Whole Foods Market (WFM) has informed me, without any attempt to negotiate terms over my submitted proposal, their board went ahead in adopting proxy access bylaws. See 8-K and amended bylaws. They have asked if I now want to withdraw my proposal. As I did for H&R Block, below I attempt to weigh the pros and cons of withdrawing my proposal.
Whole Foods Market’s Newly Adopted Proxy Access Bylaw
From the Whole Foods Market 8-K
…Section 15 has been added to the Bylaws, and related amendments were made in Sections 12, 13 and 14 of Article II, to permit an eligible shareholder, or an eligible group of up to 20 shareholders, owning 3% or more of the Company’s outstanding common stock continuously for at least three years to nominate and include in the Company’s proxy materials directors constituting up to 20% of the Board, if such nominating shareholders and nominees satisfy applicable bylaw requirements.
Read Highlights From the Whole Foods Market Amended Bylaws below.
Analysis of Whole Foods Market’s Proxy Access Bylaws
The most significant differences between their adopted bylaws and my proposal appear to be their nominations limit of 20% of the board, compared to my 25%, and allowing no more than 20 shareholders to combine into a nominating group, compared to my proposal with no such limit, although I haven’t fully reviewed their bylaws for other changes.
Like H&R Block, Whole Foods Market asserts in their draft opposition statement that recent changes in the Company’s corporate governance policies “have shown they are responsive to shareholder input.” I read that with a dose of caution, given the history of gamesmanship at Whole Foods Market.
I attended the Society of Corporate Secretaries and Governance Professionals’ 2015 National Conference recently in Chicago and found little sympathy, even in that management oriented group, for what many considered to be an attempt by Whole Foods Market to ‘game’ the system with its initial sham proposal on proxy access that no shareholder could ever meet. That antic led to my appeal of the SEC no-action letter and the suspension of SEC opinions for the season on Rule 14a-8(i)(9). Research further at SEC No-Action Letter Weekly.
Prior interactions with Whole Foods Market have made me cautious when considering their sincerity… like when their CEO carried on an extensive series of conversations with me on Yahoo! message boards pretending to be someone else after refusing to allow a proposal of mine to be presented at the annual meeting until after the vote. The latest is an overcharging scandal (LATimes)(CNN). You would think that the company that brought organics to mainstream America would also have the highest ethics but their reputation seems continually tarnished, so caution is advised.
Regarding the lower cap of 20% of available board seats, the draft Whole Foods Market opposition statement says the Board of Directors believes that number “strikes an appropriate balance between the benefits of proxy access versus the potential disruption that could be created by regular proxy contests and ongoing or excessive board turnover. The Board of Directors concluded that subjecting 25% of the board seats to proxy access was an inordinately high fraction.”
They don’t really explain why that 5% is critical. The Whole Foods Market board currently has eleven members. At 20%, that would be 2 directors. At 25% it would still be 2 directors, since their bylaws require rounding down to the nearest whole number.
The maximum number of Shareholder Nominees nominated by all Eligible Shareholders that will be required to be included in the Corporation’s proxy materials with respect to an annual meeting of shareholders shall not exceed the greater of (i) one and (ii) the Specified Percentage of the number of directors in office as of the last day on which a Notice of Proxy Access Nomination may be delivered pursuant to and in accordance with this Article II, Section 15 (the “Final Proxy Access Nomination Date”), rounded down to the closest whole number below the Specified Percentage if such amount is not a whole number…
I was initially thinking that was different than Rule 14a-11. However, I see at the bottom of page 420
Instruction to paragraph (d)(1). Depending on board size, 25% of the board may not result in a whole number. In those instances, the registrant will round down to the closest whole number below 25% to determine the maximum number of shareholder nominees for director that the registrant is required to include in its proxy statement and form of proxy.
Since shareholders would be limited to nominating two directors under either percent, why the change to the Rule 14a-11 standard? Perhaps they are thinking of adding a board member. That would bring possible proxy access candidates up to three.
