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In re TransPerfect Global, Inc.

Court of Chancery of Delaware

August 4, 2017

In re: TransPerfect Global, Inc.
Philip R. Shawe, et al. Elizabeth Elting Shirley Shawe
TransPerfect Global, Inc.

          Submitted: July 10, 2017

          Andre G. Bouchard Chancellor

          Dear Counsel:

         This letter constitutes the Court's decision on two motions: (1) Shirley Shawe's motion for expedited proceedings in C.A. No. 2017-0306-AGB, which seeks the scheduling of a meeting of stockholders of TransPerfect Global, Inc. ("TPG" or the "Company") under 8 Del. C. § 211 (the "Section 211 Action"), and (2) Elizabeth Elting's motion to enforce the Sale Order entered in C.A. Nos. 9700-CB and 10449-CB, [1] and for sanctions.

         Both motions were argued on June 2, 2017. At the conclusion of the hearing, the Court ordered the parties to engage in a mediation with former Chancellor Chandler and stated that it would hold the motions in abeyance pending the outcome of the mediation. The Court also made clear at that time that the sale process that has been underway since the Supreme Court affirmed the Sale Order would proceed on a parallel track.

         On July 10, 2017, the mediator declared that the mediation was at an impasse, prompting the need to decide the pending motions. For the reasons explained below, the motion to enforce the Sale Order is granted but Elting's request for sanctions is denied, and the motion for expedition is denied.

         I. Background

         The background of the disputes underlying these actions has been chronicled in numerous opinions.[2] This letter decision assumes familiarity with those opinions and sets forth only those facts directly relevant to the two pending motions.

          TPG has 100 shares of common stock issued and outstanding, held by three individuals: Elizabeth Elting owns 50 shares; Philip Shawe ("Shawe") owns 49 shares; and Shawe's mother, Shirley Shawe ("Ms. Shawe"), owns 1 share. TPG's bylaws provide that the number of directors constituting the board (the "Board") shall be three, or such larger number as may be fixed from time to time by action of the stockholders of the Company or the Board.

         Since its organization in 2007, TPG has never held an annual meeting of stockholders for the election of directors, and the stockholders of the Company have never taken action by written consent to elect directors in lieu of an annual meeting.

         On December 5, 2014, in connection with resolving a prior Section 211 action brought by Elting, the Court entered an order in which all of TPG's stockholders stipulated that they "were so divided that they failed to fill the vacancy on the Board and they also failed to elect successors to directors whose terms have expired (i.e., Shawe and Elting)."[3]

         On August 13, 2015, for the reasons explained in a 104-page post-trial decision, the Court granted Elting's petition to appoint a custodian (the "Custodian") to sell the Company under 8 Del. C. § 226. The decision asked the Custodian "to evaluate and report back to the Court as promptly as practicable . . . on a proposed plan to sell the Company with a view toward maintaining the business as a going concern and maximizing value for the stockholders."[4] Also on August 13, the Custodian was appointed "to serve as a third director with the authority to vote on any matters on which Shawe and Elting cannot agree and which rise to the level that he deems to be significant to managing the Company's business and affairs."[5]Before this appointment, the Board consisted of just two members since TPG's inception: Shawe and Elting.

         After issuance of the post-trial decision, the parties were afforded the opportunity to confer with the Custodian as he formulated a recommendation for conducting a sale process. On February 8, 2016, the Custodian submitted his recommendation for a proposed plan of sale for the Company. On June 21, 2016, after the parties were afforded the opportunity to submit briefs commenting on the Custodian's recommendation and to propose modifications to it, and after a hearing was held to consider all objections and proposed modifications, the Court issued a decision accepting the Custodian's recommendation but with certain modifications.[6]On July 18, 2016, the Sale Order was entered.

         On February 13, 2017, the Delaware Supreme Court affirmed the post-trial decision and the Sale Order.[7]

         On March 12, 2017, Ms. Shawe's counsel sent Elting, Shawe, and the Custodian a proposed resolution for the Board's consideration at its next meeting for the stated purpose of breaking "the current shareholder deadlock at TPG."[8] In the proposal, Ms. Shawe asked the Board to schedule an annual meeting of the stockholders on March 27, 2017, for the purpose of electing directors. She also pledged to "vote her share at the next meeting in whatever manner is necessary to break any stockholder division that may arise in the election of directors."[9] The proposal, however, was conditioned on the Board's agreement to increase the number of directors on the Board to five, with staggered three-year terms. Elting rejected the proposal on March 13, 2017, stating among other reasons for the rejection her belief that the proposal violated the Sale Order.[10]

          On April 18, 2017, Ms. Shawe made a revised proposal "to prevent deadlock in the election of Company directors, "[11] which contemplated:

1. The adoption of an amendment to TPG's bylaws restructuring the Board to consist of five directors serving staggered terms, and authorizing a majority of the members of the Board to fill any vacancies that may exist from time to time;
2. The adoption of certain guidelines for significant corporate governance issues, including that any sitting director up for re-election at the next annual meeting must submit a contingent resignation that becomes effective only if the director fails to receive a sufficient number of votes for re-election and the Board accepts the resignation;
3. The issuance of the remaining authorized shares of the Company to each of the current stockholders on a pro rata basis according to their current ownership interests; and
4. The provision of a proxy allowing Elting to vote Ms. Shawe's shares solely for the election of any directors of TPG at the next five annual meetings of the stockholders.[12]

         On April 19, 2017, Elting rejected Ms. Shawe's revised proposal, reiterating her belief that the proposal violated the Sale Order and stating other reasons for her rejection.[13]

          On April 20, 2017, Ms. Shawe filed the complaint in the Section 211 Action, asserting a single claim under 8 Del. C. § 211(c) to compel TPG to hold an annual meeting of its stockholders as soon as practicable. Simultaneous with filing her complaint, Ms. Shawe filed a motion for expedited proceedings.

         On April 25, 2017, Elting filed a motion to enforce the Sale Order and for sanctions. On April 26, 2017, the Custodian filed a letter in response to the Section 211 Action and Elting's motion, expressing his belief that Ms. Shawe's proposal is inconsistent with the Sale Order and would seem to be futile:

It was my considered judgment that Ms. Shawe's proposal was not consistent with the Sale Order, which requires me to sell the Company and, in the interim, break deadlocks between directors Phil Shawe and Liz Elting. Further, convening an annual stockholders' meeting now also would seem to be futile because Ms. Elting already has rejected Ms. Shawe's recent "settlement" proposal, for which convening a stockholders' meeting was allegedly the "first step."[14]

         On July 16, 2017, after the mediation before former Chancellor Chandler had reached an impasse, Ms. Shawe submitted a revised proposed form of order in the Section 211 Action, where she asked the Court to order, among other things, that (1) TPG schedule and hold an annual meeting of its stockholders within 30 days of the entry of the order; (2) the Company issue the remaining authorized, but unissued shares of the Company's stock pro rata to the current stockholders before the annual meeting; and (3) "as a precondition of participation in any vote on the election of directors, " five ...

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