PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 787 Seventh Avenue New York, New York 10019
25 Bishopsgate London EC2N 3AR, United Kingdom
April 28, 2024
MEMORANDUM
TO: The Board of Directors, Aurelius Global Media Group PLC
ATTENTION: Dame Elspeth Greenvale, Independent Non-Executive Chair
CC: Nadine Khalil, General Counsel & Corporate Secretary
FROM: Calderwood & Harkness LLP
Nathaniel Bower, Responsible Partner Colette Whitman, Partner Audrey Zhou, Associate Brendan Walsh, Associate
RE: Fiduciary Obligations of Directors During a Proxy Contest — AGMG 2024 Annual General Meeting
MATTER NO.: 1017-00002
PRIVILEGE LEGEND: This memorandum is a privileged and confidential attorney-client communication and constitutes attorney work product prepared in anticipation of litigation and in connection with the provision of legal advice. This document is protected from disclosure by the attorney-client privilege, the work product doctrine, and all other applicable privileges and protections. This memorandum is intended solely for the use of the Board of Directors of Aurelius Global Media Group PLC and authorized recipients. Any unauthorized review, use, disclosure, copying, or distribution of this memorandum is strictly prohibited. If you have received this document in error, please notify Calderwood & Harkness LLP immediately and destroy all copies. Nothing in this memorandum is intended to constitute, nor should it be construed as, a waiver of any applicable privilege or protection.
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I. Executive Summary
This memorandum is intended to advise the Board of Directors (the "Board") of Aurelius Global Media Group PLC ("AGMG" or the "Company") regarding the fiduciary duties and legal constraints applicable to incumbent directors during the pending proxy contest with Corvus Peak Capital Partners LP ("Corvus Peak"). The issues addressed herein are of critical importance to every member of the Board, and we urge each director to review this memorandum carefully and to consult with counsel before taking any action that could be viewed as related to the proxy contest.
The Proxy Contest. Corvus Peak, an activist hedge fund holding an approximate 8.7% stake in the Company (approximately 35,896,200 shares of 412,600,000 shares of common stock outstanding), has initiated a proxy contest for the election of directors at the Company's 2024 Annual General Meeting of Shareholders, currently scheduled for June 7, 2024 (the "AGM"). Corvus Peak filed its preliminary proxy statement with the Securities and Exchange Commission ("SEC") on April 1, 2024, and its definitive proxy statement is expected to be filed on or about May 6, 2024. Corvus Peak has nominated three director candidates — Malcolm Trask, Vanessa Loring, and Dr. Raymond Chu — for election at the AGM in opposition to the Board's incumbent slate.
The Company filed its preliminary proxy statement on April 5, 2024, recommending the re-election of all incumbent director nominees. The Company's definitive proxy statement is anticipated to be filed on or about May 3, 2024.
Broader Context. The proxy contest arises against the backdrop of significant corporate developments, including the contested CEO succession process following the resignation of Marcus Vane on March 8, 2024, the interim designation of Priya Nair-Whitfield as Interim Chief Executive Officer, and the ongoing CEO search overseen by the Special Committee of the Board (chaired by Tobias Kessler, with Lucinda Farrow-Grant and Dr. Anwen Llewellyn serving as members). The convergence of these events heightens the scrutiny that courts, regulators, shareholders, and proxy advisory firms will apply to the conduct of the Board and individual directors during the contest period.
Scope of This Memorandum. This memorandum addresses the following principal topics:
(a) the general fiduciary framework applicable to directors under Delaware law, including the duties of care, loyalty, and good faith;
(b) the permissible use of corporate resources in connection with proxy solicitation, including the engagement of professional advisors and the conduct of shareholder engagement;
(c) the Blasius enhanced scrutiny standard and its application to board actions taken during the proxy contest period;
(d) specific limitations on board actions and incumbent campaign conduct during the contest period, including restrictions on defensive measures;
(e) disclosure obligations under the SEC proxy rules and applicable UK regulatory requirements arising from the Company's dual listing; and
(f) practical guidance for the Board collectively and for individual directors, including a detailed set of action items and timing considerations through the June 7, 2024 AGM.
Key Takeaway. The paramount principle governing the Board's conduct during this proxy contest is that every action taken by the Board and by individual directors must be motivated by a good-faith belief that it serves the best interests of the Company and its shareholders as a whole. Directors must scrupulously avoid actions whose primary purpose is to entrench incumbents in office or to interfere with the shareholder franchise — that is, the right of shareholders to elect the directors of their choosing through a fair and unimpeded voting process. The shareholder franchise is the foundational mechanism of corporate governance under Delaware law, and any action taken for the primary purpose of undermining or impeding the effectiveness of that franchise will be subjected to the most exacting judicial scrutiny and will be exceedingly difficult to defend. At the same time, the Board is fully entitled — and indeed obligated — to communicate with shareholders, to advocate vigorously for the re-election of its nominees, and to make its case as to why the incumbent slate best serves shareholder interests.
This memorandum supplements and should be read in conjunction with the firm's prior memoranda delivered to the Board during the current engagement, which are identified in Section XI below.
II. Background and Factual Context
We set forth below a summary of the factual background relevant to the analysis in this memorandum. We have drawn upon information provided by the Company's management, the General Counsel's office, and our own independent review of the Company's public filings, governance documents, and related materials.
A. The Company
Aurelius Global Media Group PLC is a Delaware-incorporated, England & Wales–registered public limited company. The Company's shares of common stock are listed on the New York Stock Exchange under the ticker symbol "AGMG," and the Company maintains a secondary listing on the London Stock Exchange Main Market under the ticker symbol "AGMG.L." The Company's corporate headquarters are located at 14 Sceptre Row, London EC2V 7QN, United Kingdom. The Company's registered agent in Delaware is Pinnacle Corporate Services Inc., located at 1209 Orange Street, Wilmington, Delaware 19801.
