Company Name: Genuine Parts Co.
Public Availability Date: January 27, 2004Document Sections:
INQUIRY LETTER
STAFF REPLY LETTER
APPENDIX
STAFF REPLY LETTER [INQUIRY LETTER]
December 10, 2003 U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Shareholder Proposal Submitted for Inclusion in the Genuine Parts Company
2004 Proxy Statement by Nick Rossi, appointing John Chevedden as Proxy
Dear Sir or Madam: Genuine Parts Company ("GPC" or the "Company") has received a shareholder
proposal regarding poison pills (the "Proposal") from Mr. Nick Rossi for
inclusion in the proxy materials for its 2004 Annual Meeting of Shareholders and
appointing Mr. John Chevedden as Mr. Rossi's proxy in the matter (the
"Proponent"). On behalf of our client, GPC, we hereby request that the Staff of
the Division of Corporation Finance (the "Staff") confirm that it will not
recommend to the Securities and Exchange Commission (the "Commission") any
enforcement action in respect of the Company's omission of the Proposal from its
proxy materials. We believe that the Proposal is excludable under:
1. Rule 14a-8(i)(1), because the Proposal is not a proper subject for action by
shareholders under Georgia law; 2. Rule 14a-8(i)(2) because adoption of the Proposal would cause the Company to
violate state law; and 3. Rule 14a-8(i)(3), because (a) portions of the Proposal are so vague and
indefinite that the Company is unsure what further action should be taken if it
is adopted; and (b) the Proposal contains potentially false and misleading
statements. In support of this request and pursuant to Securities Exchange Act Rule
14a-8(j)(2), we are filing six copies of this letter, to each of which is
attached as Appendix A a copy of the Proposal. We have provided one extra copy,
and would appreciate it being date-stamped upon receipt and returned to us in
the enclosed postage-paid envelope. We are also enclosing six copies of GPC's
earlier correspondence to Mr. Nick Rossi, sent in care of Mr. Chevedden,
requesting that Mr. Rossi provide evidence of his stock ownership (attached as
Appendix B), as well as six copies of the document he provided in response to
the Company's request (attached as Appendix C). A copy of this letter has
simultaneously been sent to the Proponent. The Proposal submitted to GPC reads as follows: "RESOLVED: That the shareholders
of our company request that our Board of Directors seek shareholder approval at
the earliest subsequent shareholder election for the adoption, maintenance or
extension of any current or future poison pill. Once adopted, removal of this
proposal or any dilution of this proposal, would consistently be submitted to
shareholder vote at the earliest subsequent shareholder election."
1. The Proposal may be omitted pursuant to Rules 14a-8(i)(1) and 14a-8(i)(2).
To the extent the reasons discussed below are based on matters of Georgia law,
this letter constitutes our legal opinion. GPC is a Georgia corporation governed
by the Georgia Business Corporation Code (the "Code"), and we are admitted to
practice law in the State of Georgia. The Company believes that the Proposal may be omitted pursuant to Rule
14a-8(i)(1) because the Proposal is not a proper subject for shareholder action
under the Code and pursuant to Rule 14a-8(i)(2) because adoption of the Proposal
would cause the Company to violate the Code. Rule 14a-8(i)(1) allows a
registrant to omit from its proxy materials a shareholder proposal and any
statement in support thereof "if the proposal is not a proper subject for action
by shareholders under the laws of the jurisdiction of the company's
organization." The note to Rule 14a-8(i)(1) states that some proposals are not
considered proper under state law if they would be binding on the company if
approved by the shareholders. The first sentence of the Proposal may appear to be precatory because it states
that the shareholders request that the Board of Directors seek shareholder
approval for the adoption, maintenance or extension of "any current or future
poison pill". However, the second sentence of the Proposal states that once the
Proposal is adopted, "removal of this proposal or any dilution of this proposal
would consistently be submitted to shareholder vote at the earliest subsequent
shareholder election." Thus, the proposal contemplates that, if and when the
Proposal is adopted, it will operate as a permanent restriction, and the Board
will be required to seek shareholder approval before taking any action involving
a "poison pill" or shareholder rights plan. The following portion of the
Proposal's Supporting Statement further illustrates that this Proposal is
intended to be a mandatory and binding obligation of the Company: "[d]irectors
may make a token response to this proposal ... [a] reversible response, which
could still allow our directors to give us a poison pill on short notice, would
not substitute for this proposal." Accordingly, the Proposal could be construed
as prohibiting the Board from adopting, maintaining or extending a shareholder
rights plan without prior approval of the shareholders, under any circumstances
and without regard to whether the Board has determined in its business judgment
that the adoption of such a plan is in the best interests of the Company and
without regard to whether such action was required to fulfill its fiduciary
duties to the shareholders. As discussed more fully below, the Proposal, for
this reason, is an improper shareholder action that would violate state law.
