Wynn Resorts, Limited · PREC14A filed March 10, 2015 · PRE 14A filed February 27, 2015 · File No. 0-50028
If you plan to solicit proxies via Internet chat rooms, indicate which Web sites you plan to utilize in your response letter.
The Company does not plan to solicit proxies via
Internet chat rooms. Read in the reply ↗
Throughout the proxy statement, please revise to avoid presenting opinions or beliefs as facts. As an example only, refer to the following statement on page 18: “Our executive compensation programs have been effective at incentivizing strong results by appropriately aligning pay and performance.” Please revise generally throughout the proxy statement and in future soliciting materials.
In response to the Staff’s comment, disclosures throughout the Proxy Statement have been revised to indicate that the statements made represent opinions or beliefs. Read in the reply ↗
Please provide support for the factual assertions you make throughout the proxy statement. As an example only, we refer to the statements about the Company’s performance on page 17. Support may be provided supplementally through cites to periodic reports or other materials supporting your assertions or through references in the revised proxy statement.
The Company is supplementally providing the Staff the following information to substantiate statements made in the Proxy Statement.
Information regarding the total amount returned to stockholders since the
Company’s initial public offering in 2002 through the end of 2014, which appears on pages 8 and 19 of the Proxy Statement, is based on the “Cash dividends declared” disclosed in the Consolidated Statements of Stockholders’ Equity in Item 8—“Financial Statements and Supplementary Data” of Part II of the Company’s Annual Reports on Form 10-K (the “Forms 10-K”) for the years ended DecemberRead in the reply ↗Rest of the answer
31, 2002 through December 31, 2014.
Information regarding the amount per share returned to stockholders since the Company’s initial public offering in 2002 through the end of 2014, which appears on pages 8 and 19 of the Proxy Statement, is based on the “Cash distributions declared per common share” disclosed in Item 6—“Selected Financial Data” of Part II of the Company’s Forms 10-K for the years ended December 31, 2002 through December 31, 2014.
Information regarding the total cash returned to stockholders in 2014, which appears on pages 18 and 19 of the Proxy Statement, is based on the Consolidated Statements of Stockholders’ Equity contained in Item 8—“Financial Statements and Supplementary Data” of Part II of the Company’s Annual Report on Form
10-K for the year ended December 31, 2014 (the “2014 Form 10-K”) and the Company’s records of payments to its transfer agent.
Information regarding the total cash per share returned to stockholders in 2014, which appears on pages 18 and 19 of the Proxy Statement, can be found in
Item 6—“Selected Financial Data” of Part II of the 2014 Form 10-K.
Financial information regarding the results of operations of the
Company and its segments, which appears on pages 18 and 19 of the Proxy Statement, can be found in Note 18—“Segment Information” of the audited financial statements contained in Item 8—“Financial Statements and
Supplementary Data” of Part II of the 2014 Form 10-K.
Information regarding the liquidity of the Company, which appears on page 19 of the Proxy
Statement, is included in Consolidated Balance Sheets contained in the 2014 Form 10-K and in Note 8—“Long-Term Debt” of the audited financial statements contained in Item 8—“Financial Statements and Supplementary
Data” of Part II of the 2014 Form 10-K.
Statements regarding the Adjusted property EBITDA at Wynn Las Vegas on page 18 of the Proxy Statement have been revised to indicate that the comparative statements are based on publicly reported financial results and represent the belief of management. Supplementally, we advise the staff that to arrive at its conclusions, the Company reviewed the public earnings release for every major public gaming company operating in Las Vegas (Wynn Resorts, Limited, Las Vegas Sands Corp., MGM Resorts International, Mandalay Resort Group, Harrah’s Entertainment and Caesars Entertainment) since 2004 to determine the highest reported annual EBITDA generated by a single property on the Las Vegas Strip. Based on that analysis, management did not find disclosure of a single property that generated more than $500 million of property EBITDA in a fiscal year compared to Wynn Las Vegas’s $515 million result in 2014.
The statement on page 19 of the Proxy Statement that Wynn Resorts has more Forbes Travel Guide Stars than any other independent hotel company in the world is based on information provided by the chairman of Forbes Travel Guide when he telephoned the Company to inform the Company of the ratings that Forbes Travel Guide had awarded the Company’s properties, which was subsequently confirmed in writing with the staff of Forbes Travel Guide.
Revise the proxy statement and form of proxy to mark both as “preliminary.” See Rule 14a-6(e)(1).
As discussed above, the Company has filed the Proxy
Statement with the Commission. Read in the reply ↗
We note your reference to “multiple meetings with Ms. Wynn” leading up the decision not to renominate her as a candidate for director. Revise to provide an expanded background discussion of the prior contacts between the Company and Ms. Wynn leading up to the Company’s decision to that effect.
