TEXAS CAPITAL BANCSHARES, INC. (NASDAQ:TCBIP) Files An 8-K Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

Tendered Conditional Resignation Declined by Board of Directors

Texas Capital Bancshares, Inc. (the “Company”) filed a Current Report on Form 8-K with the Securities and Exchange Commission (“SEC”) on April 17, 2019, disclosing that Elysia Holt Ragusa, chair of the Governance and Nominating Committee (“GNC”), received more “withhold” votes than votes \”for\” her re-election to the Board of Directors (the “Board”) at the Company\’s 2019 Annual Meeting of Stockholders (“2019 Annual Meeting”). In accordance with the Company\’s majority voting policy set forth in Section G. of its Corporate Governance Guidelines (“Governance Guidelines”), Ms. Ragusa tendered her resignation to the Board, conditioned on acceptance of the resignation by the Board after following the procedures set forth in the Governance Guidelines. The Governance Guidelines are available in the “Governance Documents” section of the Company’s website at: http://investors.texascapitalbank.com/govdocs.

As contemplated by the Governance Guidelines, the GNC, with Ms. Ragusa recused, considered the tendered resignation in view of factors it deemed relevant, including without limitation:

Based upon these considerations the GNC unanimously recommended to the Board that it decline to accept Ms. Ragusa’s resignation. The Board, with Ms. Ragusa recused, considered Ms. Ragusa’s tendered resignation in view of the matters evaluated by the GNC and its recommendation and on July 8, 2019 determined unanimously not to accept Ms. Ragusa’s resignation.

Board Approves Bylaw Change to Eliminate Holding Period for Qualifying Shares Supporting a Request for a Special Meeting of Stockholders

The Board has also voted unanimously to delete from the Company’s Amended and Restated Bylaws that became effective in November 2018 (the “Revised Bylaws”) the requirement that stockholders requesting a special meeting of stockholders have held their shares for at least one year, as described below at Item 5.03. The Board also directed management and the GNC to continue discussions with stockholders regarding whether one or more proposals addressing the Revised Bylaws should be presented by the Company for stockholder voting at the 2020 Annual Meeting of Stockholders.

Reason for Majority “Withhold” Vote

The GNC concluded that the principal reason for the majority “withhold” vote for Ms. Ragusa’s re-election as a director was the recommendation of proxy advisory firms that stockholders withhold their votes in response to the Board’s approval of provisions included in the Revised Bylaws that increased the ownership threshold for stockholders to call a special meeting from 10 percent with no holding period requirement to 20 percent with a holding period of at least one year, without submitting those changes to a stockholder vote. This was characterized by the proxy advisory firms as a material diminution in stockholder rights in their voting summaries received by the Company. Discussions with a few of the Company’s larger stockholders that cast “withhold” votes without consideration of the proxy advisory firm recommendations confirmed that conclusion.

Background of Adoption of Revised Bylaws

Commencing in June 2018 the GNC undertook an evaluation of the Amended and Restated Bylaws as then in effect, which were substantially unchanged from the time of the Company’s initial public offering in 2003, with the objective of bringing them current to reflect bylaw terms and policies appropriate for the Company and comparable to similarly situated issuers. The information considered in this process included Delaware law and judicial decisions, SEC rules relating to the stockholder meeting and proxy process, bylaws adopted by peer bank holding company issuers, published proxy voting policies of the Company’s largest stockholders, the published proxy voting policies of proxy advisory firms and the results of recent public company stockholder meeting activity that focused on certain key bylaw provisions.

The Revised Bylaws, among other things, increased the required ownership threshold for stockholders to call a special meeting (the “Special Meeting Threshold”) from 10 percent of the outstanding shares, with no holding period requirement, to 20 percent of outstanding shares (the “20% Special Meeting Threshold”) with a holding period of at least one year (the “Holding Period Requirement”), and to make certain other changes to the procedural requirements applicable to stockholder meetings and actions by written consent (“Procedural Rules”).

The Revised Bylaws, including a redline showing changes made and a description of material changes, along with an invitation to stockholders to communicate with the Board regarding governance matters, were filed with the SEC as Exhibits 3.1 and 3.2 in a Current Report on Form 8-K on November 5, 2018 (the “November 2018 Form 8-K”). Descriptions of the terms of the Revised Bylaws included in this Current Report on Form 8-K are qualified in their entirety by reference to the Revised Bylaws as attached as Exhibit 3.1 to the November 2018 Form 8-K, which are incorporated by reference herein.

