam-webster.com/dictionary/business (last visited Oct. 14,
2019).


                                           24
describes how the Company will carry out its business and achieve its goals. Consistent

with the plain meaning of the term, this court has recognized that a business plan is a

confidential document precisely because of the sensitive strategic and financial information

it contains. See, e.g., Mountain W. Series of Lockton Cos. v. Alliant Ins. Servs., Inc., 2019

WL 2536104, at *7 (Del. Ch. June 20, 2019). In this case, the Company designated

information about its business plan as confidential. See, e.g., RX 6 at ‘789. If the

Company’s business plan was nothing more than a single sentence summary of its business,

then confidential treatment would be unavailable.

       The Company’s witnesses only testified in generic terms about the nature of its

business, not its business plan. The contemporaneous documents show that the Company

has always understood its business plan to include the steps needed to carry out its business.

See, e.g., RX 2; RX 3; OX 40; OX 50. The Company’s newfound understanding of a

general, non-specific “business plan” fails to raise a material dispute of fact.9

       The Company breached the Business Plan Clause when it entered into the

Settlement Agreement without Xerion’s consent. It subsequently breached the Business




       9
         See i/mx Info. Mgmt. Sols., Inc. v. Multiplan, Inc., 2014 WL 1255944, at *12 n.43
(Del. Ch. Mar. 27, 2014) (granting motion for summary judgment based on “objective
documentary evidence” that could not be disproven by testimony); Loppert v.
WindsorTech, Inc., 865 A.2d 1282, 1285–86 & n.25 (Del. Ch. 2004) (granting summary
judgment for plaintiff over defendant’s “self-serving revelations” where documentary
evidence established claim), aff’d, 867 A.2d 703 (Del. 2005); see also Merck & Co. v.
SmithKline Beecham Pharm. Co., 1999 WL 669354, at *47 (Del. Ch. Aug. 5, 1999) (post-
trial decision refusing to credit testimony interpreting a contractual provision because
“testimony cannot contradict the plain language of the agreement”), aff’d, 766 A.2d 442
(Del. 2000).


                                             25
Plan Clause when the Committee approved a new business plan without Xerion’s consent.

Ever since, the Company has been continuing to breach the Business Plan Clause by

pursuing a business plan that Xerion never approved. Summary judgment is granted in

Xerion’s favor as to the Company’s past and continuing violations of the Business Plan

Clause.

D.     The Redemption Clause

       The Redemption Clause makes Xerion’s consent “necessary for authorizing [or]

effecting” a purchase or redemption by the Company of its common stock or warrants. The

Company has been careful not to effect a redemption of the Equity Interests, so the only

question is whether the Company authorized a redemption without Xerion’s consent. By

definition, Xerion’s consent is necessary for a redemption to be authorized. Because Xerion

has not given its consent, the redemption is not authorized, and the Company has not

violated this dimension of the Redemption Clause. Nor does the Settlement Agreement

authorize the Company to proceed with the redemption without Xerion’s consent. It instead

conditions the Company’s ability to proceed with the redemption upon receipt of Xerion’s

consent.

              1.     Authorization.

       The plain meaning of “authorize” is to “[g]ive official permission for or approval

to.”10 Xerion argues that the Company has done everything it needs to do to give its official




       10
         Authorize, Lexico, https://en.oxforddictionaries.com/definition/authorize (last
visited Oct. 14, 2019); see, e.g., Authorize, Merriam-Webster (“to endorse, empower,


                                             26
permission for the redemption except for receiving Xerion’s consent. In support of this

observation, Xerion cites Section 2.5 of the Settlement Agreement, which provided as

follows:

      As soon as reasonably practicable after receipt by Red Leaf of any required
      consent or approval, and conditioned upon the execution and delivery of the
      [Stockholders Agreement] Amendment and Release Agreement and the
      [Investors’ Rights Agreement] Amendment and Release Agreement by
      [TOTAL Sub], Red Leaf, and all other parties required to execute such
      agreements, [TOTAL Sub] shall transfer and convey to Red Leaf, and Red
      Leaf shall accept, the Equity Interests.

