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A dissident shareholder’s use of a duplicate proxy card in a campaign to defeat a corporate merger is subject to the same filing and disclosure requirements as regular shareholder solicitations, the 2nd U.S. Circuit Court of Appeals has ruled. The opinion affects the proposed insurance company merger between MONY Group Inc. and the French conglomerate AXA Financial Inc. The court said a mailing opposing the merger, when accompanied by a duplicate of management’s proxy card, amounted to a “form of revocation” that triggers the filing and disclosure requirements that the anti-merger group said was too burdensome. The case was MONY Group Inc. v. Highfields Capital Management, 04-0678. The decision reversed a Southern District judge’s finding that the mailing was exempt from the filing and disclosure requirements of rules 14 a-3 to 14 a-6, which were promulgated pursuant to � 14(a) of the Exchange Act of 1934. Under those rules, anyone who solicits a proxy, whether on behalf of the company board or for some other party, must file detailed information with the Securities and Exchange Commission (SEC) and then deliver the same information to the solicited shareholders. An exemption to the requirements was recognized in 1992. The SEC said that “the federal proxy rules have created unnecessary regulatory impediments to communication among shareholders and others to the effective use of shareholder voting rights.” The merger between the two insurance groups, which called for MONY shareholders to receive $31 per share, was challenged by three of MONY’s largest shareholders. They called the price too low, and the merger poorly timed and in the self-interest of major executives at MONY. MONY sued to stop the mailing of duplicate proxies to shareholders by the anti-merger faction, saying that the mailing of a copy of the MONY proxy card attached to a letter that urged shareholders to reject the merger was subject to the disclosure requirement. MONY contended that the exemption did not apply because the inclusion of a copy of the proxy card meant that Highfields Capital Management and two other major shareholders had furnished a “form of revocation,” a form a stockholder would complete to revoke a previous vote. But Southern District Judge Richard J. Holwell disagreed. He found that the mailing was not a form of revocation, and denied MONY’s request for a preliminary injunction. “It is true that the proxy card may have the effect of a revocation in those cases where a shareholder has previously submitted a proxy,” he said, “but that is not a necessary effect inherent in the card and does not transform management’s proxy card into a form of revocation that places Highfields outside the ambit of the exemption.” CIRCUIT REVERSES The 2nd Circuit reversed in a ruling from the bench last month. On Thursday, the court issued an opinion explaining its reasoning. Writing for the circuit, Judge Dennis Jacobs said the court agreed with Judge Holwell’s statement on placing Highfields “outside the ambit of the exemption.” “We further agree that, in some proxy voting situations, the submission of a subsequent proxy card may be something other or more than a ‘revocation’ of a previous vote,” Jacobs said. But he wrote that the outcome should have been different because of the intention of the appellee dissidents and the requirements of Delaware law, which requires a majority vote of all shareholders to approve a merger. Jacobs wrote that “the factual and legal circumstances of this case clearly suggest that Appellees’ proxy duplicate would operate as a ‘form of revocation’ when distributed in the context of a vote on a merger governed by Delaware, and that it is intended as such by Appellees.” “MONY management has every incentive to ensure that all company shareholders vote … every proxy card that MONY shareholders lost, discarded, or simply did not bother to exercise is effectively a vote ‘against’ the merger opposed by Appellees,” he said. “Assuming Appellees are shrewd proxy tacticians, their only goal in sending out the duplicate proxy cards must be to encourage shareholders who have already voted for the merger to revoke their votes.” And the “plain text of Rule 14a-2(b)(1) forbids the inclusion of such a ‘form of revocation’ in an otherwise exempt solicitation,” he said. Finding that MONY demonstrated a likelihood that it will succeed on its claim that the use of the duplicate proxy cards fell outside the exemption and that their use “amounts to the sort of irreparable harm that the securities laws and regulations were intended to prevent,” the court granted a preliminary injunction in favor of MONY. Judge Barrington D. Parker Jr. and Eastern District Judge Frederic Block, sitting by designation, joined in the opinion. James P. Smith III of Dewey Ballantine represented MONY Group Inc. R. Todd Cronan of Goodwin Procter represented Highfields Capital Management. Samuel Kadet of Skadden, Arps, Slate, Meagher & Flom represented the other appellees, Longleaf Partners Small-Cap Fund and Southeastern Asset Management Inc.

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