If you’re thinking about an officer exculpation amendment, then you’re probably also thinking about what your proxy disclosure and the text of that amendment might look like. Thanks to Daniel Rubin’s Twitter feed, we’ve found an example. Nasdaq-listed SWK Holdings filed a definitive proxy statement on July 18th asking its stockholders to, among other things, amend its certificate of incorporation to exculpate officers to the fullest extent permitted by law. Here’s an excerpt describing the reasons for the proposal:
As part of its continuing review of the elements of our corporate governance standards and practices, the Governance and Nominating Committee concluded that the current exculpation and indemnification provisions in Article VIII of our Certificate of Incorporation should be updated to, among other things, reflect developing law. Legislation has been proposed that, if enacted, would enable a corporation to include in its certificate of incorporation a provision exculpating certain officers from liability for breach of the duty of care in certain actions.
Such a provision would not exculpate such officers from liability for breach of the duty of loyalty, acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, or any transaction in which the officer derived an improper personal benefit. Nor would such a provision exculpate such officers from liability for claims brought by or in the right of the corporation, such as derivative claims.
Taking into account the narrow class and type of claims that such officers would be exculpated from liability for, and the benefits the Governance and Nominating Committee believed would accrue to the corporation from providing such exculpation, the Governance and Nominating Committee recommended to the Board of Directors an amendment to the Certificate of Incorporation to provide such exculpation to the fullest extent permitted by law.
According to the company’s August 10th Form 8-K (which includes the text of the amendment), its stockholders overwhelmingly approved the proposed amendment. Steve Haas also pointed us in the direction of a Form 8-K filing from Snap, which includes the text of an officer exculpation charter amendment that its Class C stockholders approved by written consent. Snap didn’t solicit consents from public stockholders, so there’s no sample disclosure to go along with this.
I wouldn’t draw a lot of conclusions about stockholder support at other public companies from either SWK or Snap’s action. Two investment funds control nearly 80% of SWK’s stock, while voting control of Snap rests in the hands of its founders who hold the Class C stock.
— John Jenkins, TheCorporateCounsel.net, August 30, 2022