OX 28 § 2.5. As Xerion points out, this language is mandatory and leaves no room for

reconsideration, re-authorization, or re-approval once the “required consent or approval”

is received. But this language also conditions the Company’s performance on receipt of

Xerion’s consent. Until that is provided, the Company is not authorized to proceed with

the redemption.11

      Xerion also points out that under Section 2.3 of the Settlement Agreement, the

Company was obligated to deliver to TOTAL Sub at closing resolutions from the Board

“authorizing the execution, delivery, and performance by Red Leaf of this Agreement and




justify, or permit by or as if by some recognized or proper authority”),
https://www.merriam-webster.com/dictionary/authorize (last visited Oct. 14, 2019); see
also Waltman Dep. 126.
      11
         Section 2.5 also conditions the redemption on TOTAL Sub, Red Leaf, and other
parties providing releases. This decision need not express any view on whether the
inclusion of this condition subsequent would enable the Company to argue that the
redemption was not fully authorized, separate and apart from the Company’s obligation to
obtain Xerion’s consent.


                                           27
all documents required to be executed and delivered by Red Leaf in accordance with this

Agreement, and the releases, covenants, and transactions contemplated hereby and

thereby.” Id. § 2.3(d). Compliance with this covenant meant that the Board had authorized

the transactions. It did not mean that the Company had received all other consents

necessary to authorize the transactions.

       The most difficult provision in the Settlement Agreement for the Company is

Section 3.1(c), where the Company represented flatly that the transactions that the

Settlement Agreement contemplated were fully authorized:

       Authorization and Enforceability. The execution, delivery, and performance
       by Red Leaf of this Agreement and all documents required to be executed
       and delivered by Red Leaf in accordance with this Agreement, and the
       releases, covenants, and transactions contemplated hereby and thereby, have
       been duly and validly authorized by all necessary corporate action on the part
       of Red Leaf, including the board of directors or stockholder action, and the
       individual executing this Agreement on Red Leaf’s behalf is duly authorized
       to do so. This Agreement and all documents required to be executed and
       delivered by Red Leaf in accordance with this Agreement have been duly
       executed and delivered by Red Leaf and this Agreement and such documents
       constitute the valid and binding obligation of Red Leaf, enforceable in
       accordance with its terms.

Id. § 3.1(c). By making this representation, the Company obligated itself contractually to

TOTAL Sub and, as between those parties, assumed the risk of any inaccuracy. By doing

so, the Company exposed itself to remedies for breach if TOTAL Sub sought to enforce

the representation on the theory that Xerion’s failure to provide consent rendered the

representation inaccurate. Under those circumstances, it is conceivable that Xerion might

have some type of claim against the Company for harm it suffered as a result of an

inaccurate representation about due authorization made in violation of Xerion’s contractual



                                            28
consent rights, but those facts are not presented by this case. Here, Xerion claims that the

Company breached the Redemption Clause by entering into the Settlement Agreement,

even though the Settlement Agreement conditioned the Company’s authority to proceed

with the redemption on receipt of Xerion’s consent. Because of the condition subsequent,

the entry into the Settlement Agreement did not breach the “authorizing” dimension of the

Settlement Agreement. The flat representation may well create risk for the Company vis-

à-vis TOTAL Sub, but it does not mean that the redemption was authorized in violation of

the Redemption Clause.12

       Xerion has also observed that under Section 6.20 of the Settlement Agreement, the

settlement became effective immediately upon TOTAL Sub’s payment of the $85 million

in cash, without any aspect of the parties’ relationship being held in suspension pending

further developments. Written in all caps and bolded for emphasis, Section 6.20 stated:

       Effectiveness. SUBJECT TO RED LEAF’S RECEIPT OF THE CASH
       FEE, THE ASSUMPTION OF OBLIGATIONS, RELEASES,



       12
         In any dispute over the accuracy of Section 3.1(c), the Company perhaps would
have arguments that its flat representation was not so flat. Separately, in Section 3.1(e), the
Company represented:

       Except for any consent or approval required for the consummation . . . of the
       [return of the Equity Interests], no consent, approval, authorization or permit
       . . . is required for or in connection with the execution, delivery, and
       performance of this Agreement by Red Leaf or the consummation by Red
       Leaf of the transactions contemplated by this Agreement.

Id. § 3.1(e). The Company might well assert that the specific and qualified representation
it made in Section 3.1(e) governed the authorization of the redemption of the Equity
Interests, rather than the broader representation in Section 3.1(c) that addressed the
transaction as a whole.