As of March 1, 2024, the Company had an approximate market capitalization of £6.82 billion (approximately $8.65 billion at prevailing exchange rates). For the fiscal year ended December 31, 2023, the Company reported total revenue of $4.37 billion and EBITDA of $812 million, representing an EBITDA margin of approximately 18.6%.
The Company operates through four principal business segments:
• Streaming & Digital Content — comprising approximately 42% of total revenue, this segment includes the Company's subscription streaming platform, digital content production studios, and licensing operations;
• Live Entertainment & Events — comprising approximately 24% of total revenue, this segment includes the Company's live event production, touring, ticketing, and venue management operations;
• E-Commerce & Merchandising — comprising approximately 19% of total revenue, this segment includes the Company's direct-to-consumer e-commerce platform, branded merchandise operations, and physical retail partnerships; and
• Advertising & Brand Partnerships — comprising approximately 15% of total revenue, this segment includes the Company's advertising sales operations, brand integration services, and sponsorship arrangements.
The Company employs approximately 23,400 individuals worldwide across its operations in the United States, the United Kingdom, Continental Europe, and the Asia-Pacific region.
B. Corporate Governance Framework
The Company's internal corporate governance is governed by its Restated Certificate of Incorporation and its Amended and Restated Bylaws, each as most recently amended effective March 22, 2022. As a Delaware-incorporated entity, the Company's internal affairs are governed by the Delaware General Corporation Law (the "DGCL"). The Company's governance framework includes the following features of particular relevance to the current proxy contest:
Declassified Board. The Company's Board of Directors is a declassified board, with all directors elected annually for one-year terms. The declassification was approved by shareholders at the Company's 2021 Annual General Meeting and became effective for the 2022 election cycle. Prior to declassification, the Company maintained a classified board with staggered three-year terms.
Majority Voting / Plurality Standard. The Company's Bylaws provide for a majority voting standard in uncontested elections of directors, pursuant to which a nominee must receive more votes cast "for" than "against" to be elected. However, the Bylaws further provide that in the event of a contested election — defined as an election in which the number of nominees exceeds the number of board seats to be filled — the election standard automatically reverts to a plurality standard. The nomination of three director candidates by Corvus Peak, in addition to the Board's incumbent nominees, has triggered the plurality standard for the June 7, 2024 AGM. Under the plurality standard, the nominees receiving the greatest number of "for" votes will be elected, regardless of whether any nominee receives a majority.
Advance Notice Provisions. Section 2.10 of the Bylaws requires that shareholders wishing to nominate director candidates for election at an annual meeting must provide written notice to the Corporate Secretary within a specified advance notice window. For the 2024 AGM, the applicable window was February 10, 2024 through March 11, 2024 (corresponding to the period that is not less than 90 days nor more than 120 days prior to June 9, 2024, the first anniversary of the Company's 2023 Annual General Meeting held on June 9, 2023). Corvus Peak's formal nominations were submitted on March 1, 2024, within the advance notice window, and have been confirmed as timely and in proper form by the General Counsel's office.
Forum Selection. Section 11.1 of the Bylaws designates the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the United States District Court for the District of Delaware) as the exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, or other employee of the Company to the Company or to the Company's shareholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, the Certificate of Incorporation, or the Bylaws, or (iv) any action asserting a claim governed by the internal affairs doctrine.
No Poison Pill. The Company does not currently have a shareholder rights plan (commonly referred to as a "poison pill") in effect. On April 10, 2024, following deliberation at a special meeting of the Board and upon the recommendation of this firm (as set forth in our memorandum dated April 8, 2024), the Board determined not to adopt a shareholder rights plan. That decision was based on our assessment that adoption of a rights plan during an active proxy contest, absent an imminent threat of a creeping accumulation beyond the 8.7% stake already disclosed by Corvus Peak, would likely be viewed by a Delaware court as a defensive measure subject to heightened scrutiny and would be poorly received by institutional shareholders and proxy advisory firms.
C. The Proxy Contest
The following is a chronological summary of the principal events leading to the current proxy contest:
January 18, 2024: Corvus Peak filed an initial Schedule 13D with the SEC disclosing ownership of approximately 6.1% of the Company's outstanding shares. The Schedule 13D disclosed that Corvus Peak had acquired its position for investment purposes but reserved the right to engage in discussions with the Company's management and Board regarding its strategy, governance, and capital allocation.
February 12, 2024: Corvus Peak delivered a letter to the Board (the "Demand Letter") seeking (i) the appointment of new independent directors with relevant media industry experience, (ii) a comprehensive strategic review of the Company's business segments and capital allocation, and (iii) the implementation of a formal, transparent CEO succession plan. The Demand Letter was critical of the Board's oversight of the Company's strategic direction under former CEO Marcus Vane and questioned the adequacy of the Company's succession planning.
February 26, 2024: Corvus Peak filed an amended Schedule 13D disclosing an increase in its ownership position to approximately 8.7% of the Company's outstanding shares (approximately 35,896,200 shares, acquired at a weighted average cost of approximately $20.97 per share, reflecting a total investment of approximately $752.8 million). The amended filing further disclosed Corvus Peak's intention to nominate a slate of three director candidates for election at the 2024 AGM.
March 1, 2024: Corvus Peak submitted formal nominations of Malcolm Trask, Vanessa Loring, and Dr. Raymond Chu to the Company's Corporate Secretary, in compliance with the advance notice requirements of Section 2.10 of the Bylaws.
March 8, 2024: Marcus Vane tendered his resignation as Chief Executive Officer and as a member of the Board, effective immediately. The Board designated Priya Nair-Whitfield, the Company's Chief Operating Officer and a sitting director, as Interim Chief Executive Officer.
March 18, 2024: The Board formed the Special Committee (Tobias Kessler, Chair; Lucinda Farrow-Grant; Dr. Anwen Llewellyn) to oversee the CEO search process.
April 1, 2024: Corvus Peak filed its preliminary proxy statement with the SEC.
