Company Name: Tenet Healthcare Corp.
Public Availability Date: March 15, 2004Document Sections:
INQUIRY LETTER
APPENDIX 1
APPENDIX 2
APPENDIX 3
APPENDIX 4
INQUIRY LETTER
INQUIRY LETTER
APPENDIX 5
APPENDIX 6
APPENDIX 7
APPENDIX 8
INQUIRY LETTER
STAFF REPLY LETTER [INQUIRY LETTER]
February 12, 2004 Direct Dial (212) 351-3900
Fax No. (212) 351-6201
Client No. 64230-00841 VIA HAND DELIVERY
Office of the Chief Counsel
Division of Corporation Finance
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Shareholder Proposal of Courage Special Situations Master Fund, L.P.
Securities Exchange Act of 1934 - Rule 14a-8 Ladies and Gentlemen:
This letter is to inform you that it is the intention of Tenet Healthcare
Corporation (the "Company") to omit from its proxy statement and form of proxy
for its 2004 Annual Meeting of Shareholders (collectively, the "2004 Proxy
Materials") a shareholder proposal and statement in support thereof (the
"Proposal") received from Courage Special Situations Master Fund, L.P. (the
"Proponent"). The Proposal requests that the shareholders of the Company approve
an amendment to the Company's Bylaws which would allow any shareholder or group
of shareholders holding 35% or more of the outstanding shares of Company to
submit "to the Secretary any list of candidates to be nominated as directors."
Pursuant to Rule 14a-8(j), enclosed herewith are six copies of this letter and
its attachments. Also in accordance with Rule 14a-8(j), a copy of this letter
and its attachments are being mailed on this date to the Proponent, informing it
of the Company's intention to omit the Proposal from the 2004 Proxy Materials.
The Company hereby respectfully requests that the staff of the Division of
Corporation Finance (the "Staff") of the Securities and Exchange Commission (the
"Commission") concur in our view that the Proposal may be excluded from the 2004
Proxy Materials under Rule 14a-8(i)(8), because the Proposal "relates to an
election for membership on the company's board of directors."
ANALYSIS The Proposal requires that the Company amend its Bylaws to add a requirement
that the Company include in its proxy statement the nominees for director chosen
by certain shareholders in addition to those nominated by the Company's board.
To be eligible to make a nomination, a shareholder or group of shareholders must
beneficially own 35% or more of the Company's common stock. A copy of the
original proposal (the "Original Proposal") and cover letter to the Secretary of
the Company are attached hereto as Exhibit A. A copy of the amendment to the
Original Proposal is attached hereto as Exhibit B. Although the Proposal is
arguably ambiguous, we have confirmed with the Proponent (via telephone call
with Mr. Richard Patton, Chief Manager, Courage Capital Management, LLC) that
the Proposal requires that such shareholder nominees must be included in the
Company's proxy statement. Rule 14a-8(i)(8) allows the exclusion of a proposal if it "relates to an
election for membership on the company's board of directors." The Commission has
stated that the "principal purpose of [paragraph (i)(8)] is to make clear, with
respect to corporate elections, that Rule 14a-8 is not the proper means for
conducting campaigns or effecting reforms in elections of that nature...."
Release No. 34-12598 (July 7, 1976). Rather than follow the procedures
established by the Proxy Rules for conducting a proxy contest, the Proponent
seeks to use Rule 14a-8 to create a new procedure allowing certain shareholders
to circumvent those rules. In fact, the Proposal serves no other purpose than to
foster contested elections by requiring the Company to include in its proxy
materials shareholder nominees not supported by the board of directors.
The Staff has consistently granted no-action letter requests for the exclusion
of shareholder proposals that seek to mount election contests, or to establish
procedures that would likely lead to election contests. For example, in Storage
Technology Corporation (available March 22, 2002) the Staff granted a no-action
letter request to exclude a proposal that would have required the registrant to
amend its bylaws to require management to include the names of each candidate
nominated by a shareholder in the company's proxy materials. The Staff based its
decision on the ground "that the proposal, rather than establishing procedures
for nomination or qualification generally, would establish a procedure that may
result in contested elections for directors." See also Merck & Co., Inc.
(available January 25, 2004) (proposal requiring that the registrant include in
its proxy materials an alternative slate of directors proposed by the ten
largest shareholders of record); AOL Time Warner Inc. (available February 28,
2003) (proposal requiring the registrant to amend its bylaws to require that the
company include any person nominated for election to the board of directors by a
shareholder who beneficially owns 3% or more of the registrant's outstanding
shares); Citigroup Inc. (available January 31, 2003) (proposal requiring the
registrant to amend its bylaws to add a new section requiring the Company to
include in its proxy statement the name of a nominee for election to the
Company's board chosen by certain shareholders); and General Motors Corporation
(available March 22, 2001) (proposal requiring the registrant to publish the
names of all nominees for director in its proxy statement excluded on the ground
that the proposal, rather than establishing procedures for nomination or
qualification generally, would establish a procedure that may result in
contested elections for directors). The Commission has made clear that its proposed shareholder access rules, which
would require companies to include shareholder nominees for director in company
proxy materials under certain circumstances (the "Proposed Shareholder Access
Rules"), do not alter this analysis. In the proposing release, the Commission
stated: To clarify the applicability of this provision in the context of [the Proposed
Shareholder Access Rules], we are proposing an amendment to Exchange Act Rule
14a-8(i)(8) that would, if adopted, make clear that a company may not rely on
the exclusion permitted by that paragraph (i.e., the exclusion for proposals
relating to the election of directors) to exclude a proposal that the company
become subject to the procedure in [the Proposed Shareholder Access Rules]. The
requirements and exclusions in the remainder of Exchange Act Rule 14a-8 would,
of course, continue to apply to any such security holder proposal. Although we
are proposing a security holder nomination procedure in this release, we are not
reviewing or revising the position taken by the Division of Corporation Finance
regarding the application of Exchange Act Rule 14a-8(i)(8) to security holder
proposals that would have the effect of creating a security holder nomination
procedure other than a direct access proposal.... Release No. 34-48626, fn.74.
