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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
UTILIX CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
JEROME E. STOCKDALE
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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NOTICE TO SHAREHOLDERS
In January 1998, Jerome E. Stockdale ("Stockdale") mailed proxy materials
to over 400 of the largest shareholders in Utilx Corporation. The solicited
shareholders held approximately 4.43 million of shares, or 61 percent, of the
outstanding common stock of Utilx at that time. The proxy form transmitted
with the mailings purports to solicit proxies "primarily for the purpose of
electing stockholder friendly directors." As a result of this proxy
solicitation, approximately forty Utilx shareholders provided Stockdale with
proxies.
Utilx's senior management learned of Stockdale's activities and, by
letter dated January 23, 1998, advised Stockdale that his proxy solicitation
violated several provisions of the federal securities laws and requested that
he "cease and desist" his illegal proxy solicitation. Stockdale consequently
discarded the executed proxies that he had received and had no further
contact with those shareholders. Accordingly, all Utilx shareholders who
returned proxies to Stockdale received no notice that Stockdale would not
represent, or ever represented, their interests in connection with their
Utilx shares.
Stockdale's proxy form and soliciting materials were not filed with the
United States Securities and Exchange Commission and did not contain certain
disclosures required under the proxy rules. On May 27, 1999, the Commission
entered an Order finding that Stockdale violated Section 14(a) of the
Securities Exchange Act of 1934, and Rules 14a-3, 14a-4, 14a-6, 14a-9 and the
disclosure requirements of Schedule 14A thereunder. The Commission's Order
requires that Stockdale cease and desist from committing or causing further
violations of the federal securities laws. A copy of the Commission's Order
describing these violations in detail is attached.
ACCORDINGLY, PLEASE BE ADVISED THAT ANY PROXY EXECUTIED AND RETURNED TO
STOCKDALE, OR HIS AGENTS OR ASSIGNS, IS NULL AND VOID.
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UNITED STATES OF AMERICA
before the
SECURITIES AND EXCHANGE COMMISSION
Securities Exchange Act of 1934
Release No. 41458 / May 27, 1999
Administrative Proceeding
File No. 3-9914
- ------------------------------------:
:
: ORDER INSTITUTING PUBLIC
In the Matter of : PROCEEDINGS PURSUANT TO
: SECTION 21C OF THE
JEROME EDWARD STOCKDALE, : SECURITIES EXCHANGE ACT
: OF 1934, MAKING
Respondent. : FINDINGS AND IMPOSING A
: CEASE-AND-DESIST ORDER
: AND REMEDIAL SANCTIONS
- ------------------------------------:
I.
The Securities and Exchange Commission ("Commission") deems it
appropriate and in the public interest that public administrative proceedings
be, and hereby are, instituted pursuant to Section 21C of the Securities
Exchange Act of 1934 ("Exchange Act") against Jerome Edward Stockdale
("Stockdale").
II.
In anticipation of the institution of these proceedings, Stockdale has
submitted an Offer of Settlement which the Commission has determined to
accept. Solely for the purpose of these proceedings, and any other
proceedings brought by or on behalf of the Commission, or in which the
Commission is a party, without admitting or denying the FINDINGS set forth
below, except as to jurisdiction of the Commission over Stockdale and over
the subject matter of these proceedings, which Stockdale admits, Stockdale
consents to the entry of the findings, cease-and-desist order and remedial
sanctions set forth below.
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III.
FACTS
The Commission finds the following:
A. RESPONDENT
STOCKDALE, age 68, is an individual shareholder of Utilx Corporation
("Utilx") residing in Okoboji, Iowa. Stockdale is a retired businessman who
partially owned and operated, at various times, Stockdale BANCorporation (a
savings and loan business), Stockdale Agency (an insurance business), Secure
Benefits Systems (an employee benefits business), S.A.G.E. Silver & Gold
Exchange (a precious metals investment business), and Security Reinsurance Ltd.
(a credit life and disability insurance business). As of January 1998,
Stockdale and his family owned approximately 120,000 shares of Utilx common
stock, which, according to Stockdale, made him the fifth largest Utilx
shareholder at that time. Stockdale and his family currently own approximately
80,000 shares of Utilx common stock.
