Company Name: Louisiana Land and Exploration Co.
Public Availability Date: 03-31-1987
INQUIRY LETTER 1
Cahill, Gordon & Reindel
80 Pine Street
New York, N.Y. 10003
TELEPHONE(212) 701-3000
February 09, 1987
Rule 14a-8 under the Securities
Exchange Act of 1934, as
amended (17 C.F.R. ?240.14a-8)
Office of Chief Counsel
Division of Corporate Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: The Louisiana Land and Exploration Company
Gentlemen:
On behalf of The Louisiana Land and Exploration Company, a Maryland corporation
(the "Company"), we enclose pursuant to Rule 14a-8(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), six copies of each of the
following materials relating to the Company's omission of a shareholder proposal
from its proxy statement and form of proxy for the Annual Meeting of
Shareholders scheduled for May 14, 1987:
1. the proposal of the California State Teachers' Retirement System ("CSTRS"),
dated November 21, 1986, co-sponsored by the Public Employees' Retirement System
of the State of California ("PERS"), on November 20, 1986 (the "Proposal");
2. the statement of CSTRS and PERS in support of the Proposal the "Supporting
Statement";
3. this letter, setting forth the reasons why omission of the Proposal is
proper; and
4. an opinion of our firm supporting the reasons stated herein which are based
on matters of law.
We also enclose for your information a copy of the letters notifying CSTRS and
PERS of the Company's intention to omit the Proposal, as required by Rule
14a-8(d).
The Company has decided to omit the Proposal from its proxy materials. This
omission is permissible pursuant to Rule 14a-8(c) because (a) implementation of
the Proposal would recommend that the Board of Directors of the Company the
"Board") violate Maryland law; (b) the Proposal is beyond the Board's power to
effectuate; (c) the Proposal has been rendered moot; (d) the Proposal relates to
the payment of stock dividends; and (e) the Proposal and the Supporting
Statement are false and misleading in violation of Rule 14a-9.
On May 25, 1986, the Board of Directors of the Company unanimously declared a
dividend to all its shareholders of one capital stock purchase rights (a
"Right") for each outstanding share of the Capital Stock, par value $.15 per
share, of the Company (the "Capital Stock"). Each Right entitles the holder to
purchase one share of the Capital Stock at a price of $90.00 per share in the
event of the acquisition of, or a tender offer or announcement of such an offer
which would result in the offeror owning, 20% or more of the outstanding Capital
Stock. The Rights are redeemable at a price of $.05 per Rights at any time up
until 10 days after an announcement of an acquisition of at least 20% of the
outstanding Capital Stock. The issuance and distribution of the Rights were duly
approved by the Board of Directors and did not require shareholder approval. The
Rights are registered under the Exchange Act and are listed on six stock
exchanges, including the New York Stock Exchange.
1. The Proposal seeks to recommend that the Board rescind the Rights, or
alternatively, submit the issuance and distribution of the Rights to the
Company's shareholders for their approval. The Proposal may properly be omitted
pursuant to Rule 14a-8(c)(2) because the alternatives recommended for Board
action would, if implemented by the Board, require that the Board take action in
violation of Maryland law.
The Rights were legally issued as a dividend to the holders of the Capital
Stock. Under Maryland corporate law, a dividend which has been legally declared
and paid may not be revoked. Rescission of the Rights, then, would be an
unlawful attempt to rescind a dividend. The principles of Maryland corporate law
supporting this conclusion are set forth in the accompanying opinion of counsel.
The Staff has recently recommended that no enforcement action be taken against a
registrant incorporated under Nevada law, who omitted a shareholder proposal
substantially identical to the Proposal from its proxy statement for precisely
these reasons. Southwest Forest Industries, Inc. (available March 4, 1986).
In addition, rescission of the Rights by the Board would be tantamount to the
Board unilaterally revoking or cancelling shares of its validly issued and
outstanding capital stock. The Rights are securities, duly issued to the
Company's shareholders, and, as stated above, registered under the Exchange Act
and listed on six stock exchanges. Such a revocation or cancellation of all or a
portion of a class of a corporation's stock, where such is not otherwise
provided by a corporation's charter, would be contrary to Maryland law and in
contravention of the provisions of the Company's charter, which is the
controlling "contract" between the Company, as an entity, and the shareholders,
as an entity. These issues were also addressed in the Southwest Forest Letter in
the context of substantially identical facts and, as stated above, the Staff
recommended that no enforcement action be taken.
