Company Name: Int'l. Business Machines Corp.
Public Availability Date: January 2, 2004Document Sections:
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER [INQUIRY LETTER]
November 11, 2003 Securities and Exchange Commission
Office of Chief Counsel
Division of Corporation Finance
450 Fifth Street, N.W.
Judiciary Square
Washington, D.C. 20549 Subject: 2004 IBM Stockholder Proposal of Chris Rossi
Ladies and Gentlemen: Pursuant to Rule 14a-8(j) under the Securities Exchange Act of 1934, I am
enclosing six copies of this letter, together with a stockholder proposal
submitted for consideration for IBM's 2004 proxy statement (the "Proposal"),
which is attached as Exhibit A hereto. The Proposal was submitted to
International Business Machines Corporation (the "Company" or "IBM") by Chris
Rossi (the Proponent), who has appointed Mr. John Chevedden to act on his
behalf. IBM believes that the Proposal can properly be omitted from the proxy
materials for IBM's annual meeting of stockholders scheduled to be held on April
27, 2004 (the "2004 Annual Meeting") for the reasons discussed below.
To the extent that the reasons for omission stated in this letter are based on
matters of law, these reasons are the opinion of the undersigned as an attorney
licensed and admitted to practice in the State of New York.
THE PROPOSAL CAN BE OMITTED FROM IBM'S 2004 PROXY MATERIALS UNDER RULE
14a-8(h)(3) PURSUANT TO THE TERMS OF THE STAFF'S NO-ACTION LETTER TO IBM DATED
JANUARY 24, 2003, PERMITTING FUTURE EXCLUSIONS BY IBM UNDER 14a-8(h)(3) OF ANY
PROPOSALS SUBMITTED BY THE PROPONENT FOR IBM SHAREHOLDER MEETINGS DURING 2003
AND 2004. IBM believes it may exclude Chris Rossi's current Proposal from the 2004 proxy
under the terms of last year's no-action letter granting forward-looking relief
under Rule 14a-8(h)(3). (See Exhibit B). International Business Machines
Corporation (January 24, 2003)(staff permitted the exclusion of two separate
proposals filed last year by Chris Rossi under Rule 14a-8(h)(3), based upon the
proponent's failure, without good cause, to appear and present a proposal which
was included by IBM in our 2002 proxy statement, and the Staff also granted
forward-looking relief for calendar years 2003 and 2004). As we noted in our
no-action request letter to the Staff last year, IBM included Chris Rossi's
poison pill proposal in our 2002 proxy materials and neither the Proponent, Mr.
Chevedden, nor anyone else appeared to present the 2002 proposal. With the
concurrence of the staff, IBM excluded both of last year's submissions under
14a-8(h)(3), and the same result should apply again this year to the instant
Proposal. See PACCAR Inc. (November 4, 2000)(proposal excluded for a second year
under Rule 14a-8(h)(3) with the concurrence of the staff, after the proponent
had again resubmitted the proposal. In the staff's view, "[t]here appears to be
some basis for your view that PACCAR may exclude the proposal under rule
14a-8(h)(3). In this regard, we particularly note our letter to PACCAR dated
February 21, 2000. Accordingly, we will not recommend enforcement action to the
Commission if PACCAR omits the proposal from its proxy materials in reliance on
rule 14a-8(h)(3)); Masco Corporation (November 21, 2000)(second year exclusion
permitted for 2002 proxy under Rule 14a-8(h)(3) where the proponent initially
failed to appear without good cause to present a proposal which was included in
the registrant's 2000 proxy, and the proponent's 2001 submission was excluded by
no-action letter under 14a-8(h)(3)). As we noted in our no-action letter request last year, after not showing up at
IBM's 2002 annual meeting, Chris Rossi went on to file two proposals with IBM
for our 2003 proxy statement. The first, a poison pill proposal, was filed by
Chris Rossi through Mr. Chevedden, and a second proposal, relating to auditor
rotation, was filed directly by Chris Rossi. Both proposals were filed by Chris
Rossi as custodian for Vanessa Rossi. The Company maintained, and the staff
concurred, that both of Mr. Rossi's proposals were excludable last year from the
2003 proxy under 14a-8(h)(3) because of the failure in 2002 of Mr. Rossi or his
designated representative, Mr. Chevedden, to appear and present the 2002 poison
pill proposal, without good cause. As a result, IBM excluded both of Chris
Rossi's 2003 stockholder proposals under Rule 14a-8(h)(3). In such letter, the
staff also granted IBM forward looking relief under Rule 14a-8(h)(3) for 2004.
