PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 787 Seventh Avenue New York, NY 10019
25 Bishopsgate London EC2N 3AR, United Kingdom
March 26, 2024
MEMORANDUM
TO: Board of Directors, Aurelius Global Media Group PLC Nadine Khalil, General Counsel & Corporate Secretary
FROM: Nathaniel Bower, Partner Colette Whitman, Counsel Audrey Zhou, Associate Calderwood & Harkness LLP
RE: Response Recommendations — DGCL § 220 Books-and-Records Demand by Corvus Peak Capital Partners LP
MATTER NO.: 1017-00002
This memorandum is a privileged and confidential attorney-client communication and attorney work product. It is prepared for the exclusive use of the Board of Directors and General Counsel of Aurelius Global Media Group PLC and is not to be disclosed to any third party without the prior written consent of counsel. Disclosure to any third party may result in a waiver of privilege.
I. EXECUTIVE SUMMARY
On March 22, 2024, Corvus Peak Capital Partners LP ("Corvus Peak"), through its counsel Blackthorn Howell & Crane LLP (lead partner Dominic Sayer), served a formal demand for books and records on Aurelius Global Media Group PLC ("AGMG" or the "Company") pursuant to Section 220 of the Delaware General Corporation Law (the "DGCL"). The demand was addressed to Nadine Khalil, in her capacity as General Counsel and Corporate Secretary, and was delivered to AGMG's registered agent in Delaware.
The demand seeks access to a broad range of materials relating to the Company's CEO succession process, including Special Committee records, search firm correspondence, candidate evaluation materials, and Board minutes pertaining to the resignation of Marcus Vane as Chief Executive Officer and the subsequent designation of Priya Nair-Whitfield as Interim CEO. The demand is sweeping in scope, encompassing eight enumerated categories of documents that, if produced in full, would effectively afford Corvus Peak full discovery into the Board's most sensitive deliberative processes during a contested proxy campaign.
Corvus Peak currently holds approximately 8.7% of AGMG's outstanding common shares, representing approximately 35,896,200 of the Company's 412,600,000 shares outstanding. This position was established through an initial Schedule 13D filing on January 18, 2024, disclosing ownership of 6.1%, followed by an amended Schedule 13D on February 26, 2024, reflecting an increase to the current 8.7% stake. Corvus Peak's accumulation of shares and the timing of its § 220 demand occur against the backdrop of a contested proxy campaign in which Corvus Peak has nominated three director candidates for election at the Company's 2024 Annual Meeting of Stockholders.
This memorandum analyzes: (1) the statutory requirements for a valid § 220 demand and whether Corvus Peak has satisfied those requirements; (2) whether Corvus Peak has stated a proper purpose within the meaning of the DGCL; (3) the scope of documents that must be produced versus those that may properly be withheld; (4) the attorney-client privilege and work-product protections applicable to CEO search materials and related counsel communications; and (5) our recommended response strategy, including the form and timing of the Company's response to Corvus Peak's counsel.
Summary Recommendation. Based on our analysis, we recommend that AGMG respond with a partial objection to the demand. Specifically, the Company should offer a narrowed production of certain non-privileged corporate records — including redacted Board minutes, Board resolutions, the Special Committee Charter, Marcus Vane's employment agreement, and the Hargrove Tate Partners LLC engagement letter — while firmly objecting to the production of privileged CEO search committee materials, attorney-client communications, and attorney work product. This approach strikes the appropriate balance between respecting stockholder inspection rights under Delaware law and protecting the confidentiality of the Board's privileged legal strategy during the pending succession process and proxy contest. An outright rejection of the demand would be inadvisable, as it would expose the Company to a summary action in the Court of Chancery that would likely result in a court-ordered production broader than what we propose to offer voluntarily.
II. BACKGROUND
A. The Corvus Peak Activist Campaign
The § 220 demand must be understood in the context of Corvus Peak's broader activist campaign against AGMG. The following chronology sets forth the key developments:
January 18, 2024. Corvus Peak filed an initial Schedule 13D with the Securities and Exchange Commission disclosing beneficial ownership of approximately 6.1% of AGMG's outstanding common stock. The Schedule 13D identified Corvus Peak as a Delaware limited partnership with its principal office at 520 Madison Avenue, 24th Floor, New York, New York 10022. The filing identified Lukas Severyn as Corvus Peak's Managing Partner and sole control person. In the "Purpose of Transaction" section (Item 4), Corvus Peak stated its intention to engage in discussions with the Board and management regarding AGMG's strategic direction, capital allocation, and corporate governance. The filing did not, at that time, disclose any intention to nominate directors or solicit proxies.
February 12, 2024. Corvus Peak sent a public letter to Dame Elspeth Greenvale, Chair of the Board, articulating three primary demands: (i) the appointment of two new independent directors with "demonstrated expertise in digital media transformation and capital markets"; (ii) the initiation of a comprehensive strategic review, to be conducted with the assistance of an independent financial advisor, evaluating all options for maximizing stockholder value including potential asset sales, divestitures, and a possible sale of the entire Company; and (iii) the establishment of a formal CEO succession plan with defined milestones and external benchmarking. The letter criticized AGMG's stock price performance, noting that the Company's shares had underperformed the S&P 500 Media & Entertainment Sub-Index by approximately 1,800 basis points over the preceding twenty-four months.
February 26, 2024. Corvus Peak filed an amended Schedule 13D disclosing an increase in its beneficial ownership to approximately 8.7% of AGMG's outstanding common stock (approximately 35,896,200 shares). The amended filing further disclosed Corvus Peak's intention to nominate three director candidates for election at the Company's 2024 Annual Meeting of Stockholders. The filing also disclosed that Corvus Peak had retained Blackthorn Howell & Crane LLP as its legal advisor and Redstone Advisory Partners LLC as its proxy solicitor.