(October 14, 2003) (emphasis added). The proposing release describes a "direct access proposal" as a shareholder
proposal "submitted pursuant to Exchange Act Rule 14a-8 providing that the
company become subject to the security holder nomination procedure in proposed
Exchange Act Rule 14a-11." Proposed Rule 14a-11 would allow certain shareholders
to nominate between one and three director nominees (depending on the size of
the board of directors) provided a company meets certain criteria. The Proposal
is clearly not a "direct access proposal" as contemplated in the Proposed
Shareholder Access Rules. Rather than subjecting the Company to Proposed Rule
14a-11, the Proposal would allow shareholders or groups of shareholders holding
35% or more of the Company's outstanding common stock to submit "any list of
candidates to be nominated as directors," while the Proposed Shareholder Access
Rules would permit only between one and three nominees (depending on the size of
the company's board of directors). Accordingly, the Proposal is not a "direct
access proposal" as contemplated by the Proposed Shareholder Access Rules and,
the Proposal may be omitted from the 2004 Proxy Materials pursuant to Rule
14a-8(i)(8). REQUEST FOR WAIVER OF RULE 14a-8(j)
The Company presently intends to file its definitive 2004 Proxy Materials on or
about April 6, 2004. As a result, this letter is being submitted less than 80
days before the Company intends to file its definitive 2004 Proxy Materials with
the Commission. Therefore, pursuant to Rule 14a-8(j), the Company hereby
requests that the Staff waive the 80-day requirement set forth therein.
In March 2003, the Company changed is fiscal year end from May 31 to December
31. Therefore, in 2003 and again in 2004, the Company changed its annual meeting
date by more than 30 days from the anniversary of the previous year's meeting.
As a result, the Company was only required to give shareholders a "reasonable
time before the company begins to print and mail its proxy materials" to submit
proposals pursuant to Rule 14a-8. However, in order to be as responsive to
shareholders as possible, the Company did not change the deadline for the
submission of shareholder proposals from that set forth in the Company's 2003
Proxy Statement. The Company believes that these facts constitute good cause
under Rule 14a-8(j). CONCLUSION Based on the foregoing, on behalf of the Company, we hereby respectfully request
that the Staff not recommend any enforcement action if the Proposal is excluded
from the Company's 2004 Proxy Materials. Should you disagree with the
conclusions set forth in this letter, we respectfully request the opportunity to
confer with you prior to the determination of the Staff's final position. We
would be happy to provide you with any additional information and answer any
questions that you may have regarding this subject. Please do not hesitate to
call me at (212) 351-3900, or E. Peter Urbanowicz, General Counsel of the
Company at (805) 563-7105, if we can be of further assistance in this matter.
Regards, /s/ Dennis J. Friedman
DJF/dr cc: Mr. Richard Patton, Courage Special Situations Master Fund, L.P.
E. Peter Urbanowicz, Esq. [APPENDIX 1]
EXHIBIT A February 6, 2004 Via Facsimile @ 805-563-7085 and United Parcel Service (805-563-7188)
Attention: Secretary
Tenet Healthcare Corporation
3820 State Street
Santa Barbara, CA 93105 Re: Shareholder Proposal to be Voted Upon at the May 6, 2004 Annual Meeting of
Tenet Healthcare Corporation ("Tenet") Dear Tenet Secretary:
In accordance with the Restated Bylaws of Tenet, as amended (the "Bylaws"), as
such Bylaws were filed with the Securities and Exchange Commission as Exhibit
3(b) to Tenet's Quarterly Report on Form 10Q on November 10, 2003, and pursuant
to Tenet's public announcement on January 16, 2004 regarding Tenet's annual
meeting of shareholders to be held on May 6, 2004 (the "Annual Meeting")
requiring that shareholder proposals to be included in Tenet's proxy materials
be submitted to Tenet's Secretary by February 10, 2004, Courage Special
Situations Master Fund, L.P. (the "Fund") hereby submits the attached proposal
for shareholder approval at the Annual Meeting (the "Proposal").
In accordance with Rule 14a-8 of the Proxy Rules promulgated under the
Securities and Exchange Act of 1934, as amended, the Fund submits the following
information:
The Fund has continuously held, through its prime broker account with Bear
Stearns Securities Corporation ("Bear Stearns"), at least $2,000 in market value
of Tenet's voting securities for at least one year;
The Fund certifies that it will continue to hold such securities through the
date of the Annual Meeting;
Under a contractual arrangement between Courage Investments Inc., as the
general partner of the Fund and Courage Capital Management, LLC ("Courage"),
Courage has full discretionary authority to manage the Fund, including authority
to make all voting decisions with respect to the stock of Tenet;
The Fund acknowledges that it, or Courage as its investment manager and
authorized representative, intends to appear in person at the Annual Meeting to
bring the Proposal before the meeting; and
The attached letter from the Fund's prime broker, Bear Stearns Securities
Corp., evidencing the Fund's ownership of Tenet's stock pursuant Rule
14a-8(b)(2)(i). Please acknowledge receipt of this letter (with attachments) by signing the
acknowledgement below and sending Courage a signed copy via facsimile at (615)
298-7529, attention Paul Mercer, by close of business February 9, 2004. Please
contact Mr. Mercer at (615) 298-8315 should you have any questions.