In the Staff's words: "This response will also apply to any future submissions to IBM by Chris Rossi
as custodian for Vanessa Rossi with respect to any shareholder meeting held by
IBM during calendar year 2003 and calendar year 2004."
(See Exhibit B) We are now writing this letter to confirm our position that the forward-looking
relief in last year's no-action letter properly extends, in accordance with Rule
14a-8(h)(3), to the instant Proposal from Chris Rossi, and that IBM can exclude
such Proposal from our proxy materials for IBM's 2004 annual meeting.
In this connection, Rule 14a-8(h)(3) provides that:
"If you or your qualified representative fail to appear and present the
proposal, without good cause, the company will be permitted to exclude all of
your proposals from its proxy materials for any meetings held in the following
two calendar years." (emphasis added). We believe that the forward-looking relief quoted above properly extends to the
instant Proposal, which was submitted this year under cover of a letter signed
by "Chris Rossi, Record Holder" and sent in by Mr. Chevedden. As described in
greater detail below, the only IBM account of record Chris Rossi has with IBM is
the record account he controls as Custodian for Vanessa Rossi, but even if he
had another IBM account of record, it would make no difference. Chris Rossi is
and has been the active proponent, having filed four (4) stockholder proposals
with IBM over the last three years; one for the 2002 proxy, two for the 2003
proxy, and the instant Proposal. Hence, based on the facts of this particular
case, we believe the forward-looking relief, as drafted by the staff last year,
should be sufficient to exclude the instant Proposal. Moreover, we also believe we can exclude the Proposal under Rule 14a-8(h)(3); if
not under the literal wording of the forward-looking relief provision granted in
last year's no-action letter, under the plain words of Rule 14a-8(h)(3), which
rule properly serves to exclude all proposals of a proponent for a two year
period, no matter how that proponent may subsequently elect to reference his IBM
stockholdings in a cover letter to us.1 In this connection, we maintain that the text employed by the Staff in its
no-action ruling last year describing the Proponent's IBM stock account "Chris
Rossi as custodian for Vanessa Rossi" while correctly describing the title of
the account of record Chris Rossi maintains with IBM, should not be narrowly
construed. The fact that Mr. Rossi (acting through Mr. Chevedden) did not
reference any specific record account this year, signing the cover letter merely
as "Record Holder," is irrelevant. Indeed, if the staff letter were to be read
narrowly, it could serve to permit a proponent who had a proposal excluded one
year under 14a-8(h)(3) to avoid its application the next year merely by changing
the description of an account he or she referenced the first year, or by
pointing to some other account he or she might have in substantiating stock
ownership. Such a narrow reading of the Staff's no-action letter ruling would be
wholly inconsistent with both the letter and spirit of Rule 14a-8(h)(3).
A plain reading of the phrase "all of your proposals" in Rule 14a-8(h)(3)
provides no such limitation. In fact, the rule provides that:
the company will be permitted to exclude all of your proposals from its proxy
materials for any meetings held in the following two calendar years."
Moreover, the same theme (excluding all proposals by an errant proponent) is
clearly set forth in Staff Legal Bulletin 14.2 In discussing the grant of
forward-looking relief under Rule 14a-8(h)(3), the staff guidance provides that
it is "the shareholder [who] then submits a proposal" who is penalized without
limiting the application of the relief in the Rule to any specific shareholder
account.3 Consistent with Rule 14a-8(h)(3) and Staff Legal Bulletin 14, we thus
believe an issuer can exclude all proposals of a stockholder, without limiting
such exclusion to any specific account that the proponent may have, or may
reference in the filing of any of the proposals. Further, consistent with Rule
14a-8(h)(3) and Staff Legal Bulletin 14, in the other recent Staff letters we
have reviewed in which the Staff has granted forward-looking relief against the
same proponent under 14a-8(h)(3), those letters have all referred generically in
the statement to permit the exclusion of all proposals filed by "the same
proponent," without otherwise limiting the application of such relief to the
name of the specific account used by that proponent. See Raytheon Company (two
separate letters dated January 22, 2003)("This response will also apply to any
future submissions to Raytheon by the same proponent with respect to any
shareholder meetings held during calendar year 2003 and calendar year 2004.");
Burlington Northern Santa Fe Corporation (December 27, 2002)(This response will
also apply to any future submissions to BNSF by the same proponent with respect
to any shareholder meetings held during calendar year 2003 and calendar year
2004.); FleetBoston Financial Corporation (January 3, 2002)("This response will
also apply to any future submissions to FleetBoston by the same proponent with
respect to any shareholder meetings held by FleetBoston during calendar year
2002 and calendar year 2003. Accordingly, we will deem FleetBoston's statement
under rule 14a-8(j) to satisfy FleetBoston's future obligations under rule
14a-8(j) with respect to proposals submitted to FleetBoston by the same
proponent during calendar year 2002 and calendar year 2003.").
