LAMB, Vice Chancellor

MEMORANDUM OPINION I.

This class action arises out of a self-tender offer for a Delaware corporation's shares followed shortly thereafter by a transaction taking the corporation private. The named plaintiff, who represents a class of stockholders who tendered their shares in that self-tender, sued the corporation and its directors for damages. The complaint alleges that the defendant directors breached their duty of disclosure owed to the class by failing to inform them that a proposal for taking the corporation private was under consideration during the life of the self-tender offer.

The defendants have moved for summary judgment for two reasons. First, the defendants argue they did not breach any fiduciary duty of disclosure because none of them had any knowledge of material information that needed to be disclosed during the relevant time period. Second, the defendants argue that, even if they did have such knowledge, they cannot be held liable because the corporation had an exculpation clause in its corporate charter.

Summary judgment must be granted in two of the defendants' favor because there is a lack of evidence supporting the proposition that they had any knowledge of the going private proposal before the close of the self-tender offer. Summary judgment cannot be granted in favor of the third director defendant because there is a genuine issue of material fact relating to when that director actually obtained knowledge of the going private proposal. Furthermore, the corporation's exculpation provision does not shield this defendant from liability because a failure to disclose information pertaining to the going private transaction, if proven, could implicate his duty of loyalty or amount to bad faith.

II.

A. Background

Garden Ridge Corporation ("Garden Ridge" or the "Company") is a Delaware corporation that sells specialty home products throughout the southeastern United States. At the time of the matters at issue in this litigation, its board of directors consisted of seven members, as follows: Armand Shapiro, Chairman, Terry S. Boyce, Alyson Hennings, Ira Neimark, Sam J. Susser, Barbara S. Tapp, and H. Whitney Wagner. Together with the Company, each of these persons was named as a defendant in this suit.

In 1995, the Company sold stock through an initial public offering. During 1996, its common stock traded as high as $30 per share. By the spring of 1999, however, the price had fallen to roughly $5 per share.

Due to the depressed stock price, Garden Ridge's board of directors authorized the Company to engage in two open market share repurchase programs in March and July 1999. In the first program, Garden Ridge purchased one million shares at an average price of $5.67 per share. In the second program, the Company sought to repurchase three million shares, but only succeeded in buying 90,000. Thereafter, the shares traded in the area of $6 per share.

B. The Self-Tender

On August 26, 1999, Garden Ridge began a self-tender offer for up to three million shares at a price of $7 per share (the "Self-Tender"). As disclosed in the Offer to Purchase (the "Prospectus"), the closing date of the offer was September 23, 1999. Any tendering stockholder's withdrawal rights terminated as of 5:00 p.m. September 23 "unless extended by the company." However, the Prospectus also stated that a binding agreement did not arise between tendering shareholders and the Company until the Company accepted the shares for payment.

The Prospectus disclosed that Garden Ridge knew of no plans or proposals to take the Company private. In addition, it warned tendering stockholders that "in determining whether to tender Shares pursuant to the Offer, stockholders should consider the possibility that they may be able to sell their Shares in the future on Nasdaq [sic] or otherwise at a net price higher than the Purchase Price."l Finally, the Prospectus informed stockholders that Garden Ridge's 5 directors would not be tendering any of their individual holdings.

Named plaintiff Dennis Johnson ("Johnson") tendered 6,000 shares, his entire stake in Garden Ridge. Johnson bought his shares at prices ranging from $5-718 to $6-7/16, and made a profit of approximately $4,500 by selling his shares in the Self-Tender.

The Self-Tender terminated on September 23, 1999, having attracted tenders of only 1,189,411 shares. Garden Ridge appears to have accepted those shares for payment on September 27, 1999 and paid for them on September 28, 1999.

C. The Buyout Proposal

Three Cities Research, Inc. ("TCR") was a financial advisor with close ties to Garden Ridge. In early September 1999, John William Uhrig, one of TCR's managing directors, began thinking about a proposal to take Garden Ridge private.

