Court Decision Questions "Continuing Director" Provisions in Financing Agreements

The below memorandum discusses a Delaware Chancery Court decision last week that raises significant questions regarding the interpretation and validity of various types of “continuing director” change-in-control provisions that are common features in loan agreements, indentures and other contracts. Following the opinion, some existing provisions may not be interpreted as expected by some lenders and other existing provisions may be invalid. The court’s opinion also raises considerations for boards approving financing and other agreements (including employment agreements and benefit plans) with such provisions in the future and for lawyers negotiating such agreements, advising boards and drafting disclosure regarding such provisions.