The second recommendation contained in the Proposal, which recommends that the
Board submit the Rights for shareholder approval, would, if implemented,
recommend that the Board act in violation of Maryland law. As indicated below,
shareholder approval of the Rights is a moot issue since the issuance of the
Rights has already been properly approved by the Board and no other corporate
approvals were or are required. More importantly, however, this part of the
Proposal is premised on the invalid assumption that if shareholder approval were
not obtained, the Board could act to rescind, revoke or otherwise cancel the
Rights. As stated above, Maryland law does not permit the Board to rescind,
revoke or cancel the Rights and, thus, the shareholder approval recommendation
aspect of the Proposal, if implemented, proposes that the shareholders of the
Company vote on whether or not to recommend that the Board take illegal action.
In addition to containing recommendations to violate Maryland corporate law, the
Proposal also may be properly omitted because it recommends that the Board
violate principles of Maryland contract law. As stated in our accompanying
opinion, rescission of the Rights would be a breach of the Rights Agreement,
dated as of May 25, 1986, between the Company and the Bank of New York, as
Rights Agent, pursuant to which the Rights were issued (the "Rights Agreement").
The Rights Agreement does not permit or authorize the rescission, revocation or
cancellation of either the Rights or the Rights Agreement. In fact, the Rights
Agreement contains a specific mechanism for redeeming the Rights in certain
circumstances and also provides that Rights holders will receive $.05 for each
Right redeemed. The Board cannot simply bypass their obligations to abide by the
terms of the Rights Agreement. Pursuant to Section 15 of the Rights Agreement,
the Rights holders prior to the time when the Rights become exercisable, the
Rights Agreement provides that the rights of the Rights holders are coextensive
with the rights of the holders of the Capital Stock may enforce their rights
under the Rights Agreement in an action for specific performance and for
injunctive relief. If a majority of the Company's shareholders were to vote in
favor of the Proposal and the Board then acted in accordance with the
recommendation of the Proposal, the Company would be subject to possible legal
action for breaching the Rights Agreement. Moreover, the Rights Agreement also
grants these rights of action to the Rights holders in connection with any
"threatened violations" of the Company's obligations; the Company might be
subject to possible legal action in connection with consideration of acting to
rescind the Rights.
2. The Proposal may also be properly omitted from the Company's proxy materials
pursuant to Rule 14a-8(c)(6), since the Proposal deals with a matter beyond the
Company's power to implement. As stated above, the Board is powerless to take
the action recommended by the Proposal since the requested action would be a
violation of Maryland corporate law and a breach of the Rights Agreement. Our
accompanying opinion of counsel concludes that if the Proposal were included in
the Company's proxy and approved by the shareholders, the Board would not have
the authority to take the action recommended by the Proposal.
3. For the same reasons referred to above, the Proposal may also be properly
omitted pursuant to Rule 14a-8(c)(10) because part of the recommended action,
submission of the Rights for shareholder approval, is a moot issue. The Rights
were duly and validly issued and distributed to the Company shareholders as a
dividend pursuant to all required corporate approvals. The Proposal's
alternative of submitting the issuance of the Rights to shareholder vote is thus
moot since the issuance and distribution of the Rights has already been properly
approved by all necessary corporate action of the Company.
4. The Proposal may also be omitted pursuant to Rule 14a-8(c)(13). The Rights
were initially issued as a dividend on the Capital Stock. Rule 14a-8(c)(13)
clearly allows omission of a proposal relating to the amount of a dividend,
whether that dividend is of cash or stock. The Proposal affects the "amount" of
the dividend as well -- the declared dividend was one Right per share of Capital
Stock, and the Proposal, if implemented, would recommend rescission of the
dividend and effectively reduce this amount to no Rights per share.