April 5, 2024: AGMG filed its preliminary proxy statement with the SEC, recommending the re-election of all incumbent director nominees.
April 15, 2024: Corvus Peak issued a public letter to AGMG shareholders criticizing the Board's designation of Nair-Whitfield as Interim CEO as a "predetermined outcome" that reflected "the Board's unwillingness to conduct a genuine, open-minded search for the best possible leader for this company."
April 22, 2024: The Board engaged Stonebridge Crane & Co. (Anil Kapoor-Mehta, Managing Director) as financial advisor to the Board to evaluate strategic alternatives for enhancing shareholder value.
Professional Advisors. The Company has engaged Citrine Advisory Group Inc. (Sandra Eriksson, Managing Director) as its proxy solicitor for the 2024 AGM. Corvus Peak has engaged Falconer Strauss LLC (Derek Huang, Partner) as its proxy solicitor. Ashworth Velmoran LLP (Martin Cho, Partner) serves as the Company's standing outside corporate counsel and has been engaged as such since 2015. As noted above, Calderwood & Harkness LLP was engaged as independent governance counsel to the Board in connection with the proxy contest and related matters. This delineation of counsel — with Ashworth Velmoran serving as management counsel and Calderwood & Harkness serving as independent board governance counsel — was established in part because Corvus Peak has characterized Ashworth Velmoran as "management-aligned" in its public communications. The Board should maintain this delineation in all communications with shareholders and proxy advisory firms.
Corvus Peak is represented by Blackthorn Howell & Crane LLP (Dominic Sayer, Partner) as its legal counsel in connection with the proxy contest.
D. Current Board Composition (Pre-AGM)
The Board currently consists of ten voting members, with one vacancy resulting from Marcus Vane's resignation on March 8, 2024. The current directors are as follows:
Nadine Khalil, the Company's General Counsel and Corporate Secretary, attends Board meetings in a non-voting advisory capacity.
Management and board insiders collectively hold approximately 3.2% of the Company's outstanding shares (approximately 13,203,200 shares). This includes the personal holdings of Hugh Pemberton (2.1%, or 8,664,600 shares), as well as shares held by Nair-Whitfield, Voss, and other insiders.
It is relevant to note for purposes of this memorandum that the current Board is not unified on the question of CEO succession. Based on information provided to this firm, the directors' current positions on the CEO succession are as follows:
• Directors supporting the appointment of Priya Nair-Whitfield as permanent CEO: Dame Elspeth Greenvale, Lucinda Farrow-Grant, Hugh Pemberton, and Sofia Delgado-Ríos (four directors);
• Directors supporting the candidacy of Jonathan Hale (external candidate): Tobias Kessler, Reginald Osei, and Dr. Anwen Llewellyn (three directors); and
• Neutral or undecided: Garrett Voss (one director).
This internal division on the CEO succession question is a matter of particular sensitivity in the context of the proxy contest, as discussed further in Section VI.C below.
E. Key Shareholders
The following table summarizes the Company's principal shareholders as of the date of this memorandum, based on public filings and information provided by the Company's investor relations team:
We understand that Citrine Advisory Group is actively monitoring shareholder positions and voting intentions and will provide regular updates to the Board as the proxy solicitation progresses.
III. Fiduciary Framework Under Delaware Law
The following section sets forth the general fiduciary framework applicable to directors of a Delaware corporation, with particular emphasis on the application of these principles in the context of a contested election of directors.
A. Duty of Care
Under Delaware law, directors owe a duty of care to the corporation and its shareholders. The duty of care requires that directors act on an informed basis, in good faith, and after due deliberation. In the seminal formulation of the Delaware Supreme Court, directors must exercise the degree of care that an ordinarily careful and prudent person would use in similar circumstances. See Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984).
The duty of care is closely associated with the business judgment rule, which is a presumption that, in making a business decision, directors acted on an informed basis, in good faith, and in the honest belief that the action taken was in the best interests of the corporation. See id. The business judgment rule is a powerful shield for directors: when it applies, a court will not second-guess the substantive merits of a board decision, even if the decision proves, in hindsight, to have been unwise. The rule reflects the judicial recognition that directors, not courts, are best positioned to make business decisions for the corporation.
In the proxy contest context, the duty of care requires that board decisions relating to the contest — including messaging strategy, campaign communications, defensive postures, shareholder engagement, and any responsive corporate actions — be made after adequate investigation, careful deliberation, and consideration of all reasonably available material information. Decisions made hastily, without adequate information, or without meaningful board-level deliberation may forfeit the protection of the business judgment rule.
Process Recommendations. To ensure compliance with the duty of care and to preserve the protections of the business judgment rule, we recommend the following procedural safeguards:
(i) All Board deliberations regarding the proxy contest should be documented in detailed, contemporaneous minutes prepared by the Corporate Secretary or her designee. These minutes should reflect the materials reviewed, the advisors consulted, the alternatives considered, and the reasons for each decision.
(ii) The Board should actively rely on, and document its reliance on, the advice of its professional advisors: Calderwood & Harkness LLP for governance counsel, Ashworth Velmoran LLP for corporate counsel, Citrine Advisory Group Inc. for proxy solicitation advice, and Stonebridge Crane & Co. for financial advice. Under Section 141(e) of the DGCL, a director is fully protected in relying in good faith upon the records of the corporation and upon information, opinions, reports, or statements presented by officers, employees, committees of the board, or outside experts, if the director reasonably believes such person to be competent in the matter at issue.
(iii) The Board should convene regular meetings — at a minimum, on a bi-weekly basis — through the June 7, 2024 AGM to review evolving developments in the proxy contest and to deliberate and approve any responsive actions.
B. Duty of Loyalty
The duty of loyalty is the most fundamental of the fiduciary duties owed by directors under Delaware law. The duty of loyalty requires that directors act in the best interests of the corporation and its shareholders, free from self-interest, conflicts of interest, or personal entrenchment motives. A director may not place his or her personal interests — financial or otherwise — ahead of the interests of the corporation and its shareholders. See Guth v. Loft, Inc., 5 A.2d 503, 510 (Del. 1939) ("Corporate officers and directors are not permitted to use their position of trust and confidence to further their private interests.").