B. ISSUER
UTILX CORPORATION is a Delaware corporation headquartered in Kent,
Washington. Utilx provides services and products used to install, replace and
renovate underground utilities. Utilx's stock is registered with the
Commission pursuant to Section 12(g) of the Exchange Act and is traded on the
NASDAQ National Market. As of December 31, 1998 there were approximately
7.426 million shares of Utilx common stock outstanding.
C. STOCKDALE'S CONDUCT
In January 1998, Stockdale mailed a proxy form and soliciting materials
to over 400 of the largest shareholders in Utilx. The solicited shareholders
held approximately 4.43 million shares, or 61 percent, of the outstanding
common stock of Utilx at that time. The proxy form transmitted with the
mailings purported to solicit proxies "primarily for the purpose of electing
stockholder friendly directors." In a letter accompanying the proxy form,
Stockdale stated that "management needs a whole change of attitude focused
much more on a partnership to include us, the stockholders." Stockdale's
letter stated that the company's foreign operations were losing money and had
never been profitable; that the directors owned very little Utilx stock; and
that management had "neglected to inform and educate stock brokers on Utilx
stock."
Stockdale's proxy form and the accompanying materials were not filed
with the Commission and did not contain certain disclosures required under
the proxy rules. The proxy form failed to identify in bold-face type on whose
behalf the solicitation is being made, failed to identify any director
candidates, and gave Stockdale the unlimited power to vote "at any and all
meetings of the Stockholders of the Corporation" for a two year period from
the date of the proxy.
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Stockdale's proxy materials failed to disclose that he was seeking
election to Utilx's board of directors. Stockdale began seeking a position on
Utilx's board of directors in July 1997. Between July and September 1997,
Stockdale made numerous written requests to Utilx to name him to the board of
directors. He also sought the support of major institutional Utilx
shareholders. In a letter dated September 4, 1997, Stockdale told one
institutional investor that he was "ready to proceed with the "hardball"
approach of soliciting proxies...." On November 13, 1997, the board rejected
Stockdale's request for nomination and election as a director because his
"experience and background [did] not provide a good match with the
qualifications desired in prospective members." Approximately two months
thereafter, Stockdale began his effort to elect unidentified "shareholder
friendly directors" without disclosing his intent to elect himself to the
board.
The proxy materials also requested that the recipients contribute money
to Stockdale to reimburse him in the amount of $50,000 which represented his
estimated cost to elect the shareholder friendly directors. Stockdale had no
basis for believing that his effort to elect new directors would cost him
$50,000. At that time, in fact, the only expenses Stockdale had incurred were
legal and postage and handling fees which totaled approximately $2,000. None
of the solicited shareholders sent him any money in response to his request.
However, Stockdale received approximately 40 proxies in response to his
mailings.
Utilx's senior management learned of Stockdale's activities and, by
letter dated January 23, 1998, advised Stockdale that his proxy solicitation
violated several provisions of the federal securities laws and requested that
he "cease and desist" his illegal proxy solicitation. Stockdale discarded the
executed proxies that he had received and had no further contact with those
shareholders. Accordingly, those Utilx shareholders who returned proxies to
Stockdale received no notice that Stockdale was no longer representing their
interests in connection with their Utilx shares. Stockdale does not know the
identity of any of the shareholders that sent proxies or the number of shares
for which he received proxies.
IV.
LEGAL DISCUSSION
STOCKDALE'S VIOLATIONS
Stockdale violated Section 14(a) of the Exchange Act and Rules 14a-3(a)
and 14a-6(b) thereunder by failing to file a proxy statement, proxy form, and
any other soliciting materials with the Commission in connection with his
proxy solicitation. Stockdale also violated the disclosure requirements of
Schedule 14A, which is mandated by Rule 14a-3. Specifically, Stockdale's
proxy solicitation failed to make certain required disclosures such as (1) the
date, time and place of the meeting of security holders for which the action
is to be taken; (2) Stockdale's present principal occupation or employment;
(3) Stockdale's security holdings, including holdings owned beneficially,
directly or indirectly; (4) information concerning nominees for director
positions; and (5) the voting procedures to be followed.