5. Finally, the Proposal may be omitted pursuant to Rule 14a-8(c)(13) since both
the Proposal and the Supporting Statement violate Rule 14a-8 by including false
and misleading statements. First, the Proposal recommends the rescission or
submission for shareholder approval of the Rights, but fails to state that such
rescission by the Board would not be permitted by Maryland law, would be a
breach of the Rights Agreement and submission for shareholder approval would be
moot since the Rights have already been validly issued and distributed. Second,
the Supporting Statement indicates that the Rights will be `triggered' by (i) a
public announcement that a person or group of affiliated or associated persons
acquired or obtained the right to acquire beneficial ownership of 20% or more of
the outstanding shares of the Capital Stock or (ii) the commencement or
announcement of an intention to make a tender or exchange offer for 30% or more
of the outstanding shares of the Capital Stock." This is incorrect; the Rights
become exercisable (i.e., "triggered") ten days after (i) the public
announcement that a person (or persons acting as a group has acquired 20% of the
Capital Stock or (ii) the commencement, or an announcement of intention to
commence, a tender or exchange offer which, if consummated, would result in such
person or group owning 20% or more of the Capital Stock.
The second paragraph of the Supporting Statement states that "this `poison pill'
will not only deter non-negotiated takeovers of the Corporation but would serve
to entrench current management, all to the detriment of the shareholders." This
statement is misleading since it does not make clear that neither the Rights nor
the Rights Agreement contain any provision which restricts the ability of the
shareholders to elect directors of the Company, limits the ability of the
Company's shareholders to remove directors or effects the appointment of
officers of the Company.
The third and fourth paragraphs of the Supporting Statement are misleading
because they state that CSTRS and others are "concerned" about poison pills, but
fail to state either why they are concerned or the identities of any others who
are concerned. Finally, the name of the Company in the Proposal is incorrect.
In conclusion, the Company respectfully requests that the Staff recommend no
enforcement action in the event that the Company omits the Proposal from its
1987 proxy materials on the basis of the reasons set forth in this letter and
our accompanying opinion of counsel. Should the Staff disagree with the
foregoing conclusions regarding the omission of the Proposal from the Company's
1987 proxy materials or should any additional information be required in support
of the Company's position, the undersigned would appreciate an opportunity to
confer with the Staff concerning these matters.
Since the schedule for the Company's Annual Meeting tentatively contemplates
that the preliminary proxy materials will be filed no later than March 2, 1987,
the Company respectfully requests that the Staff shorten the 60-day filing
period as permitted by Rule 14a-8(d).
For the convenience of the Staff, copies of the no-action letter cited above are
enclosed.
Kindly acknowledge your receipt of this letter and the enclosed materials by
file stamping the attached duplicate of this letter and returning it to the
undersigned. As indicated above, we would appreciate a prompt determination by
the Staff with respect to the matters discussed in this letter. If you have any
questions, please contact the undersigned at (212) 701-3432, Kenneth W. Orce at
(212) 701-3215 or John Schuster at (212) 701-3323.
Thank you in advance for your consideration of our request.
Very truly yours,
Barbara C. Meili
cc: Cecilia D. Blye, Esq.
Securities and Exchange Commission
"XADEnclosures"XBD
Shareholder Proposal
to
Louisiana Land and Exploration Company
Regarding Rights to Purchase Capital Stock
RESOLVED, that it is recommended that the Board of Directors of Louisiana Land
and Exploration Company rescind or submit for shareholder approval, at the
earliest possible date, the Rights to Purchase Capital Stock declared on May 25,
1986.
Shareholder Supporting Statement
On May 25, 1986, the Board of Directors unilaterally and without shareholder
participation or approval, declared the Rights to Purchase Capital Stock. These
"Rights" when distributed to holders of the Corporation would, in our view,
significantly deter a non-negotiated takeover of the Corporation. The "Rights"
more commonly known as "poison pills," will be "triggered" by (i) a public
announcement that a person or group of affiliated or associated persons
acquired, or obtained the right to acquire, beneficial ownership of 20% or more
of the outstanding shares of the Capital Stock, or (ii) the commencement or
announcement of an intention to make a tender or exchange offer for 30% or more
of the outstanding shares of the Capital Stock.
In our opinion, this "poison pill" will not only deter non-negotiated takeovers
of the Corporation, but would serve to entrench current management, all to the
detriment of the shareholders.