Heightened Relevance in Contested Elections. The duty of loyalty takes on particular significance in the context of a contested election of directors. Incumbent directors have an inherent and inescapable personal interest in retaining their board seats. This does not, of course, mean that incumbents may not advocate for their own re-election — they may and should, as discussed in Section IV below. However, the personal interest in retaining one's position means that the duty of loyalty functions as a critical constraint on incumbent conduct. Directors must ensure that their campaign conduct, public statements, and board-level decisions are driven by a genuine belief that their continued service and the re-election of the incumbent slate are in the best interests of the Company and its shareholders — not merely by a personal desire to retain their board seats or their associated compensation, prestige, or influence.
Directors with Particular Conflicts. Certain directors on the current Board face heightened duty-of-loyalty concerns due to their specific circumstances:
• Hugh Pemberton (Co-Founder, 2.1% personal stake): Mr. Pemberton's personal economic interest in the Company is significantly larger than that of any other director. His co-founder status and substantial personal investment create a strong personal motivation to influence the Company's strategic direction and leadership. While these interests are largely aligned with shareholder interests, Mr. Pemberton should be particularly careful to ensure that his actions during the proxy contest are driven by his fiduciary obligations to all shareholders, not solely by his personal financial stake or his desire to preserve the Company's historical character.
• Priya Nair-Whitfield (Interim CEO and Executive Director): Ms. Nair-Whitfield's dual role as Interim CEO and director nominee creates a direct personal interest in the outcome of both the proxy contest and the CEO succession process. She must be vigilant in ensuring that she does not use corporate resources or her management authority to advance her personal candidacy for the permanent CEO role under the guise of proxy defense.
• Garrett Voss (CFO and Executive Director): As an executive director, Mr. Voss has a personal interest in the outcome of the proxy contest, as the election of the Corvus Peak slate could result in changes to senior management. Mr. Voss should ensure that his actions as CFO — including the preparation and dissemination of financial information — are guided by his fiduciary obligations and not by a personal desire to influence the contest outcome.
• Any director whose continued Board service is contingent on the election outcome: To the extent any incumbent director believes that his or her continued Board service, committee memberships, or other positions of influence are at risk in the proxy contest, that director must ensure that this personal interest does not drive his or her decision-making on Board matters.
C. Duty of Good Faith
Under Delaware law, the duty of good faith is not a freestanding fiduciary duty but rather a component of the duty of loyalty. See Stone v. Ritter, 911 A.2d 362, 370 (Del. 2006). A failure to act in good faith may constitute a breach of the duty of loyalty. The duty of good faith requires that directors act honestly and not with the intent to violate applicable law, the Company's charter, or their fiduciary obligations.
In the proxy contest context, the duty of good faith is relevant in several respects. First, it requires that directors not knowingly make false or misleading statements to shareholders in connection with the solicitation of proxies. Second, it constrains directors from taking board-level actions for the purpose of manipulating the electoral process, even if those actions might otherwise fall within the directors' legal authority. Third, it requires that directors approach the proxy contest and the underlying governance disputes with an honest commitment to the interests of the Company and its shareholders, rather than with a cynical or self-serving agenda.
A finding that a director acted in bad faith — for example, by knowingly approving a defensive measure whose sole purpose was to entrench the incumbent board — could expose that director to personal liability and could fall outside the scope of exculpation under Article VII of the Certificate of Incorporation (which, consistent with DGCL Section 102(b)(7), eliminates director liability for monetary damages arising from breaches of the duty of care but does not eliminate liability for breaches of the duty of loyalty or for acts not in good faith).
D. Application of Enhanced Scrutiny Standards
In certain circumstances, the conduct of directors is not evaluated solely under the deferential business judgment rule but is instead subjected to enhanced judicial scrutiny. In the proxy contest context, two enhanced scrutiny standards are of particular relevance:
Unocal/Unitrin. When a board of directors takes defensive action in response to a perceived threat to the corporation or its shareholders, the board's action is evaluated under the two-part test articulated in Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985), and refined in Unitrin, Inc. v. American General Corp., 651 A.2d 1361 (Del. 1995). Under the Unocal framework, the board must first demonstrate that it had reasonable grounds for believing that a danger to corporate policy and effectiveness existed (the "threat identification" prong), and second, that its defensive response was reasonable in relation to the threat posed (the "proportionality" prong). A defensive response that is "preclusive" or "coercive" with respect to the shareholder vote will not satisfy the proportionality requirement.
Blasius. When board action is taken for the primary purpose of interfering with or impeding the effectiveness of the shareholder franchise, the action is subject to the enhanced scrutiny standard articulated in Blasius Industries, Inc. v. Atlas Corp., 564 A.2d 651 (Del. Ch. 1988). Under the Blasius standard, the board bears the burden of demonstrating a "compelling justification" for its action — a standard that is intentionally more demanding than the Unocal proportionality test and that has rarely been satisfied in Delaware case law. The Blasius standard is discussed in greater detail in Section V below.
Interplay with the Business Judgment Rule. When enhanced scrutiny applies — whether under Unocal/Unitrin or Blasius — the burden shifts to the directors to justify their action, rather than to the plaintiffs to rebut the business judgment presumption. Only if the directors satisfy their burden under the applicable enhanced scrutiny standard will the business judgment rule apply to protect the directors' decision. This shifting of burdens has significant practical implications for the Board's conduct during the proxy contest period, as discussed throughout this memorandum.
IV. Use of Corporate Resources in Proxy Solicitation
A. General Principles
It is well established under Delaware law that incumbent directors are permitted to use reasonable corporate resources to communicate with shareholders regarding the election of directors, to solicit proxies in support of the Board's recommended slate, and to advocate for the re-election of the Board's nominees. See Rosenfeld v. Fairchild Engine & Airplane Corp., 128 N.E.2d 291 (N.Y. 1955) (leading authority, frequently cited by Delaware courts); Levin v. Metro-Goldwyn-Mayer, Inc., 264 F. Supp. 797 (S.D.N.Y. 1967).