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In contravention of Exchange Act Rules 14a-4(b)(2) and 14a-4(d)(l),
Stockdale's proxy solicitation failed to name any nominees for director
positions in his proxy solicitation. Stockdale's proxy solicitation also
violated Rules 14a-4(d)(2) and 14a-4(d)(3), which limits the scope of
authority that can be conferred by proxy to a time period not to exceed the
date of the very next annual meeting. Stockdale's proxy solicitation violated
Rules 14a-4(d)(2) and 14a-4(d)(3) because it purported to grant Stockdale
authority for "two years after the date of this proxy," which clearly
extended beyond Utilx's next annual meeting. Stockdale's proxy solicitation
violated Rule 14a-4(a)(l) by failing to state in bold-face type on whose
behalf the solicitation was made.
Finally, by failing to disclose that he was seeking a position on
Utilx's board of directors, Stockdale's proxy solicitation contained
statements which, at the time and in the light of the circumstances under
which they were made, omitted to state material facts necessary in order to
make the statements therein not false or misleading in violation of Rule 14a-9.
By failing to identify. himself as a nominee, Stockdale also violated the
disclosure requirements of Schedule 14A. Stockdale previously requested
nomination and election as a director and explicitly threatened to engage in
a "hardball" proxy fight if his request was not granted. Stockdale's failure
to identify himself as a director candidate was a material omission, because
a reasonable investor would want to know that Stockdale intended to become a
director. Stockdale omitted this information in order to increase the
probability that other shareholders would tender their proxy to him.
V.
FINDINGS
Based on the above, the Commission finds that Stockdale committed
violations of Section 14(a) of the Exchange Act and Rules 14a-3, 14a-4,
14a-6, 14a-9 and the disclosure requirements of Schedule 14A thereunder.
VI.
Based on the above, the Commission deems it appropriate and in the
public interest to accept the respondent's Offer of Settlement and impose the
sanctions specified therein. Accordingly, IT IS HEREBY ORDERED that:
A. Pursuant to Section 21C of the Exchange Act, Stockdale cease and
desist from committing or causing any violation and any future violation of
Section 14(a) of the Exchange Act and Rules 14a-3, 14a-4, 14a-6, 14a-9 and
the disclosure requirements of Schedule 14A thereunder; and
B. Stockdale shall, within twenty (20) days of the entry of this Order,
provide written notice, in a form acceptable to the Commission, to all Utilx
shareholders to whom Stockdale sent a copy of the January 1998 proxy materials
described above. Said notice shall be made via first class U.S. mail and
shall provide each such shareholder with a copy of this Order and notice of
the fact that any proxy returned to Stockdale, or his agents or assigns, is
null and void. Stockdale
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shall further, within twenty (20) days of the entry of this Order, file a
copy of said notice with the Commission. Finally, Stockdale shall, within
twenty (20) days of the entry of this order, execute and deliver to Jon A.
Soderberg of the Commission's Washington, D.C. office an affidavit that he
has complied with the terms of this paragraph.
By the Commission.
Jonathan G. Katz
Secretary
/s/ Margaret H. McFarland
By: Margaret H. McFarland
Deputy Secretary
/Seal/
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SERVICE LIST
Rule 141 of the Commission's Rules of Practice provides that the
Secretary, or another duly authorized officer of the Commission, shall serve
a copy of the ORDER INSTITUTING PUBLIC PROCEEDINGS PURSUANT TO SECTION 21C OF
THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS AND IMPOSING A
CEASE-AND-DESIST ORDER AND REMEDIAL SANCTIONS on each person named as a party
in the order and their legal agent.
The ORDER INSTITUTING PUBLIC PROCEEDINGS PURSUANT TO SECTION 21C OF THE
SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS AND IMPOSING A
CEASE-AND-DESIST ORDER AND REMEDIAL SANCTIONS has been sent to the following
parties and other persons entitled to notice:
The Honorable Brenda P. Murray
Chief Administrative Law Judge
Securities and Exchange Commission
450 Fifth Street, N.W
Washington, D.C. 20549-1106
Paul R. Berger, Esq.
Glenn S. Gentry, Esq.
Jon A. Soderberg, Esq.
Securities and Exchange Commission
Division of Enforcement
450 Fifth Street, N.W.
Washington, D.C. 20549-0702
John D. Ellsworth, Esq.
Lieben, Whitted, Houghton, Slowiaczek
Cavanagh
2027 Dodge Street
Omaha, NE 68102
Counsel for Jerome E. Stockdale
Jerome E. Stockdale
c/o John D. Ellsworth, Esq.
Lieben, Whitted, Houghton, Slowiaczek
& Cavanagh
2027 Dodge Street
Omaha, NE 68102
