This action arises out of the adoption of a rights agreement or “poison pill” by the plaintiff company’s Board in order to preserve certain net operating loss carryforwards (“NOLs”) perceived to be at risk as a result of share purchases by defendant Trilogy, Inc. Plaintiff Selectica sought declaratory judgment that the Board’s actions in adopting the pill, a subsequent exchange of shares, and the adoption of a revised and “reloaded” pill were valid and proper. The Court found that there was sufficient evidence to find good faith and reasonable investigation by the board under the first prong of Unocal (reasonable grounds for believing a threat to corporate policy and effectiveness), that the Board was reasonable in concluding that the NOLs were worth preserving, that Trilogy posed a threat, and that the Board’s actions were reasonable in response to the perceived threat. Therefore, the Court found the actions were a valid exercise of the Board’s business judgment.