Section 14-2-801(b) of the Code provides that "[a]ll corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
corporation managed under the direction of, its board of directors," subject to
certain limitations that are not relevant to this letter. The Code provides the
Board of Directors of a publicly held Georgia corporation with very broad
discretion and authority over the business and affairs of the corporation.
While there is little judicial interpretation in Georgia of the meaning and
extent of Code Section 14-2-801(b), Delaware Courts have interpreted a
substantially identical provision in Section 141(a) of the Delaware General
Corporation Law very broadly with respect to the powers and authority of a Board
of Directors. The Delaware courts have stated that "directors, rather than
shareholders, manage the business and affairs of the corporation." Aronson v.
Lewis, 473 A.2d 805, 811 (Del. 1984); see also, Paramount Communications, Inc.
v. Time, Inc., 571 A.2d 1140, 1154 (Del. 1989). The Delaware courts have also
interpreted Section 141(a) as standing for the proposition that the "adoption of
a defensive measure ... fully accorded with the powers, duties and
responsibilities conferred upon directors under our [Delaware] law." Revlon,
Inc. v. MacAndres & Forbes Holdings, Inc., 506 A.2d 173, 181 (Del. 1986).
Finally, the Delaware courts have specifically stated that the power to adopt a
rights plan "would [be] meaningless if the rights plan required shareholder
approval." Account v. Hilton Hotels Corp., 780 A.2d 245, 249 (Del. Supr. 2001).
In addition, the Staff has on several occasions accepted the position that a
proposal prohibiting directors from adopting a shareholder rights plan without
prior stockholder approval would be in contravention of Delaware law. See, e.g.,
SEC No-Action Letters: General Dynamics Corporation (March 5, 2001); Mattel,
Inc. (March 25, 2002); Atlas Air Worldwide Holdings, Inc. (April 5, 2002).
In the context of shareholder rights plans, Delaware law requires that the terms
be set forth in Board resolutions or in the Certificate of Incorporation,
whereas Georgia law mandates that the Board of Directors determine the terms of
such plans. Code Section 14-2-624(a) provides: "A corporation may issue rights, options, or warrants with respect to the shares
of the corporation whether or not in connection with the issuance and sale of
any of its shares or other securities. The board of directors shall determine
the terms upon which the rights, options, or warrants are issued, their form and
content, the consideration for which they are to be issued, and the terms and
conditions relating to their exercise, including the time or times, the
conditions precedent, and the prices at which and the holders by whom the
rights, options or warrants may be exercised." (emphasis added)
This Code section grants to the Board of Directors the sole power and
responsibility to adopt shareholder rights plans, and not only grants directors
the power to determine the terms and conditions of such plans, but mandates that
they do so. The previous version of Section 14-2-624 also stated that "[n]othing
in Code Section 14-2-601 shall be deemed to limit the board of directors'
authority to determine, in its sole discretion, the terms and conditions of the
rights, options or warrants issuable pursuant to this Code section." See SEC
No-Action Letters: Eagle Bancshares, Inc. (May 12, 1994) and Georgia-Pacific
Corporation (March 25, 1999). This sentence was deleted in the 2000 amendments
to the Code. The official comments to the 2000 amendments reveal, however, that
the reason for the deletion was not to limit directors' discretion, but to
emphasize that Section 14-2-624 is to be read in a manner consistent with other
sections of the Code, because commentators had posed the question of whether the
inclusion of the words "in its sole discretion" could or should be read as
overriding certain other sections of the Code, including Section 14-2-801.