Shareholder proposal are limited to 500 words, so many of the terms of implementation are expected to be negotiated, especially those that deviate from the overturned SEC Rule 14a-11. Bylaw amendments face no quantity limitations. For example, the rule denied access to any shareholder that has a direct or indirect agreement with the company regarding his or her nomination. I don’t see that covered in the amendments Whole Foods Market filed. Is Whole Foods Market planning to game proxy access candidates? I hope not.
What about how to demonstrate ownership? Section 15(d)(vi) appears to leave the determination of whether or not shareholders ‘own’ stock, for purposes of invoking proxy access, to the sole discretion of the board, not a broker, bank or other third party. Given my past experience with Whole Foods Market, I’m reluctant to endorse giving such authority to directors, which have a vested interest in keeping potential proxy access candidates off the ballot.
What actually constitutes a member of a nominating group? I see from their bylaws:
Two or more funds that are part of the same family of funds under common management and investment control (a “Qualifying Fund Family”) shall be treated as one shareholder for the purpose of determining the aggregate number of shareholders in this Article II, Section 15(e).
Is BlackRock one member or do each of its mutual funds, which appear to control their investments on some level, count as separate members of a group limited to twenty in number? What about other fund families that cede even more authority to component funds?
Their draft opposition statement relies mainly on platitudes, not a direct point by point comparison of their bylaws with the overturned SEC Rule 14a-11. I used to draft laws and amendments in California. The lobbyists I worked with always wanted to make them as complex as possible. That would increase the likelihood they would be hired by anyone needing to interpret them. The Whole Foods Market bylaws have that same degree and feel of unnecessary complexity.
One provision in the bylaws that I didn’t see in Rule 14a-11 is that if a proxy access candidate fails to get at least 25% of the vote they will be banned from candidacy for the next two years. That seems a high threshold.
The second major difference in their bylaws is the idea of imposing a limit on the number of group participants in making nominations to 20. This provision disenfranchises smaller shareholders. Rule 14a-11 was developed over many years of public debate and dialogue, including two prior rulemaking attempts. That process settled on the concept of ‘voting power,’ not the number of participants in a group. I would rather stick with the wisdom of that process, which involved vetting thousands of comments from issuers and shareholders.
When the SEC proposed Rule 14a-11 they did so with a sliding scale of the percent of ownership required from 1% to 3%. I and many others supported lower thresholds than the 3% finally settled on. In its final release, the SEC stated:
Of course, to the extent that shareholders believe the 3% threshold is too high our amendments to Rule 14a-8 will facilitate their ability to adopt a lower ownership percentage. (Rule 14a-11, page 91)
Unlimited participants forming a 3% group was meant to be a backstop, not a starting place. Although some appear to think 20 participants is enough (and I was willing to make that compromise earlier this year with Citigroup and others), I have my doubts. For example CalSTRS, which showed an unusual activist streak in teaming to split Timken, owns 0.19% of Whole Foods Market. Twenty funds their size would have enough to invoke proxy access. The trouble is, CalSTRS is America’s second largest public pension fund. There aren’t nineteen other similar sized funds that might reasonably be expected to join them in most circumstances. And a limit of twenty certainly cuts out any meaningful role by retail shareholders.
Yes, I understand trying to coordinate a lot of shareholders would be difficult but that’s a problem for nominating shareholders, not Whole Foods Market… other than slightly increasing the likelihood of proxy access being invoked. According to their draft opposition statement:
Aggregating the ownership of an unlimited number of shareholders could be very easy to do considering the wide availability of social media. This aggregation in practice could allow for small, vocal groups to pursue their own agenda via the boardroom at the expense of our other shareholders. The Board of Directors believes that the form of proxy access it adopted would provide a board representation mechanism that would filter out shareholders seeking short-sighted change, thereby better protecting all shareholders.
I’m a frequent user of social media but I certainly don’t see a ‘very easy’ way to aggregate enough shareholders to meet the $425M threshold to enable a nominating proxy access candidates. MoxyVote and Sharegate never came close. However, I would say that if anyone can get agreement from dozens or hundreds of shareholders to put in the effort necessary to evidence ownership, agree upon and nominate candidates, the issues would have to be very compelling. I remind readers, even after such a herculean effort, any such a group would still need to get elected. That wouldn’t be possible without the support of mainstream funds like Vanguard, SSgA, BlackRock and Goldman Sachs. While such funds aren’t likely to initiate proxy access, their votes would likely decide success or failure.
