I have not seen any evidence of a proxy fight, except for the fact that the company is opposing a proposal put forth by Kent Murphy, who owns 20.6% of the company. It may be that Murphy is a loose cannon. After all, he is Luna's founder and he did step down when the company went into bankruptcy in the summer of 2010. He may be unhappy. Hansen Medical, the company that forced Luna into bankruptcy, owns 9.7%. Maybe they want liquidity. Carilion Clinic owns 24.7%.
PROPOSAL NO. 3
BYLAW PROPOSAL
On January 18, 2011, we received notice from Dr. Murphy, who was the beneficial owner of 2,781,457 shares, or 20.6% of our outstanding common stock as of March 31, 2011, of his intention to present to stockholders at the annual meeting the following proposal to amend our Bylaws:
• To replace the first sentence of Section 3.2 in its entirety with the following sentence: “The number of directors that shall constitute the entire Board shall be seven (7).”
• To delete the second sentence of Section 3.2 in its entirety.
• To delete the words “and newly created directorships resulting from any increase in the authorized number of directors, or” appearing in the second sentence of Section 3.4 in their entirety.
Article V of our amended and restated certificate of incorporation provides that the number of directors that constitutes the entire board of directors shall be determined in the manner set forth in our bylaws. Section 3.2 of our bylaws currently provides that the authorized number of directors shall be fixed from time to time exclusively by the board pursuant to a resolution duly adopted by a majority of the board members then in office, and no reduction of the authorized number of directors shall have the effect of removing any director before such director’s term of office expires. Therefore, if the Bylaw Proposal were adopted by our stockholders, our board of directors would no longer have the ability to fix the number of directors.
Under our current bylaws, our board of directors has the flexibility to increase or decrease the size of the board of directors if it determines that such increase or decrease would be in the best interests of the Company and its stockholders. Recruiting qualified candidates is a challenging and time-consuming process, and our board of directors believes that it is in the best interests of our stockholders to retain the ability of our board of directors to either increase the size of our board of directors to add a highly-qualified candidate if such a candidate becomes available or to decrease the size of our board of directors in a year when no such candidate is readily available.
For example, we are currently conducting a search for a new Chief Executive Officer. If the Bylaw Proposal were approved, our board of directors would not have the ability to add a highly qualified Chief Executive Officer to the board, even if our board of directors believed that doing so would be in the best interests of our stockholders. In addition, in the event that a member of our board of directors retires, resigns or is not re-elected, our board of directors could determine not to fill the resulting vacancy, depending on the availability of suitable candidates. However, if the Bylaw Proposal were approved, our board of directors would be forced to fill the vacancy regardless of the availability of qualified candidates.
Our board of directors believes that retaining the ability to increase or decrease the size of our board of directors or to appoint any particular person to our board of directors, if appropriate, continues to be in the best interests of our stockholders.
If you return a signed WHITE proxy card without providing voting instructions, your shares will be voted against the Bylaw Proposal.
The affirmative vote of the holders of two-thirds of the stock issued and outstanding and entitled to vote at the annual meeting is required to approve Proposal No. 3, the Bylaw Proposal. Abstentions and broker non-votes will have the same effect as a vote against the Bylaw Proposal.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “AGAINST” PROPOSAL NUMBER 3.
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