Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Wednesday, March 19, 2008

Bear Stearns Amends Indemnification Bylaw

Bear Stearns has posted at its website Shareholder FAQs about the Morgan-Bear merger.  One question, and answer:

How could this have happened to an 85 year old firm?
Extraordinary conditions have existed in the credit markets for at least nine months,
generally restricting the credit available to financial institutions, including Bear Stearns.
During the last week, rumors about our liquidity caused customers to withdraw funds and
terminate positions, further straining our liquidity position. Even with the Fed’s
intervention on Friday, the Bear Stearns Board of Directors agreed to an acquisition by
JPMorgan Chase based on its judgment that the transaction is in the best interest of our
stakeholders, the best strategic alternative for the Firm, and allows us to continue
business operations. We believe that the acquisition represents the best outcome for all
of our constituencies based upon the current circumstances.

Bear Stearns also disclosed, in an 8-K filing, that on March 16, 2008, the Board approved an amendment to the By-laws adding a new Article 14, effective immediately (the "Amendment"). The purpose of the Amendment is to provide that in connection with any indemnification as set forth in Article VIII of the Company's Certification of Incorporation, expenses, including attorneys' fees, incurred by the person entitled to indemnification in defending any such action, suit or proceeding shall be paid or reimbursed by the Company promptly upon demand by such person.

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