Company Name: PLM Int'l., Inc.
Public Availability Date: 04-28-1997
[INQUIRY LETTER 1]
FARELLA BRAUN & MARTEL LLP
RUSS BUILDING, 30TH FLOOR
235 MONTGOMERY STREET
SAN FRANCISCO, CA 94104
TELEPHONE(415) 954-4400 March 14, 1997
VIA FEDERAL EXPRESS Securities and Exchange Commission
Office of Chief Counsel
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, DC 20549 Re: PLM International, Inc.
Shareholder Proposals of Douglas Smuckler and James A. Coyne Ladies and Gentlemen: Pursuant to Rule 14a-8(d) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), we hereby give notice on behalf of PLM International, Inc.
(the "Company") of its intention to omit from the proxy statement and form of
proxy for the Company's 1997 Annual Meeting of Stockholders (together, the
"Proxy Materials") the proposals submitted by Douglas Smuckler (the "Smuckler
Proposal") and James A. Coyne (the "Coyne Proposal;" together with the Smuckler
Proposal, the "Proposals") by letter to the Company. Duplicates of each letter,
both dated January 3, 1997 are attached hereto as Exhibits A and B,
respectively. The Company plans to file definitive copies of its proxy statement and form of
proxy on April 25, 1997. Pursuant to Rule 14a-6 of the Exchange Act, this notice
was due to be filed with the Commission not later than February 3, 1997. The
Company respectfully requests that it be permitted to file notice at this time
in the Staff's discretion. Notice was delayed because the Company believed that
it had received multiple proposals from one party in violation of the
one-proposal limitation of Rule 14a-8(a)(4). Specifically, the Company received
six related proposals, including the Proposals, at the same time, with the same
date and identical text. The Company subsequently determined that the proposals
were made by different stockholders meeting the requirements of Rule
14a-8(a)(1). Of the six related proposals, the Company intends to include all of the
proposals except the Proposals in its Proxy Materials. With respect to the
Proposals, the Company requests the concurrence of the staff of the Division of
Corporation Finance (the "Staff") that it will not recommend enforcement action
if the Company omits the Proposals from the Proxy Materials. The Smuckler Proposal The Proposal reads in its entirety as follows: "RESOLVED: That pursuant to Section 203(b)(3) of the Delaware General
Corporation Law, the Stockholders hereby amend the Company's Certificate of
Incorporation, as amended, by adding a new Article Fifteenth which shall read as
follows: FIFTEENTH: The Corporation shall not be governed by Section 203 of the Delaware
General Corporation Law." The Company is aware that the Staff has not concurred with past requests to omit
similar shareholder proposals pursuant to Rule 14a-8(c)(1) as an improper
subject for shareholder action, providing that such proposals were cast as
recommendations or requests that the board of directors take the steps necessary
to implement the proposals. See ONBANCorp, Inc. (available February 15, 1996).
The Company seeks to exclude the Smuckler Proposal pursuant to Rule 14a-8(c)(2)
under the Exchange Act, which permits the omission of a shareholder proposal if,
by implementing the proposal, the registrant would be required to violate any
state law or federal law of the United States. The Company has received an opinion from Delaware counsel (attached hereto as
Exhibit C) that the amendment contemplated by the Smuckler Proposal is an
improper attempt to amend the Company's Certificate of Incorporation solely by
stockholder action and without the requisite resolution of the board of
directors contemplated by the Delaware General Corporate Law ("DGCL") Section
242. Under Section 242(b)(1), before an amendment of a corporation's certificate of
incorporation may be considered by the stockholders at an annual or special
meeting, the corporation's "board of directors shall adopt a resolution setting
forth the amendment proposed, declaring its advisability, and either calling a
special meeting of the stockholders entitled to vote in respect thereof for the
consideration of such amendment or directing that the amendment be considered at
the next annual meeting of the stockholders." DGCL §203(b)(3) permits a Delaware corporation to opt out of the restrictions
imposed therein if "by action of its stockholders" it adopts a charter amendment
to this effect. Section 203(b)(3) was not intended to overrule the procedural
requirements of Section 242(b)(1) or to eliminate the need for board approval
that it requires. Indeed. Section 203(b)(3) explicitly states that such an
amendment must receive the affirmative vote of a majority of all shares entitled
to vote "in addition to any other vote required by law." In the opinion of
Delaware counsel, unless and until the Smuckler Proposal has first been approved