We as a $20 billion public school teachers' fund, become concerned when we see
corporations such as Louisiana Land and Exploration Company enacting "poison
pills."
And we are not alone.
In commenting on "poison pill" proposals to SEC stated: "Tender Offers can
benefit shareholders by offering them an opportunity to sell their shares at a
premium and by guarding against management entrenchment. However, because poison
pills are intended to deter non-negotiated tender offers, and because they have
this potential effect without stockholder consent, poison pill plans can
effectively prevent shareholders from even considering the merits of a takeover
that is opposed by the board. "SEC, Release No. 34-23486 (July 31, 1986).)"
INQUIRY LETTER 2
CAHILL GORDON & REINDEL
EIGHTY PINE STREET
NEW YORK, N.Y. 10005
February 09, 1987
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: The Louisiana Land and Exploration Company
Gentlemen:
On behalf of The Louisiana Land and Exploration Company, a Maryland corporation
(the "Company"), this opinion is being furnished to you pursuant to Rule
14a-8(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), in support of certain of the conclusions contained in our letter of even
date requesting that the staff of the Division of Corporate Finance of the
Securities and Exchange Commission ("the Commission") recommend no enforcement
action in the event that the Company omits the shareholder proposal and
supporting statement, dated November 21, 1986, of the California State Teachers'
Retirement System and co-sponsored by the Public Employees' Retirement System of
the State of California (the "Proposal") from the Company's 1987 proxy
materials. If the Proposal were included in the Company's 1987 proxy statements,
the Company's shareholders would vote on the Proposal at the Company's 1987
Annual Meeting of Shareholders. Specifically, the Proposal recommends that the
Board of Directors rescind, or submit for shareholder approval, the rights to
purchase shares of the Company's capital stock, $.15 par value (the "Capital
Stock"), declared as a dividend distribution by the Board of Directors of the
Company (the "Board") on May 25, 1986 (the "Rights").
The Rights were issued pursuant to a rights agreement, dated May 25, 1986,
between the Company and The Bank of New York, as Rights Agent (the "Rights
Agreement"). The Rights were registered under Section 12(b) of the Exchange Act
pursuant to a Form 8-A dated May 25, 1986 which was declared effective by the
Commission on June 6, 1986. The Rights are listed on all stock exchanges on
which the Company's Capital Stock is listed, which include the New York Stock
Exchange, the Toronto Stock Exchange, The Stock Exchange London, The Stock
Exchange of Geneva, The Stock Exchange of Zurich and The Stock Exchange of
Basel. The Rights currently trade with shares of the Company's Capital Stock.
We advise you that in our opinion:
1. The Board does not have the authority to rescind the Rights. The Rights were
validly issued as a dividend and distributed to shareholders of the Company's
Capital Stock. It is a well-established principle of Maryland corporate law that
once a legally permissible dividend has been declared by the directors of a
corporation, it cannot be rescinded or revoked. Alexander & Alexander, Inc. v.
United States (D. Ct. Maryland), 22F. Supp. 921 1938. The Rights dividend was
permitted and authorized by Maryland law, the Company's charter and by a
resolution of the Board. Section 2-309 of the Maryland General Corporation Law
provides that a corporation may declare and pay dividends if otherwise permitted
by the corporation's charter and if the corporation is neither insolvent nor
would be caused to become insolvent by virtue of such dividend and the
corporation's stated capital is neither impaired nor would it become impaired by
virtue of such dividend.
2. The Company would breach its obligations under the Rights Agreement if the
Proposal were implemented and the Board acted in accordance with the Proposal's
recommendation, since the Rights Agreement does not permit or authorize the
Company to rescind the Rights. Furthermore, Section 15 of the Rights Agreement
grants to holders of the Company Capital Stock or the holders of Rights
Certificates, depending on whether the Rights are then currently exercisable and
separately transferable, the right to specifically enforce the obligations of
the Company under the Rights Agreement and to seek injunctive relief against
actual or threatened violations of the Rights Agreement, in addition to any
other remedies that such holders may have under applicable law. If the Company
were to rescind the Rights or even to consider such action, the Company might be
subject to legal action based on claims involving the Company's actual or
threatened breach of the Rights Agreement.
