Marcato International Master Fund, Ltd.
c/o Marcato Capital Management LP
Four Embarcadero Center
Suite 2100
San Francisco, CA 94111
February 6, 2017
Buffalo Wild Wings, Inc.
5500 Wayzata Boulevard, Suite 1600
Minneapolis, MN 55416-1237
Attention: Emily C. Decker
Senior Vice President, General Counsel and Secretary
| Re: | Notice of Nomination of Candidates for Election to the Board of Directors and
Shareholder Proposal to be Presented, in each case, at the 2017 Annual Meeting
of Buffalo Wild Wings, Inc. |
Dear Ms. Decker:
This notice (including all exhibits attached hereto, this “Notice”) of the decision of Marcato International Master Fund, Ltd. (“Shareholder”), record holder of 2,000 shares of common stock, no par value (the “Shares” or “Common Stock”) of Buffalo Wild Wings, Inc., a Minnesota corporation (the “Corporation”), to (a) propose the nomination of and nominate candidates for election to the Board of Directors (the “Board”) of the Corporation (the “Nomination Proposal”) and (b) propose the repeal of each provision or amendment to the Amended and Restated Bylaws of the Corporation (the “Bylaws”) adopted by the Board subsequent to May 21, 2009, which is the date of the last publicly available Bylaws, without the approval of the shareholders of the Corporation (the “Shareholder Proposal”), in each case, at the 2017 annual meeting of shareholders of the Corporation (including any adjournments or postponements thereof or any special meeting that may be called in lieu thereof, the “2017 Annual Meeting”), is being delivered in accordance with the requirements set forth under the Bylaws.
This Notice attaches (a) as Exhibit A hereto proof of Shareholder’s record ownership, (b) as Exhibit B hereto a copy of signed consents executed by each of the Nominees (as defined below) to being named in the proxy statement as a nominee and to serving as a director of the Corporation, if elected, (c) as Exhibit C hereto each Nominee’s completed and signed Initial Questionnaire for Director Nominees and (d) as Exhibit D hereto each Nominee’s completed and signed Supplemental Questionnaire for Directors and Director Nominees (which contains a written representation and agreement executed by each of the Nominees required by Section 2.9(D) of Article 2 of the Bylaws).
As required by Section 2.9(A) of Article 2 of the Bylaws (the “Shareholder Notice Requirements”), the following information, which together with the information contained elsewhere in this Notice, constitutes all of the information required to be set forth in this Notice pursuant to the Shareholder Notice Requirements.
| I. | Notice of Nomination of Candidates for Election to the Board. |
As a record holder of Shares of the Corporation, Shareholder hereby notifies the Corporation of its decision to propose the nomination of and nominate the following individuals (the “Nominees”) for election to the Board at the 2017 Annual Meeting:
| a. | Information with Respect to the Nomination Proposal Pursuant to Section 2.9(A)(2)(a) of Article 2 of the Bylaws |
The following information constitutes all of the information required to be provided by the Shareholder pursuant to the Shareholder Notice Requirements, as the shareholder giving notice and the beneficial owner, if any, on whose behalf the Nomination Proposal is made.
| i. | Information Pursuant to Section 2.9(A)(2)(a)(i) of Article 2 of the Bylaws |
The name and address of Shareholder, as it appears on the Corporation’s books, is set forth below:
Marcato International Master Fund, Ltd.
c/o Marcato Capital Management LP
Four Embarcadero Center
Suite 2100
San Francisco, CA 94111
In light of the unclear scope of the phrase “beneficial owner, if any, on whose behalf the nomination or proposal is made” as set forth in Section 2.9(A)(2)(a) of Article 2 of the Bylaws, we are also including below the name and address of Marcato Capital Management LP (the “Investment Manager”) and Mr. McGuire (collectively with Shareholder and the Investment Manager, the “Marcato Parties”).
Marcato Capital Management LP
Four Embarcadero Center
Suite 2100
San Francisco, CA 94111
Richard T. McGuire III
Four Embarcadero Center
Suite 2100
San Francisco, CA 94111
| ii. | Information Pursuant to Section 2.9(A)(2)(a)(ii) of Article 2 of the Bylaws |
| A. | Information Pursuant to Section 2.9(A)(2)(a)(ii)(A) of Article 2 of the Bylaws |
Set forth below are the class or series and number of shares of capital stock of the Corporation which are owned, directly or indirectly, beneficially or of record by the Marcato Parties.
As of the date hereof, Shareholder:
| · | is the holder of record of 2,000 Shares; and |
| · | holds 948,000 Shares in “street name.” |
Each of the Investment Manager and Mr. McGuire may be deemed a “beneficial owner” (as such term is used in the Bylaws) of all such Corporation securities listed above, but none of the foregoing is the holder of such securities in “street name” or of record.
| B. | Information Pursuant to Section 2.9(A)(2)(a)(ii)(B) of Article 2 of the Bylaws |
Other than as set forth in this Notice, there are no options, warrants, convertible securities, stock appreciation rights, or similar rights with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Corporation or otherwise (a “Derivative Instrument”) directly or indirectly owned beneficially by any Marcato Party and no Marcato Party has any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation.
| C. | Information Pursuant to Section 2.9(A)(2)(a)(ii)(C) of Article 2 of the Bylaws |
Other than as set forth in this Notice, there is no other proxy, contract, arrangement, understanding, or relationship pursuant to which any Marcato Party has a right to vote any shares of any security of the Corporation.
| D. | Information Pursuant to Section 2.9(A)(2)(a)(ii)(D) of Article 2 of the Bylaws |
Other than as set forth in this Notice, no Marcato Party has any short interest in any security of the Corporation (for purposes of this Notice a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security).
| E. | Information Pursuant to Section 2.9(A)(2)(a)(ii)(E) of Article 2 of the Bylaws |
Other than as set forth in this Notice, no Marcato Party has any rights to dividends on the shares of the Corporation owned beneficially by such Marcato Party that are separated or separable from the underlying shares of the Corporation.
| F. | Information Pursuant to Section 2.9(A)(2)(a)(ii)(F) of Article 2 of the Bylaws |
Other than as set forth in this Notice, no Marcato Party has any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such Marcato Party is a general partner or, directly or indirectly, beneficially owns an interest in a general partner.
| G. | Information Pursuant to Section 2.9(A)(2)(a)(ii)(G) of Article 2 of the Bylaws |
Other than as set forth in this Notice, no Marcato Party is entitled to any performance related fees (other than an asset-based fee) based on any increase or decrease in the value of shares of the Corporation or Derivative Instrument, as of the date of this Notice, including without limitation, any such interests held by members of such Marcato Party’s immediate family sharing the same household.
Mr. McGuire is the managing partner of the Investment Manager, which is the investment manager of Shareholder. Through this role, Mr. McGuire controls the investment and voting decisions of Shareholder with respect to any securities held by Shareholder, including any shares of Common Stock of the Corporation held by Shareholder. The Investment Manager is, pursuant to an investment management agreement with Shareholder, entitled to management fees that are customary in the investment management industry from Shareholder, which fees are based in part on the value of Shareholder’s investment portfolio, of which shares of Common Stock of the Corporation form a part as of the date of this Notice. An entity controlled by Mr. McGuire is also entitled to performance-based fees that are customary in the investment management industry from Shareholder, which fees are based on the increase in value of Shareholder’s investment portfolio, of which shares of the Corporation form a part as of the date of this Notice. Mr. McGuire is entitled to portions of such fees through his direct or indirect equity interests in such fee recipients.
| iii. | Information with Respect to the Nomination Proposal Pursuant to Section 2.9(A)(2)(a)(iii) of Article 2 of the Bylaws |
Set forth below is all information relating to the Marcato Parties that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the election of directors in a contested election pursuant to Section 14 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations promulgated thereunder.
Item 4 of Schedule 14A. Persons Making the Solicitation.
Item 4(b)(1) of Schedule 14A. The solicitation for election of the Nominees will be made by the Marcato Parties. Proxies may be solicited by mail, facsimile, telephone, telegraph, electronic mail, internet, in person and by advertisements. By virtue of Instruction 3 of Item 4 of Schedule 14A, the Marcato Parties and the Nominees (collectively, the “Nomination Participants”) may be considered participants in the solicitation.
Item 4(b)(2) of Schedule 14A. Solicitations may also be made by certain of the respective partners, directors, officers, members and employees of the Marcato Parties, none of whom will, except as described elsewhere in this Notice, receive additional compensation for such solicitation. The Nominees may make solicitations of proxies but, except as described herein, will not receive compensation for such solicitations or acting as nominees.
Item 4(b)(3) of Schedule 14A. Innisfree M&A Incorporated (“Innisfree”) has been retained to provide solicitation and advisory services in connection with the 2017 Annual Meeting. Innisfree will receive a fee in an amount not to exceed $400,000 and reimbursement of reasonable documented out-of-pocket expenses for its services to the Marcato Parties in connection with the solicitation. Approximately 35 people may be employed by Innisfree to solicit proxies from the Corporation’s shareholders for the 2017 Annual Meeting. The Investment Manager has agreed to indemnify Innisfree in its capacity as solicitation agent against certain liabilities and expenses in connection with the solicitation. Arrangements will also be made with custodians, nominees and fiduciaries for forwarding proxy solicitation materials to beneficial owners of Shares held as of the record date. The Investment Manager will reimburse such custodians, nominees and fiduciaries for reasonable expenses incurred in connection therewith.
