The Delaware Chancery Court enjoined the enforcement of a "Don't Ask, Don't Waive" provision in a standstill agreement. This provision pertained to a target company which had entered into a merger agreement with a third party. The provision prohibited a potential bidder from asking the target company to waive an undertaking that limited the potential bidder's ability to communicate with the target company. The court found that, by agreeing to the "Don't Ask, Don't Waive" provision, the target company's board impermissibly limited its ability to discharge its ongoing statutory and fiduciary obligations to properly evaluate a competing offer, disclose material information and make a meaningful merger recommendation to its stockholders. The court reasoned that the provision could have a chilling effect upon the target company's receipt of a topping bid and thus prevent the target company's board from fulfilling the duty applicable in change of control transactions to obtain the best offer reasonably available.
In Re Complete Genomics, Inc. Shareholder Litigation, C.A. No. 7888-VCL (Del. Ch. Ct. Nov. 9, 2012 & Nov. 27, 2012)