March 1, 2024. Corvus Peak submitted formal director nominations to the Company within the advance notice window prescribed by Article II, Section 2.12 of the Company's Amended and Restated Bylaws (the "Bylaws"), which provided for a nomination window running from February 10, 2024 through March 11, 2024. The three nominated candidates are: (i) Malcolm Trask, formerly Chief Operating Officer of Marlowe Asset Management Digital Holdings and a director of two publicly traded media companies; (ii) Vanessa Loring, formerly a Managing Director at Bramwell National Bank and currently a media-focused private equity investor; and (iii) Dr. Raymond Chu, a professor of media economics at the Columbia Business School and a published scholar on digital transformation in traditional media conglomerates. Nadine Khalil confirmed on March 5, 2024, that the nominations were timely and in compliance with the Bylaws' procedural requirements.
April 1, 2024 (Anticipated). Based on Corvus Peak's public statements and the typical cadence of contested election campaigns, we anticipate that Corvus Peak will file a preliminary proxy statement with the SEC on or about April 1, 2024, initiating the formal solicitation process for the 2024 Annual Meeting, which is currently scheduled for June 12, 2024.
B. The CEO Resignation and Interim Succession
The following events relate directly to the subject matter of the § 220 demand:
March 8, 2024. Marcus Vane tendered his resignation as Chief Executive Officer and as a member of the Board of Directors, effective immediately. In his resignation letter, Vane cited "personal and family considerations" as the basis for his departure. The resignation was accepted by the Board at a special telephonic meeting convened at 11:00 a.m. Eastern Time on March 8, 2024. Under the terms of Vane's employment agreement dated September 1, 2019, as amended on March 15, 2022 (the "Vane Employment Agreement"), his resignation without "Good Reason" (as defined therein) would not have triggered severance benefits. However, the Board, upon the recommendation of the Compensation Committee and after consultation with counsel, determined that Vane's departure would be treated as a termination without "Cause," thereby entitling Vane to severance benefits totaling approximately $14.8 million, consisting of: (a) two times his annual base salary of $2,400,000 ($4,800,000); (b) two times his target annual bonus of $2,400,000 ($4,800,000); and (c) accelerated vesting of unvested equity awards with an aggregate value of approximately $5,200,000 as of the date of resignation. The separation is subject to Vane's execution of a customary release of claims and compliance with an eighteen-month post-termination non-competition covenant, which expires on September 8, 2025.
March 8, 2024. At the same special Board meeting at which Vane's resignation was accepted, the Board designated Priya Nair-Whitfield, then serving as President and Chief Operating Officer, as Interim CEO, effective immediately. The designation was approved by a vote of the full Board (with Vane having already resigned and therefore not participating). The minutes reflect that the Board considered Nair-Whitfield's twenty-two-year tenure with the Company, her institutional knowledge, and the need for immediate leadership continuity during a period of significant transition. The designation was made pending a formal succession process.
March 15, 2024. The Nominating & Governance Committee of the Board (the "N&G Committee"), chaired by Tobias Kessler, retained Hargrove Tate Partners LLC ("Hargrove Tate"), a leading global executive search and leadership advisory firm, to assist the Board in identifying and evaluating candidates for the permanent CEO position. The engagement is being led by Christine Aldridge, a Senior Partner at Hargrove Tate with extensive experience in C-suite succession for public media and entertainment companies. The engagement terms provide for a flat fee of $750,000 plus reasonable out-of-pocket expenses, payable in three installments: $250,000 upon execution of the engagement letter (paid on March 15, 2024), $250,000 upon delivery of the final candidate slate, and $250,000 upon appointment of a permanent CEO.
March 18, 2024. The Board adopted a resolution establishing a Special Committee of the Board (the "Special Committee") to oversee and manage (i) the CEO succession process and (ii) the Company's response to the Corvus Peak activist campaign. The Special Committee comprises three independent, non-management directors: Tobias Kessler (Chair), Lucinda Farrow-Grant, and Dr. Anwen Llewellyn. The Special Committee Charter grants the Committee broad authority to engage advisors, access Company personnel and resources, and make recommendations to the full Board on all matters within its mandate.
C. The § 220 Demand
The § 220 demand was served on March 22, 2024, by letter from Dominic Sayer, a partner in the corporate litigation group at Blackthorn Howell & Crane LLP, 1301 Avenue of the Americas, New York, New York 10019. The letter was addressed to Nadine Khalil, in her capacity as General Counsel and Corporate Secretary of Aurelius Global Media Group PLC, and was delivered to the Company's registered agent in Delaware, Pinnacle Corporate Services Inc., at 1209 Orange Street, Wilmington, Delaware 19801. A courtesy copy was simultaneously transmitted by email to Khalil at her Company email address.
The demand letter identifies Corvus Peak as a stockholder of record holding approximately 35,896,200 shares of AGMG common stock, representing approximately 8.7% of the 412,600,000 shares outstanding. The letter states that the demand is made pursuant to DGCL § 220(b) and demands the right to inspect and copy the Company's books and records as specified therein. The letter further states that Corvus Peak's purpose in making the demand is "to investigate whether the Board of Directors of the Company has fulfilled, and is fulfilling, its fiduciary duties in connection with the CEO succession process, including but not limited to the circumstances surrounding the resignation of Marcus Vane and the Board's immediate designation of Priya Nair-Whitfield as Interim CEO."
As a threshold matter, we note that compliance with the statutory requirement that the demand be made "under oath" must be verified. Audrey Zhou will review the demand letter and any accompanying affidavit or verification to determine whether this requirement has been satisfied. If the demand was not made under oath, this technical deficiency could provide an independent basis for rejection, although we would not recommend relying on this ground alone if the deficiency is readily curable.
D. Categories of Documents Demanded
The demand letter requests inspection and copying of the following categories of documents:
Category 1. All Board and committee minutes from January 1, 2024 to the present relating in whole or in part to CEO succession, the CEO search process, or the resignation of Marcus Vane as CEO.
Category 2. All materials created by or for the Special Committee (formed March 18, 2024), including but not limited to meeting agendas, presentations, evaluation matrices, interview notes, and any other materials distributed to or considered by the Special Committee.
Category 3. All correspondence, engagement letters, search reports, candidate slates, and any other materials provided by or exchanged with Hargrove Tate Partners LLC in connection with the CEO search process.
