Company Name: Lipid Sciences, Inc.
Public Availability Date: May 2, 2002
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
APR 17 2002
Securities and Exchange Commission
Office of Chief Counsel
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Lipid Sciences, Inc.
Omission of Shareholder Proposal submitted by Bosko Djordjevic
Ladies and Gentlemen:
We are writing on behalf of our client, Lipid Sciences, Inc., an Arizona corporation (the "Company"), regarding a shareholder proposal (the "Proposal") submitted to the Company by Bosko Djordjevic (the "Proponent") for inclusion in the Company's proxy statement and form of proxy for the 2002 annual meeting of shareholders (the "Proxy Materials").
On behalf of the Company, we hereby notify the Securities and Exchange Commission (the "Commission") that the Company intends to omit the Proposal from its Proxy Materials pursuant to Rule 14a-8, as promulgated under the Securities and Exchange Act of 1934. We request, on behalf of the Company, that the staff of the Division of Corporation Finance (the "Staff") confirm that it will not recommend enforcement action to the Commission if the Company omits the Proposal from its Proxy Materials.
For the reasons set forth below under the heading "Rule 14a-8(j) - 80-Day Waiver," we also respectfully request the Staff to permit the Company to file its definitive Proxy Materials with the Commission less than 80 days from the date that the Commission receives this letter.
Summary
The Proposal is attached hereto as Exhibit A. The Proposal is excludable because of the following reasons:
The Proposal relates to an election for membership on the Company's board of directors and is, therefore, excludable under Rule 14a-8(i) (8); and
The Proposal is designed to result in a benefit to the Proponent, or to further a personal interest, which is not shared by the other shareholders at large and is, therefore, excludable under Rule 14a-8(i)(4).
The Proposal
The Proposal is as follows:
"That a resolution be put to the stockholders to remove Phil Radlick as a director of Lipid Sciences, Inc., without cause, and I be nominated to fill the vacancy thereby created on the board of directors if Mr. Radlick is removed."
The Proposal Relates to an Election of Directors and is Excludable Under Rule 14a-8(i)(8).
Mr. Radlick has been elected as a director by the shareholders for a term expiring on the date of the Company's Annual Meeting of Shareholders in 2003. The Proposal in effect would call for his removal in a manner contrary to the election process. Accordingly, the Proposal relates directly to an election of directors and is excludable under Rule 14a-8(i)(8).
Rule 14a-(i)(8) permits a company to exclude a proposal that "relates to an election for membership on the company's board of directors or analogous governing body." The Commission has stated that the purpose of Rule 14a-8(i)(8) "is to make clear, with respect to corporate elections, that Rule 14a-8(i)(8) is not the proper means for conducting campaigns or effecting reforms in elections since other proxy rules ... are applicable thereto." See Release No. 12598 (July 7, 1976). Consistent with this statement, the Staff repeatedly has permitted companies to exclude proposals that request or require the resignation of one or more directors. See, e.g., Second Bancorp Inc. (Feb. 12, 2001) (proposal requesting the resignation of a certain director excludable under Rule 14a-8(i)(8)); U.S. Bancorp (Feb. 27, 2000) (proposal mandating the removal of the company's officers and directors excludable under Rule 14a-8(i)(8)); PepsiCo Inc. (Feb. 1 1999) (proposal calling for resignation of two directors because they were "ousted from their own places of employment" excludable under Rule 14a-8(i)(8)); Masco Corp. (March 16, 1998) (proposal calling for replacement of outside directors excludable under Rule 14a-8(i) (8)); ChemTrak Inc. (March 10, 1997) (proposal requesting that the board of directors accept the resignation of the current chairman excludable under Rule 14a-8(i)(8)).
The Proposal is Designed to Result in a Benefit to the Proponent, or to Further a Personal Interest of the Proponent, and is Excludable Under Rule 14a-8(i)(4).
The Proponent has nominated himself to replace Mr. Radlick on the Board of Directors. The non-employee board members are currently paid a retainer of $1,500 per month, plus $1,500 for attendance at each meeting and $1,000 for any meetings on a special committee. Further, the non-employee Board members were recently granted an option to purchase 80,000 shares of Company Common Stock. These payments represent a benefit to the Proponent, or further a personal interest of the Proponent, which is not shared by the other shareholders at large. Therefore, the proposal is excludable under Rule 14a-8(i)(4).