by the Company's Board of Directors in the form of a resolution setting forth
the amendment and declaring its advisability, it may not be validly adopted by a
vote of the stockholders under Delaware law." The Coyne Proposal The Proposal reads in its entirety as follows: "RESOLVED: That the stockholders hereby amend the Company's By-Laws by adding a
new Section 11 to Article II which shall read as follows: Section 11. Stockholder Meeting in Event of Certain Cash Tender Offers. If a
cash tender offer (not subject to a financing condition) is made to acquire all
the Company's Common Stock at a price at least 25% greater than the average
closing price of such shares during the 30 days prior to the date on which such
offer is made, and the Board of Directors opposes such offer (including without
limitation declining to redeem the outstanding Rights pursuant to Section 24(a)
of the Rights Agreement dated as of March 13, 1989, between the Company and
First Interstate Bank of California, or declining to approve such offer pursuant
to Section 203(a)(1) of the Delaware General Corporate Law), the Board of
Directors shall call and hold within 60 days after the date of such offer a
meeting of stockholders at which stockholders are asked to vote upon a proposal
to support the Board of Directors' policy of opposition to such offer; and if
such resolution is not approved by a vote of a majority of the votes cast for or
against such proposal at a meeting of stockholders at which a quorum is present
held within such 60-day period, the Board of Directors shall terminate its
opposition to such offer no later than 30 days after the earlier of (a) such
stockholders' meeting and (b) the end of such 60-day period. Prior to the end of
such 30-day period, the Board of Directors shall take such reasonable actions
(including without limitation delaying the Distribution Date of the Rights under
the Rights Agreement) as are necessary to preserve the stockholders' ability to
accept such offer. This Section 11 may only be amended by a stockholder vote
pursuant to Section 1 of Article IX of the By-Laws." Rule 14a-8(c)(2) under the Exchange Act permits the omission of a shareholder
proposal if, by implementing the proposal, the registrant would be required to
violate any state law or federal law of the United States. The Company has received an opinion from Delaware counsel (attached hereto as
Exhibit D) that the proposed amendment represents an impermissible restriction
on the statutory and fiduciary duties imposed upon boards of directors which
would be invalid under Delaware law. In the opinion of counsel, the Coyne Proposal is an impermissible attempt to
usurp the managerial powers exclusively invested in the Board of Directors by
DGCL §203. Section 203(a) explicitly invests in the Board of Directors the power
and the duty to assess and approve business combinations. Under Delaware law,
directors may not delegate duties that they are required by statute to perform,
unless the statute explicitly provides for such delegation. See, e.g., Nomad
Acquisition Corp. v. Damon Corp., No. C.A. 10173, 1988 Del. Ch. LEXIS 133, at
9-10 (attempt to divest the Board of Directors of its duties and authority under
Section 203 was invalid under Delaware law). The Coyne Proposal explicitly would
require the Board to hold a special meeting to permit a shareholder vote even if
the Board declined to approve such an offer pursuant to Section 203(a)(1).
Essentially, the Coyne Proposal would prevent the Board from fulfilling its duty
to assess whether an offer was in the best interests of the stockholders and
leave the decision solely to a vote of stockholders. As such, it is invalid
under Delaware law. Counsel has further advised the Company that the Coyne Proposal is an
impermissible attempt to usurp the managerial powers exclusively invested in the
Board of Directors by DGCL §141(a). Absent an express provision in a
corporation's certificate of incorporation to the contrary, Section 141(a) vests
in the board of directors the authority to manage the corporate enterprise. The
Delaware courts have consistently held that neither the affirmative duty to
manage the business and affairs of the corporation imposed upon a board of
directors by Section 141(a) nor the fiduciary duties of directors to act in the
best interests of the corporation and its stockholders may be delegated to
others or substantially restricted, unless a delegation, if permissible at all,
is accomplished pursuant to the corporation's certificate of incorporation. See,
e.g., Abercrombie v. Davies,
123 A.2d 893 (Del. Ch. 1956) rev'd as to another
point, 130 A.2d 338 (Del. 1957). The Delaware Supreme Court has explained that a board of directors has "both the
duty and responsibility to oppose threats" presented by takeover bids. See,
e.g., Ivanhoe Partners v. Newmont Mining Corp., 535 A.2d 1334, 1345 (Del. 1987).