In an SEC No-Action Letter regarding Eagle Bancshares, Inc. (May 12, 1994), the
Staff considered a shareholder proposal to a Georgia corporation that stated, in
relevant part, "[I]t is proposed and requested that the Board of Directors
reconsider [the adoption of a shareholder rights plan] .. and, upon such
reconsideration, take such steps as are necessary to remove the Poison Pill."
The Staff found some basis for the company's position that the proposal was not
a proper action for shareholders under state law. The Staff has also addressed a
shareholder proposal that would restrict the authority of the board of directors
of a Georgia corporation as to shareholder rights plans by enacting a bylaw
provision. See, e.g., SEC No-Action Letter, Georgia-Pacific Corporation (March
25, 1999). Again, the Staff found some basis for exclusion as an improper
shareholder action. While the proposals in these No-Action letters are not
identical to the Proposal submitted to GPC, these No-Action Letters do make
clear that a poison pill proposal that would be binding on the Board of
Directors of a Georgia corporation is excludable as an improper shareholder
action in violation of Georgia law. Based upon the foregoing, it is our opinion that the Proposal, if implemented by
the Company, would constitute an improper shareholder action under Georgia law
and would cause GPC to violate the Georgia Business Corporation Code.
2. The Proposal may be omitted pursuant to Rule 14a-8(i)(3).
A. Portions of the Proposal are Vague and Indefinite
The Company believes that the Proposal may be omitted pursuant to Rule
14a-8(i)(3) as false and misleading because portions of the Proposal are so
vague and indefinite that the Company is unsure what action should be taken if
the Proposal is adopted. See, e.g. SEC No-Action Letter to Occidental Petroleum
Corporation (Feb. 11, 1991), where the Staff stated: "There appears to be some
basis for your position that the entire proposal may be excluded under paragraph
(c)(3) of Rule 14a-8 as vague, indefinite and, therefore, potentially
misleading." The Staff has consistently taken the position that a company may exclude a
proposal in its entirety pursuant to Rule 14a-8(i)(3) if the proposal is vague
and indefinite. See SEC No-Action Letter to Philadelphia Electric Company (July
30, 1992), where the Staff agreed that a proposal could be omitted when it is
"so inherently vague and indefinite that neither the shareholders voting on the
proposal, nor the Company in implementing the proposal (if adopted), would be
able to determine with any reasonable certainty exactly what actions or measures
the proposal requires." See also, e.g. SEC No-Action Letters: Smithfield Foods
(July 18, 2003); Global Entertainment Holdings/Equities, Inc. (April 24, 2003);
Eastman Kodak Company (March 3, 2003); Pfizer Inc. (February 18, 2003); PepsiCo,
Inc. (February 18, 2003); Capital One Financial Corporation (February 7, 2003);
and General Electric Company (February 5, 2003);. The first sentence of the Proposal requests that GPC's Board of Directors seek
shareholder approval at the earliest subsequent shareholder election for the
"adoption, maintenance or extension of any current or future poison pill." GPC
currently has a Shareholder Protection Rights Plan ("Rights Plan"), or "poison
pill" in place, which will not expire until 2009. Therefore, to the extent the
request relates to shareholder approval of the "adoption" or "extension" of a
poison pill, it is moot until the current pill expires in 2009. The Proposal is
vague and indefinite as to the term "maintenance." GPC's current Rights Plan
does not require any type of "maintenance." If the Proposal were to be adopted,
the Company does not know what would constitute "maintenance" of the Rights Plan
such that a shareholder vote would be triggered. If the Proponent intended this
language to include the continued existence of a current plan, then the Rights
Plan is arguably maintained every day. Thus, there is no way for the Company to
determine when and how often subsequent shareholder approvals would be required.
Similarly, the Company does not know what would constitute "the earliest
subsequent shareholder election" following "maintenance" of a poison pill.
The second sentence of the Proposal states that "[o]nce adopted, removal of this
proposal or any dilution of this proposal, would consistently be submitted to
shareholder vote at the earliest subsequent shareholder election." This entire
sentence is vague and indefinite. The Company does not know what is meant by
"removal or any dilution of this proposal," nor does the Company know what is
meant by "consistently be submitted to shareholder vote at the earliest
subsequent shareholder election," in part because it is not clear what is meant
by a "shareholder election." The first sentence of the Proposal requests that
the Board seek shareholder approval regarding the adoption, maintenance or
extension of a poison pill. If the Proposal is intended to be a request by the
shareholders of the Board, then the Proposal would not become a formal Company
bylaw or corporate policy that could subsequently be "removed" by the Board.