In discussing Rule 14a-8(h)(3), the Staff has also made it clear that:
"Rule 14a-8(h)(3) is primarily designed as an after-the-fact sanction against
proponents that violate rule 14a-8(h)(1)." 4 The rule's application as an "after-the-fact sanction" has always been applied
to a proponent, without further limiting its application to any particular
stockholder account that such proponent might have initially referenced in
filing a proposal. In fact, as far back as 1948, when this rule was initially
put into place, it was clear that it was designed to encourage a security holder
to attend a meeting by sanctioning security holders who did not show up from
having any additional proposals considered for two years. As the implementing
Release provided: "(c)...the management may omit a proposal and any statement in support thereof
from its proxy statement and form of proxy under the following circumstances:
... (2) if the management has at the security holder's request included a proposal
in its proxy statement and form of proxy relating to either of the last two
annual meetings of security holders or any special meeting held subsequent to
the earlier of such two annual meetings and such security holder has failed
without good cause to attend the meeting in person or by proxy or to present the
proposal for action at the meeting...." See Rule X-14A-8(c)(2), as adopted in Release No. 34-4185, Adoption of
Amendments to Proxy Rules (November 5, 1948). (emphasis added)
The rule is clear in its application to all proposals of a "security holder" and
does not limit its application to any specific account of such security holder.
More recently, in discussing the rationale for the instant Rule, the Staff has
also stated that: "the present requirement of a personal appearance by the proponent or his or her
representative ...assures that an informed, interested individual will be
present [at the meeting] to introduce the proposal and to participate in any
ensuing debate." See Division of Corporation Finance, Securities and Exchange Commission, Staff
Report on Corporate Accountability, Senate Committee on Banking, Housing and
Urban Affairs, 96th Cong., 2nd Sess,, September 4, 1980) at pp. B-34-35 [pp.
166-67]. Neither the instant Proponent (Chris Rossi) nor his representative (Mr.
Chevedden) adhered to this requirement in 2002. No one appeared at IBM's 2002
annual meeting to introduce the proposal, and no good cause was shown for such
failure to appear. As in the instant situation, when a proponent or his or her
designated representative does not show up, the staff on an after-the-fact
basis, and upon the request of a registrant, can apply the sanction against such
a non-appearing proponent by permitting the exclusion of any and all proposals
submitted by such proponent from a company's proxy materials for the next two
calendar years. Since the rule is designed to encourage proponents or their
representatives to show up at a meeting, and present a proposal which a company
took the time and expense to include in their proxy materials, the rule could
easily be flouted if a proponent who failed to appear one year at a meeting was
merely able the next year to characterize his holdings in a different way, or to
reference some other account (record or street) in which he/she held shares.