The bylaw amendment contemplated by the Coyne Proposal would remove from the
Company's directors the discretion to exercise their independent business
judgment in reacting to certain tender offers, even if the board has determined
that a particular tender offer constitutes a threat to the Company and its
stockholders. Thus, it removes from the Company's Board of Directors the
statutory and fiduciary duty and authority contemplated by Section 141(a). As
such, it is invalid under Delaware law. Counsel has further advised the Company that the bylaw contemplated by the Coyne
Proposal is not authorized by DGCL §109(b) because it is inconsistent with the
Company's Certificate of Incorporation. Section 109(b) expressly provides that a
by-law may not be inconsistent with law or the certificate of incorporation. For
the reasons discussed supra, the bylaw contemplated by the Coyne Proposal is
consistent with Delaware law. It is also inconsistent with Article Eighth of the
Company's Certificate of Incorporation which vests in the Company's Board of
Directors (with certain exceptions not relevant here) the exclusive authority to
determine in their discretion whether to call a special meeting of stockholders.
In counsel's opinion, therefore, the Coyne Proposal also is prohibited by DGCL
§109(b) because it is inconsistent with Article Eighth of the Company's
Certificate of Incorporation. Based on the foregoing, the Company has concluded that the Proposals may be
properly omitted from the Proxy Materials pursuant to Rule 14a-8(c)(2) under the
Exchange Act, and therefore intends to omit the Proposals from the Proxy
Materials. Pursuant to Rule 14a-8(d) under the Exchange Act, there are enclosed five
additional copies of this letter, including the Smuckler and Coyne letters
attached hereto as Exhibits A and B, respectively. Pursuant to Rule 14a-8(d), by
copy of this letter Messrs. Smuckler and Coyne are being notified of the
Company's intention to omit the Proposals from the Proxy Materials. Please acknowledge receipt of the enclosed materials by date-stamping the
enclosed receipt copy of this letter and returning it in the enclosed return
envelope. Please feel free to call the undersigned with any questions or
comments regarding the foregoing. Sincerely yours, Morgan P. Guenther MPG:ks
Enclosures
cc: Stephen Peary, Esq.
James A. Coyne
Douglas Smuckler
Donald Wolfe, Esq.
[INQUIRY LETTER 2]
JAMES A. COYNE
10 WALDRON COURT
MARBELHEAD, MASSACHUSETTS 01945
TELEPHONE(999) 999-9999 March 27, 1997
Securities and Exchange Commission
Office of Chief Counsel
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, DC 20549 RE: PLM International, Inc.
Shareholder Proposal of James A. Coyne Ladies and Gentlemen: I have received a copy of a letter dated March 14, 1997, to you from Farella
Braun & Martel LLP notifying you on behalf of PLM International, Inc., of PLM's
intention to omit the stockholder proposal that I submitted to PLM from the
proxy statement and form of proxy for PLM's 1997 Annual Meeting of Stockholders.
This letter addresses certain matters raised in Farella Braun & Martel's letter. PLM requests that it be permitted to file its notice late. I complied with the
January 8, 1997, date given in PLM's proxy statement for its 1996 Annual Meeting
as the deadline for stockholder proposals for its 1997 Annual Meeting,
notwithstanding my belief that under Rule 14a-8 of Regulation 14A under the
Securities Exchange Act of 1934 the actual deadline was February 1, 1997.
(February 1 is the date that is 120 days in advance of May 31, and May 31, 1996,
is the date of PLM's proxy statement for its 1996 Annual Meeting). As a result,
PLM received my proposal well in advance of the date by which it might otherwise
have expected to receive a stockholder proposal for its 1997 Annual Meeting and
certainly well in advance of the February 3, 1997, date stated in the March 14
letter to you as the deadline under Rule 14a-6 of Regulation 14A for notice to
you of PLM's intention to omit my proposal. Accordingly, PLM had more than
adequate time to prepare and submit its notice to you within the Rule 14a-6 time
limits. Further, I cannot understand the statement in the March 14 letter to you that
notice to you was delayed because PLM believed that it had received multiple
proposals from one party. I am familiar with five of the six proposals referred
to in the March 14 letter, including my own. In every case, the proposer's name
and address are clearly stated at the head of his letter to PLM submitting his
proposal, and in every case the information presented in the first paragraph of
the proposer's letter concerning his ownership of PLM stock, along with the
documentary support for his claim of ownership attached to his letter, is
plainly specific to him. The names and addresses and stock ownership histories
of the five proposers are not confusingly similar. I find it hard to believe,
therefore, that PLM could have mistaken all five proposals as being from the
same person. With respect to the position taken by PLM on the proposal that I submitted, I
expect to send a further letter to you with my comments shortly. Very truly yours, James A. Coyne
[INQUIRY LETTER 3]
JAMES A. COYNE
10 WALDRON COURT
MARBLEHEAD, MASSACHUSETTS 01945
TELEPHONE(999) 999-9999 April 09, 1997
Securities and Exchange Commission
Office of Chief Counsel
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, D.C. 20549 RE: PLM International, Inc.