Item 4(b)(4) of Schedule 14A. The total amount to be spent in furtherance of, or in connection with, the solicitation of proxies for the 2017 Annual Meeting is not yet determinable, and approximately $50,000 has been spent to date.
Item 4(b)(5) of Schedule 14A. The entire expense of soliciting proxies for the 2017 Annual Meeting by the Marcato Parties or on the Marcato Parties’ behalf is being borne by the Marcato Parties. The Marcato Parties have not yet determined whether they intend to seek reimbursement of such solicitation expenses.
Item 4(b)(6) of Schedule 14A. Item 4(b)(6) of Schedule 14A is not applicable at the time of this Notice.
Item 5 of Schedule 14A. Interest of Certain Persons in Matters to be Acted Upon.
Item 5(b)(1) of Schedule 14A. Information as to any substantial interest, direct or indirect, by virtue of security holdings or otherwise, in the Nomination Proposal, as specified in this Notice, with respect to the Nomination Participants, is set forth herein.
Except as otherwise set forth elsewhere in this Notice, none of the Nomination Participants beneficially owns any securities of the Corporation or has any personal ownership interest, direct or indirect, in any securities of the Corporation.
As of the date hereof, Shareholder is the direct record owner of 2,000 Shares and the beneficial owner of 950,000 Shares (the “Marcato Shares”).
In addition, as of the date hereof, the Investment Manager, Mr. McGuire and Shareholder may each be deemed to be the beneficial owners of the Marcato Shares, which constitute approximately 5.2% of the Shares, based upon 18,202,127 Shares outstanding as of October 25, 2016, as reported in the Corporation’s Quarterly Report on Form 10-Q for quarter ended September 25, 2016. Shareholder may be deemed to have the shared power to vote or direct the vote of (and the shared power to dispose or direct the disposition of) the Marcato Shares. The Investment Manager, as the investment manager of Shareholder, may be deemed to have the shared power to vote or direct the vote of (and the shared power to dispose or direct the disposition of) the Marcato Shares and, therefore, may be deemed to be the beneficial owner of such Shares. By virtue of Mr. McGuire’s position as managing partner of the Investment Manager, Mr. McGuire may be deemed to have the shared power to vote or direct the vote of (and the shared power to dispose or direct the disposition of) the Marcato Shares and, therefore, may be deemed to be the beneficial owner of the Marcato Shares.
Mr. McGuire could be considered to have an indirect interest in the Nomination Proposal as described below. Mr. McGuire is the managing partner of the Investment Manager, which is the investment manager of Shareholder. Through this role, Mr. McGuire controls the investment and voting decisions of Shareholder with respect to any securities held by Shareholder, including any shares of Common Stock of the Corporation held by Shareholder. The Investment Manager is, pursuant to an investment management agreement with Shareholder, entitled to management fees that are customary in the investment management industry from Shareholder, which fees are based in part on the value of Shareholder’s investment portfolio, of which shares of Common Stock of the Corporation form a part as of the date of this Notice. An entity controlled by Mr. McGuire is also entitled to performance-based fees that are customary in the investment management industry from Shareholder, which are based on the increase in value of Shareholder’s investment portfolio, of which shares of the Corporation form a part as of the date of this Notice. Mr. McGuire is entitled to portions of such fees through his direct or indirect equity interests in such fee recipients, and as such could be considered to have an interest in the Nomination Proposal.
The Nominees may be deemed to have an interest in their nominations for election to the Board by virtue of compensation the Nominees will receive (a) from the Investment Manager for Nominee’s election to the Board by the Corporation’s shareholders and (b) from the Corporation as a director, if elected to the Board, and as described elsewhere in this Notice.
Item 5(b)(1)(i) of Schedule 14A. Set forth in Exhibit E and Exhibit F of this Notice are the names and business addresses of each of the Nomination Participants.
Item 5(b)(1)(ii) of Schedule 14A. Set forth in Exhibit E and Exhibit F of this Notice are (a) the present principal occupation or employment of each of the Nomination Participants and (b) the name, principal business and address of any corporation or other organization in which such employment is carried on, in each case, with respect to each of the Nominees, which information is incorporated herein by reference.
Item 5(b)(1)(iii) of Schedule 14A. During the past ten years, no Nomination Participant has been convicted in a criminal proceeding or is subject to a criminal proceeding that is pending as of this Notice (excluding traffic violations or similar misdemeanors).
Item 5(b)(1)(iv) of Schedule 14A.
As of the date hereof, Shareholder:
| · | is the holder of record of 2,000 Shares; and |
| · | holds 948,000 Shares in “street name.” |
The amount of each class of securities of the Corporation which each of the Nomination Participants own beneficially, directly or indirectly, is set forth below:
| | Name | | Beneficial Ownership |
| | Marcato International Master Fund, Ltd. | | 950,000 Shares |
| | Marcato Capital Management LP | | 950,000 Shares |
| | Scott O. Bergren | | 0 Shares |
| | Richard T. McGuire III | | 950,000 Shares |
| | Sam Rovit | | 0 Shares |
| | Emil Lee Sanders | | 0 Shares |
Additional information relating to the beneficial ownership of Shares by the Nomination Participants is set forth on Exhibit G and is incorporated herein by reference. Other than as set forth in the response to this Item 5(b)(1)(iv) of Schedule 14A with respect to the Marcato Parties, none of the Nomination Participants owns Shares beneficially, directly or indirectly, or of record.
Item 5(b)(1)(v) of Schedule 14A. Other than as set forth in this Notice, none of the Nomination Participants owns any securities of the Corporation of record but not beneficially.
Item 5(b)(1)(vi) of Schedule 14A. A list of all securities of the Corporation purchased or sold by the Nomination Participants within the past two years as well as the dates on which they were purchased or sold and the amount purchased or sold on each such date is set forth in Exhibit G and is incorporated herein by reference.
In connection with an internal restructuring (the “Restructuring”) resulting in the transfer of the direct ownership of Shares from other affiliated funds to Shareholder, (a) on December 30, 2016, (i) Marcato II, L.P. contributed all of its 26,270 Shares to Marcato, L.P., (ii) Marcato, L.P. issued limited partnership interests in exchange for such Shares and (iii) Marcato II, L.P. distributed such interests to its limited partners in-kind and such limited partners became limited partners of Marcato, L.P. and (b) on January 3, 2017, Marcato, L.P. contributed all of its 283,057 Shares (which Shares include all 100 Shares previously held by its wholly-owned subsidiary, Marcato NY LLC and all 26,270 Shares previously held by Marcato II, L.P.) to Shareholder, in exchange for shares of Shareholder. The Restructuring did not constitute a change in numbers of Shares beneficially owned by either the Investment Manager or Mr. McGuire.
Item 5(b)(1)(vii) of Schedule 14A. Other than as disclosed in the response to this Notice, no part of the purchase price or market value of any securities of the Corporation described in Exhibit G are represented by funds that were borrowed or otherwise obtained for the purpose of acquiring or holding such securities by any Nomination Participant.
Item 5(b)(1)(viii) of Schedule 14A. Other than as set forth in this Notice, no Nomination Participant is, or has been within the past year, a party to any contract, arrangement or understanding with any person with respect to any securities of the Corporation, including, but not limited to, joint ventures, loan or option arrangements, puts or calls, guarantees against loss or guarantees of profit, division of losses or profit, or the giving or withholding of proxies. The Shares which Shareholder holds in “street name” may be held in brokerage custodian accounts which, from time to time in the ordinary course, may utilize margin borrowing in connection with purchasing, borrowing or holding of securities, and such Shares may thereby have been, or in the future may become, subject to the terms and conditions of such margin debt and terms, together with all other securities held therein.
Item 5(b)(ix) of Schedule 14A. Other than as set forth in this Notice, no associates of any Nomination Participant own any securities of the Corporation beneficially, directly or indirectly.
Item 5(b)(x) of Schedule 14A. Other than as set forth in this Notice, no Nomination Participant owns beneficially, directly or indirectly, any securities of any parent or subsidiary of the Corporation.
Item 5(b)(1)(xi) of Schedule 14A. Item 5(b)(1)(xi) of Schedule 14A cross-references the information required by Item 404(a) of Regulation S-K of the Exchange Act with respect to each Nomination Participant in the solicitation or any associates of such Nomination Participant. Such information is set forth below:
Item 404(a) of Regulation S-K. Other than as set forth in this Notice, no Nomination Participant and no associate of any Nomination Participant has had or will have a direct or indirect material interest in any transaction since the beginning of the Corporation’s last fiscal year or any currently proposed transactions in which the Corporation was or is to be a participant and the amount involved exceeds $120,000.
Item 5(b)(1)(xii)(A) and (B) of Schedule 14A. The information set forth in the Marcato Parties’ previously filed Schedule 13D (and the amendments thereto) with respect to the Corporation, including the letters and presentations attached as exhibits thereto, is set forth in Exhibit H attached hereto and is incorporated herein by reference.
