HomeStreet, Inc.
Extract: Charter Amendment (Plain English Desc) from a DEFC14A on 05/16/2019   Download
SEC Document
SEC Filing

PROPOSAL 5

APPROVAL OF AN AMENDMENT TO THE ARTICLES OF INCORPORATION TO DECLASSIFY

THE BOARD OF DIRECTORS

Overview

The Board, with the assistance of the HRGC Committee, regularly reviews our corporate governance practices and engages with our shareholders to ensure that such practices, including the procedure for electing directors, remain in the best interests of the Company and our shareholders. Following discussions with our shareholders over the past year, the Board again reviewed the pros and cons of declassification. Our classified board structure can help protect shareholders from abusive takeover tactics and provide the Board with more time to solicit higher bids in a hostile takeover situation because it is more difficult to change a majority of directors on the Board in a single year. However, it does not prevent unsolicited takeover proposals or the consummation of such transactions. While the Board continues to believe that there are important benefits to a classified board structure, including these anti-takeover protections, it recognizes the potential advantages of declassification, including the ability of shareholders to evaluate directors annually. The Board also recognizes the growing sentiment among shareholders and the investment community in favor of annual elections. After carefully weighing these and other factors (including that the number of companies with classified boards continues to decline), the Board has determined that is it is in the best interests of the Company and our shareholders to propose an amendment to the Articles of Incorporation to declassify the Board of Directors and provide for the annual election of directors and to recommend that shareholder vote “FOR” such proposal.

Text and Legal Effect of Proposed Amendment

If Proposal 5 is approved, Article 3.3 of the Articles of Incorporation will be amended to provide that the current classified board structure will be phased out over a three-year period beginning at the 2020 annual meeting of shareholders (the “2020 Annual Meeting”). Directors elected to three-year terms prior to the effectiveness of the proposed amendment (including the Class II directors elected at this Annual Meeting) will complete those terms. Beginning with the 2020 Annual Meeting, directors will stand for election on an annual basis for one-year terms. Beginning with the 2022 annual meeting annual meeting of shareholders, all directors will stand for election annually and the Board will no longer be classified.

The proposed text of amended Article 3.3 of the Articles of Incorporation, which will replace the current text of Article 3.3 of the Articles of Incorporation in its entirety, is as follows:

ARTICLE 3. DIRECTORS

3.3. DIRECTOR TERMS.    Until the 2022 annual meeting of shareholders, the total number of directors shall be divided into three groups, with each group containing one-third of the total, as near as may be. The term of the directors in the group elected at the 2017 annual meeting of shareholders shall expire at the 2020 annual meeting of shareholders, the term of the directors in the group elected at the 2018 annual meeting of shareholders shall expire at the 2021 annual meeting of shareholders, and the term of the directors in the group elected at the 2019 annual meeting of shareholders shall expire at the 2022 annual meeting of shareholders, or, in each case, upon such director’s earlier death, resignation or removal. At each succeeding annual meeting of shareholders beginning with the 2020 annual meeting of shareholders, directors standing for election shall be elected annually for one-year terms expiring at the next succeeding annual meeting of shareholders and until his or her respective successor has been duly elected and qualified.

Vote Required and Board Recommendation

The proposal to approve an amendment to the Articles of Incorporation to declassify the Board of Directors and provide for the annual election of directors requires the affirmative vote of at least two-thirds of the outstanding shares of the Company is required to approve this Proposal 6. If this Proposal 6 is approved by the requisite shareholder vote, then the proposed amendment to Article 3.3 of the Articles of Incorporation will be adopted.

THE BOARD UNANIMOUSLY RECOMMENDS VOTING “FOR” THE APPROVAL OF AN
AMENDMENT TO THE ARTICLES OF INCORPORATION TO DECLASSIFY THE BOARD OF DIRECTORS ON THE WHITE PROXY CARD.