Rule 14a-8(j) - 80-Day Waiver
This submission is being made to the Commission less than 80 days before the Company intends to file its definitive Proxy Materials. The Company intends to file its definitive Proxy Materials on or about May 7, 2002. The reason for the delayed submission is that the Company did not receive the Proposal until April 12, 2002, less than 80 days before the Company intends to file its definitive Proxy Materials. Accordingly, we request that the Staff, in the exercise of its discretion under Rule 14a-8(j)(1), permit and accept the filing of this submission less than 80 days prior to the anticipated filing date of the Company's definitive Proxy Materials.
* * *
In light of the Company's intention to hold its 2002 Annual Meeting of Shareholders on June 18, 2002 and file its definitive Proxy Materials on or about May 7, 2002, we respectfully request an expedited review of this submission.
If you have any questions or require additional information, please call David Charapp or the undersigned at (858) 450-8400. Should the Staff disagree with our conclusion regarding the omission of the Proposal from the Proxy Materials, we would appreciate the opportunity to confer with a member of the Staff before the issuance of its response.
On behalf of the Company, we hereby file, pursuant to Rule 14a-8(j), six copies of this letter and the Proposal. We are simultaneously providing a copy of this submission to the Proponent. In addition, we have included an extra copy of this letter. Please acknowledge receipt of this letter by date-stamping a copy of this letter and returning it to me in the self-addressed envelope provided.
Very truly yours,
/s/
Joseph Lesko
[INQUIRY LETTER]
April 11, 2002
Via Federal Express
Secretary
Lipid Sciences, Inc.
7068 Koll Center Parkway, Suite 401
Pleasanton, CA 94566
Dear Sir/Madam:
I request that the following proposal beincluded in the proxy statement for the annual meeting announced for June 18, 2002:
Under Sections 4.6 and 4.3 of the company by-laws, I request that a resolution be put to the stockholders to remove Phil Radlick as a director of Lipid Sciences, Inc., without cause, and I be nominated to fill the vacancy thereby created on the board of directors if Mr. Radlick is removed.
By notice of April 3, 2002, it was confirmed that the annual meeting of stockholders of Lipid Sciences Inc. will be held on June 18, 2002 at 10:00 a.m. All prior indications of the meeting did not conclusively announce the date.
Below are the details about myself required under Section 4.3 of the company by-laws:
(1) My legal name is Bosko Djordjevic;
(2) I am 48 years old (birth date: 10/24/53);
(3) My business (mailing) address is: 264 South La Cienga Blvd., #215, Beverly Hills, CA 90211;
(4) My home address is: 130 South Mapleton Drive, Los Angeles, CA 90024;
(5) My telephone number is 310-271-1598;
(6) I currently am employed as an investor;
(7) I own directly 1,502,029 shares of common stock, no par value, of the company;
(8) During the last five years I was employed as an investor;
(9) I am not involved in any material legal proceedings;
(10) I currently do not have any agreements or arrangements with any other person that equires disclosure under the federal proxy rules;
(11) I was a director of Lipid Sciences, Inc., a Delaware corporation prior to 2001; and
(12) My current record address for my shares is c/o MDB Capital Group LLC, 401 Wilshire Blvd., Suite 1020, Santa Monica, CA 90401. I will be changing this address to my residence.
I hereby consent to being named as a nominee as a director in the company's proxy statement for the 2002 annual meeting and to serving as a director of the company if elected.
Sincerely,
/s/
Bosko Djordjevic
cc: Barry Michaels
[INQUIRY LETTER]
April 23, 2002
VIA FACSIMILE [(925) 249-4040] AND FEDERAL EXPRESS
The Board of Directors
Lipid Sciences, Inc.
7068 Koll Center Parkway, Suite 401
Pleasanton, CA 94566
Re: Shareholder Proposal of Bosko Djordjevic
Gentlemen:
We have been asked to advise Mr. Bosko Djordjevic regarding the shareholder proposal dated April 11, 2002 (the "Proposal") that he submitted to Lipid Sciences, Inc. (the "Company"). In that connection, we have reviewed the Proposal and the letter of Heller Ehrman White & McAuliffe LLP dated April 17, 2002, addressed to the Securities and Exchange Commission (the "Response") in response to the Proposal.