According to the Corporation’s public filings, each non-employee director receives an annual cash retainer of $60,000. The additional cash retainer for the Board chair is $25,000, the additional cash retainer for chair of the Audit Committee is $20,000, the additional cash retainer for chair of the Compensation Committee is $16,000, the additional cash retainer for the chair of the Governance Committee is $10,000 and the additional cash retainer for the chair of the Executive Committee is $5,000. The additional cash retainer for the non-chair members of the Executive Committee is $4,000 and for the non-chair members of the Audit, Compensation, Governance and Compliance Committees is $8,000. Each non-employee director received an annual unrestricted grant of Corporation common stock approximately equal in value to $95,000 and subject to certain stock ownership guidelines.
The Nomination Participants believe that the Corporation maintains, at its expense, a policy of insurance which insures its directors and officers. The Bylaws also contain a provision that provides for indemnification of officers and directors to the fullest extent permitted under Minnesota Statutes, Section 302A.521. The Restated Articles of Incorporation of the Corporation (the “Charter”) also contain a provision eliminating the personal liability of a director to the fullest extent permitted by Chapter 302A, Minnesota Statutes, as the same exists or may hereafter be amended, to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director. The Marcato Parties expect that the Nominees, if elected, will be indemnified for service as directors of the Corporation to the same extent indemnification is provided to the current directors of the Corporation under the Bylaws and the Charter and be covered by the policy of insurance which insures the Corporation’s directors and officers.
The Nomination Participants disclaim any responsibility for the accuracy of the foregoing information extracted from the Corporation’s public filings.
Other than as disclosed in the response to Item 5(b)(2) of Schedule 14A as set forth in Section I(a)(iii) of this Notice, the Nominees will not receive any compensation from the Marcato Parties to serve as nominees or as directors, if elected, of the Corporation.
Each Nominee has executed a written consent agreeing to be a nominee for election as a director of the Corporation and to serve as a director, if so elected, which consents are attached hereto as Exhibit B.
Other than as disclosed in this Notice, no Nomination Participant and no associate of any Nomination Participant has any arrangements or understandings with any person or persons with respect to any future employment by the Corporation or its affiliates or with respect to any future transactions to which the Corporation or any of its affiliates will or may be a party.
Item 5(b)(2) of Schedule 14A. In consideration of the Nominees’ agreement to be a member of the slate of nominees of Shareholder for election to the Board (the “Slate”), the Investment Manager, on behalf of the funds it advises, and each Nominee have entered into an Engagement and Indemnification Agreement, pursuant to which each Nominee, other than Mr. McGuire, received a $25,000 payment upon execution of the Engagement and Indemnification Agreement and, if each Nominee serves on the Slate and does not withdraw, will be entitled to an additional $25,000 upon the earlier to occur of (a) Nominee’s election to the Board by the Corporation’s shareholders, (b) Nominee’s appointment to the Board pursuant to an agreement between the Corporation and Marcato or (c) Nominee’s not being elected as a director of the Corporation following a proxy solicitation in which Shareholder nominated (and did not withdraw) Nominee for election to the Board. Each Nominee has also agreed to be named as a nominee in the proxy soliciting materials related to the 2017 Annual Meeting. Pursuant to the Engagement and Indemnification Agreement, the Investment Manager has agreed to indemnify each Nominee against any losses suffered, incurred or sustained by such Nominee in connection with such Nominee’s being a member of the Slate or the solicitation of proxies in connection therewith. The Investment Manager has further agreed to reimburse each Nominee for reasonable, documented, out-of-pocket expenses incurred as a result of such Nominee’s being a member of Slate, including, without limitation, travel expenses and expenses in connection with legal counsel retained to represent such Nominee in connection with being a member of the Slate. The foregoing is qualified in its entirety by reference to the form of Engagement and Indemnification Agreement, a form of which is attached hereto as Exhibit I.
Other than as disclosed in this Notice, there are no arrangements or understandings between or among a Nomination Participant and any other person pursuant to which any of the Nominees are proposed to be elected.
Item 5(b)(3) of Schedule 14A. This provision of Item 5 of Schedule 14A is not applicable to the Nomination Participants.
Item 7 of Schedule 14A. Directors and Executive Officers.
Item 7(a) of Schedule 14A. Item 7(a) of Schedule 14A cross-references the information required by instruction 4 to Item 103 of Regulation S-K of the Exchange Act with respect to nominees of the persons making the solicitation. Such information is set forth below:
Instruction 4 of Item 103 to Regulation S-K. There are no material pending legal proceedings in which any Marcato Party or Nominee or any of their respective associates is a party adverse to the Corporation or any of its subsidiaries, or material pending legal proceedings in which such Nominee or any such associate has a material interest adverse to the Corporation or any of its subsidiaries.
Item 7(b) of Schedule 14A. Item 7(b) of Schedule 14A cross-references the information required by Item 401, Items 404(a) and (b), Item 405, and Items 407(d)(4), (d)(5) and (h) of Regulation S-K of the Exchange Act with respect to the nominees of the person making the solicitation. Such information is set forth below:
Item 401(a) of Regulation S-K. The following information is set forth in Exhibit F of this Notice: name, age, any position and office with the Corporation held by each such Nominee, and the term thereof. Each Nominee has executed a consent to being named as a Nominee and to serving as a director of the Corporation, if so elected. Copies of such consents are attached hereto as Exhibit B. The Investment Manager has entered into the Engagement and Indemnification Agreements with each of the Nominees as described in the response to Item 5(b)(2) of Schedule 14A as set forth in Section I(a)(iii) of this Notice. A copy of the form Engagement and Indemnification Agreement is attached hereto as Exhibit I. The initial term of each Nominee, if elected, would be until the 2018 annual meeting of the shareholders of the Corporation, and until their successors are elected and qualified or until their earlier death, resignation, disqualification or removal as provided by statute, in accordance with the Bylaws.
Item 401(b) and (c) of Regulation S-K. These provisions of Item 401 of Regulation S-K are not applicable to the Nominees.
Item 401(d) of Regulation S-K. There exist no family relationships between any Nominee and any director or executive officer of the Corporation.
Item 401(e)(1) and (2) of Regulation S-K. The following information is set forth on Exhibit F of this Notice: (a) name, age, any position and office with the Corporation held by each such Nominee, and the term thereof, business experience during the past five years (including principal occupation and employment during the past five years, the name and principal business of any corporation or other organization in which such occupation or employment was carried on; and whether such corporation or organization is a parent, subsidiary or other affiliate of the Corporation), a brief discussion of the specific experience, qualifications, attributes or skills that led to the conclusion that the Nominee should serve as a director for the Corporation as of the date hereof, in light of the Corporation’s business and structure (including such material information beyond the past five years and information on the Nominee’s particular area of expertise or other relevant qualifications), and (b) any directorships held by such person during the past five years in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940, as amended. Other than as set forth in this Notice, no occupation or employment is or was, during such period, carried on by any Nominee with the Corporation or any corporation or organization which is or was a parent, subsidiary or other affiliate of the Corporation, and none of the Nominees has ever served on the Board.
Item 401(f) of Regulation S-K. During the last ten years, the Nominees have not been involved in any of the events described in Item 401(f) of Regulation S-K and that are material to an evaluation of the ability or integrity of any such nominee to become a director of the Corporation.
Items 401(g) of Regulation S-K. This provision of Item 401 of Regulation S-K is not applicable to the Nominees.
Item 404(a) of Regulation S-K. Other than as disclosed in this Notice, no Nominee and no associate of any Nominee has had or will have a direct or indirect material interest in any transaction since the beginning of the Corporation’s last fiscal year or any currently proposed transaction in which the Corporation was or is to be a participant and the amount involved exceeds $120,000.
Item 404(b) of Regulation S-K. This provision of Item 404 of Regulation S-K is not applicable to the Nominees.
Item 405 of Regulation S-K. This provision of Item 405 of Regulation S-K is not applicable to the Nominees because the Nominees are not directors, officers or ten percent holders of the Corporation.
Item 407(d)(4), (d)(5) and (h) of Regulation S-K. These provisions of Item 407 of Regulation S-K are not applicable to the Nominees.
Item 7(c) of Schedule 14A. Item 7(c) of Schedule 14A cross-references the information required by Item 407(a) of Regulation S-K of the Exchange Act.
Item 407(a) of Regulation S-K. The principles of corporate governance of the Corporation, which are available on the Corporation’s website at http://files.shareholder.com/downloads/BWLD/3391768039x0x481463/31620871-A829-43EC-A2E18BEFBE0644FD/Principles_of_Corporate_Governance.pdf, set forth guidelines to assist the Board in making a determination whether a director has a material relationship with the Corporation. No Marcato Party has any knowledge of any facts that would prevent the determination that each of the Nominees is independent under the applicable standards.
Item 7(d) of Schedule 14A. Item 7(d) of Schedule 14A cross-references the information required by Item 407(b), (c)(1), (c)(2), (d)(1), (d)(2), (d)(3), (e)(1), (e)(2), (e)(3) and (f) of Regulation S-K of the Exchange Act. These provisions of Item 407 of Regulation S-K are not applicable to the Nominees.