                                              29
       COVENANTS, AND INDEMNITIES IN THIS AGREEMENT ARE
       EFFECTIVE IMMEDIATELY AND ARE NOT CONDITIONED
       UPON THE PERFORMANCE OF ANY OBLIGATION, THE
       CONSUMMATION OF ANY TRANSACTION, OR THE
       OCCURRENCE OF ANY OTHER EVENT, INCLUDING THE
       FUTURE PERFORMANCE BY EITHER PARTY OF ANY
       OBLIGATION CONTAINED IN THIS AGREEMENT OR THE
       FUTURE    CONSUMMATION    OF   ANY    TRANSACTION
       CONTEMPLATED BY THIS AGREEMENT. THE PARTIES
       RECOGNIZE AND AGREE THAT MUTUAL CONSIDERATION
       EXISTS ON THE EFFECTIVE DATE TO SUPPORT THIS
       PROVISION OF IMMEDIATE EFFECTIVENESS.

Id. § 6.20. The inclusion of this provision supports the Company’s view of the transaction.

Because the redemption was not authorized and would not be completed until after Xerion

gave its consent, the parties did not want anyone to be able to argue that the settlement had

not been implemented. Section 6.20 makes clear that the principal aspects of the transaction

had been implemented and completed. Once Xerion gives its consent and the redemption

becomes authorized, that aspect of the transaction will also be completed.

       Xerion’s strongest interpretive argument criticizes the Company’s approach for

collapsing the distinction between “authorizing” and “effecting,” rendering the former a

nullity. As Xerion sees it, for the restriction on “authorizing” to have meaning, it must be

possible for the Company to breach the authorization requirement without having obtained

Xerion’s consent. Put differently, by including the authorization of a redemption without

Xerion’s prior consent as a separate category of breach, the parties necessarily envisioned

that a redemption could be sufficiently authorized to support a breach if Xerion’s consent

had not yet been obtained.




                                             30
       Xerion’s reading is likely correct. There could be a set of facts in which the

Company claimed to have authorized a redemption and was in the process of moving

forward towards effecting it. Under those circumstances, Xerion could assert a claim for

breach of the “authorizing” dimension of the Redemption Clause. But that is not the

situation here. In this case, the Settlement Agreement conditioned the Company’s authority

to proceed with the redemption on receipt of Xerion’s consent. The Company therefore did

not violate the Redemption Clause by entering into the Settlement Agreement.

              2.     The Step Transaction Doctrine

       In the alternative, Xerion turns to the step transaction doctrine. This doctrine “treats

the ‘steps’ in a series of formally separate but related transactions involving the transfer of

property as a single transaction if all the steps are substantially linked. Rather than viewing

each step as an isolated incident, the steps are viewed together as components of an overall

plan.” Noddings Inv. Gp., Inc. v. Capstar Commc’ns, Inc., 1999 WL 182568, at *6 (Del.

Ch. Mar. 24, 1999) (internal quotation marks omitted); accord Bank of N.Y. Mellon Tr. Co.

v. Liberty Media Corp., 29 A.3d 225, 239–40 (Del. 2011). “The purpose of the step

transaction doctrine is to ensure the fulfillment of parties’ expectations notwithstanding the

technical formalities with which a transaction is accomplished.” Coughlan v. NXP B.V.,

2011 WL 5299491, at *7 (Del. Ch. Nov. 4, 2011). “The step-transaction doctrine applies

if the component transactions meet one of three tests.” Liberty Media, 29 A.3d at 240.

       “First, under the ‘end result test,’ the doctrine will be invoked ‘if it appears that a

series of separate transactions were prearranged parts of what was a single transaction, cast

from the outset to achieve the ultimate result.’” Id. (quoting Noddings, 1999 WL 182568,


                                              31
at *6). “Second, under the ‘interdependence test,’ separate transactions will be treated as

one if ‘the steps are so interdependent that the legal relations created by one transaction

would have been fruitless without a completion of the series.’” Id. (quoting Noddings, 1999

WL 182568, at *6). If the nominally separate elements have meaning “‘only as part of the

larger transaction,’” then the interdependence test is met and the step transaction doctrine

applies. Coughlan, 2011 WL 5299491, at *8 (quoting Noddings, 1999 WL 182568, at *6).

“The third and ‘most restrictive alternative is the binding-commitment test under which a

series of transactions are combined only if, at the time the first step is entered into, there

was a binding commitment to undertake the later steps.’” Liberty Media, 29 A.3d at 240

(quoting Noddings, 1999 WL 182568, at *6).