Category 4. All materials related to the designation of Priya Nair-Whitfield as Interim CEO, including any Board deliberations, analyses, or other materials considered in connection with that designation.
Category 5. All communications between or among Board members regarding CEO succession, including but not limited to emails, text messages, and instant messages, from January 1, 2024 to the present.
Category 6. Marcus Vane's employment agreement, any separation agreement or severance agreement, and any Board resolutions authorizing or approving the terms of Mr. Vane's departure.
Category 7. Any analyses, memoranda, or reports prepared by legal counsel — specifically identified as Ashworth Velmoran LLP or Calderwood & Harkness LLP — relating to the CEO succession process or the Board's fiduciary duties in connection therewith.
Category 8. Any documents relating to Jonathan Hale or any other identified external CEO candidates, including any analyses, evaluations, presentations, or communications relating to such candidates.
The demand is notable for its breadth and specificity. Categories 2, 5, 7, and 8 are particularly aggressive and, as discussed below, encompass materials that are squarely protected by attorney-client privilege and the work-product doctrine. Category 7, which explicitly targets legal counsel's work product, is the most problematic and plainly overreaches the scope of permissible § 220 inspection.
III. STATUTORY FRAMEWORK — DGCL § 220
A. Standing Requirements
Section 220(b) of the DGCL provides, in pertinent part, that "[a]ny stockholder, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose, and to make copies and extracts from" the corporation's stock ledger, list of stockholders, and "other books and records." The statute is designed to provide stockholders with a limited but meaningful right of inspection to protect their interests as owners of the enterprise, while ensuring that this right is exercised responsibly and in good faith.
To invoke the statutory right, a demandant must satisfy three threshold requirements:
(1) Stockholder Status. The demandant must demonstrate that it is a "stockholder" within the meaning of the statute. Section 220(a) defines "stockholder" to include both stockholders of record and beneficial owners whose shares are held in "street name" through a broker, bank, or other nominee. A beneficial owner must establish its ownership through appropriate documentation.
(2) Written Demand Under Oath. The demand must be in writing, made under oath (i.e., verified by affidavit or sworn statement), and must state the purpose or purposes for which inspection is sought. This requirement ensures that the demandant is committed to its stated purpose and may be held accountable for misrepresentations.
(3) Reasonable Particularity. The books and records sought must be described with "reasonable particularity" so that the corporation can identify the documents that are responsive and the demand does not operate as an open-ended fishing expedition.
As applied to Corvus Peak's demand, the standing requirement is not at issue. Corvus Peak's Schedule 13D filings with the SEC establish its beneficial ownership of approximately 35,896,200 shares (8.7% of 412,600,000 outstanding), and the demand letter identifies Corvus Peak as a "stockholder of record." Although Corvus Peak's shares are likely held through one or more prime brokers in street name, the Schedule 13D filings and any accompanying DTC participant statements or broker confirmations would be sufficient to establish beneficial ownership for purposes of § 220. We do not recommend challenging Corvus Peak's standing.
The demand was submitted in writing by Dominic Sayer of Blackthorn Howell & Crane LLP on behalf of Corvus Peak. However, as noted above, we must verify whether the demand was made "under oath" as required by § 220(b). If the demand letter was not accompanied by an affidavit or sworn verification by an authorized representative of Corvus Peak, this constitutes a technical deficiency. While Delaware courts have occasionally permitted stockholders to cure such deficiencies, the failure to comply with the oath requirement provides a basis for rejection of the demand in the first instance. Audrey Zhou has been directed to review the demand and any accompanying materials to determine whether this requirement has been met. We will advise promptly upon completion of that review. As a tactical matter, however, even if the oath requirement has not been satisfied, we would recommend noting the deficiency in our response letter rather than treating it as the sole basis for rejection, as Corvus Peak could readily cure the deficiency by submitting a verified demand.
B. Proper Purpose Requirement
The most significant substantive requirement of § 220 is that the demandant must demonstrate a "proper purpose" for the inspection. Section 220(b) defines a "proper purpose" as "a purpose reasonably related to such person's interest as a stockholder." This requirement is broadly construed, but it is not without limits.
The Delaware courts have recognized a wide range of purposes as "proper" under § 220, including:
(i) Investigating suspected mismanagement, wrongdoing, or waste of corporate assets;
(ii) Valuing one's stockholdings;
(iii) Communicating with fellow stockholders on matters of mutual interest;
(iv) Investigating potential breaches of fiduciary duty by directors or officers;
(v) Evaluating corporate governance practices and procedures; and
(vi) Investigating the independence and disinterestedness of directors in connection with corporate transactions or processes.
Critically, a stockholder invoking § 220 need not demonstrate that wrongdoing has actually occurred. The Court of Chancery has consistently held that the threshold is a "credible basis" — i.e., the stockholder must present "some evidence to suggest a credible basis from which a court can infer that mismanagement, waste or wrongdoing may have occurred." Seinfeld v. Harborview Holdings, Inc., 909 A.2d 117, 123 (Del. 2006). This is a low evidentiary threshold, well below the preponderance standard that applies at trial, and it is designed to ensure that § 220 serves its intended function as a pre-suit investigative tool.
Corvus Peak's stated purpose — "to investigate whether the Board of Directors of the Company has fulfilled, and is fulfilling, its fiduciary duties in connection with the CEO succession process, including but not limited to the circumstances surrounding the resignation of Marcus Vane and the Board's immediate designation of Priya Nair-Whitfield as Interim CEO" — falls squarely within the categories of proper purposes recognized by Delaware courts. The investigation of fiduciary duties in the context of corporate governance decisions, including management succession, is one of the paradigmatic uses of the § 220 inspection right.
However, a stockholder's stated purpose need not be its sole purpose. Delaware courts have acknowledged that a stockholder may have multiple purposes in making a § 220 demand, and the demand is valid so long as at least one of the stated purposes is proper. See Thomas & Betts Corp. v. Leviton Mfg. Co., 681 A.2d 1026, 1030 (Del. 1996). This principle is important here because, as discussed below, Corvus Peak's concurrent proxy contest campaign suggests that the § 220 demand may serve dual purposes — investigating potential fiduciary duty breaches and gathering intelligence for the contested election.
