Company Name: Croghan Bancshares, Inc.
Public Availability Date: February 11, 2008
Document Sections: INQUIRY LETTER
APPENDIX 1
APPENDIX 2
STAFF REPLY LETTER
[INQUIRY LETTER]
January 15, 2008
VIA HAND DELIVERY
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
Re: Croghan Bancshares, Inc.Shareholder Proposal of Samuel R. Danziger
(Exchange Act of 1934Rule 14a-8)
Ladies and Gentlemen:
This letter is to inform you that our client, Croghan Bancshares, Inc. ("Croghan"),
intends to omit from its proxy statement and form of proxy for its 2008 Annual
Meeting of Shareholders (collectively, the "2008 Proxy Materials") a shareholder
proposal (the "2008 Proposal") and supporting statement received from Samuel R.
Danziger (the "Proponent").
Pursuant to Rule 14a-8(j), we have:
enclosed herewith six (6) copies of this letter and its attachments;
filed this letter with the Securities and Exchange Commission (the
"Commission") no later than eighty (80) calendar days before Croghan intends to
file its definitive 2008 Proxy Materials with the Commission; and
concurrently sent a copy of this correspondence to the Proponent.
Rule 14a-8(k) provides that shareholder proponents are required to send
companies a copy of any correspondence that the proponents elect to submit to
the Commission or the staff of the Division of Corporation Finance (the
"Staff"). Accordingly, we are taking this opportunity to inform the Proponent
that if the Proponent elects to submit additional correspondence to the
Commission or the Staff with respect to the 2008 Proposal, a copy of that
correspondence should concurrently be furnished to the undersigned on behalf of
Croghan pursuant to Rule 14a-8(k).
BASIS FOR EXCLUSION
We hereby respectfully request that the Staff concur in our view that the 2008
Proposal may be excluded from the 2008 Proxy Materials for the following
reasons:
1. The 2008 Proposal relates to a procedure for the nomination or election for
membership on Croghan's Board of Directors (Rule 14a-8(i)(8)); and
2. The 2008 Proposal and supporting statement are contrary to the proxy rules of
the Commission (Rule 14a-8(i)(3)).
THE 2008 PROPOSAL
A copy of the 2008 Proposal, entitled "Shareholder Nominees for Election to the
Board of Directors," and its supporting statement, as well as related
correspondence from the Proponent, is attached to this letter as Exhibit A. The
2008 Proposal states as follows:
RESOLVED: pursuant to Section 6.01 of the Amended and Restated Code of
Regulations (the "Regulations") of Croghan Bancshares, Inc. (the "Corporation")
and Section 1103.11 of the Ohio Revised Code, stockholders hereby amend the
Regulations to add this Section 2.04(C):
"The Corporation shall include in its proxy materials for the annual meeting of
stockholders the name, together with the Disclosure and Statement (both defined
below), of any person nominated for election to the Board of Directors by a
stockholder or group thereof (the "Nominator") that satisfies the requirements
of this Section 2.04(C), and allow stockholders to vote with respect to such
nominee on the Corporation's proxy card. Each Nominator may nominate one
candidate for election at the meeting.
To be eligible to make a nomination, a Nominator must:
(a) have directly and/or beneficially owned 1% or more of the corporation's
common stock held by shareholders (the "Required Shares") for at least one year;
(b) provide written notice received by the Corporation's Secretary on or before
the December 31\st/ immediately proceeding such annual meeting (i) with respect
to the nominee containing, (A) the information required by Items 7(a), (b) and
(c) of SEC Schedule 14A (such information is referred to herein as the
("Disclosure") and (B) such nominee's consent to being named in the proxy
statement and to serving as a director if elected; and (ii) with respect to the
Nominator, proof of ownership of the Required Shares; and
(c) execute an undertaking that it agrees (i) to assume all liability of any
violation of law or regulation arising out of the Nominator's communications
with stockholders, including the Disclosure and (ii) to the extent it uses
soliciting material other than the Corporation's proxy materials, comply with
all laws and regulations relating thereto.
The Nominator shall have the option to furnish a statement, not to exceed 500
words, in support of the nominee's candidacy (the "Statement"), at the time the
Disclosure is submitted to the Corporation's Secretary. The Board of Directors
shall adopt a procedure for timely resolving disputes over whether notice of a
nomination was timely given and whether the Disclosure and Statement comply with
this Section 2.04(C) and SEC Rules."