The rationale for this principle is straightforward. Incumbent directors have a duty to inform shareholders about the Company's position, its strategy, its governance, and the qualifications of the Board's nominees. Shareholders are entitled to receive the Board's views on these matters in order to make an informed voting decision. If incumbent directors were prohibited from using corporate resources to communicate their position, the shareholder franchise would be impoverished, not protected, because shareholders would receive information only from the activist challengers.
Permissible Expenditures. Reasonable corporate expenditures in connection with a proxy contest include, but are not limited to, the following categories:
• Printing, production, and mailing of proxy materials, including the Company's definitive proxy statement, supplemental solicitation materials, and any letters to shareholders;
• Engagement of proxy solicitors (here, Citrine Advisory Group Inc.) to assist with the identification of shareholders, the solicitation of proxies, and the monitoring of voting returns;
• Legal counsel fees, including fees paid to Calderwood & Harkness LLP for independent governance counsel and to Ashworth Velmoran LLP for corporate counsel, in connection with the preparation of proxy materials, the provision of fiduciary duty advice, and the defense of any related litigation;
• Financial advisor fees (here, Stonebridge Crane & Co.), to the extent that the engagement has a legitimate business purpose independent of the proxy contest, as discussed further in Section VII.C below;
• Shareholder communication campaigns, including website and digital communications, investor relations activities, and shareholder presentations;
• Travel expenses incurred by directors and officers in connection with shareholder engagement meetings; and
• Fees associated with the Annual General Meeting itself, including venue costs, inspector of elections fees, and related logistical expenses.
B. Limitations on Use of Corporate Funds
While the use of corporate resources in a proxy contest is permissible, it is subject to important limitations. Corporate resources may not be used for purposes unrelated to the legitimate business of informing shareholders and soliciting proxies. Expenditures must be reasonable and proportionate to the magnitude and significance of the contest. Courts have drawn a distinction between expenditures made in furtherance of a genuine policy or governance dispute — which are permissible — and expenditures made purely for the purpose of personal entrenchment — which are not.
In Levin v. Metro-Goldwyn-Mayer, Inc., the court articulated the principle that corporate expenditures in a proxy contest are appropriate when they are incurred in furtherance of a bona fide dispute over corporate policy, strategy, or governance, rather than solely to perpetuate the incumbents' control. The burden of demonstrating that expenditures are reasonable rests with the directors, and the standard of review may be more exacting in cases where the contest does not involve a genuine policy dispute but is instead a naked power struggle.
Personal Campaign Expenses. The personal campaign expenses of individual directors — for example, personal legal fees incurred in connection with a director's individual defense of his or her qualifications or reputation, or personal travel for purposes unrelated to shareholder engagement — should not be charged to the Company. Directors who wish to incur personal expenses in connection with the proxy contest should bear those costs individually or seek separate indemnification arrangements through the General Counsel's office.
AGMG's Expenditures to Date. The Company's proxy defense expenditures to date include the following:
• Citrine Advisory Group Inc.: Engagement as proxy solicitor for the 2024 AGM; fees and expenses are consistent with industry practice for contested solicitations at companies of AGMG's size and complexity.
• Calderwood & Harkness LLP: Total fees through the date of this memorandum are approximately $1,034,625, covering all governance advisory work in connection with the proxy contest, CEO succession, poison pill analysis, defensive measures analysis, conflicts analysis, and related matters.
• Stonebridge Crane & Co.: Monthly retainer of $250,000, commencing April 22, 2024, for services as financial advisor in connection with the strategic alternatives review.
• Printing and Mailing Costs: Costs associated with the preparation and distribution of preliminary proxy materials; additional costs will be incurred in connection with the definitive proxy statement and any supplemental solicitation materials.
In our assessment, these expenditures are well within the range of customary practice for a contested proxy solicitation at a company of AGMG's size, complexity, and profile, and are defensible as reasonable expenses incurred in furtherance of a genuine governance and strategic dispute.
C. Shareholder Engagement Protocols
Directors may — and should — engage directly with the Company's institutional shareholders to discuss the election and the Board's position on governance, strategy, CEO succession, and other matters of shareholder concern. Effective shareholder engagement is an integral component of a well-conducted proxy solicitation and is consistent with evolving best practices in corporate governance.
However, shareholder engagement during a proxy contest carries significant legal risks, and we recommend that all engagement activities be conducted in accordance with the following protocols:
(i) Documentation. All shareholder engagement meetings should be documented, including the date, participants, topics discussed, and any materials presented. These records will be important in demonstrating the Board's good-faith compliance with its fiduciary obligations and in defending against any claims of improper selective disclosure.
(ii) Counsel Review. Talking points and presentation materials for shareholder engagement meetings should be reviewed and approved by counsel (Calderwood & Harkness and/or Ashworth Velmoran) prior to use. Directors should adhere to approved talking points and should not improvise on matters of legal sensitivity.
(iii) No Commitments for Votes. Directors should not make commitments regarding future corporate actions — such as board seat offers, strategic transactions, management changes, or capital allocation decisions — in exchange for voting support. Such commitments could constitute improper vote-buying and could expose the Board to fiduciary duty claims.
(iv) Consistency with Public Disclosures. Information shared with shareholders during engagement meetings must be consistent with the Company's public disclosures. Directors must avoid the selective disclosure of material non-public information in violation of Regulation FD under the Securities Exchange Act of 1934 (discussed further in Section VI.B below). If a shareholder asks a question that cannot be answered without disclosing material non-public information, the director should decline to answer and refer the question to the General Counsel's office or to investor relations.