Sincerely, COURAGE SPECIAL SITUATIONS MASTER FUND, L.P.
By: Courage Investments Inc., its General Partner
By:/s/ Name:/s/
Title:/s/ Receipt of This Notice Acknowledged:
Tenet Healthcare Corporation By:________________________________
Name:______________________________
Its: Secretary Date:______________________________ [APPENDIX 2]
Proposal RESOLVED, that the stockholders of the Corporation hereby amend the bylaws of
the Corporation by adding the following provision to the end of Section 3.4.1:
"or (c) by any stockholder or group of stockholders representing at least 20% of
the outstanding shares of common stock (excluding any stockholders who are
employees, officers or directors of the Corporation or family members of any
such employees, officers or directors or entities which hold shares for the
benefit of any such employees, officers, directors or family members) (the
"Stockholders Committee") of the Corporation who submits to the Secretary any
list of candidates for nomination as directors (comprised of one or more
candidates)(the "Stockholder Slate"). In the event that a Stockholder Slate is
submitted to the Secretary under subsection (c) above, the Board (or any
nominating committee) will review such Stockholder Slate and determine (i) which
candidates from the Stockholder Slate satisfy the current published
qualifications for directors of the Corporation (the "Qualifications") and (ii)
which nominees to submit for election at the next upcoming annual stockholders
meeting and include in the Corporation's proxy materials. Such nominees shall be
in lieu of any other proposed slate of directors submitted by the Board. The
Stockholder Committee shall comply with all applicable state, federal and
foreign laws in connection with submission of a Stockholder Slate.
Statement of Support Tenet's stockholders currently have no meaningful control over the process by
which candidates are nominated for election to Tenet's board of directors.
We believe that because the board of directors of a company plays a critical
part in creating the strategy for its long term success, the stockholders should
be in a significant position of responsibility for determining the members of
the board. This is a very democratic concept and one we believe makes implicit
sense, as the stockholders are the ones who will enjoy the fruits of success or
bear the ultimate burden of failure. We want to ensure that the company is on good strategetic, operational, and
financial footing. More specifically, we want to ensure that the company
maintains and strengthens a missiondriven culture and is insulated from the risk
of regressing to one of senior management centricity. If our company pays proper
attention to its front line associates, customers, and regulators, benefits of
improved equity valuation will naturally accrue to stockholders as will
remuneration to senior managers. We firmly believe that the very important duty of choosing the board slate
should, by right, fall to the shareholders as opposed to a headhunter or
corporate recruiter who has no stake in the consequences of the directors'
decisions Once accomplished, Tenet and its management will certainly be
recognized for being proactive and taking very positive steps in the direction
of true corporate governance. Adoption of the above proposal would align the interests of stockholders and
directors of the company and provide the company's management with a clear
mandate regarding the conduct of the company's business. We urge your support
"FOR" the above proposal. [APPENDIX 3]
February 4, 2004 Corporate Secretary
Tenet Healthcare Corp.
3820 State St.
Santa Barbara, CA 93105 Ladies and Gentlemen:
Courage Special Situations Master Fund LP ("Courage") is the beneficial owner of
1,876,400 shares of Common Stock (the "Stock") of Tenet Healthcare Corporation
("Tenet") held in its Bear, Stearns Securities Corp. ("Bear Stearns") account #
102-27010-21. Bear Stearns hereby certifies that as of the date of this letter,
Courage is and has been the beneficial owner of 1,876,400 shares ("Shares") of
Tenet, and has continuously held at least $2000.00 in market value of Tenet
shares for at least one year. Please be advised that Bear Stearns in acting pursuant of Tenet's instructions
as beneficial owner of the Shares. Very truly yours,
Bear, Stearns Securities Corp. By: /s/
Name: Robert D. Klein Title: Associate Director [APPENDIX 4]
EXHIBIT B February 9, 2004 Via Facsimile @ 805-563-7085 and United Parcel Service (805-563-7188)
Attention: Secretary
Tenet Healthcare Corporation
3820 State Street
Santa Barbara, CA 93105 Re: Letter dated February 6, 2004 (the "February 6thLetter") regarding
submission of a Shareholder Proposal (the "Shareholder Proposal") to be Voted
Upon at the May 6, 2004 Annual Meeting of Tenet Healthcare Corporation ("Tenet")
Dear Tenet Secretary: After conversations between certain directors of Tenct and Courage Capital
Management, LLC, our investment manager and authorized representative, we desire
to amend the Shareholder Proposal as follows. 1) Delete the reference to "20%"
in the third line of the text under the heading "Proposal" and place "35%" in
lieu thereof, and 2) In the third line up from the bortom of the text under the
heading "Proposal" delete the phrase "in lieu of" and replace it with the phrase
"in addition to". All other text of the Shareholder Proposal remains as
presented in the Shareholder Proposal enclosed with the February 6thLetter
sent to you via facsimile on February 6, 2004 with the original following via
overnight delivery by United Parcel Service for delivery Monday morning,
February 9, 2004. Additionally, all of the certifications, confirmations and
acknowledgements in, and attachments to, the February 6thLetter are hereby
ratified and, other than the above changes, not affected by this amendment.