C. Scope of Inspection Right — "Books and Records"
The term "books and records" in § 220 encompasses a broad range of corporate documents, but the right of inspection is not unlimited. The books and records to which a stockholder is entitled include:
(i) Formal corporate records, such as Board and committee minutes, resolutions, stockholder lists, and organizational documents, which form the foundational records of the corporation's governance decisions; and
(ii) Informal documents, such as emails, memoranda, reports, and other non-formal writings, to the extent they are "necessary and essential" to accomplish the stated purpose of the inspection.
The distinction between formal and informal documents is critical to the scope analysis. Formal corporate records — particularly Board and committee minutes and resolutions — are "the primary source of evidence of Board action" and are among the most readily producible documents under § 220. See Disney v. Walt Disney Co., C.A. No. 234-N, 2004 WL 2050138, at 3 (Del. Ch. Sept. 10, 2004). Informal documents, by contrast, are subject to a higher standard: the stockholder must demonstrate that they are "necessary and essential" to its stated purpose, not merely helpful or desirable. See Espinoza v. Hewlett-Packard Co.*, 32 A.3d 365, 372 (Del. 2011).
Delaware courts have consistently emphasized that a § 220 demand is not the equivalent of litigation discovery. A stockholder is not entitled to all documents that may be relevant to its stated purpose, but only those that are necessary and essential to accomplish that purpose. Courts routinely narrow the scope of § 220 demands to prevent them from becoming vehicles for the kind of broad, burdensome discovery that is available only in plenary litigation. The stockholder's right is one of "inspection," not a right to conduct a comprehensive document review of the corporation's files.
D. Burden of Proof
The allocation of the burden of proof in a § 220 proceeding depends on the type of documents sought. Where, as here, the stockholder seeks inspection of "books and records" (as opposed to a stockholder list, which is subject to a different burden allocation under § 220(c)), the burden falls on the stockholder to demonstrate: (1) a proper purpose for the inspection; and (2) that the specific documents demanded are "necessary and essential" to accomplish that purpose.
The corporation, for its part, bears the burden of establishing any affirmative defenses to the demand, including the attorney-client privilege and the work-product doctrine. This means that if AGMG withholds documents on the basis of privilege, AGMG must be prepared to justify those withholdings through a privilege log and, if necessary, in camera review by the court.
IV. PROPER PURPOSE ANALYSIS — APPLICATION TO CORVUS PEAK'S DEMAND
A. Investigation of Fiduciary Duties in CEO Succession
Corvus Peak's demand alleges that the Board's March 8, 2024, designation of Priya Nair-Whitfield as Interim CEO — which occurred within hours of Marcus Vane's resignation and before any formal search process had been initiated — suggests that the Board had a predetermined outcome in mind for the permanent CEO position. The demand letter states that the "speed and apparent lack of deliberation" with which the Interim CEO designation was made "raise significant concerns" about whether the Board conducted the CEO succession process "in a manner consistent with its fiduciary obligations of care and loyalty."
This allegation connects to a broader set of corporate governance questions that Corvus Peak has articulated in its public campaign, including whether the pre-reconstitution Board — and particularly the four directors who reportedly supported Nair-Whitfield's candidacy (Dame Elspeth Greenvale, Lucinda Farrow-Grant, Hugh Pemberton, and Sofia Delgado-Ríos) — acted with the requisite good faith and on a fully informed basis in the succession process. Corvus Peak has publicly suggested that the designation of Nair-Whitfield was the product of a "clubby, insider-driven process" rather than a rigorous, merit-based evaluation of available candidates, and that the Board's subsequent retention of Hargrove Tate and formation of the Special Committee were designed to provide "window dressing" for a decision that had, in substance, already been made.
Under Delaware law, these allegations are likely sufficient to establish a "credible basis" for a proper purpose. The Court of Chancery has consistently held that a stockholder invoking § 220 need not prove actual wrongdoing — the stockholder must present only "some evidence" from which an inference of mismanagement or breach of fiduciary duty may be drawn. See Seinfeld, 909 A.2d at 123; Security First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d 563, 568 (Del. 1997). Here, the publicly available facts — the speed of the Interim CEO designation, the absence of a contemporaneous formal search process, and the existence of a reportedly divided Board — are likely sufficient to satisfy this low evidentiary standard.
Assessment: A Delaware court would likely find that Corvus Peak has stated a proper purpose with respect to investigating the Board's CEO succession process and the circumstances surrounding the designation of Nair-Whitfield as Interim CEO. We do not recommend contesting proper purpose as the primary basis for the Company's response.
B. Secondary Purpose — Proxy Contest
Corvus Peak's concurrent proxy contest campaign — formal director nominations were submitted on March 1, 2024, and a preliminary proxy statement is expected on or about April 1, 2024 — raises the obvious inference that the § 220 demand may also serve the purpose of gathering intelligence and ammunition for the contested election. Corvus Peak's campaign platform directly criticizes the Board's management of CEO succession, and the information sought in the § 220 demand would be highly relevant to Corvus Peak's proxy solicitation materials.
Delaware courts have acknowledged that investigating corporate management in connection with a proxy campaign can constitute a proper purpose. The right to communicate with fellow stockholders and to evaluate the performance of incumbent directors are both recognized proper purposes under § 220. See BBC Acquisition Corp. v. Durr-Fillauer Medical, Inc., 623 A.2d 85, 88 (Del. Ch. 1992) (noting that "using a stockholder list and corporate information to solicit proxies or to communicate with stockholders about the management of the company is a proper purpose"). The fact that Corvus Peak's inspection demand overlaps with its proxy contest does not, standing alone, render the demand improper.
However, the coexistence of the proxy contest is relevant to the proportionality analysis regarding scope. A court may be more skeptical of demands that appear designed primarily to gain a tactical advantage in a contested election, and the court will examine whether the scope of the demand is proportionate to the stated investigative purpose as distinct from the broader litigation and proxy strategy. This is one reason why we recommend focusing our response on scope rather than proper purpose.
