Massachusetts Continuing Legal Education, Inc. Governance of Corporations & LLCs in Massachusetts & Delaware: The Ins & Outs of Fiduciary Duty May 25, 2017 Stanley Keller, Esq., Locke Lord LLP, Boston, Chair Stephen O. Meredith, Esq., Choate Hall & Stewart LLP, Boston James A. Smith, Esq., Foley Hoag LLP, Boston Patricia O. Vella, Esq., Morris, Nichols, Arsht & Tunnell LLP, Wilmington

Extent to Which These Ground Rules Can be Varied Overview of the Governance Ground Rules for Corporations and LLCs in Massachusetts and Delaware General Duties Duty of Care Duty of Loyalty Extent to Which These Ground Rules Can be Varied Distinguishing Duties from Standards of Review Remedial Measures

What are the Basic Ground Rules for Corporations Comparing Massachusetts to Delaware Duty of Directors What Are the Duties To Whom Are Duties Owed Duty of Stockholders Duties of Controlling Stockholder Who is a Controlling Stockholder Duties in Close Corporations

What are the Basic Ground Rules for Corporations (cont’d.) To What Extent Can These Ground Rules be Varied in a Corporation Exculpation Indemnification Negation of Corporate Opportunity Stockholder Agreements Charter and Bylaw Provisions Standards of Review (Overview) Business Judgment Enhanced Scrutiny Entire Fairness

What are the Basic Default Ground Rules LLCs Comparing Massachusetts to Delaware Default Duties of Managers Default Duties of Members To What Extent Can Default Ground Rules be Varied in an LLC Duty of Good Faith and Fair Dealing Scope of Limitation Ability to Define Scope

Remedial Actions (Delaware v. Massachusetts) Derivative Claims Demands Required or Excused Role of Special Committees and Shareholders When is a Director Independent/Disinterested Direct Claims Injunctive Relief Aiding and Abetting Liability Rights to Information

Governance Considerations in Making Choices Massachusetts or Delaware Corporation or LLC

Drafting Factors in Limiting Duties in LLCs Basic Limitation on Duties Safe Harbors for Conflicted Transactions Coordinating Provisions

Eliminating Fiduciary Duties* Section 1.1. Elimination of Fiduciary Duties. All non-contractual duties (including fiduciary duties), at law or in equity or otherwise, that a Specified Person would otherwise have to any Company-related Persons with respect or relating to the Company are hereby expressly eliminated as to such Specified Person and are replaced by the contractual duties and obligations expressly imposed on such Specified Person under this Agreement; provided that this Agreement does not eliminate the implied contractual covenant of good faith and fair dealing. “Company-related Persons” means the Company, each of its members and managers and each other Person that is bound by or otherwise subject to this Agreement. “Specified Person” means any [member,] manager, officer, special committee member or liquidating trustee of the Company or any of their respective Affiliates[; provided however, that no employee of [or paid consultant to] the Company or any of the Company’s direct or indirect subsidiaries [, in such Person’s capacity as such,] shall be deemed to be a Specified Person]. *Sample Delaware LLC Agreement provisions for discussion purposes only

Standard of Conduct* Section 1.2. Exculpation From Liability. No Specified Person shall have any liability for [breach of this Agreement or] breach of any non-contractual duties (including fiduciary duties) of such Specified Person to any Company-related Person with respect or relating to the Company; provided however, that the foregoing shall not limit or eliminate liability for any act or omission that constitutes [(i) a breach of Section 1.3 of this Agreement or (ii)] for avoidance of doubt, a bad faith violation of the implied contractual covenant of good faith and fair dealing. *Sample Delaware LLC Agreement provisions for discussion purposes only

Limitation of Liability* Section 1.3. Standard of Conduct. Whenever this Agreement provides that a Specified Person is permitted or required to make a decision [or take an action] in such Specified Person’s “discretion” or “sole discretion” [or where another standard is not expressly provided,] such Specified Person shall be entitled to consider only such interests and factors as such Specified Person desires and shall have no duty or obligation to give any consideration to any interest of, or factors affecting, the Company or any other Company-related Person. [Where a standard for making a decision [or taking an action] is not expressly stated in this Agreement, a Specified Person shall make such decision [or take such action] in good faith and in a manner such Specified Person reasonably believes to be in or not opposed to the best interests of the Company as a whole.] *Sample Delaware LLC Agreement provisions for discussion purposes only

Pre-transaction v. Post-transaction Where Are We Today on the Standards of Review of Satisfaction of Duties in Fundamental Transactions Pre-transaction v. Post-transaction Interested Party Transaction v. Other Transactions Role of Disclosure