Shareholder Proposal of James A. Coyne Ladies and Gentlemen: On March 27, 1997, I wrote to you concerning the letter dated March 14, 1997, to
you from Farella Braun & Martel LLP notifying you on behalf of PLM
International, Inc., of PLM's intention to omit the stockholder proposal that I
submitted to PLM from the proxy statement and form of proxy for PLM's 1997
Annual Meeting of Stockholders. In my March 27 letter I indicated that I would
send you a further letter with respect to the position taken by PLM on the
proposal that I submitted. I am now doing so. The March 14 letter from Farella Braun & Martel relies on an opinion of counsel
that the amendment to the By-Laws that I proposed would be invalid under
Delaware law. I have received an opinion of counsel, enclosed, that a modified
version of the amendment would not be invalid under Delaware law. Accordingly, I
would agree to propose the modified version of the amendment if you determine
that such a modification would be necessary for my proposal to be included in
PLM's proxy statement and form of proxy for its 1997 Annual Meeting. The
modified proposal would be as follows: RESOLVED: That the stockholders hereby amend the Company's By-Laws by adding a
new Section 11 to Article II which shall read as follows: Section 11. Stockholder Meeting in Event of Certain Cash Tender Offers. If a
cash tender offer (not subject to a financing condition) is made to acquire all
the Company's Common Stock at a price at least 25% greater than the average
closing price of such shares during the 30 days prior to the date on which such
offer is made, and the Board of Directors opposes such offer (including without
limitation declining to redeem the outstanding Rights pursuant to Section 24(a)
of the Rights Agreement dated as of March 13, 1989, between the Company and
First Interstate Bank of California), the Board of Directors shall terminate all
defensive measures against such offer at the end of the 90th day after such
offer is made unless the Board's policy of opposition is approved by a majority
of the votes cast for or against such policy of opposition at a meeting of
stockholders held on or before such 90th day at which a quorum is present. Prior
to the end of such 90-day period, the Board of Directors shall take such
reasonable actions (including without limitation delaying the Distribution Date
of the Rights under the Rights Agreement) as are necessary to preserve the
stockholders' ability to accept such offer. Very truly yours, James A. Coyne cc: PLM International, Inc.
[INQUIRY LETTER 4]
FARELLA BRAUN & MARTEL LLP
RUSS BUILDING, 30TH FLOOR
235 MONTGOMERY STREET
SAN FRANCISCO, CA 94104
TELEPHONE(415) 954-4400 April 14, 1997
VIA FACSIMILE AND FEDERAL EXPRESS Ms. Amy Moss-Trombly, Esq.
Securities and Exchange Commission
Office of Chief Counsel
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, DC 20549 Re: PLM International, Inc.
Revised Shareholder Proposal of James A. Coyne Dear Ms. Moss-Trombly, This letter is submitted on behalf of PLM International, Inc., a Delaware
corporation (the "Company") in response to the letter dated April 9, 1997 (the
"Revised Proposal") from James A. Coyne (the "Proponent"). For the convenience
of the Staff, the Revised Proposal is attached hereto as Exhibit A. The Revised
Proposal was submitted in reply to the Company's letter to the Commission dated
March 14, 1997 (the "No-Action Request"). Capitalized terms used and not defined
herein have the meaning given to them in the No-Action Request. The Company requests the concurrence of the Staff that it will not recommend
enforcement action if the Company omits the Revised Proposal from the Proxy
Materials. Specifically, the Company believes, for the reasons set forth below,
that the Revised Proposal may be omitted pursuant to Rule 14a-8(c)(1) and Rule
14a-8(a)(3)(i) under the Exchange Act, and therefore intends to omit the Revised
Proposal from the Proxy Materials. A. The Revised Proposal May be Omitted From the Proxy Materials Pursuant to Rule
14a-8(c)(1) Because of Its Questionable Validity Under Applicable State Law. In apparent agreement with the objections raised in the No-Action Request, the
opinion of counsel in support of the Revised Proposal ("Proponent's Opinion
Letter") concedes that at least two provisions of the Original Proposal are of
questionable validity. It argues, however, that the offending provisions have
been remedied in the Revised Proposal. The Proponent's Opinion Letter is based
on an interpretation of Delaware law for which it concedes there is no legal
precedent from the Delaware courts. Indeed, it relies in part on a recent
decision by a federal district court in Oklahoma which was decided under
Oklahoma law. The Delaware law firm of Potter Anderson & Corroon considered the
same case in rendering its opinion letter to the Company (attached to the
No-Action Request as Exhibit D) and concluded that the case does not change the
opinion set forth therein. Notwithstanding the argument offered in Proponent's Opinion Letter, the Company
believes that the Revised Proposal may be omitted in reliance on Rule
14a-8(c)(1) as an improper action for shareholder action under state law.