The Company has added the first two paragraphs on pages 5 and 6 of the Proxy Statement providing an expanded discussion of the actions by the Nominating and
Corporate Governance Committee (the “Corporate Governance Committee”) with respect to Ms. Wynn prior to its determination in 2012 to recommend that she be re-nominated as a director and leading up to the Board’s determination in
2015 not to re-nominate Ms. Wynn as a candidate for election as a director. The Company respectfully believes that it is important to inform stockholders of the fact that Ms.Read in the reply ↗Rest of the answer
Wynn was provided an opportunity to discuss this matter with the
Corporate Governance Committee and that the timing of such discussions does not add additional perspective on the Corporate Governance Committee’s actions, but has provided such additional information in response to the Staff’s comment.
Explain why the size of the Board is being reduced (rather than nominating an additional candidate for Class 1 director at this time).
The Corporate Governance Committee has not at this time recommended to the Board an additional director candidate to nominate for election as a director. As discussed in the Preliminary Proxy Statement and Proxy Statement, the Corporate Governance Committee intends to search for new independent director candidates and, upon identifying suitable director candidates, expects to increase the Board size accordingly.Read in the reply ↗Rest of the answer
In response to the Staff’s comment, the Company has elaborated on the Board’s determination to reduce the size of the
Board by stating on page 6 of the Proxy Statement that because the Corporate Governance Committee is continuing to search for director candidates, it recommended that the size of the Board be reduced until a candidate has been selected and recommended to the Board by the Corporate Governance Committee.
Refer to page 5 of the proxy statement. Describe the “actual and potential conflicts of interest” that you believe would be presented if Ms. Wynn continues as a director. In this regard, did Ms. Wynn’s cross claim exist at the time she was nominated for director in 2012? If so, why does it preclude her as a director candidate now?
As an initial matter, we note that the Proxy
Statement does not state that Ms. Wynn’s cross claim in the litigation precludes Ms. Wynn from being a director candidate, but instead states that her cross claim was one of the factors that led the Corporate Governance Committee to determine not to recommend that Ms. Wynn be re-nominated.
In response to the Staff’s comments, the Company has elaborated on the information that was set forth in the Company’s Preliminary Proxy Statement as filed on March 10, 2015 to state the independent directors’ belief that Ms.Read in the reply ↗Rest of the answer
Wynn’s cross claim in the litigation described in the Proxy Statement presents a conflict of interest; specifically, because Ms. Wynn’s cross claim appears to the Corporate Governance Committee to place Ms. Wynn’s personal interest in being released from restrictions on selling, gifting or otherwise disposing of the Company’s Common Stock ahead of the Company’s and stockholders’ interest in not potentially triggering a change of control under the indentures for certain of the Company’s debt securities. In discussions with the
Corporate Governance Committee, Ms. Wynn never provided an explanation of how maintaining her cross claim is consistent with her fiduciary duties to other stockholders. Instead, during these meetings, Ms. Wynn stated her view that her lawsuit is separate from her responsibilities as a director, a view not shared by the independent directors. In this regard, the Corporate Governance Committee believes, for reasons explained in the Proxy Statement, that it would not be in the best interests of the Company and its stockholders for Ms. Wynn to be in a position where she would be able to sell, gift or otherwise dispose of more shares of the Company’s Common Stock than the $100 million worth of Common Stock that she previously agreed to in the
Amended and Restated Stockholders Agreement, and that there is a conflict between her obligations as a director to act in the best interests of the Company and its stockholders and her actions as a stockholder.
The Company also has added disclosure on page 6 of the Proxy Statement to state that prior to re-nominating Ms. Wynn in 2012, independent directors on the Board raised concerns with Ms. Wynn regarding her cross claim, which she had filed only a few months earlier, and based on assurances given by Ms. Wynn during those discussions at that time made the judgment to re-nominate her as a director candidate.
Explain the Committee’s view that Ms. Wynn is “not meaningfully contributing to the Board’s discussion and work.” How long has this been occurring in the Committee’s view? What facts support this opinion, in the Committee’s view?
As noted on page 5 of the Proxy Statement, under the Board Membership Criteria set forth in the Company’s Corporate Governance Guidelines, in determining whether to re-nominate a candidate for election as a director of the Company, the Corporate Governance Committee considers a number of factors, including a candidate’s ability to make a meaningful contribution to the Board’s oversight of the business and affairs of the Company and a candidate’s other commitments, potential conflicts of interest, and independence from management and the Company.Read in the reply ↗Rest of the answer
As stated on page 11 of the Proxy Statement under “Director Nominating
Procedures and Diversity,” the Corporate Governance Committee’s work enables the Board to update the skills and experience it seeks in the Board as a whole and in individual directors, as the Company’s needs evolve and change over time. Since 2013, the Company’s annual meeting proxy statements have discussed the relevance of these factors in the Corporate Governance Committee’s consideration of director candidates. Accordingly, the Company notes that the Corporate
Governance Committee’s process of reviewing directors’ contribution to the Board should be viewed in context of the Board’s corporate governance practices.
