Nature of the Case
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Facts
P was a shareholder of Defendant, Cisco. An amendment was submitted for shareholder vote on November 1999 that increased an outside directors grant of stock from 20,000 share to 30,000 shares. It also raised the number of options granted annually from 10,000 to 15,000. P alleged that D acted negligently in preparing their proxy statements. P alleges a violation of proxy rules by failing to include the value of the option grants based on the Black Scholes, option pricing model. According to P’s calculations the options value was $369,000 in 1998 and $1,020,600 in 1999. P contends that D uses Black Scholes in its annual financial statements and that it would be easy to determine it for the director options. P contends that the mere statement of the annual fee with the stock granted is a material misrepresentation regarding the compensation of the directors. P contends D negligently violated 14(a) of the 1934 Act and Rule 14a-9. These make it illegal to solicit proxies in violation of SEC rules, and the rule prohibits solicitation of a proxy by using misleading or materially false statements or an omission of a material fact that makes any portion of the statement false or misleading.
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