Common use of By the Stockholders Clause in Contracts

By the Stockholders. There are a number of practical problems in making a determination pursuant to Section 145(d). First, many actions that give rise to indemnification claims will be brought against all directors and therefore preclude a determination by majority vote of disinterested directors. One solution might be to appoint additional disinterested directors to make a determination, although this course of action may present its own difficulties. Second, many corporations and directors will be reluctant to use the alternative of seeking stockholder approval, particularly for publicly held corporations where the approval process would be difficult and widely publicized. Third, the term “independent legal counsel” is not defined in Section 145 or applicable case law, and even if a well-established definition existed, a number of issues would arise in rendering a required opinion should experienced counsel agree to consider doing so.

By the Stockholders. There are a number of practical problems in making a determination pursuant to Section 145(d). First, many actions that give rise to indemnification claims will be brought against all directors and therefore preclude a determination by majority vote of disinterested directors. One solution might be to appoint additional disinterested directors to make a determination, although this course of action may present its own difficulties. Second, many corporations and directors will be reluctant to use the alternative of seeking stockholder approval, particularly for publicly held corporations where the approval process would be difficult and widely publicized. Third, the term “independent legal counsel” is not defined in Section 145 or applicable case law, and even if a well-established well‑established definition existed, a number of issues would arise in rendering a required opinion should experienced counsel agree to consider doing so.