Very truly yours,
CAHILL GORDON & REINDEL
INQUIRY LETTER 3
CAHILL GORDON & REINDEL
EIGHTY PINE STREET
NEW YORK, N. Y. 10005
Re: Response to Submission of Shareholder Proposal The Louisiana Land and
Exploration Company
Dear Mr. Kurmel:
Please note that The Louisiana Land and Exploration Company (the "Company") has
decided to omit the proposal you submitted on November 21, 1986 from the proxy
materials pertaining to its 1987 annual meeting pursuant to Rule 14a-8(c) under
the Securities Exchange Act of 1934, as amended. The Company is requesting that
the staff of Securities and Exchange Commission recommend no enforcement action
with respect to the omission of this proposal. Our letter requesting this
recommendation, which sets forth the reasons that the Company will omit your
proposal, and an opinion of counsel in support of such reasons are enclosed for
your reference as required by Rule 14a-8(d).
Yours very truly,
Barbara C. Meili
Mr. Larry D. Kurmel
Chief Executive Officer
California State Teachers' Retirement System
P.O. Box 15275-C
Sacramento, California 95891
INQUIRY LETTER 4
CAHILL GORDON & REINDEL
EIGHTY PINE STREET
NEW YORK, N. Y. 10005
Re: Response to Submission of Shareholder Proposal The Louisiana Land and
Exploration Company
Dear Mr. Arau:
Please note that The Louisiana Land and Exploration Company (the "Company") has
decided to omit the proposal you submitted on November 21, 1986 from the proxy
materials pertaining to its 1987 annual meeting pursuant to Rule 14a-8(c) under
the Securities Exchange Act of 1934, as amended. The Company is requesting that
the staff of Securities and Exchange Commission recommend no enforcement action
with respect to the omission of this proposal. Our letter requesting this
recommendation, which sets forth the reasons that the Company will omit your
proposal, and an opinion of counsel in support of such reasons are enclosed for
your reference as required by Rule 14a-8(d).
Yours very truly,
Barbara C. Meili
Mr. Jose Arau
Principal Investment Officer
Public Employees' Retirement System, State of California Investment Office
Lincoln Plaza
400 P Street
Sacramento, California 95812-2749
INQUIRY LETTER 5
WILLKIE FARR & GALLAGHER
818 CONNECTICUT AVENUE N.W.
WASHINGTON, D.C. 20006-2783
TELEPHONE(202) 328-6000
February 12, 1987
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
ATTN: Division of Corporate Finance
Re: Shareholder Proposal Submitted by California State Teachers' Retirement
System for Inclusion in the 1987 Proxy Statements of Texaco Inc. and The
Louisiana Land and Exploration Company
Ladies and Gentlemen:
On behalf of our client, the California State Teachers' Retirement System
("STRS"), we hereby file 12 copies of this response to points raised by the
above-referenced corporations in their materials supporting their intention to
omit from their 1987 proxy statements a STRS sponsored or co-sponsored
shareholder proposal recommending that they "rescind or submit to a shareholder
vote" their Shareholder Rights Plan or "poison pill."
Although the corporate submissions cite a number of subsections of Rule 14(a)-8
as promulgated under the Securities Act of 1934, as amended, the underlying
basis for each is the argument that the proposal can be excluded under Rule
14a-8(c)(2) because, if adopted, it would constitute a breach of contract in
violation of state law. It would thus be beyond the company's power to
effectuate (14a-8(c)(6)), not a proper subject for action (14a-8(c)(1)), and,
because the Rights have already been issued, moot (14a-8(c)(10)).
In addition to cases necessary to establish the relevant state law contractual
obligations, the responses rely almost exclusively on a March 4, 1986 "no
action" letter to Southwest Forest Industries, Inc. In that letter the staff
stated it would not recommend enforcement action to the Commission if the
company omitted, under Rule 14a-8(c)(2), a proposal to revoke its Rights Plan.
The companies argue that unilateral revocation would constitute an unlawful
revocation of a dividend under state law.