Moving Forward at Whole Foods Market
For the reasons stated above, my inclination is to press forward with the proposal as submitted. However, as always, I would welcome comments and suggestions from readers on this issue. Is there anything to be gained by withdrawing the proposal? What am I missing? Please advise.
Highlights From the Whole Foods Market Amended Bylaws
Section 15. Proxy Access for Director Nominations.
(a) With respect to the election of directors at an annual meeting of the shareholders, subject to the provisions of this Article II, Section 15, the Corporation shall include in its proxy statement for such annual meeting, in addition to any persons nominated for election by the Board of Directors or any committee thereof, the name, together with the Required Information, of any person or persons, as applicable, nominated for election (the “Shareholder Nominee(s)”) to the Board of Directors by an individual eligible shareholder or group of up to twenty eligible shareholders that satisfy the requirements of this Article II, Section 15 (such eligible person or eligible group, the “Eligible Shareholder”), and who expressly elects at the time of providing the notice required by this Article II, Section 15 (the “Notice of Proxy Access Nomination”) to have its nominee or nominees, as applicable, included in the Corporation’s proxy materials pursuant to this Article II, Section 15.
(b) To be timely for purposes of this Article II, Section 15, the Notice of Proxy Access Nomination must be addressed to the Secretary and delivered to or mailed to and received at the principal executive offices of the Corporation not more than one hundred fifty (150) calendar days and not less than one hundred twenty (120) calendar days prior to the anniversary date of the date (as specified in the Corporation’s proxy materials for its immediately preceding annual meeting of shareholders) on which the Corporation first mailed its proxy materials for its immediately preceding annual meeting of shareholders; provided, however, that in the event the annual meeting is called for a date that is not within thirty (30) calendar days of the anniversary date of the date on which the immediately preceding annual meeting of shareholders was called, to be timely, notice by the shareholder must be so received not later than the close of business on the tenth (10th) calendar day following the day on which public announcement of the date of the annual meeting is first made; provided, further, that with respect to the 2016 Annual Meeting of Shareholders, so long as such annual meeting is called for a date that is within thirty (30) calendar days of February 24, 2016, the anniversary date of the date on which the 2014 Annual Meeting of Shareholders was held, to be timely, notice by the shareholder must be so delivered to or mailed to and received not more than one hundred fifty (150) calendar days and not less than one hundred twenty (120) calendar days prior to January 10, 2016, the anniversary date of the date (as specified in the Corporation’s proxy materials for the 2014 Annual Meeting of Shareholders) on which the Corporation first mailed its proxy materials for the 2014 Annual Meeting of Shareholders. In no event will an adjournment or postponement of an annual meeting of shareholders or the announcement thereof commence a new time period for the giving of a Notice of Proxy Access Nomination as provided above.
