PROPOSAL 5 - AMENDMENT TO THE COMPANY’S CHARTER TO ENABLE SHAREHOLDERS TO CALL SPECIAL MEETINGS
To Approve a Proposed Amendment to the Company’s Charter to Enable Shareholders Who Beneficially Own at Least 15% of the Company’s Outstanding Common Stock to Call Special Meetings
✓ The Board of Directors recommends that shareholders vote FOR the amendment to the Company’s Charter to enable shareholders who beneficially own at least 15% of the Company’s outstanding common stock to call special meetings.
In accordance with the Director Nomination Agreement, the Company is asking shareholders to approve an amendment (the “Special Meeting Charter Amendment”) to the Company’s Charter to permit shareholders of record who beneficially own, in the aggregate, at least 15% of the Company’s outstanding common stock to call a special meeting of shareholders. The description in this proxy statement of the proposed Special Meeting Charter Amendment is qualified in its entirety by reference to, and should be read in conjunction with, the full text of the proposed Special Meeting Charter Amendment, which is attached to this proxy statement as Annex A.
The ability of shareholders to call special meetings is increasingly considered an important aspect of good corporate governance. While the Board recognizes that providing a shareholder right to call special meetings is consistent with corporate governance best practices, the Board also believes that special meetings of shareholders should be extraordinary events that are held only when strategic concerns or other similar considerations require that the matters to be addressed not be delayed until the next annual meeting. Moreover, because special meetings are expensive and time-consuming for the Company and potentially disruptive to its normal business operations, the Board believes that a small percentage of shareholders should not be entitled to utilize the right to call a special meeting for their own interests, which may not be shared by the majority of the Company’s shareholders. The Board will continue to have the ability to call special meetings of the shareholders in other instances when they determine is appropriate.
In light of these considerations, the Board believes that establishing an ownership threshold of at least 15% for shareholders to call a special meeting achieves a reasonable balance between enhancing shareholder rights and adequately protecting the long-term interests of the Company and its shareholders. The Board believes that an ownership threshold of at least 15% is appropriate based on the Company’s current size and shareholder composition, as it would provide the Company’s shareholders with a meaningful right to request a special meeting, while mitigating the risk that corporate resources are wasted to serve the narrow self-interests of a few minority shareholders.
The Board has approved amendments to the by-laws to permit shareholders of record who hold, in the aggregate, at least 15% of the Company’s outstanding common stock to call a special meeting of shareholders. A complete copy of the amendment to the by-laws of the Company is filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 1, 2019 and is incorporated herein by reference.
The Board has determined that the Special Meeting Charter Amendment is advisable and in the best interests of the Company and its shareholders and has directed that it be submitted to the Company’s shareholders for approval. An affirmative vote of the holders of at least two-thirds of the outstanding shares of the Company’s common stock entitled to vote at the 2019 annual meeting is required to adopt the Special Meeting Charter Amendment. If approved, the Special Meeting Charter Amendment would become effective upon the filing of the Special Meeting Charter Amendment with the Secretary of State of the State of Delaware. The Board currently plans to file the Special Meeting Charter Amendment as soon as reasonably practicable after receiving approval from the Company’s shareholders.