GROUNDS FOR OMISSION
1. The 2008 Proposal relates to a procedure for the nomination or election for
membership on Croghan's Board of Directors (Rule 14a-8(i)(8)).
Historically, the Commission has interpreted Rule 14a-8(i)(8) of the Securities
Exchange Act of 1934 (formerly Rule 14a-8(c)(8)) as permitting companies to
exclude from their proxy materials shareholder proposals that relate to the
election of directors. The Commission stated that "the principle purpose of Rule
14a-8(i)(8) is to make clear, with respect to corporate elections, that Rule
14a-8 is not the proper means for conducting campaigns or effecting reforms in
elections of that nature." See Release No. 34-12598 (July 7, 1976).
Specifically, the Staff concurred with the exclusion of shareholder proposals
and supporting materials in reliance on Rule 14a-8(i)(8) because such proposals
"rather than establishing procedures for nomination or qualification generally,
would establish a procedure that may result in contested elections of
directors." See Sears, Roebuck & Co. (avail. Feb. 28, 2003); Eastman Kodak Co.
(avail. Feb. 28, 2003); The Bank of New York Co., Inc. (avail. Feb. 28, 2003);
AOL Time Warner Inc. (avail. Feb. 28, 2003); and Citigroup Inc. (avail. Apr. 14,
2003) (all concurring in the exclusion of a proposal to amend the by-laws to
require that the company include the name, along with certain disclosures and
statements, of any person nominated for election to the board by a stockholder
who beneficially owns 3% or more of the company's outstanding common stock).1
However, in the recent case of American Federation of State, County & Municipal
Employees, Employees Pension Plan v. American International Group Inc., 462 F.3d
121 (2nd Cir. 2006) ("AFSCME v. AIG"), the Second Circuit's refusal to defer to
the Commission's long-standing interpretation of Rule 14a-8(i)(8) cast doubt on
that interpretation.2 In response to AFSCME v. AIG, the Commission was forced to
codify its traditional interpretation of Rule 14a-8(i)(8)'s election exclusion.
On December 6, 2007, the Commission issued a final rule amending Rule
14a-8(i)(8), effective as of January 10, 2008. See Release No. 34-56914 (Jan.
10, 2008) (the "Amending Release"). The Amending Release adds new language to
Rule 14a-8(i)(8) to clarify that a shareholder proposal may be excluded "[i]f
the proposal relates to a nomination or an election for membership on the
company's board of directors or analogous governing body or a procedure for such
nomination or election." See Amending Release (emphasis added). The Amending
Release elucidates the Staff's long-standing determination that "shareholder
proposals that may result in a contested election-including those which
establish a procedure to list shareholder-nominated director candidates in the
company's proxy materialsfall within the election exclusion." See Amending
Release, p.6.
The 2008 Proposal seeks to amend Croghan's Code of Regulations to require the
inclusion by Croghan in its proxy materials of information about a candidate for
election to Croghan's Board of Directors selected by any person who beneficially
owned 1% or more of Croghan's outstanding common stock for at least one year and
to require Croghan to include such nominee on its proxy card. By its terms, the
2008 Proposal seeks to amend Croghan's Code of Regulations to establish a
procedure that (1) relates to the nomination and election for membership on
Croghan's board of directors and (2) would result in contested elections of
directors. According to the Amending Release, "[t]he term `procedures' in the
election exclusion relates to procedures that would result in a contested
election either in the year in which the proposal is submitted or in any
subsequent year." Because Croghan's Board of Directors, consistent with its
fiduciary duties, nominates a sufficient number of candidates for all available
board seats, the 2008 Proposal would necessarily establish a procedure that
would result in contested elections by forcing Croghan to include in its proxy
materials candidates opposed to Croghan's nominees. Rather than establishing
general nomination or qualification procedures, the 2008 Proposal would
establish a procedure for inclusion of shareholder nominees in the proxy
statement of Croghan that would directly result in contested elections in
subsequent years.
For the foregoing reasons, Croghan believes that it may omit the 2008 Proposal
from the 2008 Proxy Materials under Rule 14a-8(i)(8).