Proponent's Opinion Letter concedes that even the Revised Proposal suffers from
a "potential inconsistency" with [at least] one provision of Delaware law
"depending on how the provision is interpreted." Proponent's central argument in favor of the interpretation it favors is that
the grant of authority under DGCL §141(a) 1 is "not exclusive and does not
nullify by-laws, adopted by shareholders . . . ." The Staff has been presented
in the past with similar arguments in support of stockholder efforts to limit
the authority of directors under DGCL §141(a). In the two cases that we are
aware of, the Staff permitted the omission of such proposals on the ground that
they were of "questionable validity." See, Radiation Care, Inc. (December 22,
1994) (bylaw provision authorizing the expenditure of corporate funds, effected
by shareholders without any concurring action by the board of directors, is
inconsistent with Section 141(a) of the Delaware General Corporation Law unless
otherwise provided in the Company's certificate of incorporation or the Delaware
General Corporation Law). See also, Pennzoil Corporation (March 22, 1993) (bylaw
amendment which authorizes the by-laws to limit the authority of directors is of
questionable validity and not a proper subject for shareholder action). The Company notes that the Staff omitted the foregoing proposal on the ground
that the proposed bylaw was of "questionable validity," and not because the
Staff was persuaded by a particular opinion of counsel as to how DGCL §141(a)
should be interpreted. Neither the Proponent nor the Company can be sure of the
proper interpretation of DGCL §141(a) until the issue is resolved by the
Delaware courts. Consequently, the proposed bylaw is of "questionable validity." Because the bylaw amendment proposed in the Revised Proposal is of questionable
validity, it may be omitted in its entirety pursuant to Rule 14a-8(c)(1). B. The Revised Proposal May be Omitted in Its Entirety From the Proxy Materials
Pursuant to Rule 14a-8(a)(3)(i) Because It Was Not Submitted in a Timely Manner. The Company further requests the concurrence of the Staff that the Revised
Proposal may be omitted as untimely. Rule 14a-8(a)(3)(i) provides that a
proponent shall submit a proposal for an annual meeting of stockholders "not
less than 120 calendar days in advance of the date the registrant's proxy
statement released . . . in connection with the prior year's annual meeting."
The Company's 1996 Proxy Statement indicated that stockholder's proposals to be
included in the 1997 Proxy Materials were required to be submitted by January 8,
1997. Although the Original Proposal was submitted on a timely basis, the
Company believes that the Revised Proposal may be omitted in its entirety
because the latter is materially different from the Original Proposal and it was
not submitted until April 9, 1997. The Revised Proposal deletes at least two material provisions from the Original
Proposal. In particular, the Revised Proposal deletes the offending limitation
on amendments to the proposed bylaw by the Board of Directors and obscures the
procedure by which the Board of Directors would be compelled to obtain
shareholder approval of any policy of opposition to certain cash tender offers. Securities Exchange Act Release No. 12999 (November 22, 1976) permits changes of
a minor nature, including changes which are intended to bring the proposal into
accord with the requirements of applicable state law. However, such amendments
typically do no more than make the proposal precatory. The Company also points out that the Revised Proposal offers no revisions to the
original supporting statement. The Company believes that material changes in the
original supporting statement will be necessary to conform it to the
modifications offered in the Revised Proposal and that, without such changes,
the original supporting statement is confusing and possibly misleading. In
similar circumstances, the Staff has permitted the omission of all or a portion
of the supporting statement. See, for example: Pacific Enterprises (February 25,
1993) (new and different paragraph in supporting statement not timely filed);
Sonat, Inc. (March 16, 1992) (more than minor changes in the "revised"
supporting statement constitutes new shareholder proposal not timely submitted). Because the Revised Proposal is substantively different from the Original
Proposal, and the former has not been submitted in a timely manner pursuant to
Rule 14a-8(a)(3)(i), the Revised Proposal may be omitted in its entirety. Even