C. Assessment of Credible Basis
Several factors support the conclusion that Corvus Peak has a credible basis to investigate the Board's conduct of the CEO succession process:
Speed of Interim CEO Designation. The Board designated Nair-Whitfield as Interim CEO at the same Board meeting at which it accepted Vane's resignation — within hours of receiving his resignation letter. While the Board may have sound business justifications for acting quickly to ensure leadership continuity, the speed of the designation is, at a minimum, a circumstance that would give rise to a reasonable inference that the outcome was predetermined or that insufficient deliberation occurred.
Nair-Whitfield's Known Internal Support. Nair-Whitfield's status as an internal candidate with established support from certain Board members was widely reported in the financial press and has been the subject of commentary by institutional stockholders and proxy advisory firms. The existence of a known internal favorite raises questions — however preliminary — about whether the Board's process was genuinely open and competitive.
Reported Board Division. AGMG's Board is reported to be divided on the question of permanent CEO candidates, with four directors (Greenvale, Farrow-Grant, Pemberton, and Delgado-Ríos) supporting Nair-Whitfield, three directors (Kessler, Llewellyn, and one other) favoring an external candidate such as Jonathan Hale, and one director remaining neutral or undecided. This 4-3-1 split raises questions about whether the succession process is being managed in a fair and balanced manner, or whether a majority faction is steering the outcome toward a predetermined result.
Corvus Peak's Public Statements. While Corvus Peak's public advocacy is, of course, self-interested, its characterization of the process as a "predetermined outcome" and its demand for transparency provide context for the § 220 demand that a court would likely consider relevant.
Conclusion. Corvus Peak likely has a credible basis sufficient to sustain its stated proper purpose. AGMG should not contest proper purpose as its primary defense. Instead, the Company's response should focus on: (1) narrowing the scope of production to documents that are truly "necessary and essential" to Corvus Peak's stated purpose; and (2) asserting privilege over attorney-client communications and attorney work product.
V. SCOPE ANALYSIS — DOCUMENTS SUBJECT TO PRODUCTION VERSUS WITHHOLDING
The critical question for purposes of AGMG's response is not whether Corvus Peak is entitled to inspect any books and records — it almost certainly is — but rather which books and records it is entitled to receive. This section categorizes the documents demanded by Corvus Peak into three groups: (A) documents likely subject to production; (B) documents presumptively protectable by privilege or work-product protections; and (C) gray-area documents requiring case-by-case analysis.
A. Documents Likely Subject to Production
The following categories of documents are formal corporate records that are traditionally producible under § 220 and that bear a direct relationship to Corvus Peak's stated purpose of investigating the CEO succession process:
1. Board Minutes Relating to CEO Resignation and Interim CEO Designation (March 8, 2024). The minutes of the special Board meeting at which Marcus Vane's resignation was accepted and Priya Nair-Whitfield was designated as Interim CEO are core corporate records. Board minutes are the "primary source of evidence of Board action" and are among the first documents a Delaware court would order produced in a § 220 proceeding. These minutes are directly responsive to Corvus Peak's stated purpose, and there is no basis to withhold them in their entirety. However, to the extent the minutes contain references to or summaries of legal advice provided by counsel at the meeting, those portions should be redacted prior to production.
2. Board Resolutions Regarding Formation of the Special Committee (March 18, 2024). The Board resolution establishing the Special Committee is a formal governance document reflecting a corporate action that is both non-privileged and directly responsive to the stated purpose. Production is appropriate.
3. The Executed Special Committee Charter (March 18, 2024). The Charter is a formal corporate governance document that defines the mandate, authority, and composition of the Special Committee. It is a non-privileged document and is directly responsive to the stated purpose. Production is appropriate.
4. Marcus Vane's Employment Agreement and Non-Privileged Separation-Related Board Resolutions. Vane's employment agreement is a formal corporate contract, and the Board resolutions approving his severance terms are formal Board actions. These documents relate to the circumstances of Vane's departure, which is squarely within the scope of Corvus Peak's investigation. We recommend production of the employment agreement and the non-privileged portions of the Board resolutions authorizing his separation, provided that any discussions of legal advice or negotiation strategy reflected in the resolutions are redacted.
5. Non-Privileged Portions of Board Minutes Relating to CEO Succession. To the extent that Board minutes from meetings subsequent to March 8, 2024, contain discussions of the CEO succession process that do not reflect or reveal attorney-client communications, those portions are likely producible. We recommend careful review and redaction of privileged content, followed by production of the non-privileged portions.
B. Documents Presumptively Protectable
The following categories of documents are presumptively protectable by the attorney-client privilege, the work-product doctrine, or both, and should be withheld subject to a privilege log:
1. Attorney-Client Privileged Communications. All memoranda and advice prepared by Calderwood & Harkness LLP and Ashworth Velmoran LLP for the Board, the Special Committee, or the General Counsel relating to the CEO succession process are protected by attorney-client privilege. These include, without limitation:
• The March 17, 2024, memorandum from Nathaniel Bower to the Board regarding the governance framework for the CEO succession process;
• The March 20, 2024, memorandum from Colette Whitman to Nadine Khalil regarding CEO search governance protocols and document retention;
• The March 25, 2024, memorandum from Nathaniel Bower and Colette Whitman to the Special Committee regarding fiduciary duties in the CEO succession context;
• The March 28, 2024, memorandum from Audrey Zhou to the Special Committee regarding the Interim CEO designation and related governance considerations; and
• All subsequent memoranda, advice letters, and legal analyses prepared by C&H or Ashworth Velmoran in connection with the succession process.
2. Attorney Work Product. All draft analyses, strategy memoranda, internal legal research, case law compilations, and other materials prepared by Calderwood & Harkness LLP or Ashworth Velmoran LLP in anticipation of litigation or in connection with providing legal advice to the Board are protected by the work-product doctrine. Given the pending proxy contest and the § 220 demand itself, there is a well-founded reasonable anticipation of litigation that supports the application of work-product protection.