(c) The maximum number of Shareholder Nominees nominated by all Eligible Shareholders that will be required to be included in the Corporation’s proxy materials with respect to an annual meeting of shareholders shall not exceed the greater of (i) one and (ii) the Specified Percentage of the number of directors in office as of the last day on which a Notice of Proxy Access Nomination may be delivered pursuant to and in accordance with this Article II, Section 15 (the “Final Proxy Access Nomination Date”), rounded down to the closest whole number below the Specified Percentage if such amount is not a whole number; provided, however, that the maximum number of Shareholder Nominees shall be reduced, but not below zero, by (1) the number of director candidates for which the Corporation shall have received one or more valid shareholder notices pursuant to Article II, Section 12 of these Bylaws, (2) the number of directors in office or director candidates that in either case will be included in the Corporation’s proxy materials with respect to such an annual meeting as an unopposed (by the Corporation) nominee pursuant to an agreement, arrangement or other understanding with a shareholder or group of shareholders (other than any such agreement, arrangement or understanding entered into in connection with an acquisition of capital stock, by such shareholder or group of shareholders, from the Corporation) and (3) the number of directors in office that will be included in the Corporation’s proxy materials with respect to such annual meeting for whom access to the Corporation’s proxy materials was previously provided pursuant to this Article II, Section 15, other than any such director referred to in this clause (2) or this clause (3) who at the time of such annual meeting will have served as a director continuously as a nominee of the Board for at least three annual terms. In the event that one or more vacancies for any reason occurs on the board after the Final Proxy Access Nomination Date but before the date of the annual meeting and the Board of Directors resolves to reduce the size of the board in connection therewith, the maximum number of Shareholder Nominees included in the Corporation’s proxy materials shall be calculated based on the number of directors in office as so reduced. Any individual nominated by an Eligible Shareholder for inclusion in the Corporation’s proxy materials pursuant to this Article II, Section 15 whom the Board of Directors decides to nominate as a nominee for Director shall be counted as one of the Shareholder Nominees for purposes of determining when the maximum number of Shareholder Nominees provided for in this Article II, Section 15 has been reached. Any Eligible Shareholder submitting more than one Shareholder Nominee for inclusion in the Corporation’s proxy materials pursuant to this Article II, Section 15 shall rank such Shareholder Nominees based on the order that the Eligible Shareholder desires such Shareholder Nominees to be selected for inclusion in the Corporation’s proxy statement in the event that the total number of Shareholder Nominees submitted by Eligible Shareholders pursuant to this Article II, Section 15 exceeds the maximum number of nominees provided for in this Article II, Section 15. In the event that the number of Shareholder Nominees submitted by Eligible Shareholders pursuant to this Article II, Section 15 exceeds the maximum number of nominees provided for in this Article II, Section 15, the highest ranking Shareholder Nominee who meets the requirements of this Article II, Section 15 from each Eligible Shareholder will be selected for inclusion in the Corporation’s proxy materials until the maximum number is reached, going in order of the amount (largest to smallest) of shares of common stock of the Corporation each Eligible Shareholder disclosed as owned in its respective Notice of Proxy Access Nomination submitted to the Corporation. If the maximum number is not reached after the highest ranking Shareholder Nominee who meets the requirements of this Article II, Section 15 from each Eligible Shareholder has been selected, this process will continue as many times as necessary, following the same order each time, until the maximum number is reached. Notwithstanding anything to the contrary contained in this Article II, Section 15, if the Corporation receives notice pursuant to Article II, Section 12(a) of these Bylaws that a shareholder intends to nominate for election at such meeting a number of nominees greater than or equal to a majority of the total number of directors to be elected at such meeting, no Shareholder Nominees will be included in the Corporation’s proxy materials with respect to such meeting pursuant to this Article II, Section 15.
(d) For purposes of this Article II, Section 15:
(i) the term “affiliate” or “affiliates” shall have the meaning ascribed thereto under the General Rules and Regulations under Exchange Act;
(ii) the “Minimum Holding Period” is three (3) years;
(iii) the “Required Information” that the Corporation will include in its proxy statement is the information provided to the Secretary concerning the Shareholder Nominee(s) and the Eligible Shareholder that is required to be disclosed in the Corporation’s proxy statement by Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder, and, if the Eligible Shareholder so elects, a written statement, not to exceed 500 words, in support of the Shareholder Nominee(s)’ candidacy (the “Statement”). Notwithstanding anything to the contrary contained in this Article II, Section 15, the Corporation may omit from its proxy materials any information or Statement (or portion thereof) that it, in good faith, believes would violate any applicable law or regulation;