Although the corporations attempting to reject the STRS proposal characterize it
as a proposal recommending simple rescissions like the revocation exclusively
recommended in Southwest Forest Industries, it clearly is not. The STRS proposal
recommends that the Board of Directors "rescind or submit to a shareholder vote"
the Rights Plan (emphasis added). Despite this obvious choice between two
alternatives and despite the fact that it would make no sense for STRS to
recommend alternatives if they were identical, the corporations take great pains
to characterize the proposal as doing just that -- as giving a choice between
rescinding and voting to rescind."X6A1
It is clear why these corporations take such pains: giving the second
recommendation its obvious meaning makes it difficult to exclude. If, as is
recommended, shareholders vote and express disapproval of a poison pill, a board
of directors can easily carry out that recommendation without in any way
breaching state contractual or corporate law obligations. One of the few uniform
features of poison pills is the ease with which they can be redeemed by the
Board at a nominal price per share. Thus, although the proposal's second
alternative -- the submission of the recommendation to a shareholder vote --
leaves the Board free to choose the way in which it will respond, its main
option, redemption, is obvious. As stated below, if there is one thing
shareholders understand about poison pills, it is that they can be redeemed by
the boards that created them. To suggest, therefore, that STRS' proposal
recommends two virtually identical alternatives not only flies in the face of
logic, it ignores the obvious alternative open to the Board. To suggest further
that such a logical reading of the proposal is not possible absent a time-barred
amendment, is, at best, disingenuous. As stated above, the STRS proposal clearly
and on its face recommends one of two actions. Only the first relates to
rescission. The second, submission of the Plan for shareholder approval, leaves
the Board free to fashion its response -- as is preferred under Rule 14a-8(c)(1)
and the business judgment rule generally. Since the redemption option is still
available to the Board, and has not yet been taken, it cannot be said to be
moot. The proposal therefore requires no amending to avoid omission on
14a-8(c)(1), (2), (6) or (10) grounds.
The corporations themselves recognize this by arguing that there are independent
grounds for omitting proposals recommending redemption. They argue that the
proposals can be omitted because, under 14a-8(c)(7), they constitute matters
relating to the conduct of the ordinary business operation of the company
and/or, under 14a-8(c)(13), are tantamount to a request for a specific cash
dividend.
The trouble with both of these arguments is that to support them, one must
construe these 14a-8 subsections so broadly that they supply grounds to omit
almost every responsible, non-social shareholder proposal. It is perhaps to be
expected in the Alice-in-Wonderland world where corporations can call poison
pills "rights" that are bestowed upon shareholders, that such plans can be said
to relate merely to the company's ordinary business operations.
More importantly, relevant precedent strongly suggests that the "Rights Plan"
cannot be part of the company's "ordinary business operation." The Commission
has consistently taken the position that proposals involving a corporation's
"organization and structure" and matters involving important policy issues are
not matters relating to the corporations's day-to-day operation and are
therefore not excludable under 14a-8(c)(7). Paramount Packaging Corp. (available
March 11, 1981) and West Point Pepperell, Inc. (available Oct. 2, 1979). In
Release 34-12999 (November 22, 1976) the Commission took the view that proposals
having "significant policy, economic or other implications inherent in them"
should not be excluded by 14a-8(c)(7). The Commission restricted application of
that Rule to "proposals that deal with truly `ordinary' business matters. . .
that are mundane in nature and do not involve any substantial policy or other
considerations." Poison pills, which serve to entrench management, affect
fundamentally a corporation's "organization and structure" and raise important
policy considerations.
As the Commission's staff produced the leading study on the far-from-ordinary
potential effects of poison pills, STRS hopes that it will have little
difficulty dismissing this argument as without merit.
Similarly, if the nominal redemptive price of the "rights" can be used to bring
the proposal within 14a-8(c)(13) (particularly where, as here, it is clear that
this nominal amount is not the concern of the proponent), it suggests a new
technique for corporate counsel to insulate all sorts of management action from
shareholder input: link it to a nominal cash or stock dividend.
