Company Name: Martin Lawrence Ltd. Editions, Inc.
Public Availability Date: 04-11-1990
[INQUIRY LETTER 1]
GIBSON, DUNN & CRUTCHER
2029 CENTURY PARK EAST
LOS ANGELES, CALIFORNIA 90067-3026
TELEPHONE(213) 552-6500 March 09, 1990 Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549 Re: Martin Lawrence Limited Editions, Inc.
1990 Annual Meeting -- Proposal of
Carolyn B. Burch Gentlemen and Mesdames: Pursuant to Rule 14a-8(d) under the Securities Exchange Act of 1934, enclosed
herewith for filing on behalf of Martin Lawrence Limited Editions, Inc., a
Delaware corporation (the "Company"), are six (6) copies of both this letter and
a letter dated July 24, 1989 from Ms. Carolyn B. Burch, a stockholder of the
Company (the "Proponent"). It is the Company's intention to omit the Proponent's
shareholder proposal (the "Proposal") from the Company's proxy statement and
form of proxy (the "Proxy Materials") relating to the Company's 1990 Annual
Meeting of Stockholders (the "Annual Meeting"). Your advice is requested that
the Division of Corporation Finance (the "Staff") will not recommend any
enforcement action to the Securities and Exchange Commission (the "Commission")
if the Proposal is so omitted. The Proposal that the Proponent seeks the Company to include in its Proxy
Materials is as follows: Resolved: That the holders of common stock of Martin Lawrence Limited Editions,
represented in person or by proxy at this Annual Meeting, request the Board of
Directors to begin payment of a quarterly dividend. After review of applicable law and such corporate records and other documents as
we deemed relevant, it is our opinion that, for the reasons hereinafter stated,
the Proposal may be omitted from the Proxy Materials because (i) the Proponent
has not adhered to all of the procedural requirements of Rule 14a-8, (ii) the
Proposal is not a proper subject for stockholder action within the meaning of
Rule 14a-8(c)(1) and (iii) the Proposal deals with a matter relating to the
conduct of the ordinary business operations of the Company within the meaning of
Rule 14a-8(c)(7). I. RULE 14a-8(a). The first basis for excluding the Proposal from the Company's Proxy Materials is
that, pursuant to Rule 14a-8(a), a proposal of a security holder need not be
included unless the proponent has complied with the procedural requirements of
Rule 14a-8(a)(2). The Proponent has not complied with such requirements.
Specifically, in her July 24, 1989 letter to the Company, the Proponent failed
to provide to the Company either the number of shares of the Company's voting
securities held by her or documentary support for her claim of beneficial
ownership pursuant to Rule 14a-8(a)(2). II. RULE 14a-8(c)(1). Rule 14a-8(c)(1) permits the Company, a Delaware corporation, to omit the
Proposal because it is not a proper subject for stockholders' action under
Delaware law. The Company is organized under the General Corporation Law of the
State of Delaware (the "GCL"). Section 141(a) of the GCL provides that "the
business and affairs of every corporation organized under the direction of a
board of directors, except as may be otherwise provided in this chapter or in
its certificate of incorporation." Consistent with Delaware law, Section 3.01 of
the Company's By-laws provides that the business and affairs of the Company
shall be managed by the Company's Board of Directors. Section 170(a) of the GCL
empowers the Company's Board of Directors to declare and pay dividends on the
shares of its capital stock, subject to any restrictions contained in its
certificate of incorporation and subject to the restrictions contained in
Section 170 and other sections of the GCL. 1 As stated by Monsanto Company, a Delaware corporation, in its "no action"
request to omit a shareholder proposal to compel the registrant to pay
dividends, the Proposal "would conflict with the discretionary powers and
business judgment of the directors on a matter of management policy which is
granted to the directors rather than the stockholders. The declaration of
dividends or accumulation of earnings are matters for the judgment of the Board
of Directors." Monsanto Company (February 23, 1976). In taking a "no-action"
position in Monsanto Company the Staff stated: Both you and your counsel state, with some basis in our view, that since
Delaware law does not provide for stockholder action on such matters and since
neither the GCL nor the Certificate of Incorporation of the company limit in any
way the power of the board of directors to declare and pay dividends, it is
improper for the company's stockholders to act on the proposal in the form in
which it was submitted. We note that a shareholder proposal recommending or requesting a registrant's
board of directors to declare dividends may be proper under the laws of some
states. However, despite the phrasing of the Proposal in "precatory" language,
it is an inappropriate subject for the Company's stockholders in light of the
authority of the Company's Board of Directors under Section 170(a) of the GCL
and the case law construing it, and under the Company's charter documents.