(iv) the “Required Ownership Percentage” is 3% or more;
(v) the “Specified Percentage” is 20%;
(vi) an Eligible Shareholder shall be deemed to “own” only those outstanding shares of common stock of the Corporation as to which the shareholder possesses both (i) the full voting and investment rights pertaining to the shares and (ii) the full economic interest in (including the opportunity for profit from and risk of loss on) such shares; provided, that the number of shares calculated in accordance with clauses (i) and (ii) shall not include any shares (x) sold by such shareholder or any of its affiliates in any transaction that has not been settled or closed, (y) borrowed by such shareholder or any of its affiliates for any purposes or purchased by such shareholder or any of its affiliates pursuant to an agreement to resell or (z) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar agreement entered into by such shareholder or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of shares of outstanding common stock of the Corporation, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of (1) reducing in any manner, to any extent or at any time in the future, such shareholder’s or its affiliates’ full right to vote or direct the voting of any such shares, and/or (2) hedging, offsetting or altering to any degree any gain or loss realized or realizable from maintaining the full economic ownership of such shares by such shareholder or affiliate. For purposes of this Article II, Section 15, a shareholder shall “own” shares held in the name of its bank, broker or other nominee or intermediary so long as the shareholder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares through the annual meeting date. A shareholder’s ownership of shares shall be deemed to continue during any period in which the shareholder has delegated any voting power by means of a proxy, power of attorney or other instrument or arrangement which is revocable at any time by the shareholder. A shareholder’s ownership of shares shall be deemed to continue during any period in which the person has loaned such shares, provided that the person has the power to recall such loaned shares on three (3) business days’ notice and has in fact recalled such loaned shares as of the time the Notice of Proxy Access Nomination is submitted to the Corporation and through the annual meeting date. The terms “owned,” “owning” and other variations of the word “own” shall have correlative meanings. Whether outstanding shares of the common stock of the Corporation are “owned” for these purposes shall be determined by the Board of Directors or any committee thereof, which determination shall be conclusive and binding on the Corporation and its shareholders.
(e) In order to make a nomination pursuant to this Article II, Section 15, an Eligible Shareholder must have owned the Required Ownership Percentage of the Corporation’s outstanding common stock (the “Required Shares”) continuously for the Minimum Holding Period as of both the date the Notice of Proxy Access Nomination is delivered to or mailed to and received by the Secretary in accordance with this Article II, Section 15 and the record date for determining the shareholders entitled to vote at the annual meeting and must continue to own the Required Shares through the annual meeting date. An Eligible Shareholder shall certify in its Notice of Proxy Access Nomination the number of eligible shares of the Corporation’s outstanding common stock it asserts it is deemed to own for the purposes of this Article II, Section 15.The aggregate number of shareholders whose collective stock ownership may be counted for the purpose of satisfying the Required Ownership Percentage shall not exceed twenty and no shareholder may be a member of more than one group under this Article II, Section 15. Two or more funds that are part of the same family of funds under common management and investment control (a “Qualifying Fund Family”) shall be treated as one shareholder for the purpose of determining the aggregate number of shareholders in this Article II, Section 15(e). No later than the end of the time period specified in this Article II, Section 15 for delivering the Notice of Proxy Access Nomination, a Qualifying Fund Family whose stock ownership is counted for purposes of qualifying as an Eligible Shareholder must provide to the Secretary of the Corporation documentation reasonably satisfactory to the Board of Directors, or any committee thereof, that demonstrates that the funds comprising the Qualifying Fund Family satisfy the definition thereof. Within the time period specified in this Article II, Section 15 for delivering the Notice of Proxy Access Nomination, an Eligible Shareholder (including each shareholder and fund compromising a Qualifying Fund Family) must provide the following information in writing to the Secretary: (i) one or more written statements from the record holder of the shares (and from each intermediary through which the shares are or have been held during the Minimum Holding Period) verifying that, as of a date within seven