2. The Proposal and Supporting Statement are contrary to the Commission's Proxy
Rules (Rule 14a-8(i)(3)).
Rule 14a-8(i)(3) permits the omission of a proposal or any statement in support
thereof if such proposal or statement is contrary to any proxy rule or
regulation, including Rule 14a-9, which prohibits materially false or misleading
statements in proxy soliciting material. Rule 14a-9 also prohibits a statement
which "omits to state any material fact necessary in order to make [a statement]
not false or misleading." In Staff Legal Bulletin 14B (Sept. 15, 2004), the
Staff clarified the circumstances in which companies will be permitted to
exclude proposals pursuant to 14a-8(i)(3) and expressly reaffirmed that
materially false and misleading proposals may be subject to exclusion. According
to Staff Legal Bulletin 14B:
There continue to be certain situations where we believe modification or
exclusion may be consistent with our intended application of rule 14a-8(i)(3).
In those situations, it may be appropriate for a company to determine to exclude
a statement in reliance on rule 14a-8(i)(3) and seek our concurrence with that
determination. Specifically, reliance on rule 14a-8(i)(3) to exclude or modify a
statement may be appropriate where:
***
the resolution contained in the proposal is so inherently vague or indefinite
that neither the stockholders voting on the proposal, nor the company in
implementing the proposal (if adopted), would be able to determine with any
reasonable certainty exactly what actions or measures the proposal requires -
this objection also may be appropriate where the proposal and the supporting
statement, when read together, have the same result.
The 2008 Proposal does not define or provide adequate guidance to shareholders
or the Board of Directors as to many features of the procedures it seeks to
implement. These uncertainties include, among others:
the number of one percent shareholders that are eligible to nominate
candidates;
what role Croghan will have in verifying the consent to serve and the other
information provided by the shareholder;
the time and methodology for determining whether shareholders who nominate a
director hold at least one percent of the outstanding stock of Croghan; and
the process for resolving disputes regarding compliance of the nominating
shareholder's disclosure with the proxy rules.
Because the 2008 Proposal contains impermissibly vague statements, Croghan
believes that the 2008 Proposal violates Rule 14a-9 and is, therefore,
excludable under Rule 14a-8(i)(3). The Staff has consistently taken the position
that shareholder proposals that are vague and indefinite are excludable under
Rule 14a-8(i)(3) as inherently misleading because neither the shareholders, nor
the company, would be able to determine with any reasonable certainty exactly
what actions or measures would be taken in the event the proposal were adopted.
See Philadelphia Electric Co. (avail. July 30, 1992) (proposal relating to the
election of a committee of small shareholders to present plans "that will ...
equate with the gratuities bestowed on management, directors and other
employees" properly excluded as vague and indefinite); Comshare, Incorporated
(avail. Aug. 23, 2000) (shareholder proposal relating to the company not "discriminat[ing]
among directors based upon when or how they were elected" and "try[ing] to avoid
defining change of control based upon officers or directors as of some fixed
date" properly excluded as vague and indefinite).
For the foregoing reasons, Croghan believes that the 2008 Proposal may be
omitted from the 2008 Proxy Materials because it is impermissibly vague and,
thus, contrary to Rule 14a-8(i)(3).
CONCLUSION
Based upon the foregoing analysis, we respectfully request that the Staff concur
that it will take no action if Croghan excludes the 2008 Proposal from its 2008
Proxy Materials pursuant to Rules 14a-8(i)(8) and 14a-8(i)(3).
If you have any questions or require any additional information regarding this
request, please do not hesitate to call me at (614) 464-5465.
Very truly yours,
/s/
Anthony D. Weis
cc: Samuel R. Danziger (w/encls.)
Steven C. Futrell (w/encls.)