On September 16, 1999, Uhrig asked TCR's lawyers, Clifford Chance Rogers Wells, LLP (then "Rogers Wells") to begin work on such a proposal. By September 24, 1999, Rogers Wells had drafted a letter proposing a going private transaction addressed to Paul Davies ("Davies"), the President and CEO of Garden Ridge. This appears to be the first draft of such letter.

TCR's managing directors held regular Monday morning meetings ("MMMs") at which, among other things, they discussed new deals they were working on. At the MMM for September 13, 1999, the agenda listed Garden Ridge as one of TCR's "New Deals in [the] Pipeline." That meeting appears to have been attended by, among others, Uhrig and H. Whitney Wagner, a managing director of TCR and also a director of Garden Ridge. Garden Ridge again appeared on a MMM agenda as a "New Deal in [the] Pipeline" on September 27, 1999. Uhrig and Wagner attended this meeting as well. Garden Ridge was next discussed at the MMM at TCR on October 12. Garden Ridge was again discussed at the MMM of October 27 under the code name "Daisy." This was the first time a code name was used in this transaction. Code names are frequently used by TCR to maintain the confidentiality of potential transactions.

On September 28, 1999, at Uhrig's request, Willem de Vogel, another TCR managing director, called Davies and arranged a breakfast meeting with him for the following morning in Dallas, Texas. At that meeting, on September 29, De Vogel told Davies that TCR was planning to send him a written proposal to take Garden Ridge private and discussed the issues involved in such a proposal with him. On September 30, Uhrig sent a letter (the "September 30 Letter") to Davies and the Garden Ridge board of directors proposing the going private transaction at a price of $9.50 per share.

On October 6, 1999, Garden Ridge's board of directors met to consider Uhrig's September 30 Letter. Davies, who was not a board member, and Garden Ridge's outside counsel attended the meeting. At the meeting, the board established a special committee of persons who at the time had no affiliation or connection with TCR to make a recommendation to the board about the buyout proposal. The members were Davies, Terry Boyce, Sam Susser and Barbara Tapp. The special committee met six times over the next two months. It hired The Robinson-Humphrey Company to act as its financial advisor.

A meeting was held on November 1, 1999 to discuss the buyout proposal. It was attended by Robinson-Humphrey's representative, Uhrig, Jeanette Welsh from TCR, lawyers from Rogers Wells, and Garden Ridge's outside counsel. Speaking for the special committee, Robinson-Humphrey rejected Uhrig's offer due to the adequacy of the price. Three days later, Uhrig made an $11 per share offer. That offer was also rejected.

After additional negotiations, TCR offered $11.50 per share and, on November 22, 1999, the special committee voted to recommend that the board accept that offer. The board voted to accept the offer the same day. No Garden Ridge board member with an affiliation to TCR cast a vote.

III.

The plaintiff began this litigation on December 10, 1999. The complaint named Garden Ridge and its directors as defendants. Essentially, all the claims alleged depend on the allegation that the directors of Garden Ridge knew about Uhrig's proposal before the end of the Self-Tender. The complaint purports to state claims for breach of the defendants' duty of loyalty and also alleges that they engaged in intentional or bad faith misconduct or knowing violations of the law.

In the course of briefing the pending motion for summary judgment, the plaintiff agreed to dismiss the complaint as to Terry Boyce, Alyson Henning, Ira Niemark, Barbara Tapp, and Garden Ridge. Thus, the only the defendants still party to this litigation are Garden Ridge directors Shapiro, Susser, and Wagner. These three continue to press their motion for summary judgment.

IV.

A. Summary Judgment Standard

Pursuant to Court of Chancery Rule 56, summary judgment should be granted where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. In deciding a motion for summary judgment, the facts must be viewed in the light most favorable to the non-moving party, and the moving party has the burden of demonstrating that no material question of fact exists. "When a moving party has properly supported its motion, however, the non-moving party must submit admissible evidence sufficient to generate a factual issue for trial or suffer an adverse judgment." When multiple defendants move for summary judgment, the plaintiff must submit evidence with respect to each defendant in order to meet this burden.