Item 7(e) of Schedule 14A. Item 7(e) of Schedule 14A is not applicable to the Nominees.
Item 7(f) of Schedule 14A. Item 7(f) of Schedule 14A is not applicable to the Nominees.
Item 7(g) of Schedule 14A. Item 7(g) of Schedule 14A is not applicable to the Nominees.
Item 8 of Schedule 14A. Compensation of Directors and Executive Officers.
Item 8 of Schedule 14A cross-references the information required by Item 402 of Regulation S-K and paragraphs (e)(4) and (e)(5) of Item 407 of Regulation S-K of the Exchange Act with respect to each nominee of the person making the solicitation and associates of such nominee. Such information is set forth below:
Item 402(a)-(j) of Regulation S-K. None of the Nominees or any of their respective associates has received any cash compensation, cash bonuses, deferred compensation, compensation pursuant to plans, or other compensation, from, or in respect of, services rendered on behalf of the Corporation that is required to be disclosed under, or is subject to any arrangement described in, these paragraphs of Item 402 of Regulation S-K.
Item 402(k) of Regulation S-K. Other than as set forth elsewhere in this Notice, no Nomination Participant is aware of any other arrangements pursuant to which any director of the Corporation was to be compensated for services during the Corporation’s last fiscal year.
Item 402(l)-(s) of Regulation S-K. These provisions of Item 402 of Regulation S-K are not applicable to the Nomination Participants.
Item 407(e)(4) of Regulation S-K. Other than as set forth elsewhere in this Notice, there are no interlocking relationships that would have required disclosure under these paragraphs of Item 407 of Regulation S-K, had the Nominees been directors of the Corporation.
Item 407(e)(5) of Regulation S-K. This provision of Item 407 of Regulation S-K is not applicable to the Nomination Participants.
| b. | Information with Respect to Nominees Pursuant to Section 2.9(A)(2)(c) of Article 2 of the Bylaws |
The following information constitutes all of the information required to be provided by the Shareholder pursuant to the Shareholder Notice Requirements, as to the Nominees that the Shareholder proposes to nominate for election to the Board.
| i. | Information Pursuant to Section 2.9(A)(2)(c)(i) of Article 2 of the Bylaws |
As required by the Shareholder Notice Requirements, the following information, together with the information set forth elsewhere in this Notice, constitutes any other information relating to the Nominees that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the election of directors in a contested election pursuant to Section 14 under the Exchange Act and the rules and regulations promulgated thereunder. To the extent applicable, the information set forth elsewhere in this Notice is incorporated herein by reference.
Item 4 of Schedule 14A. Persons Making the Solicitation.
Item 4(b)(1) of Schedule 14A. The solicitation for election of the Nominees will be made by the Marcato Parties. Proxies may be solicited by mail, facsimile, telephone, telegraph, electronic mail, internet, in person and by advertisements. By virtue of Instruction 3 of Item 4 of Schedule 14A, the Nomination Participants may be considered participants in the solicitation.
Item 4(b)(2) of Schedule 14A. Solicitations may also be made by certain of the respective partners, directors, officers, members and employees of the Marcato Parties, none of whom will, except as described elsewhere in this Notice, receive additional compensation for such solicitation. The Nominees may make solicitations of proxies but, except as described herein will not receive compensation for such solicitation or acting as nominees.
Item 4(b)(3) of Schedule 14A. Innisfree has been retained to provide solicitation and advisory services in connection with the 2017 Annual Meeting. Innisfree will receive a fee in an amount not to exceed $400,000 and reimbursement of reasonable documented out-of-pocket expenses for its services to the Marcato Parties in connection with the solicitation. Approximately 35 people may be employed by Innisfree to solicit proxies from the Corporation’s shareholders for the 2017 Annual Meeting. The Investment Manager has agreed to indemnify Innisfree in its capacity as solicitation agent against certain liabilities and expenses in connection with the solicitation. Arrangements will also be made with custodians, nominees and fiduciaries for forwarding proxy solicitation materials to beneficial owners of Shares held as of the record date. The Investment Manager will reimburse such custodians, nominees and fiduciaries for reasonable expenses incurred in connection therewith.
Item 4(b)(4) of Schedule 14A. The total amount to be spent in furtherance of, or in connection with, the solicitation of proxies for the 2017 Annual Meeting is not yet determinable, and approximately $50,000 has been spent to date.
Item 4(b)(5) of Schedule 14A. The entire expense of soliciting proxies for the 2017 Annual Meeting by the Marcato Parties or on the Marcato Parties’ behalf is being borne by the Marcato Parties. The Marcato Parties have not yet determined whether they intend to seek reimbursement of such solicitation expenses.
Item 4 (b)(6) of Schedule 14A. Item 4(b)(6) of Schedule 14A is not applicable at the time of this Notice.
Item 5 of Schedule 14A. Interest of Certain Persons in Matters to be Acted Upon.
Item 5(b)(1) of Schedule 14A. Information as to any substantial interest, direct or indirect, by virtue of security holdings or otherwise, in the Nomination Proposal, as specified in this Notice, with respect to the Nomination Participants, is set forth herein.
Except as otherwise set forth elsewhere in this Notice, none of the Nomination Participants beneficially owns any securities of the Corporation or has any personal ownership interest, direct or indirect, in any securities of the Corporation.
As of the date hereof, Shareholder is the direct record owner of 2,000 Shares and the beneficial owner of 950,000 Shares.
In addition, as of the date hereof, the Investment Manager, Mr. McGuire and Shareholder may each be deemed to be the beneficial owners of the Marcato Shares which constitute approximately 5.2% of the Shares, based upon 18,202,127 Shares outstanding as of October 25, 2016, as reported in the Corporation’s Quarterly Report on Form 10-Q for quarter ended September 25, 2016. Shareholder may be deemed to have the shared power to vote or direct the vote of (and the shared power to dispose or direct the disposition of) the Marcato Shares. The Investment Manager, as the investment manager of Shareholder, may be deemed to have the shared power to vote or direct the vote of (and the shared power to dispose or direct the disposition of) the Marcato Shares and, therefore, may be deemed to be the beneficial owner of such Shares. By virtue of Mr. McGuire’s position as managing partner of the Investment Manager, Mr. McGuire may be deemed to have the shared power to vote or direct the vote of (and the shared power to dispose or direct the disposition of) the Marcato Shares and, therefore, may be deemed to be the beneficial owner of the Marcato Shares.
Mr. McGuire could be considered to have an indirect interest in the Nomination Proposal as described below. Mr. McGuire is the managing partner of the Investment Manager, which is the investment manager of Shareholder. Through this role, Mr. McGuire controls the investment and voting decisions of Shareholder with respect to any securities held by Shareholder, including any shares of Common Stock of the Corporation held by Shareholder. The Investment Manager is, pursuant to an investment management agreement with Shareholder, entitled to management fees that are customary in the investment management industry from Shareholder, which fees are based in part on the value of Shareholder’s investment portfolio, of which shares of Common Stock of the Corporation form a part as of the date of this Notice. An entity controlled by Mr. McGuire is also entitled to performance-based fees that are customary in the investment management industry from Shareholder, which are based on the increase in value of Shareholder’s investment portfolio, of which shares of the Corporation form a part as of the date of this Notice. Mr. McGuire is entitled to portions of such fees through his direct or indirect equity interests in such fee recipients, and as such could be considered to have an interest in the Nomination Proposal.
The Nominees may be deemed to have an interest in their nominations for election to the Board by virtue of compensation the Nominees will receive (a) from the Investment Manager for Nominee’s election to the Board by the Corporation’s shareholders and (b) from the Corporation as a director, if elected to the Board, and as described elsewhere in this Notice.
Item 5(b)(1)(i) of Schedule 14A. Set forth in Exhibit E and Exhibit F of this Notice are the names and business addresses of each of the Nomination Participants.
Item 5(b)(1)(ii) of Schedule 14A. Set forth in Exhibit E and Exhibit F of this Notice are (a) the present principal occupation or employment of each of the Nomination Participants and (b) the name, principal business and address of any corporation or other organization in which such employment is carried on, in each case, with respect to each of the Nominees, which information is incorporated herein by reference.
Item 5(b)(1)(iii) of Schedule 14A. During the past ten years, no Nomination Participant has been convicted in a criminal proceeding or is subject to a criminal proceeding that is pending as of this Notice (excluding traffic violations or similar misdemeanors).
Item 5(b)(1)(iv) of Schedule 14A. Additional information relating to the beneficial ownership of Shares by the Nominees is set forth on Exhibit G and is incorporated herein by reference. Other than as set forth in the response to this Item 5(b)(1)(iv) of Schedule 14A as set forth in Section I(a)(iii) of this Notice with respect to the Nomination Participants, none of the Nomination Participants own Shares beneficially, directly or indirectly, or of record.
Item 5(b)(1)(v) of Schedule 14A. Other than as set forth in this Notice, none of the Nomination Participants owns any securities of the Corporation of record but not beneficially.
