States Of Wisconsin Investment Board v. Peerless Systems Corp.

2000 WL 1805376 (Del.Ch.)

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Nature of the Case

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Facts

State of Wisconsin Investment Board (P) invests the assets of the Wisconsin Retirement System, the State Investment Fund and several other trusts established by the State. P was the beneficial owner of 985,000 shares of Peerless (D) representing 7-9 percent of the total outstanding shares of the D. D issued a proxy statement in 1999 for issues related to re-election of four members of the board, an increase of 1,000,000 shares for options, and ratification of Price Water House as its auditor. P was upset with the second proposal for an increase in option plan shares by 1,000,000. It began a campaign against the proposal and pointed out that the board would be able to re-price the additional options without shareholder approval and it would be able to grant the options at less than fair market value. Prior to the annual meeting, there was a special shareholder meeting to consider the acquisition of Auco, and that merger was approved with 54 percent of the outstanding voting for the merger. During the Annual meeting proposals 1 and 3 passed easily, and the meeting was closed without the option proposal being closed for voting. No objections were voiced upon the closing with the option agreement still open, and this procedure was proper for the By-Laws. If the polls had been closed the proposal would have been defeated by a hefty margin. At influence on the proposal was the fact that brokers and agents of shareholders can vote on routine matters without instructions from beneficial owners but on non-routine matters, the vote of the beneficial shareholder is required. No information was released by D on the status of the proposal, but it did continue to solicit votes but only from selected shareholders. P sent a second letter and questioned the propriety of the adjournment and urged the shareholders to vote against the proposal. The meeting was reconvened, and the polls were closed with the measure passing by less than 2 percent of outstanding shares. P sued D.