3. Special Committee Deliberative Materials. The Special Committee's interview notes, candidate evaluation matrices, and internal deliberative materials were prepared under the direction and supervision of counsel as part of a process that is integral to the Board's receipt of legal advice regarding its fiduciary duties. These materials should be withheld on the basis of attorney-client privilege and, to the extent they were prepared in anticipation of litigation, the work-product doctrine.
4. Counsel-Directed Search Firm Communications. Correspondence with Hargrove Tate Partners LLC, to the extent such correspondence was made at the direction of counsel or reflects counsel's mental impressions, legal strategy, or legal analysis regarding the succession process, is protectable as attorney-client privileged communications or attorney work product. However, as discussed in Section V.C below, not all communications with the search firm will qualify for this protection.
5. Board Member Inter-Communications Reflecting Legal Advice. Emails, text messages, and other communications between or among Board members are protectable to the extent they reflect or disclose legal advice received from Calderwood & Harkness, Ashworth Velmoran, or in-house counsel. However, purely factual or business-related communications that do not disclose legal advice would not be privileged and may be subject to production if they fall within the "necessary and essential" scope of the demand.
6. Internal Counsel Communications. All internal emails, memoranda, research materials, and correspondence of counsel at Calderwood & Harkness and Ashworth Velmoran relating to the engagement are privileged and protectable.
C. Gray-Area Documents
Certain categories of documents demanded by Corvus Peak fall into a gray area where the applicability of privilege or the appropriateness of production requires case-by-case analysis:
1. Hargrove Tate Engagement Letter and Search Firm Candidate Slates. The engagement letter between the N&G Committee and Hargrove Tate Partners is, at its core, a business agreement establishing the terms of a commercial relationship. While it may contain references to the legal framework within which the search is being conducted, the business terms of the engagement (scope, fees, timeline) are not attorney-client communications. We recommend production of the engagement letter, redacted to remove any references to legal strategy or counsel's direction. The candidate slates and search reports prepared by Hargrove Tate, however, present a closer question. To the extent these materials were prepared at the direction of counsel as part of a legally supervised succession process, they may be protectable. We recommend withholding the candidate slates and search reports, but the Company should be prepared for a challenge to this position.
2. Factual Portions of Board Minutes Interspersed with Privileged Legal Discussions. Many Board minutes contain a mixture of factual recitations (e.g., descriptions of management presentations, votes taken, and business discussions) and references to legal advice (e.g., summaries of counsel's presentations, discussions of fiduciary duty considerations, and references to legal memoranda). Production of redacted minutes — with privileged discussions excised and non-privileged content preserved — is the standard approach in § 220 proceedings and the approach we recommend here.
3. Marcus Vane's Separation Agreement. The separation agreement between AGMG and Marcus Vane is a formal corporate document executed in connection with the CEO's departure. While the negotiation of the separation agreement may have involved privileged legal advice, the executed agreement itself is a non-privileged business document and is likely producible. We recommend producing the executed agreement, but not any draft agreements, redlines, or attorney communications reflecting the negotiation of the terms.
VI. PRIVILEGE AND WORK-PRODUCT PROTECTIONS
A. Attorney-Client Privilege
Delaware law recognizes the attorney-client privilege as fully applicable in the context of § 220 demands and proceedings. The privilege protects confidential communications between a client and its attorney made for the purpose of seeking or providing legal advice. In the corporate context, the privilege extends to communications between the corporation's officers, directors, and authorized representatives, on the one hand, and the corporation's outside counsel and in-house legal department, on the other, when those communications are made for the purpose of obtaining or rendering legal advice and are intended to be confidential.
The privilege is the corporation's privilege — it belongs to AGMG as an entity, not to any individual director or officer. The authority to assert or waive the privilege on behalf of the corporation rests with the Board, acting through its authorized representatives. Nadine Khalil, as General Counsel and Corporate Secretary, is the appropriate custodian for privilege assertions on behalf of AGMG.
The following categories of materials are protected by the attorney-client privilege and should be withheld:
(a) All memoranda from Calderwood & Harkness LLP to the Board, the Special Committee, and the General Counsel, including but not limited to the March 17, 20, 25, and 28 memoranda referenced in Section V.B above, as well as all subsequent memoranda prepared in connection with the CEO succession process and the Corvus Peak activist campaign;
(b) Email and other written communications between Nathaniel Bower and Dame Elspeth Greenvale regarding legal advice on the succession process, the activist response, and related governance matters;
(c) Communications between Colette Whitman and Nadine Khalil regarding privilege protocols, document retention, and the legal framework for the Special Committee's operations;
(d) All communications between Board members and Ashworth Velmoran LLP (lead partner Martin Cho) regarding the CEO succession process, the activist response, and related matters, including any memoranda, advice letters, or legal analyses prepared by Ashworth Velmoran;
(e) Communications between Calderwood & Harkness and Ashworth Velmoran in connection with the shared representation of AGMG, to the extent such communications are directed to providing coordinated legal advice to the Board; and
(f) Any notes or summaries prepared by Board members or the Corporate Secretary reflecting or memorializing the substance of legal advice received from counsel.
It is critical that the privilege be properly maintained. To that end, we recommend that all Board members and Company personnel be reminded of the importance of maintaining the confidentiality of communications with counsel. Any disclosure of privileged communications to third parties — including Corvus Peak, its advisors, or the press — could result in a waiver of privilege over those communications and potentially over related communications.
B. Work-Product Doctrine
The work-product doctrine protects materials prepared by or for an attorney in anticipation of litigation from compelled disclosure. In Delaware, the doctrine applies to materials prepared in anticipation of litigation or for trial and provides two tiers of protection:
(i) Fact work product — documents and tangible things that contain or reflect factual information gathered or compiled by counsel in anticipation of litigation. Fact work product is discoverable only upon a showing by the requesting party that it has a "substantial need" for the materials and cannot, without "undue hardship," obtain the substantial equivalent by other means.
(ii) Opinion work product — materials that contain or reflect counsel's mental impressions, conclusions, opinions, or legal theories. Opinion work product receives near-absolute protection and is discoverable only in extraordinary circumstances.