Instead, the clear intent of the regulation is to sanction proponents, like the
instant one, who fail to show up and present a proposal included in a company's
proxy materials without good cause by permitting the exclusion of all proposals
that such stockholder submits for a two year period, irrespective of how such
stockholder may reference his or her stockholdings. Put another way, it is the
proponent, not just a specific account, that is tainted, and any subsequent
proposals, if submitted by such tainted proponent, are properly excludable for a
2 year period under Rule 14a-8(h)(3). As applied here, it should make no difference, for purposes of applying Rule
14a-8(h)(3), that Chris Rossi did not fully reference under his signature the
IBM record account he controls as custodian for Vanessa Rossi, as the staff's
determination last year of his failure to appear without good cause to present
his 2002 proposal should be dispositive again this year. Mr. Chris Rossi is one
and the same proponent. The Proponent's failure to appear and present the proposal at our 2002 annual
meeting is a defect that cannot be remedied after the fact. More importantly, in
this connection, we wish to highlight that this defect is one of a number of
limited circumstances expressly called out by the Staff under which IBM did not
have to provide the Proponent with a "notice of defect." As the Division writes
in Section C.6(c) of Staff Legal Bulletin 14: c. Are there any circumstances under which a company does not have to provide
the shareholder with a notice of defect(s)? For example, what should the company
do if the shareholder indicates that he or she does not own at least $2,000 in
market value, or 1%, of the company's securities? The company does not need to provide the shareholder with a notice of defect(s)
if the defect(s) cannot be remedied. In the example provided in the question,
because the shareholder cannot remedy this defect after the fact, no notice of
the defect would be required, The same would apply, for example, if
the shareholder indicated that he or she had owned securities entitled to be
voted on the proposal for a period of less than one year before submitting the
proposal;
the shareholder indicated that he or she did not own securities entitled to be
voted on the proposal at the meeting;
the shareholder failed to submit a proposal by the company's properly
determined deadline; or
the shareholder, or his or her qualified representative, failed to attend the
meeting or present one of the shareholder's proposals that was included in the
company's proxy materials during the past two calendar years.
In all of these circumstances, the company must still submit its reasons
regarding exclusion of the proposal to us and the shareholder. The shareholder
may, but is not required to, submit a reply to us with a copy to the company.
See Staff Legal Bulletin No. 14 at Section C.6(c). (emphasis added)
Under the terms of the fourth bulleted item under Section C.6(c) of Staff Legal
Bulletin 14, underlined above, the Company had no obligation to go back to Mr.
Rossi following the submission of the instant Proposal and provide any
notification to him of the defects we have now outlined in this request for
no-action relief.5 In sum, under the terms of Staff Legal Bulletin 14, there was
nothing either Chris Rossi or John Chevedden could do to "remedy the defect"
which they created by failing to appear, without good cause to present the
proposal which we included in our 2002 proxy materials. Rule 14a-8(h)(3) simply
serves to bar Chris Rossi, as the Proponent, from having any proposals included
in IBM's proxy materials through calendar year 2004, because neither Chris
Rossi, Mr. Chevedden (his designated representative in 2002), or anyone else,
attended IBM's 2002 annual meeting to present Chris Rossi's proposal which we
included in our proxy materials. By virtue of the failure to appear, without
good cause, at IBM's 2002 annual meeting, IBM should again be properly able
under Rule 14a-8(h)(3) to exclude the instant Proposal, irrespective of how
Chris Rossi described his ownership status in the cover letter to the instant
Proposal. IBM therefore respectfully requests your advice that the Staff will
not recommend any enforcement action to the Commission if the Proposal is
omitted from IBM's proxy materials being prepared for the 2004 Annual Meeting
pursuant to Rule 14a-8(h)(3). By copy of this letter, we are advising both Messrs. Rossi and Chevedden of the
reasons why we believe Mr. Rossi's 2004 submission is defective and should be
excluded from our 2004 proxy materials. Each of these gentlemen are respectfully
requested to copy the undersigned on any response that may be made to the
Commission. If there are any questions relating to this submission, please
contact the undersigned at 914-499-6148. Thank you for your interest and
attention in this matter. Very truly yours,
/s/ Stuart S. Moskowitz
Senior Counsel cc: Mr. Chris Rossi
P.O. Box 249
Boonville, CA 95415 and Mr. John Chevedden
2215 Nelson Avenue, No. 205
Redondo Beach, CA 90278 -----FOOTNOTES-----
1 We wish to make clear that we are not presently challenging (i) Mr. Chris
Rossi's status as the custodian of Vanessa Rossi, the owner of IBM shares; (ii)
his general ability to file a proposal; or (iii) his right to appoint Mr.
Chevedden to act on his behalf. We currently assert that Mr. Chris Rossi is
ineligible to have the instant Proposal considered this year under 14a-8(h)(3).