In response to the Staff’s comment, the Company has added disclosure on page 6 of the Proxy Statement elaborating on the statement that the Corporate
Governance Committee’s opinion is that Ms. Wynn is not meaningfully contributing to the Board’s discussion and work. Specifically, as a result of evolving corporate governance practices that increasingly rely on Board oversight of management by independent directors and the Company’s growth, an increasing amount of the Board’s work is conducted through committees composed of independent directors. Because Ms. Wynn is not an independent director, she is unable to serve on any existing Board committees and, therefore, is unable to help carry out much of the work of the Board. In addition, the Company has added disclosure on page 6 of the Proxy Statement addressing the Corporate Governance Committee’s view that corporate governance trends support increasing the percentage of directors serving on a board who not only are familiar with the business environment in which a company competes, but who also are independent and have obtained their knowledge and skills from diverse experiences. In this regard, the Company wishes to note to the Staff that, consistent with and representative of these corporate governance trends, in late 2012 two other directors who were members of Company management, and therefore were not considered independent, stepped down from the Board. As stated in the Company’s Current Report on Form 8-K filed on December 13, 2012, “inside directors Linda Chen and Marc D. Schorr … stepped down from the Board to reduce the number of inside directors.”
Supplementally, in support of the Corporate Governance Committee’s view on corporate governance trends, we wish to direct the Staff’s attention to the Spencer Stuart U.S. Board Index 2014, a copy of which is available at https://www.spencerstuart.com/research-and-insight/spencer-stuart-us-board-index-2014. As stated on page 3 of this annual corporate governance survey:
In recent years, there has been a growing conversation about board composition and turnover, among directors themselves as well as investors and governance observers. On the external front, investors have become a potent voice in board composition, calling for annual director elections, demanding more information about the specific skills and experience individual directors bring to the board ….
Two paragraphs later the Spencer Stuart U.S. Board Index 2014 states:
At a time when growth and innovation are top priorities for most organizations, companies are transforming themselves through new product strategies, different product mixes, and expansion into new markets and geographies. In an ideal world, outside directors with relevant experience can serve as valuable advisers to the board and management about the company’s market, geographic and product directions. They also can serve as a sounding board for management on the critical issues the company is likely to encounter. Wise boards will want to foresee where the company is headed in the future and have individuals on the board with the expertise to help the company move in that direction as efficiently as possible.
In contrast to the perspective and experience of Ms. Wynn, the Corporate Governance Committee believes that a candidate with broader experience could contribute meaningfully to the Board’s work in connection with the Company’s important strategic initiatives.
In the same paragraph, expand to explain “the atmosphere” of the Board that you believe results from Ms. Wynn’s claim and how specifically (in your view) it limits her ability to participate effectively on the Board.
In response to the Staff’s comment and the additional detail that the Company has added to the Proxy Statement in response to the Staff’s other comments, the Company has deleted the reference to the atmosphere of the Board. The Company has disclosed on page 6 of the Proxy Statement how specifically, in the Corporate Governance Committee’s view, Ms. Wynn’s claim limits the effectiveness of her participation on the Board due to concerns that Ms.Read in the reply ↗Rest of the answer
Wynn might seek to utilize statements made at the Board meetings, or take positions concerning decisions made at the meetings, to advance her litigation claims or to otherwise advance her individual position as a stockholder.
We note the disclosure later in the proxy statement that like Ms. Wynn, Mr. Wynn is also not considered independent under NASDAQ listing standards. Given this fact, as well as the fact that Ms. Wynn was presumably not independent when previously nominated by the Company, explain why her lack of independence now disqualifies her to be a director candidate.
Statement does not (and the Preliminary Proxy Statement did not) indicate that Ms. Wynn’s lack of independence disqualifies her to be a director candidate, but instead states that her lack of independence was one of the factors that led the Corporate Governance Committee to determine not to recommend that Ms. Wynn be re-nominated.
As a director who is neither a member of the
Company’s management nor independent under Nasdaq rules, Ms. Wynn is unable to serve on any existing Board committees and, therefore, unable to help carry out much of the work of the Board. Unlike Mr.Read in the reply ↗Rest of the answer
Wynn, the Company’s CEO, who has significant management experience in the gaming industry generally and with the Company specifically, Ms. Wynn has never served in a role where she had daily operating responsibility of the Company or any direct responsibility for lines of business or major corporate functions, and she does not represent management’s perspective in the boardroom.
In response to the Staff’s comment, the Company has added disclosure to the Proxy Statement on page 6 addressing the Corporate Governance Committee’s view that corporate governance trends support increasing the percentage of directors serving on a board who not only are familiar with the business environment in which a company competes, but who also are independent and have obtained their knowledge and skills from diverse experiences. As noted in response to comment 8 above, over recent years the Board has reduced the number and percentage of directors on the Board who are not independent. In addition, as noted on page 15 of the Spencer Stuart U.S. Board Index 2014, the CEO is the only non-independent director on 58% of boards of S&P 500 companies today, compared with 50% in 2009 and 39% in 2004.