Further, it is not clear what is meant by "any dilution" of the Proposal, so it
is uncertain what potential actions or activities undertaken by the Board would
be considered by the Proponent, or the Company's shareholders, to "dilute" the
Proposal. The Company believes that the Proposal is so inherently vague and indefinite
that neither the shareholders voting on the Proposal, nor the Company in
implementing the Proposal would be able to determine with any reasonable
certainty exactly what actions or measures the proposal requires. In summary, in
reading the text of the Proposal as such Proposal would be submitted to
shareholders: (i) there is no way to know what is meant by "maintenance" of a
poison pill and when and how often such "maintenance" might trigger a subsequent
shareholder approval; (ii) there is no way to know what is meant by the
"earliest subsequent shareholder election" and when and how often this would
occur; (iii) there is no way to know what potential actions taken by the Board
might trigger a "removal" or "dilution" of the Proposal (if adopted); and (iv)
there is no way to know what is meant by "consistently submitted to shareholder
vote" or to determine how often a shareholder vote must occur on the Proposal to
be "consistently submitted." B. The Proposal Contains Unsupported Assertions and False and Misleading
Statements of Fact The Company believes that the Proposal may be omitted pursuant to Rule
14a-8(i)(3) because it contains unsupported assertions and false and misleading
statements of fact. Rule 14a-8(i)(3) permits the omission of a shareholder
proposal if the proposal or its supporting statement is contrary to any of the
Commission's proxy rules, including Rule 14a-9, which prohibits registrants from
including statements in their proxy materials that are "false or misleading with
respect to any material fact," or which omit "to state any material fact
necessary in order to make the statements therein not false or misleading."
The Company believes that the Proposal should be excluded under Rule 14a-8(i)(3)
for the following reasons: (i) Missing Sources and Citations
The Proposal is contrary to Rule 14a-9 because it contains numerous unsupported
generalizations and fails to provide authority or a source for several
statements in the Proposal. The following statements are unsupported assertions
with no proper citation or authority referenced. Such statements should either
be excluded from the Proposal or adequate citations should be provided and
summary statements accurately reflected. - This topic also won an overall 60% yes-vote at 79 companies in 2003. There is
no source cited for this statement. In its response to GPC's no-action request
last year concerning a similar proposal from the Proponent, the SEC Staff opined
that the proponent must "provide a citation to a specific source" for the
statement that "This topic won an average 60% yes-vote at 50 companies in 2002."
SEC No-Action Letter to Genuine Parts Company (January 15, 2003). See also,
e.g., SEC No-Action Letters: AMR (April 12, 2003); J.P Morgan Chase & Co. (March
10, 2003); FirstEnergy Corp. (March 10, 2003); The Boeing Company (February 26,
2003); and The Home Depot, Inc. (March 31, 2003)(all with similar facts and
findings as GPC). It is somewhat disturbing that such an experienced Proponent
continues to ignore the previous guidance of the SEC Staff concerning his use of
this statement. - An anti-democratic scheme to flood the market with diluted stock is not a
reason that a tender offer for our stock should fail. This statement is
attributed to The Motley Fool. Since it is not contained within quotation marks
in the supporting statement, we assume this to be a summary statement rather
than an exact quotation. After an extensive search, we have been unable to
locate this source to verify its context or its accuracy. If the experienced
reference librarians of a law firm are unable to locate a reference, it is
extremely unlikely that an average shareholder would be able to do so.
- Statements of T. J. Dermot Dunphy. The proponent attributes the quoted
statements to Mr. Dunphy, but fails, within the text of the proposal, to provide
the context or source of the statements. - The key negative of poison pills is that pills can preserve management
deadwood instead of protecting investors. Morningstar.com, the source for this
statement as provided in the supporting statement, is not a complete web address
and is insufficient to locate this reference. In addition, the statement is a
paraphrase and not an exact quote. Monsanto Company recently filed a no-action
request concerning an almost identical proposal and supporting statement, which
included this same statement attributed to Morningstar.com. In its response to
Monsanto, available November 26, 2003, the Staff said that the proponent must
"revise the sentence attributed to Morningstar.com to directly quote the
sentence from the source." In response to prior no-action letter requests with respect to poison pill
proposals by John Chevedden, the Staff has required revision or allowed omission
of similar unsupported statements. See, e.g., SEC No-Action Letters: AMR (April
12, 2003); The Home Depot, Inc. (March 31, 2003); Sabre Holdings Corporation
(March 20, 2003); and The Dow Chemical Company (March 17, 2003) (all regarding
poison pill proposals submitted by John Chevedden with Staff approval for
revision or omission of materially misleading statements).
