Repeat Proposal by No-Show Shareholder Is Excludable from Proxy Materials

May a company exclude a shareholder proposal from its proxy statement when the same shareholder had submitted a similar proposal the prior year and had, without good cause, failed to appear or appoint a representative to present the proposal at the company's prior annual meeting? According to the staff of the Securities and Exchange Commission's ("SEC") Division of Corporate Finance (the "Staff"), the company may do so pursuant to Rule 14a-8(h)(3) promulgated under the Securities Exchange Act of 1934 (the "1934 Act"), even if the company brought the proposal forward on its own initiative at the prior annual meeting.

Excalibur Technical Corporation ("Excalibur" or the "Company") sought a no-action ruling from the Staff after one of its shareholders submitted a proposal to be included in the Company's proxy statement for the 1999 Annual Meeting that was "substantially the same" as his 1998 proposal. Both proposals requested that the Company's Board of Directors sell or merge the Company, or give shareholders the Company's value "by way of a sale, merger or liquidation." After submitting the 1998 proposal, the proponent neither appeared at the 1998 Annual Meeting nor appointed a representative to appear in his stead. Nevertheless, the Company brought the proposal forward as a convenience to the shareholders, who ultimately rejected it.

Excalibur asserted that it could exclude the 1999 proposal from its proxy statement based on Rule 14a-8(h)(3), which provides that if a proponent or appointed representative "fail[s] to appear and present the proposal, without good cause, the company will be permitted to exclude all of [his] proposals from its proxy materials for any meetings held in the following two calendar years." Excalibur claimed that Rule 14a-8(h)(3) applied, since the proponent's absence was not "cured" by the Company's action on the proposal.

The Staff agreed. Due to the shareholder-proponent's failure both to attend the 1998 Annual Meeting and to state a "good cause" for his absence, the Staff advised Excalibur that it would not recommend enforcement action if the proposal were excluded from the Company's 1999 proxy materials. *

Excalibur Technical Corp., SEC No-Action Letter (avail. May 4, 1999).

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