We note the assertion at the bottom of page 6 that if Elaine Wynn prevails in her cross claim, it could “increase the likelihood that a change in control may occur under the Wynn Las Vegas debt documents.” Expand to discuss why this is uncertain and what could cause this not to occur. In addition, explain whether there are measures that can be taken by the Company or Ms.Rest of the question
Wynn to avoid a default under the debt instruments even if a change in control occurs.
In response to the Staff’s comment, the Company has expanded the discussion that now appears on page 7 of the Proxy Statement to explain the contingencies that could trigger the covenant in certain of the Company’s debt instruments and require the
Company to redeem such debt at a premium. In response to the Staff’s comment, the Company supplementally advises the Staff that the Company is not aware of any action that Ms.Read in the reply ↗Rest of the answer
Wynn could take under the debt instruments to alter the
Company’s obligation to redeem the affected debt if a change of control (as defined in the applicable indentures) were to occur and the redemption obligation were triggered. The Company has added disclosures on page 7 of the Proxy Statement stating that, if the covenant obligation is triggered, the Company could seek to refinance the affected debt, but that there can be no assurance that the Company will be able to refinance the Senior Notes on terms as favorable as currently exist under the Senior Notes, or at all.
Expand to discuss the possible impact on the Company of being exempted from the provisions of NRS 78.191. Provide examples of what can occur if the Board is not subject to the restrictions in that provision of Nevada law.
The Company has revised the disclosure in Proposal 3 to expand the discussion of the possible result of being exempted from the provisions of NRS 78.288(2)(b), by providing an example stating that the Board, subject to applicable fiduciary duties and the Solvency Test set forth in NRS 78.288(2), would be able to make a distribution in any of the forms provided under NRS 78.191, such as a cash dividend or certain share repurchases, that it would otherwise be prohibited from making if the distribution would cause the
Company to fail the Balance Sheet Test. Read in the reply ↗
Explain the timing of the Board’s adoption of the Articles Amendment. Why did the Board choose to exempt itself from the provisions of NRS 78.191 at this time?
In response to the Staff’s comment, the Company has revised the Proxy Statement to disclose additional background on the Company’s consideration of the Articles Amendment, including that the Company explored and evaluated implementation of the provisions of NRS 78.288(2)(b) within the last year after reviewing the limitations imposed under the Balance Sheet Test in light of the Company’s accumulated amortization and depreciation expense.Read in the reply ↗Rest of the answer
In this regard, the Company supplementally advises the Staff that, as reported in Note 6 to the Company’s Consolidated Financial Statements in the 2014 Form 10-K, the Company’s accumulated depreciation has steadily increased, which (unless offset by additional acquisitions of property, plant and equipment) can affect the
Company’s ability to satisfy the Balance Sheet Test. In addition, over the past year, the Company has amended the articles of its material Nevada-domiciled subsidiaries as permitted by the statute. While the Articles Amendment would make a corresponding change to the Articles, the Board cannot unilaterally adopt the Articles Amendment as the adoption of an amendment to the Company’s Second Amended and Restated Articles of Incorporation requires stockholder approval. The Annual
Meeting of Stockholders provides the opportunity for the Company to submit matters requiring stockholder approval to a vote of stockholders. As such, the Board chose to present this matter for a stockholder vote at the Company’s Annual Meeting of Stockholders. The Company has revised the Proxy Statement to disclose that the Company has over the past year studied the availability of NRS 78.288(2) to avoid restrictions on the Company’s capital deployment activities and is proposing the
Articles Amendment consistent with the Company’s determination to revise the governing documents of its material Nevada-domiciled subsidiaries in order to make corresponding changes.
Acknowledgement
We hereby inform you on behalf of the Company that the Company acknowledges that:
• the Company is responsible for the adequacy and accuracy of the disclosures in the filing;
Staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
If you plan to solicit proxies via Internet chat rooms, indicate which Web sites you plan to utilize in your response letter.
In
2012, in response to serious concerns the independent directors had expressed with recommending the election of a director candidate who had initiated claims in litigation against the Company’s Chief Executive Officer and concerns over the potential triggering of a change of control provision under the indentures for the Company’s outstanding debt securities, thereby potentially requiring the Company to offer to repurchase a significant amount of its then outstanding debt securities, Ms.Read in the reply ↗Rest of the answer
Wynn assured the Corporate Governance Committee that her cross claim in that litigation would not interfere with her service as a director. At its February 24, 2015 meeting, the Corporate Governance Committee voted to recommend that Ms. Wynn not be re-nominated due to the Corporate Governance Committee’s numerous concerns described on page 6 of the Definitive Proxy Statement. In light of the Company’s disclosures, the Company respectfully questions the basis for the assertion in the definitive proxy statement filed by Ms. Wynn on March 20, 2015 (the “EW Proxy”), that it is apparent the Board had “no problem” re-nominating Ms. Wynn as a director in 2012.