(v) UK Regulatory Overlay. AGMG's secondary listing on the London Stock Exchange Main Market subjects the Company to the Financial Conduct Authority's ("FCA") Market Abuse Regulation ("UK MAR") and the Disclosure Guidance and Transparency Rules ("DTR"), including DTR 5 major shareholding notification requirements. These regulations may restrict the timing and content of certain shareholder communications, particularly with respect to shareholders who hold positions in the Company's LSE-listed shares. We refer the Board to our memorandum dated April 3, 2024, which addresses the UK regulatory overlay in detail and provides specific guidance on compliance with UK MAR and DTR in the context of the proxy contest.
D. Role of Management vs. Role of the Board
It is important to maintain a clear distinction between the role of management and the role of the Board during the proxy contest.
Management's Role. Management — including Priya Nair-Whitfield as Interim CEO, Garrett Voss as CFO, and Nadine Khalil as General Counsel — may assist in proxy solicitation efforts consistent with their corporate duties. Management is typically responsible for the day-to-day coordination of proxy solicitation logistics, the preparation of proxy materials in conjunction with counsel, the management of investor relations communications, and the operation of the Company's business during the contest period. These are proper functions of management, and the corporate officers are entitled to participate fully in these activities.
Constraint on Management. However, management must not treat the proxy contest as an opportunity to advance personal interests. In particular, Ms. Nair-Whitfield, as Interim CEO and a candidate for the permanent CEO position, must exercise particular caution to ensure that she does not use corporate resources, management authority, or her position of influence to promote her personal CEO candidacy under the guise of proxy defense. The Company's proxy solicitation should focus on the merits of the incumbent Board slate and the Board's governance record — not on advocating for any particular CEO candidate. Similarly, Mr. Voss should ensure that his role as CFO does not lead to the selective presentation of financial information designed to support a particular narrative favored by the incumbents.
Board Oversight. The Board, through the Chair (Dame Elspeth Greenvale) and the General Counsel, should maintain oversight of all proxy solicitation activities undertaken by management. All significant communications with shareholders, proxy advisory firms, and the media should be reviewed and approved by the Board or its authorized delegates before dissemination.
Delineation of Counsel. As noted in Section II.C above, Ashworth Velmoran LLP serves as the Company's standing outside corporate counsel and has advised management since 2015. This firm, Calderwood & Harkness LLP, was engaged as independent governance counsel to the Board. This delineation exists in part because Corvus Peak has characterized Ashworth Velmoran as "management-aligned" in its public communications. To preserve the integrity and independence of the Board's governance advisory relationship, this delineation should be maintained in all communications with shareholders, proxy advisory firms, regulators, and the public. It is appropriate for the Board to represent to shareholders that it has retained independent governance counsel separate from the Company's regular outside counsel.
V. Blasius Enhanced Scrutiny
The Blasius enhanced scrutiny standard represents the most significant legal risk facing the Board during the proxy contest period. This section provides a detailed analysis of the Blasius standard, its application in Delaware case law, and its specific relevance to the Board's current situation.
A. The Blasius Standard — Origins and Formulation
In Blasius Industries, Inc. v. Atlas Corp., 564 A.2d 651 (Del. Ch. 1988), then-Chancellor William T. Allen articulated a principle that has become a cornerstone of Delaware corporate governance jurisprudence. In Blasius, an activist shareholder sought to obtain control of the Atlas Corporation board by written consent. In response, the Atlas board expanded its size from seven to nine members and filled the two new seats with management-friendly directors, thereby preventing the activist from obtaining majority control through its consent solicitation. Chancellor Allen struck down the board's action, holding that when a board acts for the "primary purpose" of impeding or interfering with the effectiveness of the shareholder franchise, that action will be subject to enhanced judicial scrutiny and will not be protected by the business judgment rule.
The Blasius standard rests on the foundational principle that the shareholder franchise is the "ideological underpinning" upon which the legitimacy of the Delaware corporate governance system depends. Blasius, 564 A.2d at 659. As Chancellor Allen explained:
"The shareholder franchise is the ideological underpinning upon which the legitimacy of directorial power rests. . . . [T]he board . . . bears the burden of demonstrating a compelling justification for [its] action."
Under the Blasius standard, when a board acts for the primary purpose of interfering with the shareholder franchise, the board bears the burden of demonstrating a "compelling justification" for its action. This is an intentionally demanding standard — substantially more rigorous than the Unocal proportionality test, which requires only that the board's response be reasonable in relation to the threat posed. Delaware courts have rarely found the compelling justification standard to be satisfied, and the standard has been described as "quite onerous" and "the most exacting standard of review" applied to board action in the corporate governance context.
B. When Blasius Applies
The threshold question in any Blasius analysis is whether the board action at issue was taken for the "primary purpose" of interfering with the shareholder franchise. If the primary purpose of the action is to advance a legitimate corporate objective — even if the action has an incidental effect on the franchise — Blasius does not apply, and the action will be evaluated under the business judgment rule (or, if the action constitutes a defensive measure, under Unocal/Unitrin).
The determination of primary purpose is a fact-intensive inquiry. Delaware courts examine the totality of the circumstances, including the timing of the board action (i.e., whether it occurred during or in close proximity to a proxy contest or other shareholder vote), the board's stated rationale, the board's deliberative process as reflected in meeting minutes and other contemporaneous records, and the objective effect of the action on the shareholders' ability to exercise their voting rights effectively.
The following types of board actions have triggered Blasius scrutiny in Delaware case law:
• Expanding the size of the board and filling vacancies to dilute the impact of an activist slate. This is the paradigmatic Blasius scenario, as illustrated by the Blasius case itself and by subsequent decisions such as Liquid Audio, Inc. v. MM Companies, Inc., 813 A.2d 1118 (Del. 2003).
• Accelerating or postponing the annual meeting date to disadvantage a challenging party. If a board changes the meeting date for the purpose of shortening or extending the contest period in a manner designed to advantage the incumbents, such action may be subject to Blasius scrutiny.