-----FOOTNOTES-----
1 See also Tenet Healthcare Corp. (avail. Mar. 15, 2004) (concurring in the
exclusion of a proposal amending by-laws to permit a shareholder holding 35% or
more of the company's outstanding shares to submit a list of candidates to be
nominated as directors); Merck & Co., Inc. (avail. Jan. 25, 2004); (concurring
in the exclusion of a proposal requiring that the registrant include in its
proxy materials an alternative slate of directors proposed by the ten largest
shareholders of record); Wilshire Oil Co. of Texas (avail. Mar. 28, 2003)
(concurring in the exclusion of a proposal requiring company to include in its
proxy materials the names, biographical sketches and photographs of nominees
nominated by shareholders owning 3% of company's common stock); Goldfield
Corporation (avail. Apr. 9, 2002) (concurring in the exclusion of a proposal
requesting that Goldfield develop by-laws to "qualify nominees who have
demonstrated a meaningful level of stockholder support and to provide them with
free and equal ballot access."); Storage Technology Corp. (avail. Mar. 22, 2002)
(concurring in the exclusion of a proposal recommending that the company amend
its by-laws to require the inclusion in its proxy materials of the name of each
candidate for the board nominated by shareholders); General Motors Corp. (avail.
Mar. 22, 2001) (concurring in the exclusion of a proposal requiring the
registrant to publish the names of all nominees for director in its proxy
statement on the ground that the proposal, rather than establishing procedures
for nomination or qualification generally, would establish a procedure that may
result in contested elections for directors); Toys "R" Us, Inc. (avail. Apr. 3,
2000) (concurring in the exclusion of a proposal to include a non-management
candidate for election to the board of directors in the proxy statement and to
develop a system to advance the candidacy of that non-management nominee); Kmart
Corporation (avail. Mar. 23, 2000) (concurring in the exclusion of a proposal
requiring the company to grant any 2% shareholder a "right of access" to the
proxy statement for the purpose of presenting a non-management candidate for
election to the board of directors.); United Road Services (avail. Mar. 10,
2000) (concurring in the exclusion of a proposal that would amend by-laws to
require that each duly-nominated candidate for director be listed in the
company's proxy statement and on its proxy card and that the company's proxy
materials contain the same type and amount of information about each
duly-nominated candidate for director); CVS Corporation (avail. Feb. 1, 2000)
(concurring in the exclusion of a proposal to include a non-management candidate
for election to the board of directors in the proxy statement and to develop a
system to advance the candidacy of that non-management nominee); The Boeing
Company (avail. Jan. 24, 2000) (concurring in the exclusion of a proposal
requiring company to include in its proxy materials the names, biographical
sketches and photographs of nominees nominated by shareholders owning 3% of
company's common stock); BellSouth Corp. (avail. Jan. 24, 2000); (concurring in
the exclusion of a proposal recommending a by-law providing that shareholder
nominees to the board would be included in the company's proxy statement and
proxy card, even if the board recommended a vote against such person); Citigroup
Inc. (avail. Jan. 21, 2000) (concurring in the exclusion of a proposal requiring
the registrant to amend its by-laws to add a new section requiring the Company
to include in its proxy statement the name of a nominee for election to the
Company's board chosen by certain shareholders); BellSouth Corp. (avail. Feb. 4,
1998) (concurring in the exclusion of a proposal recommending a by-law providing
that shareholder nominees to the board would be included in the company's proxy
statement and proxy card, even if the board recommended a vote against such
person); Unocal Corporation (avail. Feb. 8, 1991) (concurring in the exclusion
of a proposal recommending a by-law to require the company to include in its
proxy materials the names of any shareholder's nominees for director and
information about the nominees "in the same manner as any, and all other
nominees presented for election").
2 Because AFSCME v. AIG was a Second Circuit decision, it is not controlling
precedent with respect to Croghan, an Ohio corporation located in the Sixth
Circuit. Consequently, the Commission's traditional interpretation of Rule
14a-8(i)(8) would have governed the instant case even if the Commission had not
amended Rule 14a-8(i)(8).
[APPENDIX 1]
EXHIBIT A
November 14, 2007
Mr. Barry F. Luse, Secretary
Croghan Bancshares, Inc.
323 Croghan Street
Fremont, Ohio 43420
Dear Mr. Luse:
Please be advised the undersigned requests the inclusion of the enclosed
Shareholder Proposal C and supporting statement in the proxy material for the
2008 Annual Meeting of the shareholders of Croghan Bancshares, Inc. In accord
with applicable SEC Rule 14(a)-8(b) I Intend to continue ownership of my shares
through the date of the 2008 Annual Meeting or continuation thereof, It is
expected the Board of Directors will advise me promptly should there be
non-compliance with the applicable SEC Rule together with a timely period within
which to achieve compliance.