if the Staff does not concur with our reasons for omitting the Revised Proposal
in its entirety, the Company requests its concurrence that the original
supporting statement may be omitted in view of the proponent's failure to
conform it to the changes embodied in the Revised Proposal. For the foregoing reasons, as well as the reasons previously stated in the
No-Action Request, the Company seeks the concurrence of the Staff of the
Division of Corporate Finance that the Revised Proposal, together with the
original supporting statement, may be properly omitted from the Proxy Materials
pursuant to Rule 14a-8(c)(1) and Rule 14a-8(a)(3)(i) under the Exchange Act, and
therefore intends to omit the same from the Proxy Materials. Pursuant to Rule 14a-8(d) under the Exchange Act, there are enclosed five
additional copies of this letter, including the Revised Proposal attached hereto
as Exhibit A. Pursuant to Rule 14a-8(d), by copy of this letter Mr. Coyne is
being notified of the Company's intention to omit the Revised Proposal from the
Proxy Materials. Please acknowledge receipt of the enclosed materials by date-stamping the
enclosed receipt copy of this letter and returning it in the enclosed return
envelope. Please feel free to call the undersigned with any questions or
comments regarding the foregoing. Sincerely yours, Morgan P. Guenther MPG:ks
Enclosures
cc: Stephen Peary, Esq.
James A. Coyne
Donald Wolfe, Esq.
[Footnotes] 1 DGCL Section 141(a) states: "The business and affairs of every corporation
organized under this chapter shall be managed by or under the direction of a
board of directors, except as may be otherwise provided in this chapter or in
its certificate of incorporation."
[INQUIRY LETTER 5]
FARELLA BRAUN & MARTEL LLP
RUSS BUILDING, 30TH FLOOR
235 MONTGOMERY STREET
SAN FRANCISCO, CA 94104
TELEPHONE(415) 954-4400 April 21, 1997
VIA FACSIMILE AND FEDERAL EXPRESS Frank G. Zarb, Jr., Special Counsel
Securities and Exchange Commission
Office of Chief Counsel
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, DC 20549 Re: PLM International, Inc.
Shareholder Proposal of James A. Coyne Dear Mr. Zarb, This attached supplemental opinion is submitted on behalf of PLM International,
Inc., a Delaware corporation (the "Company") in response to your telephone
request that Potter Anderson & Corroon ("Potter Anderson") address in greater
detail the basis for its view that the bench ruling by the U.S. District Court
for the Western District of Oklahoma in International Brotherhood of Teamsters
General Fund v. Fleming Co., Inc., No. 96-165, Alley, J. (W.D. Okla., Jan. 14,
1997) is without persuasive force as to the issue of Delaware law on which it
opined. In addition to the statutory provisions and common law principals on which
Potter Anderson has relied, we note for emphasis that the text of the Coyne
Proposal is distinguishable from the text of the proposal by the International
Brotherhood of Teamsters at issue in Fleming (the "Fleming Proposal"). The
Fleming Proposal was a defensive mechanism which was concerned with possible
future advances. Here, we have a mechanism which applies to the Board of
Directors' reaction to a specific takeover threat. This distinction implicates
at least one provision of the Delaware General Corporation Law which would be
irrelevant to the Fleming Proposal: specifically, Section 203(a) which expressly
vests the board of directors of a Delaware corporation with both the power and
the duty to respond to proposed business combinations. For the convenience of
the Staff, the full text of the Fleming Proposal is attached hereto as Exhibit
B. Thanks for your attention to this matter. If you have additional questions,
please call. Sincerely yours, Morgan P. Guenther MPG:ks
Enclosures
cc: Stephen Peary, Esq.
Donald Wolfe, Esq.
[INQUIRY LETTER 6]
FARELLA BRAUN & MARTEL LLP
RUSS BUILDING, 30TH FLOOR
235 MONTGOMERY STREET
SAN FRANCISCO, CA 94104
TELEPHONE(415) 954-4400 April 24, 1997
VIA FACSIMILE Frank G. Zarb, Jr., Special Counsel
Securities and Exchange Commission
Office of Chief Counsel
Division of Corporate Finance
450 Fifth Street, N.W.
Washington D.C. 20549 Dear Mr. Zarb: This will confirm that a copy of our letter to you dated April 21, 1997 together
with the supplemental opinion of Potter Anderson & Corroon was sent by facsimile
to Howard, Darby & Levin, counsel for James A. Coyne, on April 23, 1997. Please note that we filed preliminary proxy materials on behalf of PLM
International, Inc. yesterday. Although the shareholder proposals of Messrs.