Please contact Paul Mercer at (615) 298-8315 should you have any questions.
Sincerely, COURAGE SPECIAL SITUATIONS MASTER FUND, L.P.
By: Courage Investments Inc., its General Partner
By: /s/ Name: /s/
Title: /s/ [INQUIRY LETTER]
March 8, 2004 VIA HAND DELIVERY Securities and Exchange Commission
Division of Corporation Finance
Office of the Chief Counsel
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Shareholder Proposal of Courage Special Situations Master Fund, L.P. (the
"Fund"); No-Action Request by Tenet Healthcare Corporation ("Tenet"); March 2,
2004 Letter from Tenet's Counsel Dear Sir/Madam:
Thank you for allowing us to respond to the letter sent to you by Tenet's
counsel on March 2, 2004 ("Tenet's March Letter"). We realize that the SEC's
no-action request process was not designed to air shareholder/company disputes.
However, since the process will become public record we feel it necessary to
respond to Tenet's March Letter to clarify certain items raised by Tenet's
counsel. We have provided a copy of this letter to Tenet's counsel.
First, the Draft Proposal (as defined in Tenet's March Letter) was not submitted
to Tenet as a shareholder proposal to be included in Tenet's proxy statement;
rather, the Draft Proposal was sent to Tenet's executive management at Mr.
Fetter's request so that Tenet could better understand Mr. Patton's concerns
with its current system of nominating directors. To put the Draft Proposal into
context, Mr. Patton and Mr. Fetter had a telephone conversation prior to
February 3, 2004 (the date Mr. Patton sent the Draft Proposal to Mr. Fetter via
electronic-mail). During that conversation Mr. Patton described his desire to
have Tenet include in its upcoming proxy materials a shareholder proposal
regarding nomination of directors by a shareholder committee, and Mr. Fetter
asked Mr. Patton to provide him specific information about the proposal. Even
though the Draft Proposal was only in outline form (As Tenet's counsel points
out, the draft was hundreds of words longer than permitted under Rule 14a-8(d),
without even taking into account the supporting statement which had not yet been
drafted.) and had not been reviewed by counsel for compliance with SEC rules,
Mr. Patton agreed to share the Draft Proposal with Mr. Fetter in the spirit of
cooperation. Mr. Patton believes that he clearly communicated the state of the
proposal to Mr. Fetter when Mr. Patton agreed to send him the initial draft.
Sharing this draft with Mr. Fetter was never intended to constitute a formal
submission of the proposal and was, in fact, not a formal submission in
accordance with Rule 14a-8 or Tenet's Bylaws. Any other view of the reason the
Draft Proposal was sent to Mr. Fetter mischaracterizes the spirit and intent of
sending him the Draft Proposal. Second, the meeting between Messrs. Kangas and Patton was not initiated in
response to Tenet's receipt to the First Proposal (as defined in Tenet's March
Letter). The meeting between Messrs. Kangas and Patton had been scheduled well
in advance of the submission of the First Proposal. In fact, Mr. Kangas and Mr.
Patton met in Nashville, Tennessee on February 6 at 4:00 p.m. CST. The First
Proposal was sent by the Fund's general counsel to Tenet via facsimile on
February 6 at 2:49 p.m. CST. The purpose of the meeting was to continue dialogue
between Tenet and the Fund regarding an appropriate shareholder access provision
for the nomination of directors. The First Proposal was submitted to meet the
deadline imposed by Tenet. The Final Proposal (as defined in Tenet's March
Letter) was subsequently submitted to address concerns raised by Mr. Kangas
during that meeting in order to attempt to reach a mutually acceptable proposal.
Finally, the response by the Fund's counsel to Tenet's no-action request
submitted to the Commission on February 24, 2004 (the "February 24thLetter")
was not meant to imply that Tenet was responsible for the substance of the Final
Proposal. As rightfully pointed out in Tenet's March Letter, the Fund has been
advised by counsel and, as stated by the Fund's counsel in the February 24thLetter, the Fund is certainly aware of the provisions of Rule 14a-8 and its
subparts and of the current position taken by the Staff with respect to similar
requests for no-action, including the Staff's position with respect to a
shareholder proposal that would require director nominees to be selected by a
company's board exclusively from a pool of candidates selected by a group of
shareholders in lieu of that board's own nominees. See, e.g., Rockwell
International Corporation (Dec. 11, 1992). Counsel to the Fund simply intended
to clarify the point that the Fund has been, and is willing to continue,
communicating with Tenet regarding the Final Proposal and any further
refinements. The hope is that a mutually acceptable provision can be drafted and
included in Tenet's proxy materials, thus giving all shareholders of Tenet the
ability to evaluate such proposal and decide whether it is an appropriate
governance tool for Tenet. If, in fact, as was stated in Tenet's March Letter,
Tenet has a strong desire that its shareholders have a voice in the management
of Tenet, the Fund hopes that Tenet would continue to participate in good faith
negotiations regarding such refinements to the Final Proposal, such as the
refinement described by the Fund's counsel in the February 24thLetter.