Arguments about the credibility of witnesses are often encountered on motions for summary judgment. When the court concludes that there are litigable issues of credibility that bear on material factual disputes, summary judgment is not appropriate. Also, "[w]hen state of mind or "consciousness and conscious' is involved, credibility—a [fact-finder] determination—is often central to the case." In such cases, the court should evaluate the demeanor of the witnesses whose states of mind are at issue during examination at trial.

B. Duty of Disclosure Standard

Delaware law clearly establishes that "directors owe the corporation's stockholders a fiduciary duty to disclose all facts germane to a transaction involving stockholder action, in an atmosphere of complete candor." This duty applies whenever a corporate board seeks shareholder action. Furthermore, the duties of loyalty and good faith require directors to disclose all material information even where no stockholder action is required, if information has already been disseminated to stockholders, in order to make the previously disclosed information not materially misleading. Omitted information is considered material if there is "a substantial likelihood that, under all the circumstances, the omitted fact would have assumed actual significance in the deliberations of a reasonable shareholder" or, in other words, it would have "significantly altered the "total mix' of information made available" to the shareholder.

When a corporation is engaged in a self-tender offer, "the exacting duty of disclosure is even "more onerous' than in a contested offer" because "the disclosures are unilateral and not counterbalanced by opposing points of view." However, corporate directors are not required to disclose information that is "speculative" or "confusing." There is also, generally, "no requirement that intentions be disclosed." Furthermore, potentially misleading "soft information" such as forward-looking valuation data or estimates, may be properly withheld.

V.

This case essentially comes down to deciding what each of Susser, Shapiro and Wagner knew about Uhrig's proposal, and when he knew it. If a director knew of a proposal to take Garden Ridge private at a time relevant to the SelfTender, then the information must be deemed material for two separate reasons. First, it would have "significantly altered the "total mix' of information made available" to the stockholder in deciding whether to tender one's shares. By holding out, a stockholder may have been able to reap greater gains when selling pursuant to a going private transaction rather than the Self-Tender. Second, disclosure would be necessary, even if it is not considered "material" in the traditional sense, because it would be the only way to make the previously disclosed information in the Prospectus not materially misleading. The Prospectus specifically stated that Garden Ridge knew of no plans or proposals to take the Company private. Necessarily, this statement means that none of the Company's directors had such knowledge either, because such knowledge would be imputed to the corporation for these purposes. Therefore, to say that Garden Ridge did not know of any proposal, when any of its directors did know of such proposal, would be misleading.

Of course, there came a time when all of the directors learned of Uhrig's proposal. The question is whether any of them came by this information at a time that was relevant to the Self-Tender. Thus, the question is posed as follows: when was the business of the Self-Tender so concluded that subsequent developments were no longer relevant to it? This question may be answered by reference to the fiduciary relationship between the tendering stockholders and the directors. Alternatively, it may be answered by an analysis of the contractual relationship arising out of the Self-Tender.

For example, the plaintiff argues that September 28 must be the cutoff date because that is when Garden Ridge actually paid for tendered shares, thus terminating any fiduciary relationship between the parties. The defendants argue for September 23, the date on which the right to withdraw tendered shares terminated and all tenders became irrevocable. Another possible cutoff date is September 27, the date that Garden Ridge sent notice to its depositary of its decision to accept all tendered shares. Depending on how one reads the Prospectus disseminated in connection with the Self-Tender, this may be the earliest date that the Company became bound to purchase the tendered shares, making the contract mutually enforceable.