• Amending bylaws during a proxy contest to alter advance notice requirements or director qualifications. Mid-contest amendments to director qualification provisions, advance notice deadlines, or meeting procedures that have the effect of disadvantaging the activist's nominees or complicating the activist's solicitation may trigger Blasius.
• Issuing shares to a friendly party to dilute an activist's voting power. A share issuance timed to coincide with a proxy contest and designed to dilute the activist's percentage ownership and voting influence may be subject to Blasius scrutiny.
Importantly, Blasius does not apply to every board action taken during a proxy contest. The mere fact that a board takes action during a contest period does not subject that action to enhanced scrutiny. Rather, Blasius applies only when the primary purpose of the action — as determined by the court based on the totality of the evidence — is to thwart, impede, or undermine the shareholders' ability to exercise their franchise effectively.
C. Application to AGMG's Current Situation
We have analyzed several specific actions that the Board has taken, or may contemplate taking, during the proxy contest period, and we assess the Blasius risk associated with each as follows:
1. Rejection of the Poison Pill (April 10, 2024). On April 10, 2024, the Board determined not to adopt a shareholder rights plan, following this firm's recommendation set forth in our memorandum dated April 8, 2024. This decision actually favored the shareholder franchise by declining to impose a structural impediment to the accumulation of shares by Corvus Peak or other shareholders. Accordingly, the rejection of the poison pill would not trigger Blasius scrutiny and, if anything, demonstrates the Board's commitment to respecting the shareholder franchise.
2. Designation of Nair-Whitfield as Interim CEO (March 8, 2024). Corvus Peak has publicly criticized the designation of Ms. Nair-Whitfield as Interim CEO as a "predetermined outcome" that preempts the CEO succession process. However, we assess the Blasius risk associated with this action as low for several reasons. First, the designation occurred on March 8, 2024 — one week after Corvus Peak's formal nominations on March 1, 2024, but before the proxy contest was fully joined (Corvus Peak's preliminary proxy statement was not filed until April 1, 2024). The timing is consistent with an action taken in response to the immediate business necessity of ensuring continuity of leadership following Mr. Vane's sudden resignation, rather than an action taken for the primary purpose of interfering with the shareholder vote. Second, the business purpose of the interim designation is well-documented: the Company needed a functioning CEO to manage day-to-day operations, and Ms. Nair-Whitfield, as the sitting COO and a current director, was the logical choice for an interim appointment. Third, the designation was expressly characterized as "interim," pending the conclusion of the formal CEO search process overseen by the Special Committee. A court reviewing this action would likely conclude that its primary purpose was business continuity, not franchise interference.
3. Formation of the Special Committee (March 18, 2024). The formation of the Special Committee to oversee the CEO search process reflects a governance best practice and is unlikely to be characterized as a franchise-interfering measure. The Special Committee was constituted with independent directors and a clear mandate to conduct a thorough, independent search for a permanent CEO. This action enhances, rather than impedes, the integrity of the CEO succession process and is responsive to legitimate shareholder concerns — including those raised by Corvus Peak in its February 12, 2024 demand letter.
4. Engagement of Stonebridge Crane to Evaluate Strategic Alternatives (April 22, 2024). This engagement presents a more nuanced Blasius analysis. Corvus Peak may argue that the Board's decision to launch a strategic alternatives review — announced approximately six weeks before the June 7, 2024 AGM — is an entrenchment device designed to demonstrate incumbent competence, undermine the activist's platform, and influence the shareholder vote by creating the impression that the Board is already pursuing value-enhancing initiatives.
We assess the Blasius risk associated with this engagement as moderate, depending on how the engagement is conducted and communicated. The key factors are as follows:
(a) The Board should be able to articulate a legitimate business purpose for the strategic alternatives review that is independent of the proxy contest. Such a purpose exists: the Company's recent leadership transition, evolving competitive dynamics in the global media industry, and shareholder feedback regarding capital allocation all provide independent justification for a comprehensive review of strategic options.
(b) The review must be conducted through proper processes — with full Board involvement, detailed documentation, and genuine exploration of alternatives — rather than as a cosmetic exercise designed solely to influence the proxy vote.
(c) The Board should exercise particular caution regarding the timing of any public announcement of preliminary findings or strategic decisions. If the Board announces a material strategic transaction or initiative on the eve of the AGM — without having conducted a genuine and thorough review — a court could infer that the primary purpose of the announcement was to influence the shareholder vote rather than to advance a legitimate business objective.
5. Potential Future Actions Requiring Caution. The Board should be particularly cautious regarding the following potential actions, each of which could trigger Blasius scrutiny:
(a) Board expansion and vacancy filling. Any attempt to expand the size of the Board from its current ten-member configuration and fill new seats with incumbents or incumbent-aligned directors before the June 7, 2024 AGM would present the most acute Blasius risk. This is the paradigmatic Blasius scenario and would almost certainly be challenged successfully in the Court of Chancery.
(b) Bylaw amendments. Any amendment to the Bylaws during the contest period that would alter director qualifications, meeting procedures, quorum requirements, or advance notice terms in a manner that disadvantages the Corvus Peak nominees or the Corvus Peak solicitation would be subject to Blasius scrutiny.
(c) Accelerated stock issuance or extraordinary dividends. Any issuance of new shares — whether through a primary offering, the exercise of management equity awards, or other mechanisms — or any declaration of an extraordinary dividend designed to alter the shareholder base composition before the vote could trigger Blasius scrutiny.
(d) Meeting date changes. Any acceleration or postponement of the June 7, 2024 AGM date without a compelling business justification unrelated to the proxy contest could be subject to Blasius scrutiny.
Recommendation. In light of the foregoing analysis, we strongly recommend that the Board refrain from taking any action between now and the June 7, 2024 AGM whose primary purpose could reasonably be characterized as interfering with the shareholder vote. Any action taken during this period should have a clear, well-documented, independent business purpose that is contemporaneously recorded in board minutes and supported by the advice of professional advisors.