The undersigned anticipates the Board will include a statement in the proxy
material setting forth a contra position. Therefore, this letter is to formally
request a shareholder list as of November 30, 2007, and periodically thereafter,
so that the shareholders of record can be advised of the desire of the
undersigned to have the resolution placed in the 2008 proxy materials as well as
the undersigned's position. The request for a shareholder list is provided for
by statute (see Ohio Revised code 1701.37, etc.). Additionally, a current copy
of the NOBO list is requested at such time as it becomes available to
Bancshares.
Very truly yours,
/s/
Samuel R. Danziger
5,087 Shares
Enclosure-Resolution and Supporting Statement
[APPENDIX 2]
2008 SHAREHOLDER PROPOSAL "C"
A proposal is being presented by Samuel R. Danziger. The corporation's address
of record for Samuel R. Danziger is 7740 Camino Real, Miami, Florida 33143. The
share holdings that have been reported to the Corporation by the proponent is
5,087 shares for Samuel R. Danziger. The Proposal C is as follows:
RESOLVED: pursuant to Section 6.01 of the Amended and Restated Code of
Regulations (the "Regulations") of Croghan Bancshares, Inc. (the "Corporation")
and Section 1103.11 of the Ohio Revised Code, stockholders hereby amend the
Regulations to add this Section 2.04(C):
"The Corporation shall include in its proxy materials for the annual meeting of
stockholders the name, together with the Disclosure and Statement (both defined
below), of any person nominated for election to the Board of Directors by a
stockholder or group thereof (the "Nominator") that satisfies the requirements
of this Section 2.04(C), and allow stockholders to vote with respect to such
nominee on the Corporation's proxy card. Each Nominator may nominate one
candidate for election at the meeting.
To be eligible to make a nomination, a Nominator must:
(a) have directly and/or beneficially owned 1% or more of the corporation's
common stock held by shareholders (the "Required Shares") for at least one year,
(b) provide written notice received by the Corporation's Secretary on or before
the December 31\st/ immediately proceeding such annual meeting (i) with respect
to the nominee containing, (A) the information required by Items 7(a), (b) and
(c) of SEC Schedule 14A (such information is referred to herein as the
("Disclosure") and (B) such nominee's consent to being named in the proxy
statement and to serving as a director if elected; and (ii) with respect to the
Nominator, proof of ownership of the Required Shares; and
(c) execute an undertaking that it agrees (i) to assume all liability of any
violation of law or regulation arising out of the Nominator's communications
with stockholders, including the Disclosure and (ii) to the extent it uses
soliciting material other that the Corporation's proxy materials, comply with
all laws and regulations relating thereto.
The Nominator shall have the option to furnish a statement, not to exceed 500
words, in support of the nominee's candidacy (the "Statement"), at the time the
Disclosure is submitted to the Corporation's Secretary. The Board of Directors
shall adopt a procedure for timely resolving disputes over whether notice of a
nomination was timely given and whether the Disclosure and Statement comply with
this Section 2.04(C) and SEC Rules."
SUPPORTING STATEMENT
This proposal provides for corporate governance democracy by allowing
shareholders access to the corporate proxy. A similar proposal received the
support of approximately 6% of the shareholder voting for/against this proposal
at last year's annual meeting.
I URGE YOU TO VOTE FOR THIS PROPOSAL
[STAFF REPLY LETTER]
February 11, 2008
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Croghan Bancshares, Inc. Incoming letter dated January 15, 2008
The proposal amends the Code of Regulations to
require that Croghan include in its proxy materials the name, along with certain
disclosures and statements, of any person nominated for election to the board by
a stockholder who has directly and/or beneficially owned 1% or more of Croghan's
outstanding common stock for at least one year.
There appears to be some basis for your view that Croghan may exclude the
proposal under rule 14a-8(i)(8). Accordingly, we will not recommend enforcement
action to the Commission if Croghan omits the proposal from its proxy materials
in reliance on rule 14a-8(i)(8). In reaching this position, we have not found it
necessary to address the alternative basis for omission upon which Croghan
relies.
Sincerely,
John R. Fieldsend
Attorney-Adviser
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