MAR » Topics » ITEM 3-MANAGEMENT PROPOSAL FOR APPROVAL OF AMENDMENTS TO THE CHARTER TO DECLASSIFY THE BOARD OF DIRECTORS AND ESTABLISH ANNUAL ELECTION OF ALL DIRECTORS

This excerpt taken from the MAR DEF 14A filed Mar 22, 2006.

ITEM 3—MANAGEMENT PROPOSAL FOR APPROVAL OF AMENDMENTS TO THE CHARTER TO DECLASSIFY THE BOARD OF DIRECTORS AND ESTABLISH ANNUAL ELECTION OF ALL DIRECTORS

 

The Company’s current classified board structure, in which directors are divided into three classes serving staggered three-year terms, has been in place since the Company’s shareholders approved it in 1998. In 2005 a shareholder proposal by Mrs. Evelyn Y. Davis requesting that the Board take the necessary steps to declassify the Board and establish annual election of all directors received 55.2% of the votes cast. In light of shareholder support for this proposal, the Company’s management recommended to the Board of Directors that the Board be declassified, with directors standing for election annually.

 

The Nominating and Corporate Governance Committee and the Board have considered the merits of annually elected and staggered boards, taking a variety of perspectives into account. The Board

 

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believes that its classified board has helped assure continuity and stability of the Company’s business strategies and policies and has reinforced a commitment to a long-term point of view rather than encouraging excessive focus on short-term goals. Although these are important benefits, the Board acknowledges our shareholders’ growing sentiment in favor of annual elections and believes that the Board would be equally effective in protecting shareholder interests under an annual election system. As a result, the Nominating and Corporate Governance Committee and the Board of Directors have considered the matter, adopted resolutions setting forth the proposed amendments to the Company’s Third Amended and Restated Certificate of Incorporation, declared such amendments advisable and unanimously resolved to submit such amendments to the Company’s shareholders for consideration.

 

In addition, the Company’s Bylaws provide for a classified board structure and state that the relevant Bylaw provisions may be amended only by the affirmative vote of the holders of at least 66 2/3% of the voting power of all the shares of the Company entitled to vote generally in the election of directors. Accordingly, the Nominating and Corporate Governance Committee and the Board of Directors recommend that shareholders approve amendments to the Company’s Bylaws to amend provisions of our current Bylaws that provide for a classified Board.

 

The terms of the proposed amendments to each of the Company’s Third Amended and Restated Certificate of Incorporation and Bylaws (collectively, our “Charter”) are set forth in Appendix C to this proxy statement, with struck-through text indicating deletions and underlined text indicating additions.

 

The Declassification Amendments and Ancillary Changes

 

If this proposal is approved, the Charter will be amended as follows to eliminate the classified Board, provide for the annual election of directors and make ancillary changes to reflect the absence of classification:

 

  1.   Our Third Amended and Restated Certificate of Incorporation and our Bylaws will be amended to eliminate all classes of directors and to provide for the annual election of all directors from and after the 2007 annual meeting of shareholders.

 

  2.   Provisions in our Charter providing that the classified board structure may only be amended with the affirmative vote of at least 66 2/3% of the voting power of all shares entitled to vote will be amended to delete this supermajority voting requirement, so that if the Board and shareholders in the future wish to reestablish a classified Board, that action would need the affirmative vote of only a majority of the outstanding stock entitled to vote thereon.

 

  3.   Consistent with Delaware law for unclassified boards, our present Charter provisions which permit removal of directors for cause by holders of at least 66 2/3% of the voting power of all shares entitled to vote generally in the election of directors will be modified to permit the same percentage of shareholders to remove directors either with or without cause.

 

If this proposal is approved, each director who was elected at the 2005 annual meeting of shareholders and each nominee for director at the 2006 annual meeting (whose terms would otherwise expire at the 2008 and 2009 annual meetings, respectively) has also agreed to resign effective at the 2007 annual meeting. Accordingly, each of our directors would then stand for election at the 2007 annual meeting, and each director elected at that and each subsequent annual meeting of shareholders will hold office for a term expiring at the next annual meeting, with such director to hold office until his or her successor is elected and qualified.

 

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Effects of the Declassification Amendments

 

Classified boards provide a measure of protection against unsolicited or hostile acquisitions and/or control contests because they increase the time necessary to elect directors who constitute a majority of the board, thereby making it more difficult for a substantial shareholder to gain or alter control of a board of directors without the cooperation or approval of incumbent directors. Thus, eliminating the classified board structure may make the Company more susceptible to such actions.

 

Correspondingly, when boards are not classified, the entire board of directors can be removed in a single year. As a result, if this proposal is approved and implemented, it would be easier for one or more shareholders holding a large number of shares, whether an existing or long-term shareholder or one that accumulates a large position in or for a short period of time, to replace the entire Board of Directors at once.

 

Classified boards may, on the other hand, also be viewed as reducing the accountability of directors to shareholders, as they limit the ability of shareholders to evaluate and elect each director each year. Moreover, many institutional investors believe that the election of directors is the primary means for shareholders to influence corporate governance policies and to hold management accountable for implementing those policies.

 

Vote Required

 

Under our Charter, approval of the proposed resolution requires the affirmative vote of the holders of at least 66 2/3% of the outstanding shares of our Class A common stock.

 

The Board recommends a vote FOR approval of amendments to the Charter to declassify the Board of Directors and establish annual election of all directors.

 

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