The Company acknowledges that the proponent included a list of references,
although apparently only for the benefit of the Company itself since the
references were not included as part of the proposal. If the complete cites were
added to the proposal as submitted, the proposal would have exceeded the 500
word limit. Even with the reference list, the following should be noted: the
Company was unable to locate the item referenced in The Motley Fool; the cite
for Morningstar.com is still incomplete; no website address or other source
information is given for the Council of Institutional Investors Corporate
Governance Policies; and the IRRC Corporate Governance Bulletin for
June-September of 2003, for which no cite or source is provided, is only
available for a $100 fee. (ii) False Statements or Misleading Statements
The supporting statement says, "I do not see how our Directors object to this
proposal because it gives our Directors the flexibly [sic] to overrule our
shareholder vote if our Directors seriously believe they have a good reason."
While the first sentence of the Proposal is phrased in a precatory fashion, the
second sentence is not, and the language of the resolution provides no
indication of an intent to respect the discretion of the Board. This statement
implies that that the Board retains the flexibility to exercise its good
judgment. "Flexibility" is a misnomer for something that would require the Board
to "overrule our shareholder vote." The Proposal says that "We as shareholders voted in support of this topic:
Year..........Rate of Support 2003..........49%"
The actual vote in support of the poison pill proposal last year was 44%. The
Proponent indicates that his 49% is only "based on yes and no votes cast." This
calculation is misleading, because it is contrary to the method announced in the
Company's proxy for determining how the vote would be calculated. The Company's
2003 proxy statement included the following: "With respect to the proposal for
the selection of independent auditors and the shareholder proposal, abstentions
and broker `non-votes' will be counted as present for purposes of determining
the existence of a quorum and as part of the base number of votes to be used in
determining if the proposal has received the requisite number of votes for
approval, and will have the same effect as a vote `against' such proposal."
Based upon this methodology, the vote in support of the proposal was 44%. This
statement should be omitted or revised to reflect the correct percentage.
The Proponent then states, "I believe our majority vote is a strong signal of
shareholder concern." Regardless of the method used to calculate the percentage
of votes in support of the Proposal, neither 49% nor 44% constitutes a majority,
making this statement blatantly false. (iii) Website Reference
The supporting statement to the Proposal includes a reference to the www.cii.org
website. The reference to a third party web site in the Company's proxy
materials is inappropriate as the Company has no control over the content of
such website and such a third party website may contain false and misleading
information. Furthermore, the information available on the cited web page is not
relevant to the subject matter of the Proposal. The web page found at the cite
provided does not mention "poison pills." The Proposal would lead the reader to
believe that the statement about the Council calling for approval of poison
pills came from information on the web page cited. Question F. 1 of Staff Legal
Bulletin No. 14 states that a website address may be excluded under Rule
14a-8(i)(3) because "information contained on the website may be materially
false or misleading, irrelevant to the subject matter of the proposal or
otherwise in contravention of the proxy rules." In its response to GPC's
no-action request last year, the Staff required the proponent to "revise the
reference to www.cii.org to provide a citation to a specific source for the
discussion referenced." See also SEC No-Action Letters: AMR (April 12, 2003);
J.P Morgan Chase & Co. (March 10, 2003); FirstEnergy Corp. (March 10, 2003); The
Boeing Company (February 26, 2003); and The Home Depot, Inc. (March 31, 2003);
and Sabre Holdings Corporation (March 20, 2003)(all with similar facts and
findings as GPC.) Again, it is disturbing that such an experienced Proponent
continues to ignore the previous guidance of the SEC Staff concerning his use of
this statement. A review of no-action letters concerning the numerous shareholder proposals
submitted by or on behalf of Mr. Chevedden in recent years evidences a
continuing disregard for the Commission's proxy rules regarding false and