The work-product doctrine is applicable here because there is a reasonable basis to anticipate litigation in multiple forums. The § 220 demand itself is a precursor to a potential § 220 enforcement action in the Court of Chancery. More broadly, the contested proxy campaign, Corvus Peak's public accusations of fiduciary duty breaches, and the possibility of a plenary breach of fiduciary duty action all support the conclusion that litigation was reasonably anticipated at the time the relevant materials were prepared. Indeed, Calderwood & Harkness's engagement by the Board was motivated in part by the need for independent governance advice in connection with a contested election campaign and a complex CEO succession — both of which carried significant litigation risk from the outset.
Protected materials include, without limitation:
(a) Internal Calderwood & Harkness research memoranda analyzing Delaware case law on CEO succession, interim appointments, and board process in the context of activist campaigns;
(b) Strategy analyses and draft correspondence prepared by C&H in connection with the Company's response to the § 220 demand and the broader activist campaign;
(c) Case law compilations, analytical frameworks, and decision trees prepared by C&H to guide the Board's and the Special Committee's deliberative process; and
(d) Mental impressions, conclusions, and legal theories reflected in counsel's internal communications and memoranda.
It is important to note that the work-product doctrine protects materials prepared in anticipation of litigation, not merely materials prepared by attorneys. Accordingly, documents prepared by non-lawyers (including Hargrove Tate or Company personnel) at the specific direction of counsel for litigation-related purposes may also be protectable. Conversely, materials prepared by attorneys for business purposes (as opposed to litigation purposes) would not qualify for work-product protection.
C. Privilege Log Requirements
AGMG is obligated to prepare a privilege log identifying each document that is withheld on the basis of attorney-client privilege or the work-product doctrine. The privilege log must describe each withheld document with sufficient particularity to permit judicial review of the privilege claim, without revealing the privileged content itself.
For each document withheld, the privilege log should include:
(a) The date of the document;
(b) The identity of the author or creator;
(c) The identities of all recipients (including copy recipients);
(d) A general description of the subject matter of the document (e.g., "Memorandum from outside counsel to the Special Committee regarding governance protocols for CEO succession process"), stated at a level of generality that does not disclose the substance of the privileged communication;
(e) The type of document (e.g., memorandum, email, text message, presentation);
(f) The specific privilege basis asserted (attorney-client privilege, work-product doctrine, or both); and
(g) Any additional information necessary to support the privilege claim (e.g., that the document was prepared at the direction of counsel, or that it was prepared in anticipation of specific litigation).
We recommend that Nadine Khalil work with Colette Whitman and Audrey Zhou to prepare the privilege log. Detailed instructions regarding the format, content, and review process for the privilege log will be provided in a separate communication from Colette Whitman.
VII. RECOMMENDED RESPONSE STRATEGY
A. Overarching Approach
We recommend that AGMG adopt a response strategy that is cooperative but firm — one that acknowledges the Company's obligations under § 220 and offers meaningful production of non-privileged corporate records, while vigorously protecting the confidentiality of the Board's privileged legal strategy and the Special Committee's deliberative processes.
An outright rejection of the demand would be inadvisable for several reasons. First, as discussed in Section IV, Corvus Peak has likely stated a proper purpose, and a Delaware court would be expected to order at least partial production if the matter were litigated. Second, an aggressive refusal to produce any documents would risk a summary § 220 action in the Court of Chancery, which would be expedited (typically resolved within weeks to a few months) and could result in a court order requiring production broader than what we propose to offer voluntarily. Third, the optics of a § 220 court proceeding during the pendency of a contested proxy campaign would be damaging to the Company. A public court filing by Corvus Peak alleging that AGMG is obstructing stockholder access to corporate records would lend credibility to Corvus Peak's narrative that the Board is operating in a secretive, non-transparent manner — precisely the narrative that Corvus Peak's proxy campaign is built upon.
The recommended approach — partial objection with narrowed production — accomplishes several strategic objectives simultaneously:
(i) It demonstrates good faith and a commitment to stockholder rights, which strengthens the Company's position if the matter proceeds to litigation and informs the broader proxy contest narrative;
(ii) It preserves the Company's privilege claims by offering production only of non-privileged materials, thereby establishing a defensible record if the privilege assertions are challenged;
(iii) It narrows the scope of any potential § 220 litigation to the genuinely disputed categories of documents (principally the Special Committee deliberative materials, the Hargrove Tate candidate slates, and counsel communications), rather than requiring the court to adjudicate the entire demand de novo; and
(iv) It controls the timing and flow of information, allowing the Company to make a measured production on its own timetable rather than being subject to a court-imposed schedule.
B. Proposed Production Scope (Narrowed Offer)
Based on our analysis, we recommend that AGMG offer to produce the following categories of documents:
1. Board Minutes from the March 8, 2024 Meeting. Redacted to remove any portions that reflect or reveal attorney-client communications, counsel's advice, or privileged legal discussions. The non-privileged portions — including the factual recitation of Vane's resignation, the Board's designation of Nair-Whitfield as Interim CEO, the vote tally, and any factual business justification for the immediate designation — should be produced.
2. Board Resolutions Regarding Formation of the Special Committee (March 18, 2024). The resolutions establishing the Special Committee and defining its mandate should be produced in full, as they are formal corporate governance records.
3. The Executed Special Committee Charter. The Charter defines the Committee's authority, composition, and scope, and is a non-privileged governance document that should be produced.
4. Marcus Vane's Employment Agreement (Non-Privileged Portions). The executed employment agreement, including the base salary, bonus, equity, non-competition, and severance provisions, should be produced. The separation agreement, to the extent it has been executed, should also be produced. Draft agreements, negotiation-related correspondence, and attorney communications regarding the terms of separation should be withheld.
5. Redacted Board Minutes from Subsequent Meetings. To the extent that Board minutes from meetings after March 8, 2024, contain non-privileged deliberations on CEO succession — including factual discussions of the search timeline, the search firm engagement, and the Special Committee's work — those portions should be produced. All references to legal advice, counsel's recommendations, and privileged deliberations should be redacted.
6. The Hargrove Tate Partners Engagement Letter (Non-Privileged Business Terms). The engagement letter setting forth the scope of the search, the fee structure, and the timeline should be produced. Any language reflecting legal strategy, counsel's direction, or privileged communications should be redacted.