Almost every non-social shareholder proposal will at some level involve specific
amounts of cash dividends -- corporations are economic entities and shareholders
have economic interest in them. It is to be presumed that shareholders submit
most non-social shareholder proposals with the assumption that the value of
their stock or dividends will sooner or later be enhanced because of the
requested action. Thus 14a-8(c)(13) cannot have been meant to bar any proposal
that can in any way be linked to a specific cash amount or a specific cash stock
dividend. Rather 14a-8(c)(13) appears to be tailored to allow omission of
proposals that will demand payment of an actual dividend or seek to impose a
dividend schedule upon the corporation's management. See, e.g., Loew's
Corporation (available Dec. 22, 1986) (proposal establishing formula for
dividend payments properly excluded); Chrysler Corporation (available March 28,
1985) (same); High Voltage Engineering Corp. (available Sept. 6, 1984) (same);
Rockwell International Corp. (available Nov. 2, 1986) (proposal establishing
minimum ration for stock split properly excluded). In this case, the proposal
does not seek to compel payment of a dividend nor does it seek to prevent
payment of a dividend. The proposal merely asks that the shareholders have a
chance to vote on a course of action currently open to the Board. Thus to permit
the proposal's exclusion is to prefer form over substance and stretch
14a-8(c)(13) not only beyond any existing precedent, but beyond all reason.
Further, even if the "right" received by shareholders were regarded by the
Commission as a dividend for 14a-8(c)(13) purposes, the proposal should not be
excluded. If the "right" is a dividend, it has been distributed already
currently belongs to the shareholders. Redeeming the "right," i.e., purchasing
the "right" from the shareholder pursuant to the terms of the contract is giving
the shareholder no further dividend -- it is merely consummating a contractual
relationship already extant. To apply 14a-8(c)(7) and (13) in such a case would
be to make extremely difficult the already difficult and expensive task facing
shareholders wishing to provide responsible input into the corporations they
own.
Please acknowledge receipt of this letter by stamping the enclosed
acknowledgement copy of this letter and returning it to our messenger.
Very truly yours,
Ian D. Lanoff
STAFF REPLY LETTER
March 31, 1987
RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF CORPORATION FINANCE
Re: The Louisiana Land and Exploration Company (the "Company")
Incoming letter dated February 9, 1987
The proposal relates to the board of directors of the Company rescinding or
submitting for shareholder approval the previously issued Rights to purchase
Company common stock.
There appears to be some basis for your opinion that the proposal may be omitted
from the Company's proxy material under paragraphs (c)(2) and (c)(6) of Rule
14a-8 because it would, if implemented, require the Company to violate Maryland
law and existing contractual agreements. It appears, however, that these defects
would be cured if the proposal were revised to refer to redemption of the Rights
rather than rescission of the Rights. Assuming that the proponent promptly
revises the proposal in the manner indicated, we do not believe that the Company
may rely on either Rule 14a-8(c)(2) or Rule 14a-8(c)(6) as a basis for omitting
the proposal.
While this Division does not concur in your view that the proposal and
supporting statement may be excluded in their entirety from the Company's proxy
material pursuant to Rule 14a-8(c)(3), there appears to be some basis for your
view that the third sentence of the first paragraph of the supporting statement
may be excluded under Rule 14a-8(c)(3) unless revised to correctly identify the
triggering events under the Rights Agreement. Assuming, however, that the
proponent promptly relives the third sentence of the first paragraph of the
supporting statement in the manner indicated, this Division does not believe
that the Company may rely on Rule 14a-8(c)(3) as a basis for omitting that
sentence from its proxy material.
This Division does not concur in your view as to the applicability of paragraphs
(c)(1), (c)(10) and (c)(13) of Rule 14a-8 to the proposal. Accordingly, we do
not believe that the Company may rely on any one of those provisions as a basis
for omitting the proposal from its proxy material.
Sincerely,
Cecilia D. Blye
Special Counsel
"X6A1The companies go on to suggest that any other interpretation would make the
proposal excludable under Rule 14a-8(c)(3) as vague and misleading. It is ironic
that a proposal that is crafted in a way generally preferred by the corporations
-- it allows the Board to choose the appropriate response to the vote -- is
criticized for precisely that quality, especially when the Board has an obvious
response available to it. If there is one thing shareholders understand about
poison pills, it is that the Board can redeem them. This is hardly misleading.
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