Disregarding, for a moment, fiduciary duty issues and focusing only on principles derived from the federal securities law, it would appear that disclosure obligations ended on September 23. Sections 6 and 14 of the Prospectus govern amendment, termination, extension and postponement of the Self-Tender. Section 6 provides that Garden Ridge could refuse to accept for payment, purchase or pay for any shares tendered, terminate or amend the offer, or postpone the acceptance for payment of tendered shares, if it learned of a subsequent tender offer, exchange offer, merger, business combination or "similar transaction" "at any time on or after August 25, 1999 and prior to the Expiration Date. " The Expiration Date is defined as "September 23, 1999 at 5 p.m., Eastern Daylight Savings Time, unless extended by the Company."

Section 14 provided that, regardless of the requirements of Section 6, Garden Ridge could "extend" the Self-Tender and delay acceptance for payment; terminate the Self-Tender and not accept stock for payment; amend the SelfTender; or "postpone payment" (but, in this last case, only "upon the occurrence of any of the conditions specified in Section 6"). However, any extensions of the Self-Tender had to comply with Rule 14e-1 of the Securities Exchange Act of 1934. This rule precludes extensions unless the company making the offer issues a "notice of such extension by press release or other public announcement" no later than 9:00 a.m. on the next business day following the scheduled expiration of the offer, or, if that corporation is publicly traded on a national securities exchange, the next business day on which that exchange is open.

Therefore, in accordance with the contract terms set forth in the Prospectus and the federal securities laws, the Self-Tender expired and tenders of shares became irrevocable at 5:00 p.m. September 23. After that time, the federal securities laws did not require Garden Ridge to amend its tender offer materials to reflect changes in information previously disclosed.

Notwithstanding the foregoing, the fiduciary relationship between Garden Ridge and its tendering stockholders continued in existence at least until a mutually binding contract for the purchase and sale of the tendered shares arose. Here, a binding contract to tender one's shares was not formed until Garden Ridge notified its depositary, apparently on September 27, that Garden Ridge had accepted the tendered shares for payment. When it gave that notice, Garden Ridge became absolutely obligated to accept and pay for the tendered shares.

Even the existence of a mutually binding contract does not, however, conclusively mark the end of the fiduciary relationship with tendering stockholders. And, while the court sees no reason to decide the issue in the context of the pending motion, it does acknowledge the substantial probability that the fiduciary relationship is only terminated when payment is actually made for tendered shares. In this case, that would mean that the relevant date is September 28.

B. Shapiro And Susser Were Unaware of Any Material Information On or Before September 28

Although the plaintiff argues that Shapiro and Susser had knowledge of the plan to take the Company private on or before September 28, the record is clear that they did not. The plaintiff asserts that "the record suggests substantial uncertainty regarding when Shapiro and Susser actually learned of TCR's buyout proposal, and clearly implicates the possibility that this knowledge could have been obtained on or before September 28." The court disagrees. Mr. Shapiro unambiguously testified that, at the earliest, he first learned of the proposal on September 29th. In fact, Shapiro's admission is more limited than that, conceding only that on September 29, he knew Uhrig would be "sending a communication" to Davies. There is no evidence that Shapiro knew what the communication said until it was received at Garden Ridge on September 30.

The evidence that Susser knew of the buyout proposal on or before September 28 is even more tenuous. Susser first saw Uhrig's September 30 letter "in early October." Susser never saw any drafts of Uhrig's letter. Susser admits that he learned of the buyout proposal in a conversation with Shapiro that occurred either "just after" or "just prior" to Susser receiving the proposal. It is clear that Shapiro did not learn of the buyout proposal until, at the earliest, September 29. It follows, therefore, that Susser could not have learned about the proposal until at least September 29 since he learned about it either from Shapiro or from Uhrig's September 30 letter. This is enough to grant summary judgment in favor of Shapiro and Susser.

C. Wagner May Have Known About The Proposal As Early As September 13

Wagner presents a different and more difficult case because (i) he and Uhrig are in business together and work out of the same offices, (ii) there is some evidence (i.e., the September 13 and 27 MMM agendas) that supports an inference that Wagner was aware of Uhrig's activities during the relevant time period, and (iii) his defense depends substantially on his and Uhrig's testimony denying Wagner's knowledge. Not surprisingly, the plaintiff argues that issues about the credibility of Wagner's and Uhrig's denial can only be resolved at trial.