Item 5(b)(1)(vi) of Schedule 14A. A list of all securities of the Corporation purchased or sold by the Nomination Participants within the past two years as well as the dates on which they were purchased or sold and the amount purchased or sold on each such date is set forth in Exhibit G and is incorporated herein by reference.
In connection with the Restructuring resulting in the transfer of the direct ownership of Shares from other affiliated funds to Shareholder, (a) on December 30, 2016, (i) Marcato II, L.P. contributed all of its 26,270 Shares to Marcato, L.P., (ii) Marcato, L.P. issued limited partnership interests in exchange for such Shares and (iii) Marcato II, L.P. distributed such interests to its limited partners in-kind and such limited partners became limited partners of Marcato, L.P. and (b) on January 3, 2017, Marcato, L.P. contributed all of its 283,057 Shares (which Shares include all 100 Shares previously held by its wholly-owned subsidiary, Marcato NY LLC and all 26,270 Shares previously held by Marcato II, L.P.) to Shareholder, in exchange for shares of Shareholder. The Restructuring did not constitute a change in numbers of Shares beneficially owned by either the Investment Manager or Mr. McGuire.
Item 5(b)(1)(vii) of Schedule 14A. Other than as disclosed in this Notice, no part of the purchase price or market value of any securities of the Corporation described in Exhibit G are represented by funds that were borrowed or otherwise obtained for the purpose of acquiring or holding such securities by any Nomination Participant.
Item 5(b)(1)(viii) of Schedule 14A. Other than as set forth in this Notice, no Nomination Participant is, or has been within the past year, a party to any contract, arrangement or understanding with any person with respect to any securities of the Corporation, including, but not limited to, joint ventures, loan or option arrangements, puts or calls, guarantees against loss or guarantees of profit, division of losses or profit, or the giving or withholding of proxies. The Shares which Shareholder holds in “street name” may be held in brokerage custodian accounts which, from time to time in the ordinary course, may utilize margin borrowing in connection with purchasing, borrowing or holding of securities, and such Shares may thereby have been, or in the future may become, subject to the terms and conditions of such margin debt and terms, together with all other securities held therein.
Item 5(b)(ix) of Schedule 14A. Other than as set forth in this Notice, no associates of any Nomination Participant own any securities of the Corporation beneficially, directly or indirectly.
Item 5(b)(x) of Schedule 14A. Other than as set forth in this Notice, no Nomination Participant owns beneficially, directly or indirectly, any securities of any parent or subsidiary of the Corporation.
Item 5(b)(1)(xi) of Schedule 14A. Item 5(b)(1)(xi) of Schedule 14A cross-references the information required by Item 404(a) of Regulation S-K of the Exchange Act with respect to each Nomination Participant in the solicitation or any associates of such Nominee. Such information is set forth below:
Item 404(a) of Regulation S-K. Other than as set forth in this Notice, no Nomination Participant and no associate of any Nomination Participant has had or will have a direct or indirect material interest in any transaction since the beginning of the Corporation’s last fiscal year or any currently proposed transactions in which the Corporation was or is to be a participant and the amount involved exceeds $120,000.
Item 5(b)(1)(xii)(A) and (B) of Schedule 14A. The information set forth in the Marcato Parties’ previously filed Schedule 13D (and the amendments thereto) with respect to the Corporation, including the letters and presentations attached as exhibits thereto, is set forth in Exhibit H attached hereto and is incorporated herein by reference.
According to the Corporation’s public filings, each non-employee director receives an annual cash retainer of $60,000. The additional cash retainer for the Board chair is $25,000, the additional cash retainer for chair of the Audit Committee is $20,000, the additional cash retainer for chair of the Compensation Committee is $16,000, the additional cash retainer for the chair of the Governance Committee is $10,000 and the additional cash retainer for the chair of the Executive Committee is $5,000. The additional cash retainer for the non-chair members of the Executive Committee is $4,000 and for the non-chair members of the Audit, Compensation, Governance and Compliance Committees is $8,000. Each non-employee director received an annual unrestricted grant of Corporation common stock approximately equal in value to $95,000 and subject to certain stock ownership guidelines.
The Nomination Participants believe that the Corporation maintains, at its expense, a policy of insurance which insures its directors and officers. The Bylaws also contain a provision that provides for indemnification of officers and directors to the fullest extent permitted under Minnesota Statutes, Section 302A.521. The Charter also contains a provision eliminating the personal liability of a director to the fullest extent permitted by Chapter 302A, Minnesota Statutes, as the same exists or may hereafter be amended, to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director. The Marcato Parties expect that the Nominees, if elected, will be indemnified for service as directors of the Corporation to the same extent indemnification is provided to the current directors of the Corporation under the Bylaws and the Charter and be covered by the policy of insurance which insures the Corporation’s directors and officers.
The Nomination Participants disclaim any responsibility for the accuracy of the foregoing information extracted from the Corporation’s public filings.
Other than as disclosed in the response to Item 5(b)(2) of Schedule 14A as set forth in Section II(a)(iii) of this Notice, the Nominees will not receive any compensation from the Marcato Parties to serve as nominees or as directors, if elected, of the Corporation.
Each Nominee has executed a written consent agreeing to be a nominee for election as a director of the Corporation and to serve as a director, if so elected, which consents are attached hereto as Exhibit B.
Other than as set forth in this Notice, no Nomination Participant and no associate of any Nomination Participant has any arrangements or understandings with any person or persons with respect to any future employment by the Corporation or its affiliates or with respect to any future transactions to which the Corporation or any of its affiliates will or may be a party.
Item 5(b)(2) of Schedule 14A. In consideration of the Nominees’ agreement to be a member of the Slate, the Investment Manager, on behalf of the funds it advises, and each Nominee have entered into an Engagement and Indemnification Agreement, pursuant to which each Nominee, other than Mr. McGuire, received a $25,000 payment upon execution of the Engagement and Indemnification Agreement and, if each Nominee serves on the Slate and does not withdraw, will be entitled to an additional $25,000 upon the earlier to occur of (a) Nominee’s election to the Board by the Corporation’s shareholders, (b) Nominee’s appointment to the Board pursuant to an agreement between the Corporation and Marcato or (c) Nominee’s not being elected as a director of the Corporation following a proxy solicitation in which Shareholder nominated (and did not withdraw) Nominee for election to the Board. Each Nominee has also agreed to be named as a nominee in the proxy soliciting materials related to the 2017 Annual Meeting. Pursuant to the Engagement and Indemnification Agreement, the Investment Manager has agreed to indemnify each Nominee against any losses suffered, incurred or sustained by such Nominee in connection with such Nominee’s being a member of the Slate or the solicitation of proxies in connection therewith. The Investment Manager has further agreed to reimburse each Nominee for reasonable, documented, out-of-pocket expenses incurred as a result of such Nominee’s being a member of Slate, including, without limitation, travel expenses and expenses in connection with legal counsel retained to represent such Nominee in connection with being a member of the Slate. The foregoing is qualified in its entirety by reference to the form of Engagement and Indemnification Agreement, a form of which is attached hereto as Exhibit I.
Other than as disclosed in this Notice, there are no arrangements or understandings between or among the Marcato Parties and any other person pursuant to which any of the Nominees are proposed to be elected.
Item 5(b)(3) of Schedule 14A. This provision of Item 5 of Schedule 14A is not applicable to the Nominees.
Item 7 of Schedule 14A. Directors and Executive Officers.
Item 7(a) of Schedule 14A. Item 7(a) of Schedule 14A cross-references the information required by Instruction 4 to Item 103 of Regulation S-K of the Exchange Act with respect to nominees of the persons making the solicitation. Such information is set forth below:
Instruction 4 of Item 103 to Regulation S-K. There are no material pending legal proceedings in which any of the Nominees or any of their respective associates is a party adverse to the Corporation or any of its subsidiaries, or material pending legal proceedings in which such Nominee or any such associate has a material interest adverse to the Corporation or any of its subsidiaries.
Item 7(b) of Schedule 14A. Item 7(b) of Schedule 14A cross-references the information required by Item 401, Items 404(a) and (b), Item 405, and Items 407(d)(4), (d)(5) and (h) of Regulation S-K of the Exchange Act with respect to the nominees of the person making the solicitation. Such information is set forth below:
Item 401(a) of Regulation S-K. The following information is set forth in Exhibit F of this Notice: name, age, any position and office with the Corporation held by each such Nominee, and the term thereof. Each Nominee has executed a consent to being named as a Nominee and to serving as a director of the Corporation, if so elected. Copies of such consents are attached hereto as Exhibit B. The Investment Manager has entered into the Engagement and Indemnification Agreements with each of the Nominees as described in the response to Item 5(b)(2) of Schedule 14A as set forth in Section II(a)(iii) of this Notice. A copy of the form Engagement and Indemnification Agreement is attached hereto as Exhibit I. The initial term of each Nominee, if elected, would be until the 2018 annual meeting of the shareholders of the Corporation, and until their successors are elected and qualified or until their earlier death, resignation, disqualification or removal as provided by statute, in accordance with the Bylaws.
Item 401(b) and (c) of Regulation S-K. These provisions of Item 401 of Regulation S-K are not applicable to the Nominees.