misleading statements. Given Mr. Chevedden's continuing disregard for Rule 14a-8
as evidenced by the misleading, inaccurate and incomplete statements made in the
Proposal, the Company believes it would be appropriate to exclude the entire
Proposal from the Company's proxy materials. 3. Conclusion
Based upon the aforementioned factors, we respectfully request that the Staff
confirm it will take no action if the Proposal is excluded from the Company's
proxy materials. Should you have any questions regarding any aspect of this
matter or require any additional information, please contact the undersigned at
(404) 881-7446. Very truly yours, /s/
B. Harvey Hill, Jr. MCY:mcy
cc: Carol Yancey, Genuine Parts Company
[STAFF REPLY LETTER]
6 Copies
7th copy for date-stamp return December 27, 2003
Via Airbill Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
Mail Stop 0402
450 Fifth Street, NW
Washington, DC 20549 Response to Alston & Bird LLP No Action Request
Genuine Parts Company (GPC)
Nick Rossi Ladies and Gentlemen:
The number preceding the bracket below correspond to the pages of the company
letter. 1] The proposal is not intended to be binding because the third word of the
proposal is "request." If the proposal, or any part of the proposal, is
considered binding then the opportunity to cure appears to be in order according
to SLB 14. The company did not say that it is opposed to curing a proposal
according to SLB 14. The Staff has allowed proposals which are completely binding to be cured.
Therefore if a proposal is determined to be binding in part then it should be an
even better candidate to be cured. The following is stated in SLB 14:
Basis Rule 14a-8(i)(1)
Type of revision that we may permit
When a proposal would be binding on the company if approved by shareholders, we
may permit the shareholder to revise the proposal to a recommendation or request
that the board of directors take the action specified in the proposal.
I believe the company incorrectly applied Georgia law: This proposal calls for a
shareholder vote. The linchpin Account v. Hilton Hotels citation specifies
"shareholder approval." Additionally in the quote provided by the company
Account v. Hilton Hotels only refers to "shareholder approval" of a "rights
plan." The quote apparently does not apply to the removal of a proposal, once
adopted, involving a shareholder vote. In General Dynamics and other similar cases the SLB 14 extract above was not
introduced in support of the shareholder proposal. Please note that the company summaries of the following staff determinations in
Eagle Bancshares, Inc. (May 12, 1994) and Georgia-Pacific Corp. (March 25, 1999)
seem to be hardly recognizable from the following abstracts which are believed
to be correct. Since the company has cited Eagle Bancshares, Inc. (May 12, 1994) it seems that
the company may be implicitly calling for the same determination as in Eagle
Bancshares, specifically that the proposal be "revised" as "a request." The
Eagle Bancshares, Inc. abstract follows: A shareholder proposal, which mandates that this company's board of directors
terminate a shareholder rights agreement, may not be omitted from the company's
proxy materials under rule 14a- 8(c)(1) assuming the proposal is revised, within
seven calendar days from the receipt of the staff's response, to take the form
of a request or recommendation that the board take the proposed action.
The Georgia-Pacific Corp. (March 25, 1999) abstract:
A revised shareholder proposal, which requests that this company's board of
directors redeem the shareholder rights previously issued unless their issuance
is approved by shareholders, may not be omitted from the company's proxy
material under rule 14a-8(e)(2). 5] A purported company analogy is Philadelphia Electric Co. (July 30, 1992).
Philadelphia Electric concerned a somewhat unusual shareholder proposal
regarding the election of a committee of small shareholders to present plans to
the company's board. Another purported company analogy is a case involving hog
production, Smithfield Foods (July 18, 2003). The company claim fails to acknowledge that the company can turn on a dime and
discontinue its poison pill and thus a shareholder proposal may be written to
allow for this possibility. Contrary to company insistence, a shareholder
proposal provision for realistic contingencies is not "moot."
The company acknowledges that it maintains a pill. This is the key point.
Whether the company claims it maintains its pill actively or passively does not
seem to be material. Contrary to this company contrivance the proposal does not
state that the company poison pill requires routine "maintenance."