After we included Chris Rossi's proposal in our 2002 proxy, and no one appeared
to present it, the same proposal was filed last year by Mr. Emil Rossi, (acting
through Mr. Chevedden). We did not challenge Emil Rossi's eligibility to submit
that proposal last year and we included Emil Rossi's proposal in our 2003 proxy
statement. (See IBM request for no-action relief dated December 12, 2002). This
year, however, Emil Rossi did not resubmit the Proposal. Instead, the Proposal
was submitted by Chris Rossi (acting through Mr. Chevedden). Since the Staff's
no-action letter last year was directed at Chris Rossi's proposals, and such
letter granted forward-looking relief through calendar year 2004, the Staff
letter should properly permit the exclusion of Chris Rossi's instant Proposal,
no matter how he might reference his status in his cover letter. In fact, as
noted earlier, the only stockholder account of record Chris Rossi has at IBM is
the custodial account he maintains for Vanessa Rossi. More importantly, it would
make no difference if Mr. Rossi had another IBM account of record, or if he had
another account in which he held IBM stock such as stock held in trust or
through a broker (i.e., in street name). Since Chris Rossi, as a proponent,
didn't appear to present the stockholder proposal he submittedand we
includedin our 2002 proxy materials, Rule 14a-8(h)(3) properly serves to
exclude any submission to us from Chris Rossi for meetings held in 2003 and
2004. 2 See Division of Corporation Finance, U.S. Securities and Exchange Commission,
Staff Legal Bulletin No. 14 (July 13, 2001) at Section C.4.
3 Question C.4(c) of Staff Legal Bulletin No. 14 provides:
If a company demonstrates that it is entitled to exclude a proposal under rule
14a-8(h)(3), can the company request that we issue a no-action response that
covers both calendar years? Yes. For example, assume that, without "good cause," neither the shareholder nor
the shareholder's representative attended the company's 2001 annual meeting to
present the shareholder's proposal, and the shareholder then submits a proposal
for inclusion in the company's 2002 proxy materials. If the company seeks to
exclude the 2002 proposal under rule 14a-8(h)(3), it may concurrently request
forward-looking relief for any proposal(s) that the shareholder may submit for
inclusion in the company's 2003 proxy materials. If we grant the company's
request and the company receives a proposal from the shareholder in connection
with the 2003 annual meeting, the company still has an obligation under rule
14a-8(j) to notify us and the shareholder of its intention to exclude the
shareholder's proposal from its proxy materials for that meeting. Although we
will retain that notice in our records, we will not issue a no-action response.
4 See Exxon Mobil Corporation (March 7, 2001)(staff permitted the exclusion of
proposal under rule 14a-8(i)(3) as contrary to proxy rule 14a-8(h)(1). There the
staff wrote: "While rule 14a-8(h)(3) is primarily designed as an after-the-fact
sanction against proponents that violate rule 14a-8(h)(1), the instant situation
would be contrary to rule 14a-8(h)(1) because the proponent has indicated that
neither he nor his qualified representative will attend the meeting to present
his proposal."); Johnson & Johnson (January 9, 2001)(to same effect).
5 For a recent Staff letter discussing the same proponent and the same issue
under Staff Legal Bulletin 14, see R.J. Reynolds Tobacco Holdings, Inc.
(February 12, 2002). [APPENDIX]
3Shareholder 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. 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. This topic won an overall 60%
yes-vote at 79 companies in 2003. I believe majority shareholder votes are a
strong signal of shareholder concern on this topic. I believe that shareholders are more likely to vote in favor of this proposal
topic if shareholders have the staff and/or resources to thoroughly evaluate the
best corporate governance practices. In two years our Directors have not
provided any management position evidence that they consulted with a corporate
governance authority who supported this proposal topic. Chris Rossi, P.O Box 249, Boonville, Calif. 95415 submitted this proposal.
Poison Pill Negative The key negative of poison pills is that pills can preserve management deadwood
instead of protecting investors. Source: Moringstar.com
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 sell the company out from under its
present management. Source: Wall Street Journal, Feb. 24, 2003
Diluted Stock An anti-democratic management 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 Like a Dictator
Poison pills are like 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."
T.J. Dermot Dunphy, CEO of Sealed Air (NYSE) for 25 years
I believe our Directors could make a token responsehoping 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 with not even a subsequent
vote, would not substitute for this proposal. Council of Institutional Investors Recommendation
The Council of Institutional Investors www.cii.org whose members have $2
trillion invested, called for shareholder approval of poison pills.
