References to Rule 14a-11 are beginning to show up in public filings. Set forth below are some examples. The examples show the multitude of ways in which Rule 14a-11 will impact corporate legal practice.
Disclosures in Proxy Statements
Dynegy includes the following 14a-11 disclosure in its preliminary proxy statement:
“Under Rule 14a-8 promulgated under the Exchange Act, eligible stockholders may present proper proposals for inclusion in the Company’s proxy statement and proxy, and for consideration at the next annual meeting of its stockholders, by submitting their proposals to the Company in a timely manner. To be so included for the next annual meeting, stockholder proposals must be received by the Company no later than December 6, 2010, and must otherwise comply with the requirements of Rule 14a-8. Under Rule 14a-11 promulgated under the Exchange Act, eligible stockholders and eligible groups of stockholders may be permitted to properly nominate a limited number of directors for inclusion in the Company’s proxy statement and proxy, and for consideration at the next annual meeting of its stockholders, by submitting their nominations to the SEC and to the Company in a timely manner. To be so included for the next annual meeting, a notice filing on Schedule 14N must be made with the SEC and notice must be given to the Company not later than December 6, 2010 nor earlier than November 6, 2010. In addition, our bylaws establish an advance notice procedure with regard to certain matters, including stockholder proposals not included in the Company’s proxy statement, to be brought before an annual meeting of stockholders. To be timely, a stockholder’s notice must be submitted in writing to the secretary of the Company not later than the close of business on February 20, 2011 nor earlier than the close of business on January 21, 2011, regardless of the public announcement of the adjournment of that meeting to a later date; provided, however, that if the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder, to be timely, must be submitted not earlier than the close of business on the 120th day before such annual meeting and not later than the close of business on the later of (i) the 90th day before such annual meeting or (ii) the 10th day following the day on which public announcement of the date of such meeting is first made.”
Universal Power included the following disclosure in its definitive proxy:
“On August 25, 2010, the SEC adopted new Exchange Act Rule 14a-11, which will permit shareholders or groups holding 3% of the voting power of U.S. public companies who have held their shares for at least three years to include director nominees in company proxy materials. In addition, the SEC also amended Rule 14a-8 to provide that companies may not exclude from their proxy materials shareholder proposals that seek to establish less restrictive proxy access procedures, and adopted a number of related rule amendments intended to facilitate proxy access. The new rules will be effective 60 days after their publication in the Federal Register, and Rule 14a-11 will apply for a company’s 2011 annual meeting if the first anniversary of the mailing of the 2010 proxy materials occurs within 120 days of effectiveness. However, the compliance date of Rule 14a-11 for smaller reporting companies has been delayed for a period of three years from the effective date.”
Definition of Election Contest
In change of control provisions in employment agreements and stock plans, issuers are using Rule 14a-11 to define what a threatened election contest is. Footnote 63 of the Rule 14a-11 adopting release states “”election contest” and “contested election” refer to any election of directors in which another party commences a solicitation in opposition subject to Exchange Act Rule 14a-12(c).” Cedar Shopping Centers’ S-3 discloses that it has a stock purchase agreement where the stock purchaser agrees not to become a participant in an “election contest” as defined in Rule 14a-11. As an additional example, Oracle’s new long-term incentive plan defines a change of control to include:
“[I]ndividuals who constitute the Board of Directors of the Company on the effective date of the Plan (the “Incumbent Board”) cease for any reason to constitute at least a majority thereof, provided that any Approved Director, as hereinafter defined, shall be, for purposes of this subsection (ii), considered as though such person were a member of the Incumbent Board. An “Approved Director”, for purposes of this subsection (ii), shall mean any person becoming a director subsequent to the effective date of the Plan whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee of the Company for director), but shall not include any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, corporation, partnership, group, associate or other entity or “person” other than the Board”.”
Articles and By-laws
Global Options Group’s preliminary proxy statement contains a disclosure which states that, according to its by-laws, any stockholder nominee for director must be accompanied by the information required in Rule 14a-11.
Sparton Corp. is proposing to amend its certificate of incorporation in certain respects. The new advance notice provision explicitly states that it is not applicable to Rule 14a-11 nominations.
A 13D filed with respect to United American Healthcare indicates the stockholder, in a standstill agreement, agreed not to “take any action pursuant to any “shareholder access” proposal that may be adopted by the SEC, whether in accordance with proposed Rule 14a-11 or otherwise.”
Use of New Schedule 14A
Some companies, such as Hemispherx, are using the new cover page to Schedule 14A which references Rule 14a-11 even though the new rules are not yet effective.
Check dodd-frank.com frequently for updates on the Dodd-Frank Act.