Moreover, the fact that the Proposal is phrased as a request and not as a demand
should have little or no significance to the Staff in deciding whether the
Proposal is appropriate for inclusion in the Company's Proxy Materials. In
Section II.E.1 of Release No. 34-20091 (August 16, 1983), the Commission
indicated that it wished to "dispel any mistaken impression that the
Commission's application of paragraph (c)(1) is based on the form of the
proposal", instead, "whether the nature of the proposal, mandatory or precatory,
affects its includability is solely a matter of state law." III. RULE 14a-8(c)(7). That Staff has taken the position that stockholder proposals relating to the
distribution of dividends address matters within the scope of a registrant's
ordinary business operations and hence are excludable under Rule 14a-8(c)(7).
This position was recently reinforced in NYNEX Corporation (Jan. 19, 1989), in
which the Staff took a "no-action" position on a registrant's decision to omit
from its proxy materials a shareholder proposal establishing the dividend
payment date for any dividends declared. In the Staff's view "determining the
dividend payment date" related to the conduct of ordinary business operations.
Other "no-action" letters under Rule 14a-8(c)(7) support the Staff's position in
NYNEX Corporation and the Company's position expressed herein. For example, in
The Seagram Company, Ltd. (June 16, 1976), the Staff stated that it would not
recommend enforcement action if a registrant omitted from its proxy statement a
proposal that "all U.S. stockholders be paid dividends in U.S. currency," since
that proposal, relating to the management of the registrant's financial
resources and use of currencies, fell within the scope of the registrant's
ordinary business operations. Similarly, the Proposal relates directly to the
management of the Company's financial resources by addressing the frequency of
dividend payments. Therefore, the same reasons supporting the Staff's position
in NYNEX Corporation and The Seagram Company support the Company's position on
this Proposal. The determination of the amount and timing of dividends must be
left with a registrant's Board of Directors, which, unlike a registrant's
shareholders, is in a position to know the registrant's cash needs and how to
coordinate the timing and amounts of dividends with those cash needs. Moreover,
Rule 14a-8(c)(13) provides that a shareholder proposal relating to a specific
amount of cash or stock dividends may be excluded from a registrant's proxy
statement. As the Commission noted in Release No. 34-12999, the purpose of Rule
14a-8(c)(13) is "to prevent security holders from being burdened with a number
of conflicting proposals on such matters." Inclusion of the Proposal in the
Proxy Materials would open the door to a number of conflicting proposals being
raised at the Annual Meeting as to the frequency of dividends (i.e., quarterly,
semi-annually or annually) by attendees. For the Staff's information, we are informed that the Company's Board of
Directors has considered paying cash dividends to its stockholders and has
determined, given the Company's business plan to expand the geographical
diversity of its markets in view of its existing capital resources, not to pay
cash dividends in the foreseeable future. The payment of dividends to
stockholders at this time may force the Company to reduce its expansion plans
and may force the Company to seek additional capital at rates which may not be
favorable to the Company. The Company has also informed us that it believes its
business plan will increase the current market price of the Company's common
stock to a greater extent than would the declaration and payment of dividends.