In the meantime, we continue to request that the Commission encourage such
discussions by not granting Tenet's no-action request or request for waiver of
Rule 14a-8(j) for the reasons stated in the February 24thLetter.
Thank you for your time and attention, and allowing the submission of this
letter for your consideration. Sincerely,
/s/ Tonya Mitchem Grindon
cc: Paul Mercer, Esq.
Dennis J. Friedman, Esq. [INQUIRY LETTER]
March 2, 2004 Direct Dial (212) 351-3900
Client No. 64230-00841
Fax No. (212) 351-6201 VIA HAND DELIVERY
Office of the Chief Counsel
Division of Corporation Finance
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Shareholder Proposal of Courage Special Situations Master Fund, L.P.
Ladies and Gentlemen: We are writing on behalf of Tenet Healthcare Corporation (the "Company") in
response to the letter of Baker, Donelson, Bearman, Caldwell & Berkowitz, PC,
counsel to Courage Special Situations Master Fund, L.P. (the "Proponent"),
submitted to the Staff on February 24, 2004 (the "Letter"), in regard to our
no-action request dated February 12, 2004 (the "No-Action Request"). Although we
recognize that the Staff will not address any proposal other than that set forth
in our No-Action Request, we wish to address certain issues raised by the
Proponent's counsel in the Letter. We have provided a copy of this letter to the Proponent.
In January, 2004, the Proponent contacted Trevor Fetter, the President and Chief
Executive Officer of the Company, and requested that he organize a meeting of
the Company's largest shareholders for the purpose of creating a method for a
group of shareholders to nominate directors. On February 3, 2004, the Company
received a draft proposal from the Proponent, which is attached hereto as
Exhibit A (the "Draft Proposal"). The Draft Proposal was 724 words before any
statement in support, and the Company found it to be ambiguous and internally
inconsistent. However, because the Board of Directors of the Company (the
"Board") feels strongly that shareholders should have a voice in governance, Mr.
Fetter contacted the Proponent in an attempt to determine what the Proponent was
attempting to achieve and whether the Board could recommend such a proposal to
shareholders. Following those conversations, the Proponent submitted a proposal
to the Secretary of the Company on February 6, 2004, attached hereto as Exhibit
B (the "First Proposal"). The First Proposal, if approved, would have required that the Company's bylaws
be amended to allow any group representing 20% of the outstanding shares of the
Company to nominate directors in lieu of those nominated by the Board. In the
Company's view, this proposal was still ambiguous. More importantly, it took the
responsibility for nominating directors away from the Board and placed it in the
hands of a group of minority shareholders. After receipt of the First Proposal,
the Chairman of the Board, Edward Kangas, met in person with the Proponent to
express the Board's opposition to such a proposal. During that meeting, Mr.
Kangas made clear that binding nominations submitted by a group of minority
shareholders was, in his opinion, not in the best interest of shareholders
generally. After this meeting, the Proponent submitted an amendment to the First
Proposal on February 9, 2004, attached hereto as Exhibit C, resulting in the
proposal (the "Final Proposal") upon which we filed our No-Action Request.
The Letter implies that these meetings resulted in the Final Proposal being
excludable Rule 14a-8(i)(8). While we do believe that the Final Proposal is
excludable under that Rule, the Company has no responsibility for the substance
of the Final Proposal. The Proponent has apparently been advised by counsel
during the entire period in which the Company and Proponent have communicated in
regard to this matter. Furthermore, we believe that both the Draft Proposal and
First Proposal also are excludable under Rule 14a-8. Not only would they be
excludable under Rule 14a-8(i)(8), but they would also be excludable under Rule
14a-8(i)(1). While the Staff has apparently never had to address a proposal
which would take the duty to nominate directors away from a company's board, we
believe that one of the basic tenets of Rule 14a-8(i)(8), that shareholders not
be able to use Rule 14a-8 to nominate directors, would be violated by either of
these proposals. In addition, we received a draft opinion of Nevada counsel,
attached hereto as Exhibit D, stating that the First Proposal would illegally
restrict the Board's fiduciary duty to manage the Company, and therefore would
be excludable under Rule 14a-8(i)(1) as well. Plainly stated, the Company received a proposal from one shareholder that the
Board thought was clearly not in the best interest of all shareholders and
provided that shareholder with ample time to craft something that the Board
could consider recommending to shareholders. Finally, while we recognize that Rule 14a-8(j) does not create any right on
behalf of the Proponent, we would like to point out again that it is exactly the
Board's strong desire that shareholders have a voice in the management of the
Company, as demonstrated by the above discussion, which lead to the Board's
decision not to change the deadline for shareholder proposals under Rule 14a-8.