C. Categories to Withhold (with Privilege Log)
The following categories of documents should be withheld, and each withheld document should be identified on the privilege log:
(i) All memoranda, advice letters, and legal analyses prepared by Calderwood & Harkness LLP, including all memoranda addressed to the Board, the Special Committee, or the General Counsel relating to the CEO succession process, fiduciary duties, governance protocols, or the Corvus Peak activist campaign;
(ii) All memoranda, advice letters, and legal analyses prepared by Ashworth Velmoran LLP, including any communications from Martin Cho to the Board or management relating to the CEO succession process or activist response;
(iii) All internal attorney work product, including research memoranda, strategy analyses, draft correspondence, case law compilations, and materials reflecting counsel's mental impressions;
(iv) Special Committee deliberative materials prepared at the direction of or with the involvement of counsel, including candidate evaluation matrices, interview notes, and internal analyses;
(v) Hargrove Tate candidate slates, search reports, and candidate-specific analyses, to the extent they were prepared at the direction of counsel or reflect legal strategy for the succession process;
(vi) Communications between or among Board members that reflect or disclose legal advice received from counsel, including emails and text messages discussing or forwarding counsel's advice; and
(vii) All internal communications of counsel at Calderwood & Harkness and Ashworth Velmoran relating to the AGMG engagement.
D. Form of Response
We recommend that the response take the form of a formal letter from Nadine Khalil, in her capacity as General Counsel and Corporate Secretary, addressed to Dominic Sayer at Blackthorn Howell & Crane LLP. The letter should be prepared by Audrey Zhou and Brendan Walsh (associate, Calderwood & Harkness), reviewed and finalized by Nathaniel Bower, and delivered on or about April 2, 2024 — within approximately ten business days of receipt of the demand.
The response letter should include the following elements:
(1) Acknowledgment. The letter should acknowledge receipt of the March 22, 2024, demand letter and confirm that the Company has reviewed the demand in consultation with outside counsel.
(2) Commitment to Stockholder Rights. The letter should state AGMG's commitment to respecting stockholder inspection rights under Section 220 of the DGCL and its intention to respond to the demand in good faith.
(3) Stockholder Confirmation. The letter should confirm that AGMG recognizes Corvus Peak as a stockholder of the Company based on the Schedule 13D filings and any supporting ownership documentation provided.
(4) Objection to Overbreadth. The letter should object to the scope of the demand as overbroad and not tailored to the "necessary and essential" standard applicable to § 220 demands. The letter should identify specific categories of documents that exceed the permissible scope of inspection, with particular emphasis on Category 7 (counsel's work product), Category 5 (all Board member communications), and Category 8 (external candidate materials).
(5) Privilege and Work-Product Assertions. The letter should assert attorney-client privilege and work-product protection over the categories of documents identified in Section VII.C above, and should state that a detailed privilege log will be provided in connection with the document production.
(6) Narrowed Production Offer. The letter should offer to produce the categories of documents identified in Section VII.B above, subject to appropriate redactions for privilege and confidentiality. The letter should explain that these documents satisfy the "necessary and essential" standard and are directly responsive to Corvus Peak's stated purpose.
(7) Proposed Timetable. The letter should propose a reasonable timetable for production, with the document set and privilege log to be delivered on or about April 8, 2024.
(8) Reservation of Rights. The letter should reserve all of AGMG's rights, including the right to assert additional objections or defenses, and should state that nothing in the response constitutes a waiver of any privilege, protection, or objection.
If the demand letter was not made under oath, the response should note this technical deficiency and request that Corvus Peak cure the deficiency by submitting a verified demand before the Company completes its production.
E. Litigation Risk Assessment
In the event that Corvus Peak is dissatisfied with AGMG's narrowed production offer, Corvus Peak's most likely recourse would be to file a summary action under § 220 in the Court of Chancery of the State of Delaware. Section 11.1 of AGMG's Amended and Restated Bylaws designates the Court of Chancery as the exclusive forum for intra-corporate disputes, and § 220 actions are summary proceedings that are decided on an expedited basis.
Key considerations regarding litigation risk:
Procedural Timeline. Section 220 proceedings in the Court of Chancery are among the fastest forms of corporate litigation in Delaware. The court typically schedules a trial within 60 to 90 days of the complaint, and cases are often resolved on the papers or following a brief evidentiary hearing. If Corvus Peak files a § 220 action in early to mid-April 2024, a decision could be rendered as early as June or July 2024 — potentially before or shortly after the Annual Meeting.
Overall Risk Level: Moderate. Delaware courts generally enforce legitimate privilege assertions and respect the distinction between § 220 inspection rights and plenary litigation discovery. If AGMG's privilege claims are well-documented and the privilege log is thorough, the court is likely to sustain most of the Company's withholdings. However, certain categories of documents present heightened risk.
Specific Risk Area: Hargrove Tate Materials. The Company's position that Hargrove Tate's candidate slates and search reports are privileged is defensible but not unassailable. If these materials were prepared in the ordinary course of the search firm's engagement and were shared with the Board or the Special Committee without the involvement or direction of counsel, a court may conclude that they are business records rather than privileged attorney-client communications. The key question will be whether the Company can demonstrate that the search firm's work was performed at the direction of counsel as part of a legally supervised process. To strengthen this position, we strongly recommend that all future interactions with Hargrove Tate be channeled through or directed by counsel, and that Hargrove Tate be instructed to mark its deliverables as prepared at the direction of counsel.
Specific Risk Area: Board Member Communications. The Company's assertion of privilege over Board member emails and text messages will be examined on a communication-by-communication basis. Communications that merely discuss business matters — even if they relate to CEO succession — are not privileged merely because they involve directors. Only communications that reflect or disclose legal advice received from counsel will be protected. A thorough review of Board member communications is essential to ensure that the privilege is asserted only where it is genuinely applicable.
Mitigation Strategies. The primary mitigation strategies are: (i) ensuring a thorough, well-documented privilege log that withstands judicial scrutiny; (