We understand from the Response that the Company intends to omit the Proposal from its proxy statement and form of proxy for the 2002 annual meeting of shareholders (the "Proxy Materials") pursuant to Rule 14a-8 under the Securities Exchange Act of 1934. We also understand that the Board of Directors of the Company has agreed to hear a presentation from Mr. Djordjevic at a special meeting on Wednesday, April 24, 2002. At that time, Mr. Djordjevic will present the substantive reasons that he believes the Proposal is in the best interests of the Company and its shareholders. This letter is intended to address what we believe to be a fundamental legal issue.
The entire Response is directed to Mr. Djordjevic's and the Company's respective rights under Rule 14a-8. However, the Proposal was not submitted pursuant to Rule 14a-8; it was submitted pursuant to Arizona law and to Sections 4.3 and 4.6 of the Company's Bylaws. The full texts of Title 10, Section 10-808 of the Arizona Revised Statutes (the "Statute") and Sections 4.3 and 4.6 of the Company's Bylaws are attached hereto as Exhibit A.
Under the Statute, "[T]he shareholders may remove one or more directors with or without cause unless the articles of incorporation provide that directors may be removed only for cause." We have reviewed the Company's Amended and Restated Articles of Incorporation and all amendments thereto filed as Exhibits to the Company's Registration Statement on Form S-4 (File No. 333-67012), and there is no provision for removal of directors. In accordance with the Statute, the Company's Bylaws (likewise filed as an Exhibit to the Form S-4 Registration Statement) provide for removal of directors by shareholders with or without cause.
Section 4.3 of the Company's Bylaws provides a detailed procedure for the nomination of directors by shareholders. Mr. Djordjevic's Proposal complies in all respects with the procedures set forth in that Section.
Finally, although it has nothing to do with Mr. Djordjevic's rights under Arizona law and under the Bylaws of the Company, we feel it necessary to respond to the assertion in the Response that the Proposal is designed to, or will result in, a benefit to the proponent in the form of director's fees. Mr. Djordjevic has committed that, if he becomes a director of the Company, he will donate any and all director's fees he receives to charity and will give to the Board of Directors a receipt or other evidence satisfactory to the Board of such donation.
We ask that the Company reconsider its decision not to include the Proposal in the Proxy Materials. We do not believe that any "no action" or other advice from the Staff of the Securities and Exchange Commission (with respect to federal law) can in any way diminish the rights of the Company's shareholders under Arizona law and under its Bylaws.
Very truly yours,
/s/
Paula J. Peters
PJP:klm
cc: Office of Chief Counsel (Via Federal Express)
Securities & Exchange Commission
450 Fifth Street Northwest
Washington, DC 20549
Heller Ehrman White & McAuliffe LLP (Via Facsimile [(858) 450-8499] and U.S. Mail)
4350 La Jolla Village Drive, 7\th/ Floor
San Diego, CA 92122-1245
Attention: Joseph Lesko, Esq.
Mr. Bosko Djordjevic
Norman H. Levine, Esq.
[STAFF REPLY LETTER]
May 2, 2002
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Lipid Sciences, Inc.
Incoming letter dated April 17, 2002
The submission seeks to remove a member of Lipid Sciences' board and nominate the proponent to the board.
It is unclear whether the submission involves only a rule 14a-8 issue, or, also questions regarding nomination procedures, a matter we do not address. To the extent the submission involves a rule 14a-8 issue, there appears to be some basis for your view that Lipid Sciences may exclude it under rule 14a-8(i)(8), as relating to an election to Lipid Sciences' board of directors, and we will not recommend enforcement action to the Commission if Lipid Sciences omits the proposal from its proxy materials in reliance on rule 14a-8(i)(8). In reaching this position, we have not found it necessary to address the alternative basis for omission upon which Lipid Sciences relies. To the extent the submission involves a question of Lipid Sciences' nomination procedures, rule 14a-8 would not be implicated.
We note that Lipid Sciences did not file its statement of objections to including the submission in its proxy materials at least 80 days before the date on which it will file definitive proxy materials as required by rule 14a-8(j)(1). Noting the circumstances of the delay, we hereby grant Lipid Sciences's request that the 80-day requirement be waived.
Sincerely,
/s/
Keir D. Gumbs
Special Counsel