Regards, /s/ Dennis J. Friedman
DJF/jk [APPENDIX 5]
EXHIBIT A Proposal to Amend Section 3.4 of the Restated Bylaws of Tenet Healthcare
Corporation, as amended (the "Bylaws"), as such Bylaws were filed with the
Securities and Exchange Commission as Exhibit 3(b) to Tenet Healthcare
Corporation's Quarterly Report on Form 10Q on November 10, 2003
RESOLVED, that the stockholders of Tenet Healthcare Corporation (the
"Corporation") hereby approve and amend the bylaws of the Corporation by adding
the following provision to the end of Section 3.4.1 thereof:
"or (c) by any stockholder or group of stockholders representing at least twenty
(20) percent of the outstanding shares of common stock (excluding any
stockholders who are employees, officers or directors of the Corporation or
immediate family members of any such employees, officers or directors or any
entities which hold shares for the benefit of any such employees, officers,
directors or family members) (the "Stockholders Nominating Committee") of the
Corporation who submits to the Secretary any list of candidates to be nominated
as directors (comprised of one or more candidates). In the event that a list of
candidates is submitted to the Secretary under subsection (c) above, the
nominating committee or Board, as the case may be, will review such list of
candidates and determine which of such candidates satisfy the current published
qualifications for directors of the Corporation (the "Qualifications"). The
nominating committee or the Board, as the case may be, will determine the slate
of nominees to be included in the Corporation's proxy materials and submitted
for election at the next upcoming annual stockholders meeting only from such
list of candidates which meet the Qualifications and in lieu of any other
proposed slate of directors. If the nominating committee or Board, as the case
may be, shall reasonably determine, in good faith, that there is not a
sufficient number of candidates on such list who meet the Qualifications, the
nominating committee or Board, as the case may be, will so notify the
Stockholder Nominating Committee which submitted the list and give it a
reasonable amount of time to substitute candidates thereon. If within _______
(___) days of the date which proxy materials are to be mailed by the Corporation
to its stockholders, a sufficient number of candidates to fill all open director
positions who meet the Qualifications are not submitted by such Stockholder
Nominating Committee, the nominating committee or Board, as the case may be,
shall include any and all candidates on the list who are so qualified on the
Corporation's slate of nominees and shall submit their own nominees who meet the
Qualifications to fill any remaining director positions. In the event that more
than one Stockholder Nominating Committee submits a list of candidates under
this subpart (c), the nominating committee or the Board, as the case may be,
shall only be required to accept the first list of candidates it received that
was properly submitted in accordance with the notice procedures set forth in
this Section 3.4. In addition to the list provided under subpart (c) above, the Stockholder
Nominating Committee shall provide a written notice to the Secretary of the
Corporation within a reasonable length of time before the annual meeting. The
notice shall contain (i) with respect to each candidate, (A) the information
required by Items 5(b) and 7 of SEC Schedule 14A and (B) each candidate's
consent to being named as a nominee in the Corporation's proxy statement and to
serving as a director if elected; and (ii) with respect to each stockholder
comprising the Stockholder Nominating Committee, the information required by
Item 5(b) of SEC Schedule 14A (such disclosure in the foregoing sentence being
hereinafter referred to as the "Disclosure"). In addition to the Disclosure, the
Corporation shall include in its proxy materials a 500-word or less statement by
the Stockholder Nominating Committee in support of each candidate (the
"Statement of Support"). The Board of Directors shall adopt procedures for
timely resolving disputes over whether the Disclosure and the Statement of
Support comply with the SEC rules and regulations, including Rule 14a-9. To the
extent that the Stockholder Nominating Committee uses solicitation materials
other than the Corporation's proxy materials, it will execute an undertaking to
the Corporation to comply with all laws and regulations relating to such
solicitation. Further, if the Corporation establishes new or revised qualifications for
serving as a director, such new or revised qualifications must be reasonable and
must be posted on the Corporation's website (or otherwise broadly publicly
noticed and reasonably accessible by any stockholder) at least 180 days prior to
the next annual stockholders meeting. [APPENDIX 6]
EXHIBIT B Proposal RESOLVED, that the stockholders of the Corporation hereby amend the bylaws of
the Corporation by adding the following provision to the end of Section 3.4.1:
"or (c) by any stockholder or group of stockholders representing at least 20% of
the outstanding shares of common stock (excluding any stockholders who are
employees, officers or directors of the Corporation or family members of any
such employees, officers or directors or entities which bold shares for the
benefit of any such employees, officers, directors or family members) (the
"Stockholders Committee") of the Corporation who submits to the Secretary any
list of candidates for nomination as directors (comprised of one or more
candidates) (the "Stockholder Slate"). In the event that a Stockholder Slate is
submitted to the Secretary under subsection (c) above, the Board (or any
nominating committee) will review such Stockholder Slate and determine (i) which
candidates from the Stockholder Slate satisfy the current published
qualifications for directors of the Corporation (the "Qualifications") and (ii)
which nominees to submit for election at the next upcoming annual stockholders
meeting and include in the Corporation's proxy materials. Such nominees shall be
in lieu of any other proposed slate of directors submitted by the Board. The
Stockholder Committee shall comply with all applicable state, federal and
foreign laws in connection with submission of a Stockholder Slate.
Statement of Support Tenet's stockholders currently have no meaningful control over the process by
which candidates are nominated for election to Tenet's board of directors.