Throughout the proxy statement, please revise to avoid presenting opinions or beliefs as facts. As an example only, refer to the following statements which should be revised: “… I’ve been an integral part of helping the Company grow into the successful global enterprise it is today;” “No one else at the Company, other than the Chairman and CEO, is more knowledgeable about its history, its operations, itsRest of the question
customers, or its awardwinning staff;” “The reason the Company’s Proxy Statement does not identify any specific reasons is because there are none.” The characterization of Mr. Stephen Wynn’s obligations under the Amended and Restated Stockholders Agreement dated January 6, 2010, with respect to Mr. Wynn’s obligation to support your reelection to the Board (see page 5 of the proxy statement).
As stated on page 7 of the Definitive Proxy
Statement, under the 2023 Indenture and the 2025 Indenture, if (1) a change of control (as defined in the 2023 Indenture, a “Change of Control”) occurs, and (2) at any time within 60 days after the occurrence of a Change of
Control, the Senior Notes are rated below investment grade by both rating agencies that rate such Senior Notes (defined in the 2023 Indenture and the 2025 Indenture as a “Ratings Event”), then the Company is required to make an offer to repurchase the Senior Notes at a purchase price equal to 101% of the aggregate principalRead in the reply ↗Rest of the answer
amount thereof plus accrued and unpaid interest on the Senior Notes purchased, if any, to the date of the repurchase. As relevant for this discussion, the 2023
Indenture defines a “Change of Control” to occur if Stephen A. Wynn, together with certain related parties that include Ms. Wynn, in the aggregate beneficially owns a lesser percentage of the outstanding common stock of the Company than is beneficially owned by any other person. Under the 2025 Indenture, any event that constitutes a “Change of Control” under the 2023 Indenture also will constitute a “Change of Control” under the 2025 Indenture.
Thus, there are two conditions that must exist to trigger the Company’s obligation to make an offer to repurchase the Senior Notes: (1) a Change of Control and (2) a Ratings Event. The occurrence of both a Change of Control and a Ratings Event is defined under the 2023 Indenture as a “Change of Control Triggering Event.” Under the
2023 Indenture and the 2025 Indenture, a Change of Control and a Ratings Event do not have to be causally related in order to constitute a Change of Control Triggering Event; for example, if the Senior Notes are rated below investment grade by both of the applicable rating agencies and subsequently, but while that situation exists, a Change of Control occurs, the Company’s obligation to offer to repurchase the Senior Notes at a premium to their principal amount is triggered immediately.
For the Staff’s reference, the 2023 Indenture is available at http://www.sec.gov/Archives/edgar/data/1174922/000119312513231532/d542917dex41.htm and the relevant covenant is set forth in Section 4.11 of the 2023 Indenture; the corresponding provision is set forth in Section 4.11 of the 2025 Indenture, available at http://www.sec.gov/Archives/edgar/data/1174922/000117492215000017/ex41-indenture.htm. The defined terms “Change of Control,” “Ratings
Event,” and “Change of Control Triggering Event” are set forth in Section 1.01 of both the 2023 Indenture and the 2025 Indenture.
Mr. Wynn and the Company are unable to control rating actions on the Senior Notes and thus are unable to control the occurrence of a Ratings Event. Under the Amended and Restated Stockholders Agreement, Mr. Wynn currently is able to prevent Ms. Wynn from selling, gifting or disposing of any of her Common Stock, except that Ms. Wynn is permitted to dispose of up to $10 million worth of
Common Stock each year for ten years. If Elaine Wynn prevails in her cross claim, Stephen A. Wynn would not control Elaine Wynn’s shares, meaning that Ms. Wynn would be free to sell, gift or otherwise dispose of shares of Common Stock that currently are subject to the Amended and Restated Stockholders Agreement and those shares would cease to be deemed beneficially owned by Mr. Wynn or his related parties for purposes of the Indentures. Thus, compared to the situation that currently exists where Mr. Wynn is able to prevent Ms. Wynn from selling, gifting or otherwise disposing of Ms. Wynn’s shares, if Elaine Wynn prevails in her cross claim, the resulting inability of Mr. Wynn or the Company to prevent any dispositions by Ms. Wynn or to control rating actions on the Senior Notes increases the likelihood that the obligation to offer to repurchase the Senior Notes upon a Change of Control may be triggered under the Senior Notes. In this regard, the Company notes that, in contrast to Ms. Wynn’s statements in the EW Proxy Preliminary Proxy, it is impossible to determine in advance what level of stock ownership is necessary to prevent a Change of Control from occurring, since the test is a relative test comparing the aggregate stock ownership of Mr. Wynn and Ms. Wynn to the stock ownership of a third party. Thus, any disposition of Company shares by Ms. Wynn makes it more likely that a Change of
Control will occur than if such a disposition does not occur.
