Pizza Hut 2010 Annual Report Download - page 44

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ITEM 5: PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY’S
ARTICLES OF INCORPORATION TO PERMIT SHAREHOLDERS TO CALL SPECIAL MEETINGS
(Item 5 on the Proxy Card)
Current Standard for Calling Special Meetings of Shareholders
North Carolina law provides that a public corporation shall hold a special meeting of shareholders on
call of (1) its board of directors or (2) the person or persons authorized to do so by the articles of
incorporation or bylaws. Currently, the Company’s Restated Articles of Incorporation (the ‘‘Articles of
Incorporation’’) and Amended and Restated Bylaws (the ‘‘Bylaws’’) provide only that the Board of
Directors may call a special meeting of shareholders (subject to the rights of holders of preferred shares).
What am I voting on?
The Board of Directors has adopted, and now recommends shareholder approval of, an amendment
to Article FIFTH of the Articles of Incorporation (the ‘‘Amendment’’) that would give holders of record of
at least 25% of the outstanding common shares the right to request that a special meeting of shareholders
be called, subject to procedural requirements to be set forth in the Bylaws, amended as described below.
The form of the proposed Amendment, consisting of a deletion to paragraph (a) and the insertion of new
paragraph (j) of Article FIFTH, is attached as Appendix A to this proxy statement. The general
descriptions of the Amendment herein are subject to the actual text of the Amendment in the form of
Appendix A.
Background
The ability of shareholders to call special shareholder meetings is increasingly considered an
important aspect of good corporate governance. Last year, a shareholder proposal requesting that 10% of
the holders of our outstanding common shares be permitted to call special meetings received majority
support from our shareholders. The Board of Directors supports the concept of permitting shareholders to
request special meetings, but believes that a 25% threshold strikes a better balance than a 10% threshold
in terms of enhancing shareholder rights and protecting against the risk that a small percentage of
shareholders could trigger a special meeting to pursue special interests that are not are in the best interests
Proxy Statement
of the Company and its shareholders in general. A special meeting is an extraordinary event that imposes
significant financial expense and administrative burdens on the Company. The proposed 25% threshold
ensures that the Company will incur the costs and disruptions associated with calling and holding a special
meeting only if a significant portion of our shareholders support holding such a meeting. The 25%
threshold is also consistent with thresholds adopted by many other large public companies.
Amendment of Restated Articles of Incorporation and Related Bylaw Amendments
After due consideration and upon the recommendation of the Nominating and Governance
Committee, the Board of Directors adopted resolutions (1) setting forth and adopting the proposed
Amendment to provide that shareholders shall have the right to request special meetings of the
shareholders and that a special meeting of the shareholders shall be called upon the proper request of the
holders of record of at least 25% of the outstanding common shares and (2) declaring the advisability of
the Amendment and recommending that our shareholders approve the Amendment.
If approved, the Amendment will become effective upon the filing of Articles of Amendment to the
Company’s Articles of Incorporation with the Secretary of State of North Carolina. The Company would
make such a filing promptly after approval of the Amendment by the shareholders at the annual meeting.
The Board of Directors has also adopted corresponding amendments to our Bylaws which would become
effective if and when the Amendment becomes effective. The Bylaw amendments provide that holders of
record of at least 25% of our outstanding common shares shall be permitted to request and present
business at a special meeting, subject to certain procedural and informational requirements. Each request
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