Item 401(d) of Regulation S-K. There exist no family relationships between any Nominee and any director or executive officer of the Corporation.
Item 401(e)(1) and (2) of Regulation S-K. The following information is set forth on Exhibit F of this Notice: (a) name, age, any position and office with the Corporation held by each such Nominee, and the term thereof, business experience during the past five years (including principal occupation and employment during the past five years, the name and principal business of any corporation or other organization in which such occupation or employment was carried on; and whether such corporation or organization is a parent, subsidiary or other affiliate of the Corporation), a brief discussion of the specific experience, qualifications, attributes or skills that led to the conclusion that the Nominee should serve as a director for the Corporation as of the date hereof, in light of the Corporation’s business and structure (including such material information beyond the past five years and information on the Nominee’s particular area of expertise or other relevant qualifications), and (b) any directorships held by such person during the past five years in any company with a class of securities registered
pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940, as amended. Other than as set forth in this Notice, no occupation or employment is or was, during such period, carried on by any Nominee with the Corporation or any corporation or organization which is or was a parent, subsidiary or other affiliate of the Corporation, and none of the Nominees has ever served on the Board.
Item 401(f) of Regulation S-K. During the last ten years, the Nominees have not been involved in any of the events described in Item 401(f) of Regulation S-K and that are material to an evaluation of the ability or integrity of any such nominee to become a director of the Corporation.
Items 401(g) of Regulation S-K. This provision of Item 401 of Regulation S-K is not applicable to the Nominees.
Item 404(a) of Regulation S-K. Other than as disclosed in this Notice, no Nomination Participant and no associate of any Nomination Participant has had or will have a direct or indirect material interest in any transaction since the beginning of the Corporation’s last fiscal year or any currently proposed transaction in which the Corporation was or is to be a participant and the amount involved exceeds $120,000.
Item 404(b) of Regulation S-K. This provision of Item 404(b) of Regulation S-K is not applicable to the Nominees.
Item 405 of Regulation S-K. This provision of Item 405 of Regulation S-K is not applicable to the Nominees because the Nominees are not directors, officers or ten percent holders of the Corporation.
Item 407(d)(4), (d)(5) and (h) of Regulation S-K. These provisions of Item 407 of Regulation S-K are not applicable to the Nominees.
Item 7(c) of Schedule 14A. Item 7(c) of Schedule 14A cross-references the information required by Item 407(a) of Regulation S-K of the Exchange Act.
Item 407(a) of Regulation S-K. The principles of corporate governance of the Corporation, which are available on the Corporation’s website at http://files.shareholder.com/downloads/BWLD/3391768039x0x481463/31620871-A829-43EC-A2E18BEFBE0644FD/Principles_of_Corporate_Governance.pdf, set forth guidelines to assist the Board in making a determination whether a director has a material relationship with the Corporation. No Marcato Party has any knowledge of any facts that would prevent the determination that each of the Nominees is independent under the applicable standards.
Item 7(d) of Schedule 14A. Item 7(d) of Schedule 14A cross-references the information required by Item 407(b), (c)(1), (c)(2), (d)(1), (d)(2), (d)(3), (e)(1), (e)(2), (e)(3) and (f) of Regulation S-K of the Exchange Act. These provisions of Item 407 of Regulation S-K are not applicable to the Nominees.
Item 7(e) of Schedule 14A. Item 7(e) of Schedule 14A is not applicable to the Nominees.
Item 7(f) of Schedule 14A. Item 7(f) of Schedule 14A is not applicable to the Nominees.
Item 7(g) of Schedule 14A. Item 7(g) of Schedule 14A is not applicable to the Nominees.
Item 8 of Schedule 14A. Compensation of Directors and Executive Officers.
Item 8 of Schedule 14A cross-references the information required by Item 402 of Regulation S-K and paragraphs (e)(4) and (e)(5) of Item 407 of Regulation S-K of the Exchange Act with respect to each nominee of the person making the solicitation and associates of such nominee. Such information is set forth below:
Item 402(a)-(j) of Regulation S-K. None of the Nominees or any of their respective associates has received any cash compensation, cash bonuses, deferred compensation, compensation pursuant to plans, or other compensation, from, or in respect of, services rendered on behalf of the Corporation that is required to be disclosed under, or is subject to any arrangement described in, these paragraphs of Item 402 of Regulation S-K.
Item 402(k) of Regulation S-K. Other than as set forth elsewhere in this Notice, no Nominee is aware of any other arrangements pursuant to which any director of the Corporation was to be compensated for services during the Corporation’s last fiscal year.
Item 402(l)-(s) of Regulation S-K. These provisions of Item 402 of Regulation S-K are not applicable to the Nominees.
Item 407(e)(4) of Regulation S-K. Other than as set forth elsewhere in this Notice, there are no interlocking relationships that would have required disclosure under these paragraphs of Item 407 of Regulation S-K, had the Nominees been directors of the Corporation.
Item 407(e)(5) of Regulation S-K. This provision of Item 407 of Regulation S-K is not applicable to the Nominees.
| ii. | Information Pursuant to Section 2.9(A)(2)(c)(ii) of Article 2 of the Bylaws |
Mr. McGuire is the managing partner of the Investment Manager, which is the investment manager of Shareholder. Through this role, Mr. McGuire controls the investment
and voting decisions of Shareholder with respect to any securities held by Shareholder, including any shares of Common Stock of the Corporation held by Shareholder. The Investment Manager is, pursuant to an investment management agreement with Shareholder, entitled to management fees that are customary in the investment management industry from Shareholder, which fees are based in part on the value of Shareholder’s investment portfolio, of which shares of Common Stock of the Corporation form a part as of the date of this Notice. An entity controlled by Mr. McGuire is also entitled to performance-based fees that are customary in the investment management industry from Shareholder, which are based on the increase in value of Shareholder’s investment portfolio, of which shares of the Corporation form a part as of the date of this Notice. Mr. McGuire is entitled to portions of such fees through his direct or indirect equity interests in such fee recipients, and as such could be considered to have an interest in the Nomination Proposal.
Other than as disclosed in response to Item 5(b)(2) of Schedule 14A as set forth in Section III(c)(i) of this Notice, there are no direct or indirect compensation or other material monetary agreements, arrangements or understandings during the past three years, or any other material relationships, between or among the Marcato Parties, or their respective affiliates and associates, or others acting in concert therewith, on the one hand, and any Nominee, or his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the Marcato Parties, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule and the Nominee were a director or executive officer of such registrant.
| c. | Information with Respect to Nominees Pursuant to Section 2.9(A)(2)(d) of Article 2 of the Bylaws |
This Notice also attaches as Exhibit C hereto each Nominee’s completed and signed Initial Questionnaire for Director Nominees and as Exhibit D hereto each Nominee’s completed and signed Supplemental Questionnaire for Directors and Director Nominees (which contains a written representation and agreement executed by each of the Nominees required by Section 2.9(D) of Article 2 of the Bylaws).
| II. | Notice of Shareholder Proposal.
|
| a. | Information with Respect to the Shareholder Proposal Pursuant to Section 2.9(A)(2)(a) of Article 2 of the Bylaws |
The following information constitutes all of the information required to be provided by the Shareholder pursuant to the Shareholder Notice Requirements, as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the Shareholder Proposal is made.
| i. | Information Pursuant to Section 2.9(A)(2)(a)(i) of Article 2 of the Bylaws |
The name and address of Shareholder, as it appears on the Corporation’s books, is set forth below:
Marcato International Master Fund, Ltd.
c/o Marcato Capital Management LP
Four Embarcadero Center
Suite 2100
San Francisco, CA 94111
In light of the unclear scope of the phrase “beneficial owner, if any, on whose behalf the nomination or proposal is made” as set forth in Section 2.9(A)(2)(a) of Article 2 of the Bylaws, we are also including below the name and address of each Marcato Party.
Marcato Capital Management LP
Four Embarcadero Center
Suite 2100
San Francisco, CA 94111
Richard T. McGuire III
Four Embarcadero Center
Suite 2100
San Francisco, CA 94111
| ii. | Information Pursuant to Section 2.9(A)(2)(a)(ii) of Article 2 of the Bylaws |
| A. | Information Pursuant to Section 2.9(A)(2)(a)(ii)(A) of Article 2 of the Bylaws |
Set forth below are the class or series and number of shares of capital stock of the Corporation which are owned, directly or indirectly, beneficially or of record by the Marcato Parties.