We respectfully believe that the Definitive Proxy Statement accurately describes (1) the terms of the
2023 Indenture and the 2025 Indenture and (2) the situation that would exist if Elaine Wynn prevails in her cross claim. The Definitive Proxy Statement does not state that Ms. Wynn’s litigation impacts the Company’s ability or inability to control rating actions on the Senior Notes. The Definitive Proxy Statement states on page 7 that Ms. Wynn’s litigation impacts Mr. Wynn’s ability to prevent dispositions of her shares (specifically, it states,
“If Elaine Wynn prevails in her cross claim, Stephen A. Wynn would not beneficially own or control Elaine Wynn’s shares, meaning that Ms. Wynn would be free to sell, gift or otherwise dispose of shares of Common Stock that are currently subject to the Amended and Restated Stockholders Agreement.”). The Definitive Proxy Statement then states that as a result of such a situation, “the inability of Mr. Wynn or the Company to control the timing of any such dispositions by Ms. Wynn or to control rating actions on the Senior Notes, increase the likelihood that the change of control provision may be triggered under the Senior Notes.”
Finally, the Company wishes to reiterate that it is not aware of any action that Ms. Wynn could take under the 2023 Indenture and the 2025 Indenture to alter the Company’s obligations to redeem the notes should those obligations be triggered. On page 3 of the EW Proxy, Ms. Wynn states:
I could agree to let Mr. Wynn vote fewer shares than he now does, but still a sufficient number to ensure that our combined voting share total is larger than that of the next-largest stockholder. While such an agreement cannot be certain, as the second and third largest stockholders of the company, respectively, Mr. Wynn and I would have every incentive to arrive at an agreement and avoid triggering a covenant violation.
The relevant issue under the 2023 Indenture for determining whether a Change of Control has occurred is whether Mr. Wynn, Ms. Wynn, and certain related parties in the aggregate beneficially own more shares of the Company’s Common Stock than are beneficially owned by any other person. If Ms. Wynn grants Mr. Wynn voting power over her shares, it does not change the number of shares that the two of them beneficially own in the aggregate. The statements in the EW Proxy regarding Ms. Wynn’s willingness to agree to let Mr. Wynn vote some of her shares of Company Common Stock thus are not relevant under the 2023 Indenture or the 2025 Indenture. In contrast, an agreement by Ms. Wynn not to dispose of her shares of Company Common Stock would be relevant, but in her cross claim
Ms. Wynn is seeking to be freed of exactly that type of agreement. Accordingly, the Company respectfully believes that the language quoted above from the EW Proxy is inapposite and that the EW Proxy does not accurately describe the relevant provisions of the 2023 Indenture and the 2025 Indenture or accurately analyze the possible implications of Ms. Wynn’s cross claim.
Please provide support for the factual assertions you make throughout the proxy statement. As an example only, we refer to the statements about your accomplishments at the bottom of page 4 carrying over onto page 5 of the proxy statement. Support may be provided supplementally through cites to periodic reports or other materials supporting your assertions or through references in the revised proxy statement.
Under NASDAQ Listed Company Rule 5605(a)(2),
“‘Independent Director’ means a person other than an Executive Officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.” The rule further states, “The following persons shall not be considered independent….” and then lists a number of standards (often referred to as “bright line” standards) under which a person cannot be determined independent.1 In order toRead in the reply ↗Rest of the answer
qualify as independent, a director must meet each standard; that is, a director must not have “a relationship which, in the opinion of the Company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director” and the director must not have any relationship that is proscribed by the “bright line” standards.
The controlling nature of a board’s determination of independence is reflected in interpretive material issued by NASDAQ. For example, an interpretation of the independence standards set forth in the Nasdaq Listed Company Manual as IM-5605, “Definition of Independence - Rule 5605(a)(2),” states:
Similarly, for purposes of paragraph (B) of the Rule, compensation received by a director for former service as an interim Executive
Officer need not be considered as compensation in determining independence after such service, provided such interim employment did not last longer than one year. Nonetheless, the Company’s board of directors still must consider whether such former employment and any compensation received would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director.2 (emphasis added).
Under Nasdaq Listed Company Rule 5605(a)(2)(B), “The following persons shall not be considered independent:… (B) a director who accepted or who has a Family Member who accepted any compensation from the
Company in excess of $120,000 during any period of twelve consecutive months within the three years preceding the determination of independence…” Clause (B) provides an exception, however, for “compensation paid to a Family
Member who is an employee (other than an Executive Officer) of the Company.”
This interpretive material is set forth as IM-5605 in the Nasdaq Listed Company Manual at:
http://nasdaq.cchwallstreet.com/NASDAQTools/PlatformViewer.asp?selectednode=chp%5F1%5F1%5F4%5F3&manual=%2Fnasdaq%2Fmain%2Fnasdaq%2 Dequityrules%2F.