These matters are central to a registrant's ordinary business operations, and
therefore should be squarely excludable under Rule 14a-8(c)(7). In summary, it is our opinion that the Proposal may be omitted from the 1990
Proxy Materials because (i) the Proponent has not adhered to all of the
procedural requirements of Rule 14a-8, (ii) the Proposal is not a proper subject
for stockholder action within the meaning of Rule 14a-8(c)(1) and (iii) the
Proposal deals with a matter relating to the conduct of the ordinary business
operations of the Company within the meaning of Rule 14a-8(c)(7). A copy of this letter has been sent to the Proponent to advise her of the
Company's intention to omit the Proposal from the Company's 1990 Proxy
Materials. The Company respectfully requests that the Commission render its
advice on this matter in sufficient time for the Company to file definitive
copies of the Proxy Materials with the Commission by April 30, 1990. Five
additional copies of this statement, and five copies of the Proposal, are
submitted herewith. Kindly stamp one additional copy of this statement to
indicate receipt by the Commission, and return it to the undersigned in the
enclosed self-addressed stamped envelope. Please direct any questions regarding
this request to Allen E. Kelinsky, Esq. of this firm at (213) 557-8047. The opinion herein has been rendered solely for the benefit of the Commission in
connection with the request for omission of the Proposal from the Proxy
Materials. The opinion set forth in this letter may not be relied upon by any
other person besides the Commission or for any other purpose or quoted to or
relied upon by any other person or entity without our prior express written
permission. Very truly yours, Ronald S. Beard
Of GIBSON, DUNN & CRUTCHER RSB:ck:0934e
[INQUIRY LETTER 2]
Carolyn B. Burch
804 Locust Street
Sterling, IL. 61081 Mr. Allen A. Baron
Chief Financial Officer
Martin Lawrence Limited Editions
16250 Stagg Street
Van Nuys, California 91406 Dear Mr. Baron: I have been a stockholder of Martin Lawrence Limited Editions since December of
1984. I have just read the proxy statement which shows executive compensation of
in excess of one and three quarter million for five persons, in addition to
personal benefit indirect compensation, stock options, special bonus plans and
lucrative opportunities in the sale of fine art. Where does the lowly stockholder fit into these financial plans? Your first
quarter report shows assets five plus times liabilities, but you pay no dividend
to your stockholders. And your proxy material indicates you do not intend to
present any "matter for action" at the annual meeting. As an eligible stockholder, I submit the following proposal for inclusion in the
1990 Proxy Statement; Resolved: That the holders of common stock of Martin Lawrence Limited Editions,
represented in person or by proxy at this Annual Meeting, request the Board of
Directors to begin payment of a quarterly dividend. Yours, Carolyn B. Burch cb
[STAFF REPLY LETTER]
APR 11 1990 RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF CORPORATION FINANCE Re: Martin Lawrence Limited Editions, Inc.
(the "Company")
Incoming letter dated March 9, 1990 The proposal involves a request that the Company's Board of Directors begin
paying a quarterly dividend. The Division is unable to concur in your view as to the applicability of rule
14a-8(a)(2). In this regard, the Commission has stated that "if the proponent
fails to initially furnish documentary support for a claim of beneficial
ownership i.e., assuming the proponent is not a record holder, the registrant
must request such support before the proposal is excludable..." Securities
Exchange Act Release No. 25217 (December 21, 1987). Noting the absence of a
timely request from the Company to the proponent for documentary evidence to
demonstrate eligibility, the Division does not believe that the Company may rely
on rule 14a-8(a)(2) as a basis for excluding the proposal from its proxy
materials. The Division is unable to concur in your opinion that the proposal may be
excluded from the Company's proxy materials pursuant to rule 14a-8(c)(1). In
reaching a position, the staff notes that the proposal is precatory and that
neither applicable state law nor the Company's governing instruments preclude
shareholders from considering the matter recommend by the proposal. Accordingly,
the Division does not believe that the Company may rely on rule 14a-8(c)(1) as a
basis to omit the proposal. The Division is also unable to concur in your view that the proposal may be
excluded from the Company's proxy materials pursuant to rule 14a-8(c)(7). In
arriving at a position, we note that the Commission has indicated that "because
dividend matters are extremely important to most security holders, and because
they involve significant economic and policy considerations, they are not
`ordinary' business matters... ." Securities Exchange Act Release No. 12999
(November 27, 1976). In the staff's view, this proposal, which does not concern
the form, method or procedure for dividend payments, and which does not relate
to a specific amount of dividends (see rule 14a-8(c)(13) involves a matter of
policy outside the realm of the Company's ordinary business operations.
Accordingly, this Division does not believe that the Company may rely on rule
14a-8(c)(7) as a basis to omit the proposal. Sincerely, John C. Brousseau
Special Counsel
1See also Gabelli & Co., Inc. v. Liggett Group, Inc., 479 A.2d 276, 280 (Del.
Supr. 1984). ("It is settled law in this State that the declaration and payment
of a dividend rests in the discretion of the corporation's board of directors in
the exercise of its business judgment; that, before the Courts will interfere
with the judgment of the board of directors in such matter, fraud or gross abuse
of discretion must be shown.") |