calendar days prior to the date the Notice of Proxy Access Nomination is delivered to or mailed to and received by the Secretary, the Eligible Shareholder owns, and has owned continuously for the Minimum Holding Period, the Required Shares, and the Eligible Shareholder’s agreement to provide, within five business days after the record date for the annual meeting, written statements from the record holder and intermediaries verifying the Eligible Shareholder’s continuous ownership of the Required Shares through the record date; (ii) a copy of the Schedule 14N that has been filed with the Securities and Exchange Commission as required by Rule 14a-18 under the Exchange Act; (iii) the information, representations and agreements that are the same as those that would be required to be set forth in a shareholder’s notice of nomination pursuant to Article II, Section 13(c) of these Bylaws; (iv) the consent of each Shareholder Nominee to being named in the Corporation’s proxy statement as a nominee and to serving as a Director if elected; (v) a representation that the Eligible Shareholder (A) acquired the Required Shares in the ordinary course of business and not with the intent to change or influence control at the corporation, and does not have any such intent, (B) will maintain qualifying ownership of the Required Shares through the date of the annual meeting, (C) has not engaged and will not engage in, and has not and will not be a “participant” in another person’s, “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a Director at the annual meeting other than its Shareholder Nominee(s) or a nominee of the Board of Directors, (D) will not distribute to any shareholder any form of proxy for the meeting other than the form distributed by the Corporation, (E) has not nominated and will not nominate for election any individual as a Director at the annual meeting other than its Shareholder Nominee(s), (F) agrees to comply with all applicable laws, rules and regulations with respect to any solicitation in connection with the meeting and will file with the SEC any solicitation or other communication with the Corporation’s shareholders relating to the meeting at which the Shareholder Nominee will be nominated, regardless of whether any such filing is required under Regulation 14A of the Exchange Act or an exemption from filing is available thereunder, and (G) will provide facts, statements and other information in all communications with the Corporation and its shareholders that are or will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; (vi) an undertaking that the Eligible Shareholder agrees to (A) assume all liability stemming from any legal or regulatory violation arising out of the Eligible Shareholder’s communications with the shareholders of the Corporation or out of the information that the Eligible Shareholder provided to the Corporation and (B) indemnify and hold harmless the Corporation and each of its directors, officers and employees individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the corporation or any of its directors, officers or employees arising out of any nomination submitted by the Eligible Shareholder pursuant to this Article II, Section 15; (vii) a representation as to the Eligible Shareholder’s intentions with respect to maintaining qualifying ownership of the Required Shares for at least one year following the annual meeting (which representation the Eligible Shareholder shall also include in its Statement, it being understood that the inclusion of such representation therein shall not count towards the Statement’s 500-word limit); and (viii) in the case of a nomination under this Article II, Section 15 by a group of shareholders, the designation by all group members of one group member that is authorized to act on behalf of all members of the nominating shareholder group with respect to the nomination and matters related thereto, including withdrawal of the nomination. For the avoidance of doubt, in the event that the Eligible Shareholder consists of a group of shareholders, the requirements and obligations applicable to an individual Eligible Shareholder that are set forth in these Bylaws, including the Minimum Holding Period, shall apply to each member of such group individually; provided, however, that the Required Ownership Percentage shall apply to the continuous ownership of the eligible group in the aggregate.
(f) Within the time period specified in this Article II, Section 15 for delivering the Notice of Proxy Access Nomination, each Shareholder Nominee must deliver to the Secretary the representations, agreements and other information required by Article II, Section 14 of these Bylaws.
(g) In the event that any information or communications provided by the Eligible Shareholder or any Shareholder Nominees to the Corporation or its shareholders ceases to be true and correct in all material respects or omits a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading, each Eligible Shareholder or Shareholder Nominee, as the case may be, shall promptly notify the Secretary of any defect in such previously provided information and of the information that is required to correct any such defect; it being understood that providing any such notification shall not be deemed to cure any such defect or limit the remedies (including without limitation under these Bylaws) available to the Corporation relating to any such defect.