Smuckler and Coyne are included therein, the Company still intends to omit such
proposals from the definitive proxy materials subject to the concurrence of the
Staff. If you have any questions, please feel free to call Morgan Guenther or
me. Very truly yours, James E. Grand JEG:ks
cc: Morgan P. Guenther, Esq.
[INQUIRY LETTER 7]
HOWARD, DARBY & LEVIN
1330 AVENUE OF THE AMERICAS
NEW YORK, N.Y. 10019
TELEPHONE(212) 841-1000 April 25, 1997
Mr. Frank G. Zarb, Jr., Special Counsel
Securities and Exchange Commission
Office of Chief Counsel
Division of Finance
450 Fifth Street, N.W.
Washington, D.C. 20549 RE: PLM International Shareholder Proposal Dear Mr. Zarb: We are members of the New York bar who have acted as special counsel to Mr.
James A. Coyne in connection with the by-law amendment he submitted to PLM
International, Inc. (the "Company") for adoption by shareholders and inclusion
in the Company's 1997 Proxy Statement (the "Coyne By-law"). We write in response
to the supplemental opinion (the "Supplemental Opinion") of Potter Anderson &
Corroon ("Potter Anderson") dated April 21, 1997 regarding the persuasive force
of the opinion of the United States District Court for the Western District of
Oklahoma in Int'l Brotherhood of Teamsters General Fund v. Flemming Co., Inc.,
No. 96-165, Allay J., (W.D. Okla. Jan. 14, 1997) as to validity of the Coyne
By-law under Delaware law. The text of the Coyne By-law is attached as Exhibit
A. The Supplemental Opinion does not present a cogent argument against the
persuasive force of the Flemming case. First, Section 203(a) of the Delaware
General Corporation Law is not relevant to or implicated by the Coyne By-law.
Section 203(a) provides, in effect, that if any person acquires beneficial
ownership of 15% or more of a company's outstanding shares (thereby becoming an
"Interested Stockholder"), the Interested Stockholder may not engage in a
business combination with the company for three years thereafter, subject to
certain exceptions. The Coyne By-law provides that in the event of a fully
financed cash tender offer, the Company's board of directors shall discontinue
any policy of opposition if such policy of opposition is not approved by the
Company's shareholders within ninety days of such offer. Since the Coyne By-law
does not deal with business combinations, it is not inconsistent with the
provisions of Section 203(a) and Section 203(a) does not, accordingly, reduce
the persuasive force of the Flemming case. Additionally, the Supplemental Opinion mistakenly states that the Coyne By-law
is inconsistent with Article Eighth of the Company's certificate of
incorporation. Article Eighth provides that, with certain exceptions, a special
meeting of the Company's stockholders may only be called by the Company's board
of directors. The Coyne By-law does not require the Company's board to call and
hold a special meeting of shareholders. The By-law provides that the board
cannot continue its policy of opposition to a qualified offer beyond ninety days
without shareholder approval. Because the Coyne By-law leaves it up to the
Company's board whether or not to call a meeting, the provisions of Article
Eighth of the Company's certificate are not inconsistent with the Coyne By-law
and Article Eighth does not reduce the persuasive force of the Flemming case. The Supplemental Opinion fails to address the clear implication of the Flemming
case: that a statutory grant of authority to a company's board of directors is
not necessarily an exclusive grant of authority and does not preclude
shareholder action in that area. Section 1038 of the Oklahoma law clearly grants
to a company's board of directors the authority to issue rights and options
respecting stock in connection with shareholder rights plans. 1 Nevertheless,
the Fleming court found that the shareholder resolution requiring shareholder
approval of any new shareholder rights plans and repeal of any existing
shareholder rights plans is a proper subject for shareholder action under Oklahoma law, specifically
section 1013A. 2 Section 1038 of the Act vests initiative in the Board of
Directors, but does not foreclose shareholder action in this matter. (citations
omitted). Thus, the Flemming case is a powerful precedent in support of the view that
Section 141(a)'s grant of authority to the Company's board of directors does not
preclude the adoption of a shareholder by-law, such as the Coyne By-law,
relating to the Company's business and affairs. Section 109(a) of the Delaware
General Corporation Law and the parallel Oklahoma provision on which the Fleming
court ruled, Section 1013(A), give stockholders the power to "adopt, amend or
repeal bylaws . . . relating to the business of the corporation, the conduct of
its affairs, and its rights or powers or the rights or powers of its
stockholders, directors, officers or employees." (emphasis added). The Flemming