Part of the company claim seems not to address the proposal but instead leads to
questions of the qualifications of the current directors. The company seems to
imply that the current directors are not qualified as directors because they are
unable to determine "the earliest subsequent shareholder election." Or they are
further incapacitated by not being able to obtain professional advice.
Dow Chemical Company adopted a "Certified Resolution" on February 13, 2003 which
had similar text: "Any stockholder rights plan so adopted by the board without
prior stockholder approval will be submitted to a non-binding vote of
stockholders as a separate ballot item at the next subsequent meeting of Dow
stockholders." 6] The company inscrutably claims that it "does not know what is meant by
`removal or any dilution of this proposal'" once it is adopted.
7] Proposal text concerning the 60% vote, The Motley Fool, Morningstar.com, Mr.
Dunphy and www.cii.org was found to be includable with modification in UGI Corporation (December 18, 2003).
The source of the 60% vote is given at the end of the proposal, IRRC Corporate
Governance Bulletin, June - Sept. 2003. At the end of the proposal the company
was invited to ask the shareholder party if there were any questions on the
references. In its rush to resort to a no action request the company failed to
do so. The company fails to acknowledge each source provided in the proposal and the
references following the proposal. In the company's rush to resort to a no action request the company failed to
thoroughly read the shareholder proposal and references or accept the invitation
of assistance by the shareholder party and rushed to submit its unnecessary
objections. The company gloats, "If the experienced reference librarians of a law firm are
unable to locate a reference, it is extremely unlikely that an average
shareholder would be able to do so." A middle-school student could embarrass the
"experienced reference librarians of a law firm." by simply entering the words
"Motley Fool poison pill" into "Google" and thus produce the reference.
The submittal materials stated, "Mr. Dunphy's statements are from The Wall
Street Journal, April 28, 1999 and "Moringstar.com, Aug. 15, 2003."
8] The company reproduces part of the proposal text and then deceptively omits
the next immediate part of the proposal. The company failed to reproduce the
proposal text immediately following "49%" which was "This percentage is based on
yes and no votes cast." The inclusion of this company omitted text deflates the
company argument. 9] The company did not ask if there was any typographical question, as it was
invited to in the proposal submittal. "Majority" was not intended to be
included. SLB 14 states: Companies seeking to exclude a website address under rule 14a-8(i)(3) should
specifically indicate why they believe information contained on the particular
website is materially false or misleading, irrelevant to the subject matter of
the proposal or otherwise in contravention of the proxy rules.
The company failed to state a reason it believes the Council of Institutional
Investors website contains "false and misleading" material.
With the sentence after sentence of contrived company objections in addition to
no support or thin support, the company may be subject to this criticism:
Martin Dunn, Deputy Director, Securities and Exchange Commission said, "Related
to taking too much time are companies that take issue with sentence after
sentence, almost as though they're proving their case by arguing about every
sentence. And that takes us a great deal of time, because we take every one of
these and go through it. We consider every sentence in the context of the
argument that's made and the substance of it." I do not believe the company has met its burden of proof according to rule
14a-8. For the above reasons this is to respectfully request non-concurrence with the
company no action request on each point. Sincerely,
/s/ John Chevedden
cc: Emil Rossi
Larry Prince [APPENDIX]
3 - Shareholder Voting Right on a Poison Pill RESOLVED: That the shareholders of our company request that our Board of
Directors seek shareholder approval at the earliest subsequent shareholder
election, for the adoption, maintenance or extension of any current or future
poison pill. Once adopted, removal of this proposal or any dilution of this
proposal, would consistently be submitted to shareholder vote at the earliest
subsequent shareholder election. We as shareholders voted in support of this topic:
Year..........Rate of Support 2003..........49%
This percentage is based on yes and no votes cast. I believe this level of
shareholder support is impressive because the 49% support followed our
Directors' objection to the proposal and insiders hold 3% of our stock. I
believe that there is a greater tendency for shareholders, who more closely
follow our company's corporate governance, to vote in favor of this proposal
topic. I do not see how our Directors object to this proposal because it gives our
Directors the flexibly to overrule our shareholder vote if our Directors
seriously believe they have a good reason. I believe our majority vote is a
strong signal of shareholder concern. Shareholder voices have been heard, but
not a satisfactory response from our Directors. This topic also won an overall
60% yes-vote at 79 companies in 2003. Nick Rossi, P.O. Box 249, Boonville, Calif. 95415 submitted this proposal.