D. Relationship Between Blasius and Unocal
The relationship between the Blasius and Unocal standards has been the subject of significant academic and judicial discussion. Some Delaware decisions have applied Blasius as a standalone standard, entirely separate from the Unocal proportionality framework. Under this approach, if a board action is taken for the primary purpose of interfering with the shareholder franchise, the court applies Blasius and requires the board to demonstrate a compelling justification, without reference to Unocal. Other decisions — most notably the Delaware Supreme Court's decision in Mercier v. Inter-Tel (Delaware), Inc., 929 A.2d 786 (Del. 2007), and certain subsequent Chancery Court opinions — have suggested that the franchise-protection analysis should be subsumed within the Unocal proportionality framework, such that a board action that is preclusive of the shareholder vote will fail the Unocal proportionality test without the need to invoke Blasius as a separate standard.
The precise doctrinal relationship between these two standards remains somewhat unsettled in Delaware law. However, the practical implications for the Board are clear: regardless of which standard a reviewing court might apply, the Board should treat every contest-period action as potentially subject to the more demanding *Blasius compelling-justification test. The safer approach — and the approach we recommend — is to assume that Blasius applies to any action taken during the contest period that has a material impact on the effectiveness of the shareholder vote, unless counsel has confirmed that the action is clearly outside the scope of Blasius* scrutiny.
VI. Limitations on Incumbent Campaign Conduct
A. Public Statements and Communications
All public statements by incumbent directors regarding the proxy contest — including press releases, letters to shareholders, media interviews, analyst presentations, and social media posts — should be reviewed and approved by counsel before dissemination. This requirement applies to all directors, including the Chair, executive directors, and non-executive directors.
Public statements should focus on the following themes:
• The Company's strategy, business performance, and prospects;
• The qualifications, experience, and contributions of the incumbent director nominees;
• The Board's governance record and its responsiveness to shareholder concerns;
• The Board's assessment of why the incumbent slate best serves shareholder interests; and
• Factual responses to specific claims or criticisms raised by Corvus Peak, supported by accurate and verifiable information.
Directors should avoid the following in their public statements:
• Personal attacks on Corvus Peak, its principals, or its director nominees (Trask, Loring, or Chu) that are not supported by factual record;
• Misleading statements about the Company's financial performance, strategic prospects, or the qualifications of opposing nominees;
• Statements that could be construed as threats or retaliation against Corvus Peak for exercising its rights as a shareholder; and
• Statements that disclose material non-public information, including details of the CEO search process, the strategic alternatives review, or internal financial projections.
The prohibition on misleading statements is not merely a matter of fiduciary prudence; it is a legal requirement under the federal proxy rules. SEC Rule 14a-9, promulgated under the Securities Exchange Act of 1934, prohibits materially false or misleading statements or omissions in any proxy solicitation material. Violations of Rule 14a-9 can give rise to SEC enforcement actions, private actions by shareholders, and potential injunctive relief that could delay or disrupt the AGM.
All public communications by the Board and its members should be consistent with the disclosures set forth in the Company's definitive proxy statement (to be filed on or about May 3, 2024). Inconsistencies between public statements and proxy disclosures could create a basis for Rule 14a-9 claims by Corvus Peak or other shareholders.
B. Selective Disclosure and Regulation FD
Directors must exercise extreme caution to avoid the selective disclosure of material non-public information ("MNPI") to certain shareholders during engagement meetings in an effort to influence voting decisions.
Regulation FD. Regulation FD, adopted by the SEC under the Securities Exchange Act of 1934, prohibits issuers from selectively disclosing material non-public information to market professionals (including analysts, institutional investors, and broker-dealers) and holders of the issuer's securities. When an issuer, or a person acting on its behalf, makes an intentional disclosure of MNPI to such a person, Regulation FD requires that the issuer simultaneously make public disclosure of the same information. If the selective disclosure is non-intentional, the issuer must promptly make public disclosure (generally within 24 hours or by the commencement of the next day's trading session, whichever is later).
In the context of the proxy contest, the following categories of information are likely to constitute MNPI and should not be selectively disclosed to shareholders during engagement meetings:
• Details of the CEO search process, including the identities of candidates under consideration, the status of negotiations, the timeline for a decision, or the preferences of individual directors;
• Preliminary findings or recommendations from the strategic alternatives review being conducted with Stonebridge Crane;
• Internal financial projections, forecasts, or budgets that have not been publicly disclosed;
• The substance of settlement discussions with Corvus Peak; and
• Any other information that a reasonable investor would consider important in deciding how to vote.
If a director is asked about any of these topics during a shareholder engagement meeting, the director should decline to provide non-public information and should indicate that the Company will provide appropriate disclosures in its proxy materials and public filings.
UK Overlay. AGMG's secondary listing on the London Stock Exchange Main Market subjects the Company to the FCA Market Abuse Regulation (UK MAR), which prohibits the unlawful disclosure of inside information. "Inside information" under UK MAR is defined broadly and includes information that is not generally available, relates to the Company or its securities, and would be likely to have a significant effect on the price of the Company's securities if it were made generally available. Directors must ensure that their shareholder engagement activities comply with UK MAR in addition to Regulation FD. Violations of UK MAR can result in significant civil penalties and, in egregious cases, criminal sanctions.
C. Individual Director Conduct
Several aspects of individual director conduct require particular attention during the proxy contest period.
Internal Board Disagreements. As noted in Section II.D above, the current Board is divided on the question of CEO succession, with some directors favoring the appointment of Priya Nair-Whitfield as permanent CEO and others favoring the external candidacy of Jonathan Hale. Directors on both sides of this internal debate should refrain from publicly airing these disagreements during the proxy contest period. Public disclosure of internal board divisions could undermine the Board's collective advocacy for the incumbent slate, provide ammunition for Corvus Peak's narrative that the Board is dysfunctional, and damage the Company's reputation with shareholders and the broader market. Directors who disagree with the Board's collective position on the CEO succession or other matters should express their views in the boardroom, not in the public arena.