case stands for the proposition that a statutory grant of authority to a
company's board is not necessarily exclusive and does not preclude the adoption
by shareholders of by-laws relating to such rights or powers of directors. The
Supplemental Opinion fails to articulate any point that lessens the persuasive
force of the Flemming case. The Commission should not allow the Company to exclude the Coyne By-law from its
proxy materials. The Flemming case provides a powerful precedent in support of
the By-law's validity, and we have found no Delaware case that has invalidated a
by-law because of its inconsistency with Section 141(a). Moreover, such a policy
of exclusion would stifle creativity and innovation in the corporate governance
debate and eliminate from the marketplace of ideas proposals whose validity
under the laws of a certain state has yet to be conclusively decided. Moreover,
the proposal was timely submitted to the Company and the amendments thereto are
of the kind specifically provided for in the Release governing timeliness of
14a-8 proposals. See Adoption of Amendments Relating to Proposals of Security
Holders, Exchange Act Release No. 19771, 1976 SEC LEXIS 326 at *11 (November 22,
1976) (concept of corporate democracy underlying Section 14a-of the Exchange Act
is best served by affording proponents the opportunity to make minor corrections
necessary to bring proposals into accord with the requirements of the applicable
state law). Please call me at (212) 841-1096 to discuss any questions you may have. We look
forward to discussing the Coyne By-law with you and will be happy to provide any
additional information you may require in order to complete your evaluation. We
respectfully request that if you do not agree with our analysis, that we be
given the opportunity to confer with you before the issuance of a response
letter. Very truly yours, Leonard Chazen cc: Morgan P. Gunther
James E. Grand
[Footnotes] 1 Section 1038 of the Oklahoma General Corporation Act is equivalent to Section
157 of the Delaware General Corporation Law, governing the issuance of rights
and options respecting stock. 2 Section 1013(A) of the Oklahoma General Corporation Act is equivalent to
Section 109 of the Delaware General Corporation Law, governing shareholder power
to adopt by-laws.
[STAFF REPLY LETTER]
April 28, 1997 RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF CORPORATION FINANCE Re: PLM International, Inc. (the "Company")
Incoming letter dated March 14, 1997 The Smuckler Proposal would amend the Company's certificate of incorporation to
state that the Company shall not be governed by Section 203 of the Delaware
General Corporation Law. The revised Coyne Proposal would amend the Company's
by-laws to terminate all defensive measures to certain cash tender offers unless
the board's opposition to the offer is approved by a majority of shareholders by
the end of a 90-day time period, during which period the board would be required
to take all reasonable actions to preserve shareholders' ability to accept the
offer. There appears to be some basis for your view, supported by an opinion of
counsel, that the Smuckler proposal may be excluded under rule 14a-8(c)(2) as a
violation of state or federal law. It appears that this defect could be cured,
however, if the proposal is cast as a recommendation or a request that the board
of directors take the steps necessary to implement the proposal. Assuming that
the proponent provides the Company with a proposal revised in this manner within
seven calendar days after receipt of this letter, the staff does not believe
that rule 14a-8(c)(2) may be relied on as a basis to omit the Smuckler proposal
from its proxy materials. The Division is unable to concur in your view that the revised Coyne proposal
may be excluded under rule 14a-8(a)(3)(i) as untimely. Accordingly, the Division
is unable to conclude that rule 14a-8(c)(3)(i) may be relied upon as a basis for
excluding the proposal from the Company's proxy materials. The Division is unable to concur in your view that the revised Coyne proposal
may be excluded under rule 14a-8(c)(1) as an improper subject for shareholder
action under applicable state law. The staff notes in particular that whether
the proposal is an appropriate matter for shareholder action appears to be an
unsettled point of Delaware law. Accordingly, the Division is unable to conclude
that rule 14a-8(c)(1) may be relied upon as a basis for excluding that proposal
from the Company's proxy materials. The staff notes that the Company did not file its statements of objection to
including the proposals at least 80 days prior to the date on which definitive
proxy materials will be filed as required under Rule 14a-8(d). Noting the
circumstances, the staff is unable to waive the 80-day requirement. Sincerely, Amy M. Trombly
Attorney Advisor
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