As of the date hereof, Shareholder:
| · | is the holder of record of 2,000 Shares; and |
| · | hold 948,000 Shares in “street name.” |
Each of the Investment Manager and Mr. McGuire may be deemed a “beneficial owner” (as such term is used in the Bylaws) of all such Corporation securities listed above, but none of the foregoing is the holder of such securities in “street name” or of record.
| B. | Information Pursuant to Section 2.9(A)(2)(a)(ii)(B) of Article 2 of the Bylaws |
Other than as set forth in this Notice, there are no Derivative Instruments directly or indirectly owned beneficially by any Marcato Party and no Marcato Party has any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation.
| C. | Information Pursuant to Section 2.9(A)(2)(a)(ii)(C) of Article 2 of the Bylaws |
Other than as set forth in this Notice, there is no other proxy, contract, arrangement, understanding, or relationship pursuant to which any Marcato Party has a right to vote any shares of any security of the Corporation.
| D. | Information Pursuant to Section 2.9(A)(2)(a)(ii)(D) of Article 2 of the Bylaws |
Other than as set forth in this Notice, no Marcato Party has any short interest in any security of the Corporation (for purposes of this Notice a person shall be deemed to have a short interest in a security if such person, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security).
| E. | Information Pursuant to Section 2.9(A)(2)(a)(ii)(E) of Article 2 of the Bylaws |
Other than as set forth in this Notice, no Marcato Party has any rights to dividends on the shares of the Corporation owned beneficially by such Marcato Party that are separated or separable from the underlying shares of the Corporation.
| F. | Information Pursuant to Section 2.9(A)(2)(a)(ii)(F) of Article 2 of the Bylaws |
Other than as set forth in this Notice, no Marcato Party has any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such Marcato Party is a general partner or, directly or indirectly, beneficially owns an interest in a general partner.
| G. | Information Pursuant to Section 2.9(A)(2)(a)(ii)(G) of Article 2 of the Bylaws |
Other than as set forth in this Notice, no Marcato Party is entitled to any performance related fees (other than an asset-based fee) based on any increase or decrease in the value of shares of the Corporation or Derivative Instrument, as of the date of this Notice, including without limitation, any such interests held by members of such Marcato Party’s immediate family sharing the same household.
Mr. McGuire is the managing partner of the Investment Manager, which is the investment manager of Shareholder. Through this role, Mr. McGuire controls the investment and voting decisions of Shareholder with respect to any securities held by Shareholder, including any shares of Common Stock of the Corporation held by Shareholder. The Investment Manager is, pursuant to an investment management agreement with Shareholder, entitled to management fees that are customary in the investment management industry from
Shareholder, which fees are based in part on the value of Shareholder’s investment portfolio, of which shares of Common Stock of the Corporation form a part as of the date of this Notice. An entity controlled by Mr. McGuire is also entitled to performance-based fees that are customary in the investment management industry from Shareholder, which fees are based on the increase in value of Shareholder’s investment portfolio, of which shares of the Corporation form a part as of the date of this Notice. Mr. McGuire is entitled to portions of such fees through his direct or indirect equity interests in such fee recipients.
| iii. | Information with Respect to the Shareholder Proposal Pursuant to Section 2.9(A)(2)(a)(iii) of Article 2 of the Bylaws |
Set forth below is all information relating to the Marcato Parties that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the Shareholder Proposal pursuant to Section 14 under the Exchange Act.
Item 4 of Schedule 14A. Persons Making the Solicitation.
Item 4(a)(1) of Schedule 14A. This provision of Item 4 of Schedule 14A is not applicable to the Marcato Parties.
Item 4(a)(2) of Schedule 14A. The solicitation in connection with the Shareholder Proposal will be made by the Marcato Parties. By virtue of Instruction 3 of Item 4 of Schedule 14A, the Marcato Parties may be considered participants in the solicitation.
Item 4(a)(3) of Schedule 14A. The information included under the heading “Item 4 of Schedule 14A. Persons Making the Solicitation” in Section I(a)(iii) of this Notice regarding the methods of solicitation to be employed, the material features of any contract or arrangement for such solicitation with specially engaged employees or paid solicitors and the cost or anticipated cost thereof, is incorporated herein by reference.
Item 4(a)(4) of Schedule 14A. The information included under the heading “Item 4 of Schedule 14A. Persons Making the Solicitation” in Section I(a)(iii) of this Notice regarding the names of persons by whom the cost of solicitation will be borne, directly or indirectly, is incorporated herein by reference.
Item 5 of Schedule 14A. Interest of Certain Persons in Matters to be Acted Upon.
Item 5(a)(1) of Schedule 14A. This provision of Item 5 of Schedule 14A is not applicable to the Marcato Parties.
Item 5(a)(2) of Schedule 14A. Information as to any substantial interest, direct or indirect, by security holdings or otherwise, in the Shareholder Proposal with respect to the Marcato Parties is described in the response to Item 5(b)(1) of Schedule 14A as set forth in Section I(a)(iii) of this Notice with respect to the Nomination Proposal is incorporated herein by reference mutatis mutandis with respect to the Shareholder Proposal. Except as otherwise set forth in this Notice, none of the Marcato Parties and no associate of the Marcato Parties has any substantial interest, direct or indirect, by security holdings or otherwise, in the Shareholder Proposal.
Item 5(a)(3) of Schedule 14A. Information as to any substantial interest, direct or indirect, by security holdings or otherwise, in the Shareholder Proposal with respect to the Nominees is described in the response to Item 5(b)(1) of Schedule 14A as set forth in Section I(a)(iii) of this Notice with respect to the Nomination Proposal is incorporated herein by reference mutatis mutandis with respect to the Shareholder Proposal. Except as set forth elsewhere in this Notice, none of the Nominees and no associates of the Nominees has any substantial interest, direct or indirect, by security holdings or otherwise, in the Shareholder Proposal.
Item 5(a)(4) of Schedule 14A. Except as otherwise set forth in this Notice, no associate of the Marcato Parties or any of the Nominees has any substantial interest, direct or indirect, by security holdings or otherwise, in the Shareholder Proposal.
Item 5(a)(5) of Schedule 14A. This provision of Item 5 of Schedule 14A is not applicable to the Marcato Parties.
Item 19 of Schedule 14A. Amendment of Charter, Bylaws or Other Documents.
Pursuant to Section 9.1 of Article 9 of the Bylaws, the Board is authorized to make, alter, amend or repeal the Bylaws without the approval of the shareholders (other than with respect to fixing a quorum for meetings of shareholders, prescribing procedures for removing directors or filling vacancies on the Board, or fixing the number of directors or their classifications, qualifications or terms of office and in any event subject to the power of the shareholders to change or repeal the Bylaws). Chapter 302A.181, Subdivision 3 of the Minnesota Business Corporation Act provides that shareholders holding three percent or more of the voting power of the shares entitled to vote may propose an amendment to the Bylaws and submit the amendment to shareholders for approval.
The Marcato Parties believe that in order to ensure that the will of the Corporation’s shareholders with respect to this proxy solicitation is upheld, no effect should be given to any provision or amendment to the Bylaws unilaterally adopted by the Board after the date of the most recent publicly disclosed Bylaws, which is May 21, 2009. Shareholders are therefore being asked to adopt a resolution that would repeal any provision of the Bylaws or amendment to the Bylaws that the Board adopted or adopts after May 21, 2009 and before any of our Nominees join the Board, if elected, including, without limitation, any amendments the Board has adopted without public disclosure or might adopt in an effort to impede the effectiveness of the Marcato Parties’ nomination of its Nominees, negatively impact the Marcato Parties’ ability to solicit and/or obtain proxies from shareholders, contravene the will of the shareholders expressed in those proxies or modify the Corporation’s corporate governance regime. The Marcato Parties are not currently aware of any specific Bylaw provisions that would be repealed by the adoption of the Shareholder Proposal.
| b. | Information with Respect to Shareholder Proposal Pursuant to Section 2.9(A)(2)(b) of Article 2 of the Bylaws |
The following information constitutes all of the information required to be provided by the Shareholder pursuant to the Shareholder Notice Requirements, as to the Shareholder Proposal that the Shareholder proposes to bring before the 2017 Annual Meeting.
| i. | Information Pursuant to Section 2.9(A)(2)(b)(i) of Article 2 of the Bylaws |
| A. | A Brief Description of the Shareholder Proposal Desired to be Brought Before the Meeting |
Shareholders of the Corporation are being asked to adopt a resolution that would repeal any provision of the Bylaws or amendment to the Bylaws that the Board adopted or adopts after May 21, 2009 and before any of the Nominees join the Board. Pursuant to Section 9.1 of Article 9 of the Bylaws, the Board is authorized to make, alter, amend or repeal the Bylaws without the approval of the shareholders (other than with respect to fixing a quorum for meetings of shareholders, prescribing procedures for removing directors or filling vacancies on the Board, or fixing the number of directors or their classifications, qualifications or terms of office and in any event subject to the power of the shareholder to change or repeal the Bylaws). Chapter 302A.181, Subdivision 3 of the Minnesota Business Corporation Act provides that shareholders holding three percent or more of the voting power of the shares entitled to vote may propose an amendment to the Bylaws and submit the amendment to shareholders for approval. Pursuant to Minnesota law, this amendment may be adopted without Board approval by the affirmative vote of the holders of the greater of a majority of the voting power of (a) the shares present and entitled to vote or (b) the minimum number of shares entitled to vote that would constitute a quorum at the next regular or special meeting.
Shareholder intends to present the following resolution for a vote of shareholders at the 2017 Annual Meeting:
RESOLVED, that each provision or amendment of the Bylaws adopted by the Board without the approval of the Corporation’s shareholders subsequent to May 21, 2009 (purportedly the last date of reported changes) and prior to the approval of this resolution be, and they hereby are, repealed, effective as of the time this resolution is approved by the Corporation’s shareholders.