We believe that because the board of directors of a company plays a critical
part in creating the strategy for its long term success, the stockholders should
be in a significant position of responsibility for determining the members of
the board. This is a very democratic concept and one we believe makes implicit
sense, as the stockholders are the ones who will enjoy the fruits of success or
bear the ultimate burden of failure. We want to ensure that the company is on good strategrc, operational, and
financial footing. More specifically, we want to ensure that the company
maintains and strengthens a missiondriven culture and is insulated from the risk
of regressing to one of senior management centricity. If our company pays proper
attention to its front line associates, customers, and regulators, benefits of
improved equity valuation will naturally accrue to stockholders as will
remuneration to senior managers. We firmly believe that the very important duty of choosing the board slate
should, by right, fall to the shareholders as opposed to a headhunter or
corporate recruiter who has no stake in the consequences of the directors'
decisions Once accomplished, Tenet and its management will certainly be
recognized for being proactive and taking very positive steps in the direction
of true corporate governance. Adoption of the above proposal would align the interests of stockholders and
directors of the company and provide the company's management with a clear
mandate regarding the conduct of the company's business. We urge your support
"FOR" the above proposal. [APPENDIX 7]
EXHIBIT C February 9, 2004 Via Facsimile @ 805-563-7085 and United Parcel Service (805-563-7188)
Attention: Secretary
Tenet Healthcare Corporation
3820 State Street
Santa Barbara, CA 93105 Re: Letter dated February 6, 2004 (the "February 6thLetter") regarding
submission of a Shareholder Proposal (the "Shareholder Proposal") to be Voted
Upon at the May 6, 2004 Annual Meeting of Tenet Healthcare Corporation ("Tenet")
Dear Tenet Secretary: After conversations between certain directors of Tenct and Courage Capital
Management, LLC, our investment manager and authorized representative, we desire
to amend the Shareholder Proposal as follows. 1) Delete the reference to "20%"
in the third line of the text under the heading "Proposal" and place "35%" in
lieu thereof, and 2) In the third line up from the bottom of the text under the
heading "Proposal" delete the phrase "in lieu of" and replace it with the phrase
"in addition to". All other text of the Shareholder Proposal remains as
presented in the Shareholder Proposal enclosed with the February 6thLetter
sent to you via facsimile on February 6, 2004 with the original following via
overnight delivery by United Parcel Service for delivery Monday morning,
February 9, 2004. Additionally, all of the certifications, confirmations and
acknowledgements in, and attachments to, the February 6thLetter are hereby
ratified and, other than the above changes, not affected by this amendment.
Please contact Paul Mercer at (615) 298-8315 should you have any questions.
Sincerely, COURAGE SPECLAL SITUATIONS MASTER FUND, L.P.
By: Courage Investments Inc., its General Partner
By: /s/ Name: /s/
Title: /s/ [APPENDIX 8]
EXHIBIT D February , 2004 Tenet Healthcare Corporation
3820 State Street
Santa Barbara, California 93105 Re: Courage Special Situations Master Fund, L.P. Stockholder Proposal
Ladies and Gentlemen: We have acted as special Nevada counsel to Tenet Healthcare Corporation, a
Nevada corporation (the "Corporation" or "Tenet"), with respect to a proposal
(the "Proposal") by Courage Special Situations Master Fund, L.P. (the
"Proponent"), which the Proponent has requested to be included in the proxy
statement of the Company for its 2004 annual meeting of the stockholders. In
this connection, you have requested our opinion as to certain matters under
Chapter 78 of the Nevada Revised Statutes, relating to corporations.
In rendering the opinions set forth herein, we have examined the following:
(i) the Amended and Restated Articles of Incorporation of the Corporation, as
amended and restated July 23, 2003 (the "Articles");
(ii) the Restated Bylaws of the Corporation, As Amended and Restated November 6,
2003 (the "Bylaws"); and (iii) the Proposal, dated February 6, 2004.
In rendering the opinions expressed below, we have, with your consent, assumed
that all documents submitted to us as originals or duplicate originals are
authentic and all documents submitted to us as copies, whether certified or not,
conform to authentic original documents. THE PROPOSAL
The Proposal is a request that a stockholder amendment to the Bylaws be placed
on the stockholder ballot at Tenet's May 6, 2004 annual meeting and included in
the Corporation's proxy materials. The proposed amendment to the Bylaws, adding
an additional subsection (c) to the end of Section 3.4.1, is as follows:
or (c) by and stockholder or group of stockholders representing at least 20% of
the outstanding shares of common stock (excluding any stockholders who are
employees, officers or directors of the Corporation or family members of any
such employees, officers or directors or entities which hold shares for the
benefit of any such employees, officers, directors or family members) (the
"Stockholders Committee") of the Corporation who submits to the Secretary any
list of candidates for nomination as directors (comprised of one or more
candidates) (the "Stockholder Slate"). In the event that a Stockholder Slate is
submitted to the Secretary under subsection (c) above, the Board (or any
nominating committee) will review such Stockholder Slate and determine (i) which
candidates from the Stockholder Slate satisfy the current published
qualifications for directors of the Corporation (the "Qualifications") and (ii)
which nominees to submit for election at the next upcoming annual stockholders
meeting and include in the Corporation's proxy materials. Such nominees shall be
in lieu of any other proposed slate of directors submitted by the Board. The
Stockholder Committee shall comply with all applicable state, federal and
foreign laws in connection with submission of a Stockholder Slate.