The Potential of a Tender Offer Can Motivate Our Directors
Hectoring directors to act more independently is a poor substitute for the
bracing possibility that shareholders could turn on a dime and sell the company
out from under its present management. Wall Street Journal, Feb. 24, 2003
Diluted Stock An anti-democratic scheme to flood the market with diluted stock is not a reason
that a tender offer for our stock should fail. Source: The Motley Fool
Akin to a Dictator Poison pills are akin to a dictator who says, "Give up more of your freedom and
I'll take care of you. "Performance is the greatest defense against getting taken over. Ultimately if
you perform well you remain independent, because your stock price stays up."
Source: T.J. Dermot Dunphy, CEO of Sealed Air (NYSE) for more than 25 years
The key negative of poison pills is that pills can preserve management deadwood
instead of protecting investors. Source: Moringstar.com
I believe our Directors may make a token response to this proposal - hoping to
gain points in the new corporate governance rating systems. A reversible
response, which could still allow our directors to give us a poison pill on
short notice, would not substitute for this proposal. Council of Institutional Investors Recommendation
The Council of Institutional Investors www.cii.org, an organization of 130
pension funds investing $2 trillion, called for shareholder approval of poison
pills. Based on the 60% overall yes-vote in 2003 many shareholders believe
companies should allow their shareholders a vote. Notes:
The above format is the format submitted and intended for publication.
Please advise if there is any typographical question.
The company is requested to assign a proposal number (represented by "3" above)
based on the chronological order in which proposals are submitted. The requested
designation of "3" or higher number allows for ratification of auditors to be
item 2. References: The Motley Fool, June 13, 1997
Moringstar.com, Aug. 15, 2003 Mr. Dunphy's statements are from The Wall Street Journal, April 28, 1999.
IRRC Corporate Governance Bulletin, June - Sept. 2003
Council of Institutional Investors, Corporate Governance Policies, March 25,
2002 Please advise within 14 days if the company requests help to locate these or
other references.
[STAFF REPLY LETTER]
January 27, 2004 Response of the Office of Chief Counsel Division of Corporation Finance
Re: Genuine Parts Company Incoming letter dated December 10, 2003
The proposal requests that the board seek shareholder approval at the earliest
subsequent shareholder election for the adoption, maintenance or extension of
any current or future poison pills and further requests that, once adopted,
removal or dilution of the proposal be submitted to a shareholder vote.
We are unable to concur in your view that Genuine Parts may exclude the proposal
under rule 14a-8(i)(1). Accordingly, we do not believe that Genuine Parts may
omit the proposal from its proxy materials in reliance on rule 14a-8(i)(1).
We are unable to concur in your view that Genuine Parts may exclude the proposal
under rule 14a-8(i)(2). Accordingly, we do not believe that Genuine Parts may
omit the proposal from its proxy materials in reliance on rule 14a-8(i)(2).
We are unable to concur in your view that Genuine Parts may omit the entire
proposal under rule 14a-8(i)(3). There appears to be some basis for your view,
however, that portions of the proposal's supporting statement may be materially
false or misleading under rule 14a-9. In our view, the proponent must:
delete the discussion that begins "I do not see..." and ends "... if our
Directors seriously believe they have a good reason";
delete the sentence that begins "I believe our..." and ends "... of
shareholder concern";
provide a citation to a specific source for the sentence that begins "This
topic also..." and ends "... 79 companies in 2003";
revise the sentence attributed to The Motley Fool to directly quote the
sentence from the source;
revise the sentences attributed to T.J. Dermot Dunphy to identify clearly
which sentences are direct quotes;
revise the sentence attributed to Morningstar.com to directly quote the
sentence from the source;
revise the reference to www.cii.org to provide a citation to a specific
source. Accordingly, unless the proponent provides Genuine Parts with a proposal and
supporting statement revised in this manner, within seven calendar days after
receiving this letter, we will not recommend enforcement action to the
Commission if Genuine Parts omits only these portions of the supporting
statement from its proxy materials in reliance on rule 14a-8(i)(3).
Sincerely, /s/
Anne Nguyen
Attorney-Advisor
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