Similarly, in NASDAQ interpretation 2012-2, NASDAQ evaluates whether a compensation arrangement with a director is or is not covered by the employment relationship provisions set forth under the “bright line” independence requirements of Rule 5605(a)(2)(B). Although NASDAQ determines that the facts before it do not preclude the director from being independent under Rule 5605(a)(2)(B), the interpretation goes on to emphasize the necessity of the company’s board of directors determining whether a relationship exists which, in the opinion of the board, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Specifically, the interpretive opinion (the full text of which is attached as Appendix A to this letter) states:
Notwithstanding this conclusion [that the bright line standard is not applicable], pursuant to Listing Rule 5605(a)(2) and IM-5605, the company’s board has the responsibility to make an affirmative determination that no relationship exists that would impair the independence of any individual serving as an independent director. In assessing the Director’s independence, the
Board should consider his prior service as the company’s Chief Executive Officer and the Payments made to him pursuant to the Transition Agreement, along with any other relationships that the Director has with the company and its executive officers and employees, in order to determine whether any of these relationships individually or in the aggregate may interfere with the Director’s exercise of independent judgment in carrying out his responsibilities of a director.
Thus, under NASDAQ listing standards, a company’s board of directors makes the determination of whether a director is “independent.” A director’s or nominee’s individual view of her status is not controlling. In this regard, it is important to note, as the EW Proxy now concedes, that at the meeting of the Company’s Board of Directors on February 26, 2015, following a review of the definition of “independent director,” the Company’s Board unanimously determined that Governor Miller, Dr. Irani, and Messrs. Hagenbuch, Shoemaker, Virtue, and Wayson qualify as independent directors of the Company. Ms. Wynn participated in this Board meeting and, as she has done for over a dozen years, voted without objection in determining that she and Mr. Wynn do not qualify as independent. The Company believes that, contrary to what is suggested in the EW Preliminary Proxy, it is important to note that the Board’s determination of independence at its February 26, 2015 meeting occurred after the Board had voted to reduce the size of the Board and to re-nominate only Messrs. Hagenbuch and Virtue as the Company’s nominees.
Under the NASDAQ listing standards, a board must affirmatively determine whether a director qualifies as independent. Under Item 407(a)(3) of Regulation S-K, a company’s proxy statement must describe, “[f]or each director and nominee for director that is identified as independent, … any transactions, relationships or arrangements not disclosed pursuant to Item 404(a) … that were considered by the board of directors under the applicable independence definitions in determining that the director is independent.” Accordingly, on page 9 of the Definitive Proxy
Statement, the Company states:
In assessing independence, the Board considered all relevant facts and circumstances, including that none of the independent directors or their immediate family members has any economic relationship with the Company other than the receipt of his director’s compensation and compensation provided to directors’ immediate family members, as defined under NASDAQ listing standards, which was less than $120,000 in the aggregate and was not for consulting or advisory services. None of the independent directors or their immediate family members is engaged in any related party transaction with the Company.
We respectfully believe that the foregoing disclosure satisfies the Company’s disclosure obligations regarding its determination of director independence under Item 407(a)(3) of Regulation S-K.
Acknowledgement
We hereby inform you on behalf of the Company that the Company acknowledges that:
• the Company is responsible for the adequacy and accuracy of the disclosures in the filing;
Staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
Revise the proxy statement and form of proxy to mark both as “preliminary.” See Rule 14a-6(e)(1).
No numbered answer found in the reply. Read the reply ↗
Provide a background or other section describing in detail Ms. Wynn’s contacts with the Company leading up to the present solicitation in opposition.
No numbered answer found in the reply. Read the reply ↗
We note the following statement on page 1 of the proxy statement and elsewhere: “It is clear that [as a 9.4% stockholder in the Company], my interests are very much aligned with the interests of my fellow stockholders.” However, it appears that several of Ms. Wynn’s claims in her litigation are to permit her to sell her shares in the Company without restriction. Please revise to address.
No numbered answer found in the reply. Read the reply ↗
Refer to your assertion on page 2 of the proxy statement that your dispute with Mr. Wynn is “one between two stockholders” and is “not a Board issue.” Revise to address any potential conflicts of interests presented by Ms. Wynn’s position as a party to the stockholders agreement and her fiduciary duties as a director of the Company if she is reelected.
No numbered answer found in the reply. Read the reply ↗
Please explain this statement on page 2 of your proxy statement” “Moreover, even if I win my cross claim against Mr. Wynn, I could still choose to use my shares to remedy a technical violation of the indenture covenants.” How would you effectuate this? Are there uncertainties associated with your ability to do so?
No numbered answer found in the reply. Read the reply ↗
Provide the disclosure required by Item 4(b)(3) and (4) of Schedule 14A with respect to your arrangements with Okapi Partners.