       The step-transaction doctrine is inapposite because the question in this case is not

whether nominally separate transactions are actually parts of a single transaction. The

question in this case is whether the final aspect of a single transaction should be treated as

if it were authorized even though the Company’s ability to proceed was conditioned

expressly on Xerion’s consent. The Settlement Agreement is a single transaction—a

settlement—that admittedly has multiple parts. One of those parts—the redemption—has

not yet taken place because the Company has not yet authorized it. If the Company was

claiming that the redemption was not part of the settlement, then the step-transaction

doctrine would defeat that argument, most obviously because the Settlement Agreement

would satisfy the binding commitment test. But that is not the issue. The question is rather

whether the Company is currently authorized to redeem the Equity Interests in compliance

with an otherwise binding commitment imposed by the Settlement Agreement. The


                                             32
Settlement Agreement conditions the Company’s obligation to redeem the Equity Interests

on receipt of Xerion’s consent, which is necessary for the Company to authorize the

redemption. The step transaction doctrine cannot supply an authorization that does not yet

exist. Once again, the Company did not breach the Redemption Clause when it entered into

the Settlement Agreement without Xerion’s consent.

E.     Other Arguments

       The Company made other points in its papers that do not impede granting summary

judgment on the issue of liability for breach of the Interested Party Clause and the Business

Plan Clause. When discussing the Company’s development of its technology and past

interactions between the Company and Xerion, the Company pointed out a series of

occasions when Xerion did not assert a consent right, even though it theoretically could

have. The Company did not argue that Xerion waived its consent right, and Xerion’s

decision not to assert a consent right on previous occasions under different factual

circumstances would not prevent Xerion from asserting its consent rights in connection

with the settlement and subsequent developments. The Company also did not argue that

Xerion’s decision not to assert a consent right on previous occasions resulted in a course

of dealing that should be used to interpret the consent rights. Because the consent rights

are clear and unambiguous, resort to extrinsic evidence such as the parties’ course of

dealing is unwarranted.

       The Company also argued repeatedly and at length that the Board acted in good

faith and complied with its fiduciary duties when approving the settlement and making

decisions regarding the post-settlement business plan. Xerion has not asserted a claim for


                                             33
breach of fiduciary duty. Xerion has asserted a claim for breach of contract. The two legal

frameworks are separate. A board can readily comply with its fiduciary duties while

making a decision that breaches a contract, just as a board could opt to comply with a

contract under circumstances where its fiduciary duties would call for engaging in efficient

breach. See Frederick Hsu Living Tr. v. ODN Hldg. Corp., 2017 WL 1437308, at *24 (Del.

Ch. Apr. 14, 2017).

       Along similar lines, the Company observed that Xerion’s designee on the Board

congratulated Company management on achieving the settlement and voted in favor of the

initial resolution that approved the settlement subject to receiving Series A consent. A

stockholder and its director designee occupy different roles, are subject to different

decisional frameworks, and can have different views.

       Stockholders in Delaware corporations have a right to control and vote their
       shares in their own interest. They are limited only by any fiduciary duty owed
       to other stockholders. It is not objectionable that their motives may be for
       personal profit, or determined by whim or caprice, so long as they violate no
       duty owed other shareholders.

Bershad v. Curtiss-Wright Corp., 535 A.2d 840, 845 (Del. 1987). A director is a fiduciary

who must seek loyally, in good faith, and with due care to pursue the best interests of the

corporation and maximize its value for the ultimate benefit of the undifferentiated equity

in the aggregate. See ODN, 2017 WL 1437308, at *17–22.

       The fact that Xerion’s director designee viewed the transaction as favorable for the

Company when acting in his capacity as a director does not limit Xerion’s ability to

withhold consent for the same transaction in its capacity as a stockholder. This conclusion

does not mean that the actions of Xerion’s director designee are irrelevant to the ultimate


                                            34
outcome of the case. During a later phase of the case, the views of Xerion’s director

designee may provide probative evidence on the quantum of damages. But this case has

not yet reached the damages phase. The question presently is whether the Company

breached Xerion’s consent rights.

                             III.      CONCLUSION

      Partial summary judgment is granted in favor of Xerion as to the Company’s breach

of the Interested Party Clause and the Business Plan Clause. Xerion’s motion is otherwise

denied.




                                           35