Shareholder intends to propose the Shareholder Proposal at the commencement of the 2017 Annual Meeting before any other matter is addressed or voted upon by the shareholders of the Corporation at the 2017 Annual Meeting, including the election of directors.
| B. | The Reasons for Conducting the Shareholder Proposal at the Meeting |
The Marcato Parties believe that in order to ensure that the will of the Corporation’s shareholders with respect to this proxy solicitation is upheld, no effect should be
given to any provision or amendment to the Bylaws unilaterally adopted by the Board after the date of the most recent publicly disclosed Bylaws, which is May 21, 2009. Shareholders are therefore being asked to adopt a resolution that would repeal any provision of the Bylaws or amendment to the Bylaws that the Board adopted or adopts after May 21, 2009 and before any of our Nominees join the Board, if elected, including, without limitation, any amendments the Board has adopted without public disclosure or might adopt in an effort to impede the effectiveness of the Marcato Parties’ nomination of its Nominees, negatively impact the Marcato Parties’ ability to solicit and/or obtain proxies from shareholders, contravene the will of the shareholders expressed in those proxies or modify the Corporation’s corporate governance regime. The Marcato Parties are not currently aware of any specific Bylaw provisions that would be repealed by the adoption of the Shareholder Proposal.
| C. | Any Material Interest of the Marcato Parties in the Shareholder Proposal |
The response to Item 5(a)(2) of Schedule 14A as set forth in Section II(a)(iii) of this Notice with respect to the Nomination Proposal is incorporated herein by reference mutatis mutandis with respect to the Shareholder Proposal. To the extent that the adoption of the Shareholder Proposal could have the effect of counteracting any unilateral adoption, amendment or repeal of the Bylaws by the Board that purports to impede the effectiveness of the Nomination Proposal, negatively impact the Marcato Parties’ ability to solicit and/or obtain proxies from shareholders of the Corporation, contravene the will of the shareholders of the Corporation expressed in those proxies or modify the Corporation’s corporate governance regime, the Marcato Parties could be considered to have an interest in the Shareholder Proposal. The Marcato Parties intend to vote the Shares owned by it in favor of the Shareholder Proposal. Except as otherwise set forth in this Notice, the Marcato Parties have no material interest in the Shareholder Proposal.
| ii. | Information Pursuant to Section 2.9(A)(2)(b)(ii) of Article 2 of the Bylaws |
Other than as set forth in this Notice, there are no other agreements, arrangements or understandings between the Marcato Parties and any other person in connection with the proposal of the Shareholder Proposal by the Shareholder.
* * *
Disclosure in any section of this Notice (including all exhibits attached hereto) shall be deemed to apply to all other sections of this Notice. Shareholder believes that this Notice satisfies the requirements set forth in the Bylaws. Certain information set forth in this Notice is additional information which may not be required by the Bylaws but which is included for completeness. The fact that any item of information not expressly required by the Bylaws is disclosed in this Notice shall not be construed to mean that such information is required to be disclosed herein.
The information included herein represents the best knowledge of Shareholder and the other Marcato Parties as of the date hereof. Shareholder reserves the right, in the event such information shall be or become inaccurate, to provide corrective information to the Corporation as soon as reasonably practicable, although except as otherwise stated herein, Shareholder does not commit to update any information which may change from and after the date hereof. If there are no changes to the information set forth herein as of (a) the voting record date for the 2017 Annual Meeting and/or (b) the date that is ten (10) days prior to the 2017 Annual Meeting, then in each case this Notice shall serve as the update and supplement contemplated by Section 2.9(A)(2)(a)(ii) of Article 2 of the Bylaws, and no further supplement shall need to be provided.
Shareholder requested the questionnaire and representation and agreement for director nominees referenced in Section 2.9(D) of Article 2 of the Bylaws pursuant to a letter to the Corporation’s Secretary dated December 21, 2017. Almost two weeks after this request was made, Shareholder received an initial and supplemental questionnaire in an email sent by the Corporation’s outside counsel on January 3, 2017. These questionnaires, which according to the Corporation’s outside counsel are “substantially similar” to what the Corporation has historically used for new directors, appear to go beyond the scope of what is required for disclosure under the Corporation’s Bylaws and Schedule 14A of the Exchange Act. The Nominees have been as responsive as possible in fully and accurately completing the questionnaire and the answers provided by the Nominees’ represent their best efforts to provide the information requested by the Corporation. All information set forth herein relating to the Nominees has been furnished to Shareholder by the Nominees.
If this Notice shall be deemed for any reason by a court of competent jurisdiction to be ineffective with respect to the nomination of any of the Nominees at the 2017 Annual Meeting, or if any individual nominee shall be unable to serve for any reason, this Notice shall continue to be effective with respect to any and all other Nominees, including any replacement nominees, nominated by Shareholder on behalf of the Marcato Parties.
Shareholder reserves the right to give further notice of additional nominations or any business to be made or conducted at the 2017 Annual Meeting or any other meeting of the Corporation’s Shareholders. In addition to the foregoing, Shareholder reserves the right to further nominate, substitute or add additional persons in the event (a) the Corporation purports to increase the number of directorships, (b) the Corporation makes or announces any changes to the Bylaws or takes or announces any other action that purports to have, or if consummated would purport to have, the effect of disqualifying any of the Nominees or any additional nominee nominated pursuant to the foregoing and/or (c) any Nominee is unable or hereafter becomes unwilling for any reason to serve as a director. Additional nominations made pursuant to the preceding clauses (a) and/or (b) are without prejudice to the position of Shareholder that any attempt to change the size of the Board or disqualify any of the Nominees through Bylaw amendments or otherwise would constitute unlawful manipulation of the Corporation’s corporate machinery. Shareholder further reserves the right to (a) withdraw any or all of the Nominees and/or (b) nominate fewer than all of the Nominees listed herein and/or to re-designate one or more of such individuals as alternate nominees.
The Marcato Parties may elect in their proxy statement to seek authority in accordance with Rule 14a-4(d) of the Exchange Act to vote for nominees named in the Corporation’s proxy statement; provided, that any such election by the Marcato Parties shall, pursuant to Rule 14a-4(d) of the Exchange Act, include the following: (a) the Marcato Parties shall seek authority to vote in the aggregate for the number of director positions then subject to election; (b) the Marcato Parties shall represent that they will vote for all the Corporation’s nominees, other than those Corporation nominees specified in the Marcato Parties’ proxy statement; (c) the Marcato Parties shall provide each Corporation security holder an opportunity to withhold authority with respect to any other Corporation nominee by writing the name of that nominee on the form of proxy and (d) the Marcato Parties shall state on the form of proxy and in the proxy statement that there is no assurance that the Corporation’s nominees will serve if elected with any of the Nominees.
Shareholder reserves the right to give further notice of additional nominations or any business to be made or conducted at the 2017 Annual Meeting or any other meeting of the Corporation’s shareholders.
Please be advised that, notwithstanding the compliance by Shareholder with the Bylaws and with the applicable law, neither the delivery of this Notice nor the delivery of additional information, if any, provided by or on behalf of the Marcato Parties to the Corporation from and after the date hereof shall be deemed to constitute an admission by Shareholder that this Notice is in any way defective or as to the legality, validity or enforceability of any particular requirement or provision of the Bylaws or any other matter or a waiver by the Marcato Parties of their right to, in any way, contest or challenge the enforceability thereof or of any other matter.
The Marcato Parties understand that certain information regarding the 2017 Annual Meeting (including, but not limited to, the record date, voting shares outstanding and date, time and place of the 2017 Annual Meeting), the Corporation (including, but not limited to, its various committees and proposal deadlines) and the beneficial ownership of the Corporation’s securities will be set forth in the Corporation’s proxy statement on Schedule 14A, to be filed with the SEC by the Corporation with respect to the 2017 Annual Meeting, and in certain other SEC filings made or to be made by the Corporation, and potentially third parties, under the Exchange Act. To the extent the Corporation believes any such information is required to be set forth herein, the Marcato Parties hereby refer the Corporation to such filings and incorporates them herein by reference. The Marcato Parties accept no responsibility for any information set forth in any such filings not made by Shareholder.
This Notice has been prepared and delivered in accordance with the requirements of the Bylaws. If, for any reason, the Corporation, its executive officers, its Secretary, or any officer designated as the chairperson of the 2017 Annual Meeting or the Board believes otherwise, Shareholder requests that it be notified of such belief immediately so that Shareholder may consider such matters and supplement and/or amend this Notice as may be appropriate or take any other action available to them under applicable law. In such an event please call immediately Richard M. Brand at (212) 504-5757 or Jason M. Halper at (212) 504-6300.
Please direct any questions regarding the information contained in this Notice to Richard M. Brand, Esq., Cadwalader, Wickersham & Taft LLP, 200 Liberty Street, New York, New York 10281, (212) 504-5757 (Phone), (212) 504-6666 (Facsimile) or Jason M. Halper, Esq., Cadwalader, Wickersham & Taft LLP, 200 Liberty Street, New York, New York 10281, (212) 504-5757 (Phone), (212) 504-6666 (Facsimile).
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