No numbered answer found in the reply. Read the reply ↗
Expand the discussion of the legal proceedings between Ms. Wynn and the Company to describe the bases for the legal arguments advanced by Ms. Wynn and the facts supporting those positions. In addition, describe the potential outcome for Ms. Wynn and the Company, assuming she is successful in her claims. See Item 5 of Schedule 14A.
No numbered answer found in the reply. Read the reply ↗
If Ms. Wynn had contacts with any other Company insiders regarding the matters addressed here other than the members of the Nominating and Corporate Governance Committee, please revise to describe them. This would include contacts with Mr. Wynn.
No reply letter found.
Explain your determination that Ms. Wynn is independent under Nasdaq listing standards. List each requirement for independence and explain how she meets it.
No reply letter found.
Clarify your reference to the Board “stating the opposite conclusion” at the bottom of page 3.
No reply letter found.
Please revise this heading as we believe it is misleading, given the substance of the disclosure in the section.
No reply letter found.
Refer to prior comment 7 in our letter dated March 13, 2015 and your response, as well as the revised disclosure appearing in this section of the definitive proxy statement. Describe the assurances made by Ms. Wynn in 2012 regarding her litigation claims that caused the Corporate Governance Committee to determine at that time that her claim was unlikely to interfere with Ms.Rest of the question
Wynn’s service as a director of the Company. What caused this determination to change by February 2015?
No reply letter found.
We reissue comment 11 in our letter dated March 13, 2015. Apparently, a change in control if Ms. Wynn prevails in her counterclaims will occur only if the Company’s outstanding notes are rated below investment grade. Please revise to clarify, including your statement that if Ms. Wynn prevails in her litigation, it will impact the Company’s ability to “control rating actions on the Senior Notes. ”
No reply letter found.
Refer to comment 10 in our comment letter dated March 13, 2015. In light of the assertions to the contrary in Ms. Wynn’s revised proxy statement, explain your belief that Ms. Wynn is not independent under NASDAQ listing standards. Your revised disclosure should address each standard and why Ms. Wynn does or does not meet it, noting any uncertainties or judgment calls where applicable.Rest of the question
Please note that depending on the nature of the revised disclosure provided in response to the comments above, we may require you to disseminate additional soliciting materials. Please contact me at (202) 551-3263 with any questions about dissemination or otherwise.
No reply letter found.
We reissue comment 1 in our letter dated March 19, 2015. Please revise your proxy statement to describe what changed between 2012 when the Company re-nominated Ms. Wynn as a director despite her pending litigation, and February 2015 when it declined to do so. Revise to describe why the concerns outlined on page 6 of the Company’s definitive proxy statement exist now but did not exist or were overcome by Ms.Rest of the question
Wynn’s assurances in 2012.
The
Revised Disclosure elaborates on the disclosures in the Definitive Proxy Statement regarding the Corporate Governance Committee’s concerns and discussions when it determined to recommend that the Board re-nominate Ms. Wynn in 2012, and provides additional discussion of the independent directors’ concerns described on page 6 of the Definitive Proxy Statement in order to elaborate on what changed between the situation in 2012 and the situation in 2015. Read in the reply ↗
We reissue comment 11 in our letter dated March 13, 2015 and comment 2 in our letter dated March 19, 2015. Include the explanation you have provided in your March 23, 2015 response letter in revised proxy materials. Your amended disclosure should clarify that the ability to control rating action on its Senior Notes is not impacted by Ms. Wynn’s litigation; rather, if Ms.Rest of the question
Wynn is successful in her cross claim and the rating on the Senior Notes changes, the Company may become obligated to repurchase its debt.
The Revised Disclosure sets forth the clarifying language that was provided in our March 23, 2015 response to the Staff’s comments, including clarifying that the Company’s inability to control rating actions on its Senior Notes is not impacted by Ms. Wynn’s litigation. Read in the reply ↗
Refer to comment 10 in our comment letter dated March 13, 2015 and comment 3 in our letter dated March 19, 2015. Revise the proxy statement to include the disclosure provided in your March 23, 2015 response regarding why you believe Ms. Wynn is not independent under NASDAQ listing standards, and fully describing the Board’s role in such determination of independence or lack thereof.Rest of the question
Please note that depending on the nature of the revised disclosure provided in response to the comments above, we may require you to disseminate additional soliciting materials. Please contact me at (202) 551-3263 with any questions about dissemination or otherwise.
The Revised Disclosure sets forth the information provided in our March 23, 2015 response to the Staff’s comments regarding the basis for the Company’s statements that Ms. Wynn is not independent under NASDAQ Listing Standards and the Board’s role in determining the independence of the Company’s directors.Read in the reply ↗Rest of the answer
The portions of our March 23, 2015 response setting forth, by way of example, interpretive material issued by NASDAQ were supplemental information for the Staff’s reference and therefore have not been included in the Revised Disclosure.
Acknowledgement
We hereby inform you on behalf of the Company that the Company acknowledges that:
• the Company is responsible for the adequacy and accuracy of the disclosures in the filing;
Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