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Proposal 6
APPROVAL OF AN AMENDMENT TO THE ARTICLES OF INCORPORATION TO ELIMINATE
THE SUPERMAJORITY SHAREHOLDER VOTE REQUIREMENT TO APPROVE
MAJOR CORPORATE CHANGES

Overview

Our Board is committed to best-in-class corporate governance and regularly considers and implements governance improvements. As part of this effort, our Board has determined that the elimination of all supermajority shareholder vote requirements from our Articles of Incorporation is in the best interests of the Company and its shareholders, and that proposals to this effect should be put forth at the Annual Meeting.

In making this determination, our Board has carefully considered the advantages and disadvantages of supermajority shareholder vote provisions. Supermajority shareholder vote requirements are intended to facilitate corporate governance stability by requiring broad shareholder consensus to effect certain changes and provide increased anti-takeover protections by requiring the vote of a greater number of shareholders to approve certain corporate actions. However, evolving corporate governance practices have come to view supermajority shareholder vote provisions as conflicting with principles of good corporate governance and that the elimination of supermajority shareholder vote provisions in a company’s constituent documents increases a board’s accountability to shareholders and provides shareholders with greater ability to participate in the corporate governance of a company.

The Board has determined that the appropriate voting standard to replace all supermajority shareholder vote requirements is the affirmative vote of a majority of the outstanding shares of the Company, which is the lowest approval standard permitted by the Washington Business Corporation Act. Our Board believes that adopting this standard in place of the supermajority shareholder vote standard balances the opportunity for shareholders to participate meaningfully in the corporate governance of the Company with the desire to protect the interests of all shareholders from action that may only be in the interest of a small percentage of shareholders.

Accordingly, the Board has unanimously adopted and is submitting for shareholder approval an amendment to our Articles of Incorporation that would eliminate the supermajority vote requirements described below. Elimination of all supermajority shareholder vote requirements must be considered in a single proposal, as the language of the current Articles of Incorporation makes it is impossible to amend each requirement individually without also presenting conflicting amendments as to the other requirements.

Current Shareholder Vote Requirement

Article 5 of the Articles of Incorporation provides that, if a vote of shareholders is required to authorize (1) adoption of a plan of merger or plan of share exchange, (2) the sale, lease, exchange, or other disposition of all or substantially all of the property of the Company, other than in the usual and regular course of business or (3) the dissolution of the Company (each referred to herein as an “extraordinary transaction”), then such matter must be approved by the affirmative vote of two-thirds of the outstanding shares of the Company.

Text and Legal Effect of Proposed Amendment

If Proposal 6 is approved, Article 5 of the Articles of Incorporation will be amended to reduce the shareholder vote requirement to authorize an extraordinary transaction to the affirmative vote of a majority of all the votes entitled to be cast on the proposed matter and of each other voting group entitled to vote separately on the proposed matter, which is the lowest approval standard permitted by the Washington Business Corporation Act.

The text of the proposed amended Article 5 of the Articles of Incorporation marked to show all changes proposed under this Proposal 6 against the current text of Article 5 of the Articles of Incorporation, with deletions indicated by strikeout and additions indicated by underline, is as follows:

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ARTICLE 5. MAJOR CORPORATE CHANGES

If a vote of the shareholders is required to authorize any of the following matters, such matter must be approved by the affirmative vote of two-thirds of the outstanding shares of the corporation a majority of all the votes of the corporation entitled to be cast on the proposed matter and of each other voting group of the corporation entitled to vote separately on the proposed matter:

(a)     Amendment of the Articles of Incorporation.

(b)    Adoption of a plan of merger or plan of share exchange.

(c)     The sale, lease, exchange, or other disposition of all or substantially all of the property of the corporation, other than in the usual and regular course of business.

(d)    Dissolution of the Corporation.

Vote Required and Board Recommendation

The proposal to approve an amendment to the Articles of Incorporation to eliminate the supermajority shareholder vote requirement for approval of major corporate changes requires the affirmative vote of at least two-thirds of the outstanding shares of the Company is required to approve this Proposal 5. If this Proposal 5 is approved by the requisite shareholder vote, then the proposed amendment to Article 3.3 of the Articles of Incorporation will be adopted.