Shareholder Voting Right on a Poison Pill Yes on 3
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, JuneSept. 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. [INQUIRY LETTER]
Chris Ross
P.O. Box 249
Boonville, CA 95415 Mr. Samuel Palmisano
Chairman
International Business Machines (IBM)
One New Orchard Road
Armonk, NY 10504
Phone: (914) 499-1900
Fax: (914) 765-6021, 499-6007 Dear Mr. Palmisano,
This Rule 14a-8 proposal is respectfully submitted for the next annual
shareholder meeting. This proposal is submitted in support of the long-term
performance of our company. Rule 14a-8 requirements are intended to be met
including ownership of the required stock value until after the date of the
applicable shareholder meeting. This submitted format, with the
shareholder-supplied emphasis, is intended to be used for definitive proxy
publication. This is the proxy for Mr. John Chevedden and/or his designee to act
on my behalf in shareholder matters, including this shareholder proposal for the
forthcoming shareholder meeting before, during and after the forthcoming
shareholder meeting. Please direct all future communication to Mr. Chevedden at:
2215 Nelson Ave., No. 205
Redondo Beach, CA 90278
PH: 310-371-7872 Your consideration and the consideration of the Board of Directors is
appreciated. Sincerely, /s/
Oct 7-03 Record Holder
cc: Daniel E. O'Donnell
Corporate Secretary
FX: 914/499-6519 [INQUIRY LETTER]
November 21, 2003 Via Airbill 6 Copies
7th copy for date-stamp return Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
Mail Stop 0402
450 Fifth Street, NW
Washington, DC 20549 International Business Machines (IBM)
Response to No Action Request
Postmarked: Nov. 7, 2003
Dated: November 11, 2003
Received by mail: November 13, 2003
Chris Rossi Ladies and Gentlemen:
The key part of the company 7-page company request is the page 6 company
quotation from SLB 14 Section C.6(c). SLB 14 Section C.6(c) states "The company does not need to provide the
shareholder with a notice of defects if the defects cannot be remedied." In this
situation the defect can be remedied. This is contingent on action that the
proponent would take upon receiving the all important notice from the company.
The remedy is that the proponent would suggest to the 2003 IBM proponent on this
same proposal topic that he timely resubmit his proposal on the same topic. This
defect could thus be remedied. Rule 14a-8 does not state that only one person
can remedy a defect. It is clear the company gave no notice.
It appears that SLB 14 Section C.6(c) does not contemplate the situation here.
Yet the company, which has the burden of proof, provides no comment on the
unique issue here. I believe the company is already well aware of the unique
circumstance here because the company's 2003 definitive proxy published Mr. Emil
Rossi's proposal on the same topic. Mr. Chris Rossi's proposal was submitted on October 15, 2003. This proposal was
inadvertently re-submitted in error by Chris Rossi. Had the company given notice
within the specified 14-days this defect could have thus been cured by a
qualified proponent known to Mr. Chris Rossi. This proponent, Mr. Emil Rossi was
the sponsor of this proposal topic in the company 2003 definitive proxy.
Since SLB 14 does not seem to cover this specific and apparently unique
situation here, it would seem that the original rule 14a-8 text would be relied
upon: f. Question 6: What if I fail to follow one of the eligibility or procedural
requirements explained in answers to Questions 1 through 4 of this section?
1. The company may exclude your proposal, but only after it has notified you of
the problem, and you have failed adequately to correct it. Within 14 calendar
days of receiving your proposal, the company must notify you in writing of any
procedural or eligibility deficiencies, as well as of the time frame for your
response. Since the company clearly did not notify the proponent within 14 days it has not
followed rule 14a-8. Consequently the company should not rest its case on rule
14a-8 when it has not followed rule 14a-8. I do not believe the company has met its burden of proving its allegations.
For the above reasons this is to respectfully request that the Office of Chief
Counsel not agree with the company no action request. Sincerely,
/s/ John Chevedden
cc: Chris Rossi
Samuel Palmisano, IBM
[STAFF REPLY LETTER]
January 2, 2004 Response of the Office of Chief Counsel Division of Corporation Finance
Re: International Business Machines Corporation
Incoming letter dated November 11, 2003 The proposal requests that the board of directors seek shareholder approval to
adopt, maintain or extend any current or future poison pill.
There appears to be some basis for your view that IBM may exclude the proposal
under rule 14a-8(h)(3). In this regard, we particularly note our letter to IBM
dated January 24, 2003. Accordingly, we will not recommend enforcement action to
the Commission if IBM omits the proposal from its proxy materials in reliance on
rule 14a-8(h)(3). Sincerely, /s/
Lesli L. Sheppard-Warren
Attorney-Advisor
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