First, the plaintiff points out that Jane Arbuthnot, Garden Ridge's Chief Financial Officer, testified that Uhrig told her that the buyout proposal had not been planned, or even conceived of, until after September 23, 1999. But, Uhrig has now admitted that he began considering the buyout proposal in the beginning of September 1999. He spoke with Rogers Wells about the proposal on September 16, and received a written draft of a proposal letter by September 24.

Second, the plaintiff argues Uhrig's and Wagner's testimony is further questioned by the entries of "Garden Ridge" under the heading "New Deals in [the] Pipeline" on TCR's MMM agendas for September 13 and 27, 1999. There are differing accounts of what these notations stood for, but none of the explanation is, as yet, fully satisfactory. Although believing these references were for the Self-Tender, Uhrig and Wagner themselves were both uncertain about what "New Deal" those listings referred to. Moreover, the way that Uhrig described what "deals" are placed in the "New Deals in [the] Pipeline" agendas casts some doubt on whether the notation related to the Self-Tender as opposed to the buyout proposal.

The defendants respond that Garden Ridge listed as "New Deals in [the] Pipeline" must refer to the Self-Tender and not the proposed buyout because a "code name" is typically used in buyout-type transactions, and because Garden Ridge was subsequently given code name "Daisy" in later MMM agendas. However, previous MMM agendas contradict the idea that any time a public company is engaged in a buyout-type transaction, a code name is issued. In fact, TCR's MMM agenda lists a non-public potential deal involving a public company that was negotiated just a few months before the Garden Ridge buyout in which no code names were used.

The defendants also respond that because the references to Garden Ridge on the September 13 and September 27 MMM agendas do not contain the initials of the TCR managing director responsible for the transaction, it could only refer to the Self-Tender. This is due to the fact that new "deals" are always assigned a managing director. This may prove to be so. But, as Wagner himself testified, the "agendas changed all the time. Thus, the format of the agendas changed all the time." The fact that initials are missing is not enough for the court to draw a definitive inference that the reference to Garden Ridge in the September 13 and September 27 MMM agendas relates to the Self-Tender and not the proposed buyout.

Taking all of this into account, and also considering the close nature of the working relationship between Wagner and Uhrig, the court concludes that it is necessary to conduct a trial on the claims against Wagner in order to resolve the issues of credibility presented.

C. Section 102 (b)(7) Does Not Preclude Liability of Wagner

Finally, Wagner argues that, even if a duty of disclosure violation is found, the finding would not implicate the duty of loyalty, and the claims should be dismissed because Garden Ridge had an exculpation provision in its corporate charter pursuant to 8 Del. C. § 102 (b)(7). The court disagrees.

The fiduciary duty of disclosure is not an independent or separate duty apart from the duties of due care and loyalty. Under § 102 (b)(7), a claim for damages for breach of fiduciary duty that only represents a breach of the duty of care not involving bad faith is barred. Furthermore, when a party has "averred sufficient evidence to permit the inference that one or more defendants may have knowingly withheld material information from the company's shareholders," then such allegations may be deemed to implicate a "violation of the directors' duty of loyalty . . . , and this would not warrant immunity under the exculpatory clause of the [company's corporate charter."

If Wagner intentionally failed to disclose, or was reckless in his failure not to disclose, material information known on or before September 28, 1999 about the buyout proposal to Garden Ridge stockholders, then § 102 (b)(7) does not save him as a matter of law. At this stage of the proceeding, there remains a material question of fact as to whether Wagner violated his duty of loyalty to tendering stockholders by engaging in bad faith or intentional misconduct, or committing a knowing violation of the law.

VI.

For the foregoing reasons, the motion for summary judgment is granted as to Armand Shapiro and Sam Susser. The motion for summary judgment is denied as to H. Whitney Wagner. IT IS SO ORDERED. .