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Business Organizations Keyed to Bauman
Broz v. Cellular Information Systems, Inc.
Citation:
673 A.2d 148 (Del. 1996).Facts
Broz was the President and sole shareholder of RFBC, a cellular company providing phone service in the Midwest. Broz was also on the board of directors for CIS. CIS was aware of Broz’ interests in RFBC and their conflicting business interests. At some point, CIS had financially difficulties and entered Chapter 11 bankruptcy. It then began to actively divest its assets.
Around this same time, Mackinac Cellular Corp. approached Broz about purchasing its Michigan-2 license. Michigan-2 was not offered to CIS because it was not seen as viable purchaser. CIS would not be able to make the purchase without the permission of its bankruptcy creditors. Despite this, Broz still spoke with several CIS officers who agreed that CIS had no interest in nor ability to pursue Michigan-2.
Negotiations began for PriCelluar to purchase CIS. It ultimately made a tender offer of $2.00 per share. However, its financing fell through and it had to delay the closing date. Simultaneously, PriCellular executed an option to purchase with Mackinac for Michigan-2 at $6.7 million. The agreement provided that Mackinac was free to sell the license to any party willing to exceed the price by at least $500,000. Broz agreed to pay $7.2 million for Michigan-2 and a purchase agreement was executed by Mackinac and RFBC.
Nine days later, PriCellular closed its tender offer with CIS. It then discharged and replaced the CIS board of directors and commenced this action.
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