Tuesday, January 15, 2008

CNET's bylaws

Enough background. We've cracked open the coconut and can drink the milk of the dispute between CNET and the activist investor leading the proxy fight, JANA Partners.

CNET's bylaws provide as follows:

"Any stockholder of the Corporation that has been the beneficial owner of at least $1,000 of securities entitled to vote at such meeting for at least one year may submit a director nomination to the Board of Directors or, if designated by the Board of Directors, a Nominating Committee."

As you can see, that concerns nominees specifically, not resolutions such as JANA's effort to expand the size of the board.

Another bylaw discusses resolutions:

Any stockholder of the corporation that has been a beneficial ownerof at least $1,000 of securities entitled to vote at an annual meeting for at least one year may seek to transact other corporate business at the annual meeting, provided that such business is set forth in a written notice and mailed by certified mail to the Secretary of the Corporation and received no later than 120 calendar days in advance of the date of the Corporation’s proxy statement released to security-holders in connection with the previous year’s annual meeting of security holders. … Notwithstanding the foregoing, such notice must also comply with any applicable federal securities laws establishing the circumstances under which the Corporation is required to include the proposal in its proxy statement or form of proxy.


JANA hasn't satisfied the one-year deadline, so (on CNET's reading of these rules) it isn't entitled to propose resolutions or board nominees.

JANA wants the courts either to declare the one-year period invalid or to reinterpret it out of existence. As to the two nominees, it has a good case here. Delaware courts have been vigilant about allowing shareholders a fair shot at getting nominees on the ballot, and are likely to see this holding period as excessive.

As to proposing resolutions, JANA's case seems weaker.

Steven Davidoff explains this all quite well and gives the pertinent links. I'll indulge my own lazy tendencies this morning and simply link to him.

Davidoff is here.

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