The Revised Bylaws were approved by the unanimous vote of the Board based on the unanimous recommendation of the GNC.

Factors Considered by the Board in Approving the Revised Bylaws

The GNC and the Board considered a number of factors in determining to approve the Revised Bylaws, including the 20% Special Meeting Threshold, the Holding Period Requirement and the Procedural Rules, which included, without limitation:

provision for stockholders to call a special meeting (2 of 14 issuers). Other levels were 20% (1 issuer), 25% (3 issuers), 40% (1 issuer), 50% (1 issuer), 50.1% (2 issuers) and 51% (1 issuer). Accordingly, within this population of issuers, the 20% Special Meeting Threshold appeared reasonable.

Stockholder Communication and Engagement

The Board and GNC considered how best to engage with stockholders relative to the changes made in the Revised Bylaws. In view of:

it was determined that it would be most efficient, and fair to all stockholders, to adopt and publicly file the Revised Bylaws and then communicate with stockholders relative to any resulting questions or concerns based on a publicly available document.

The Board views the questions raised by certain of its stockholders and by the proxy advisors in connection with the 2019 Annual Meeting, and this response, as part of that process of engagement. The Board was, and remains, open to respond to constructive questions and recommendations by stockholders for further changes to the Revised Bylaws.

The Company engages in a continuous program of communication and engagement with stockholders throughout the year. After the Revised Bylaws became effective in November 2018, through the time of distribution of the Company’s 2019 Proxy Statement on March 7, 2019, the Company’s CEO and CFO met with more than 90 investors, representing more than 40% of outstanding shares of common stock, including 5 of the 10 largest stockholders. During that time only one stockholder, owning significantly less than 1% of the outstanding shares, objected to the 20% Special Meeting Threshold and Holding Period Requirement. This response was perceived as confirming the Board’s belief that the Revised Bylaws were reasonable and in line with expectations of stockholders and the market generally. The Company did not undertake active engagement with the proxy advisory firms.

The Company learned of “withhold” vote recommendations by proxy advisory firms as described above after filing the 2019 Proxy Statement with the SEC. Over the following weeks the Revised

Bylaws were discussed with a few of the Company’s larger stockholders, with the chairman of the Board participating in one call at the stockholder’s request. Given the limited amount of time prior to the 2019 Annual Meeting and the Board’s commitment to continuing communication with stockholders and thoughtful deliberation regarding the issues that had been raised, the Company did not undertake to communicate the information presented in this Current Report on Form 8-K to the proxy advisory firms or stockholders at that time, or solicit stockholders providing “withhold” votes for Ms. Ragusa to change their votes.

Responding to Ms. Ragusa’s Conditional Resignation

The GNC and the Board believe:

are fully responsive to the issues regarding the Revised Bylaws raised by the proxy advisory firms, the stockholders that cast “withhold” votes in accordance with proxy advisor recommendations and other stockholders casting “withhold” votes to their own evaluation of the issues.

Based upon the foregoing conclusions and the value of Ms. Ragusa’s past and future contributions to the Board, including her continuing commitment to assuring that the Company maintains high governance standards, the Board determined it would not be in the interest of the Company and its stockholders to accept her tendered resignation.

Further Stockholder Communication and Engagement Encouraged

The Board encourages stockholders wishing to communicate with the Board regarding the issues discussed in this Current Report on Form 8-K or any other governance matters to communicate with the Board by sending an e-mail to bod@texascapitalbank.com or by sending a letter to the Board of Directors, c/o Corporate Secretary, 2000 McKinney Avenue, 7^th Floor, Dallas, Texas 75201.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

The Board on July 8, 2019 unanimously approved an amendment of the Company\’s Revised Bylaws to delete the requirement set forth in Section 2.3(c) d. that stockholders seeking to call a special meeting of stockholders must have held their qualifying shares for at least one year. Effective as of that date Section 2.3(c) d. of the Revised Bylaws was amended to read in its entirety as set forth on Exhibit 3.1, which is incorporated herein by reference. The action was taken in connection with the processes, and based on the considerations, described above in Item 5.02.

Item 9.01. Financial Statements and Exhibits.

TEXAS CAPITAL BANCSHARES INC/TX Exhibit
EX-3.1 2 exhibit31amendmenttoamende.htm EXHIBIT 3.1 Exhibit Exhibit 3.1Amendment to Amended and Restated Bylaws of Texas Capital Bancshares,…
To view the full exhibit click here