(h) The Corporation shall not be required to include, pursuant to this Article II, Section 15, a Shareholder Nominee in its proxy materials for any meeting of shareholders (i) whose election as a member of the Board of Directors would cause the Corporation to be in violation of these Bylaws, the Articles of Incorporation, the rules and listing standards of the principal U.S. exchanges upon which the common stock of the Corporation is traded, or any applicable state or federal law, rule or regulation; (ii) for which the Secretary receives a notice that a shareholder has nominated such Shareholder Nominee for election to the Board of Directors pursuant to the advance notice requirements for shareholder nominees for director set forth in Article II, Section 12(a) of these Bylaws; (iii) who is not independent under the listing standards of each principal U.S. exchange upon which the common stock of the Corporation is listed, any applicable rules of the Securities and Exchange Commission and any publicly disclosed standards used by the Board of Directors in determining and disclosing independence of the Corporation’s directors, in each case as determined by the Board of Directors; (iv) if the Eligible Shareholder that has nominated such Shareholder Nominee or any such Shareholder Nominee has engaged in or is currently engaged in, or has been or is a “participant” in another person’s, “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a Director at the annual meeting other than the Eligible Shareholder’s Shareholder Nominee(s) or a nominee of the Board of Directors; (v) if the Shareholder Nominee is or becomes a party to any compensatory, payment or other financial agreement, arrangement or understanding with any person or entity other than the Corporation, or is receiving or will receive any such compensation or other payment from any person or entity other than the Corporation, in each case in connection with service as a Director of the Corporation; (vi) if the Shareholder Nominee is or becomes a party to any Voting Commitment; (vii) who is or has been, within the past three years, an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914; (vii) who is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses) or has been convicted in such a criminal proceeding within the past 10 years; (viii) who is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act of 1933, as amended; (ix) if such Shareholder Nominee or the applicable Eligible Shareholder shall have provided information to the Corporation in respect to such nomination that was untrue in any material respect or omitted to state a material fact necessary in order to make the statement made, in light of the circumstances under which they were made, not misleading, as determined by the Board of Directors or any committee thereof; or (x) the Eligible Shareholder or applicable Shareholder Nominee fails to comply with its obligations pursuant to these Bylaws, including this Article II, Section 15.
(i) Any Shareholder Nominee who is included in the Corporation’s proxy materials for a particular annual meeting of shareholders but either (i) does not receive at least 25% of the votes cast in favor of such Shareholder Nominee’s election, or (ii) becomes ineligible or unavailable for or withdraws from election at the annual meeting will be ineligible to be a Shareholder Nominee pursuant to this Article II, Section 15 for the next two annual meetings. Any Eligible Shareholder (including each shareholder or fund comprising a Qualifying Fund Family whose stock ownership is counted for the purposes of qualifying as an Eligible Shareholder) whose Shareholder Nominee is elected as a director at the annual meeting will not be eligible to nominate or participate in the nomination of a Shareholder Nominee for the following two annual meetings other than the nomination of such previously elected Shareholder Nominee in accordance with this Article II, Section 15. Notwithstanding anything to the contrary set forth herein, the Board of Directors or the presiding officer of the annual meeting of shareholders shall declare a nomination by an Eligible Shareholder to be invalid, and such nomination shall be disregarded notwithstanding that proxies in respect of such vote may have been received by the Corporation, if (i) the Shareholder Nominee(s) and/or the applicable Eligible Shareholder shall have breached its or their obligations under this Article II, Section 15, as determined by the Board of Directors or such presiding officer or (ii) the Eligible Shareholder (or a qualified representative thereof) does not appear at the meeting of shareholders to present any nomination pursuant to this Article II, Section 15. For purposes of this Article II, Section 15, (i) to be considered a qualified representative of the Eligible Shareholder, a person must be a duly authorized officer, manager or partner of such Eligible Shareholder or authorized by a writing executed by such Eligible Shareholder (or a reliable reproduction of the writing) delivered to the Corporation prior to the making of such nomination at such meeting by such Eligible Shareholder stating that such person is authorized to act for such Eligible Shareholder as proxy at the meeting of shareholder; (ii) in the event that a qualified representative of the Eligible Shareholder will appear at the annual meeting of shareholders to make a nomination, the Eligible Shareholder must provide notice of the designation, including the identity of the representative, to the Corporation at least forty-eight (48) hours prior to such meeting; and (iii) where a Eligible Shareholder fails to provide such notice of designation to the Corporation within the required timeframe, such Eligible Shareholder must appear in person to present his, her or its nomination at the annual meeting or such nomination shall be disregarded as provided for above.
(j) This Article II, Section 15 shall be the exclusive method for shareholders to include nominees for Director in the Corporation’s proxy materials. This Article II, Section 15 shall not prevent a shareholder from nominating a person to the Board of Directors pursuant to and in accordance with Article II, Section 12(a) of these Bylaws instead of pursuant to and in accordance with this Article II, Section 15. For the avoidance of doubt, the Corporation may in its sole discretion solicit against, and include in the proxy statement its own statements or other information relating to, any Eligible Shareholder and/or shareholder Director nominees for Director, including any information provided to the Corporation with respect to the foregoing.
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