DISCUSSION The Proposal is an unwarranted restriction of the Board of Directors' ability to
manage the affairs of the Corporation. Nevada law vests authority over the
corporation's affairs in the Board of Directors. "Subject only to such
limitations as may be provided by this chapter, or the articles of incorporation
of the corporation, the board of directors has full control over the affairs of
the corporation." NRS 78.120(1). Stockholders are given the authority to adopt
bylaws which the directors are obliged to follow. NRS 78.120(2). However, bylaws
relate to procedural elements: "the management, regulation and government of its
affairs and property, the transfer of its stock, the transaction of its
business, and the calling and holding of meetings of its stockholders." NRS
78.060(2)(e). While the Proposal arguably relates to the conduct of affairs of
the Corporation or the holding of meetings of Tenet's stockholders, in our view
the Proposal unduly restricts the Board's ability to exercise its business
judgment in selecting qualified candidates for election to the Board of
Directors in violation of the principle that the Board of Directors has full
control over the affairs of the corporation. Although a Nevada court has never faced the issue, the Delaware Supreme Court
has ruled that a bylaw amendment may go so far as to improperly restrict the
board of directors' ability to exercise its powers to manage to affairs of the
corporation. Where Nevada law is silent, Nevada courts have looked to Delaware's
well developed body of corporate law as persuasive authority. See, .e.g., Hilton
Hotels Corp v. ITT Corp., 978 F. Supp. 1342, 1346 (D. Nev. 1997). In Quickturn
Design Sys., Inc. v. Shapiro,
721 A.2d 1281 (Del. 1998), the Delaware Supreme
Court was faced with a takeover battle. The target, Quickturn, had suffered a
decline in its stock price due to the 1998 Asian financial crisis. Id. at 1285.
The acquiror, Mentor, made an all cash tender offer for all of Quickturn's
stock. Id. Mentor's offer, though a 50% premium over Quickturn's current trading
price was a 20% discount from Quickturn's trading price just six months earlier,
before the financial crisis. Id. Quickturn's board rejected the Mentor offer and
adopted several defensive measures, one of which was to amend Quickturn's bylaws
to prohibit a newly elected board of directors from redeeming Quickturn's
"poison pill" stockholder rights plan for six months. Id. at 1286. Noting that
"[o]ne of the most basic tenets of Delaware corporate law is that the board of
directors has the ultimate responsibility for managing the business and affairs
of a corporation," the Delaware Supreme Court ruled that the delayed redemption
provision violated Section 141(a) of the Delaware General Corporation Law
(Delaware's corollary to NRS 78.120(1)) because the bylaw would "prevent a newly
elected board of directors from completely discharging its fundamental
management duties to the corporation and its stockholders for six months." Id.
at 1290. NRS 78.120(1)'s grant of "full control over the affairs of the corporation"
vests the Corporation's Directors with the right and obligation to manage the
affairs of the Corporation. While the Board of Directors oversees the
Corporation's day-to-day affairs, the stockholders are owners of equity
interests in the corporation, who share in the profits of the Corporation and in
the Corporation's assets in the event of liquidation. Consistent with this
division of rights and responsibilities, we believe that the determination of
the a slate of candidates for election to the Board of Directors is an essential
part of the Board's management function. We believe that a Nevada court could deem the Proposal to be an undue
restriction on the Board of Directors' ability to select nominees for election
to the Board. While the Proposal may allow the Board to disqualify candidates
submitted to it by the Stockholder Committee, the Proposal severely confines the
pool of qualified candidates for election to the Board. Rather than allowing
Tenet's nominating committee to completely discharge its fiduciary duty by
seeking out qualified candidates for election to the Board, the Proposal merely
lets the Board pass judgment on the Stockholder Slate, which may or may not
contain the "best of the best" that the nominating committee would have
recommended. Because of this restriction in the Board's authority, we believe
that the Proposal is an unlawful restriction on the Board's ability to control
Tenet's affairs. CONCLUSION We are not aware of any decision of a Nevada court which specifically addresses
whether a bylaw amendment like the Proposal is permissible under Nevada law. We
believe that the Proposal would be violative of Nevada because the Proposal
significantly narrows the pool from which nominees to the Board may be chosen,
which we believe unlawfully restricts the Board's ability to control Tenet's
affairs. The opinions set forth above are limited to the matters expressly set forth
herein and no opinion is implied or may be inferred beyond the matters expressly
stated. We disclaim any obligation to update this letter for events occurring
after the date of this letter or as a result of knowledge acquired by us after
that date, including changes in any of the statutory or decisional laws after
the date of this letter. We are members of the Bar of the State of Nevada. We
express no opinion as to the effect and application of any securities or blue
sky laws of any state, including the State of Nevada. We are not opining on, and
assume no responsibility as to, the applicability of, or the effect on, any of
the matters covered herein of the laws of any other jurisdiction other than the
laws of Nevada as presently in effect. This opinion is solely for your benefit in connection with the matters addressed
herein. We understand that you may furnish a copy of this opinion letter to the
Securities Exchange Commission and to the Proponent in connection with the
matters addressed herein, and we consent to your doing so. Except as stated in
this paragraph, this opinion may not be relied upon in any manner by any other
person and may not be disclosed, quoted, or otherwise referred to without our
prior written consent. Sincerely, WOODBURN & WEDGE
By: ______________________________
Gregg P. Barnard [INQUIRY LETTER]
February 24, 2004 VIA HAND DELIVERY 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 of Courage Special Situations Master Fund, L.P.;
No-Action Request by Tenet Healthcare Corporation Dear Sir/Madam:
Pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, as amended,
Courage Special Situations Master Fund, L.P. (the "Fund") timely submitted to
Tenet Healthcare Corporation ("Tenet") a shareholder proposal (the "Proposal")
to amend the bylaws of Tenet. Unless otherwise indicated, capitalized terms used
herein but not otherwise defined have the meanings set forth in the Proposal.
The amendment would establish a process whereby a Stockholders Committee could
submit to Tenet a Stockholder Slate for inclusion of nominees that meet the
Qualifications in Tenet's proxy statement and on its proxy card.
In a letter to the Commission, dated February 12, 2004, Tenet stated that it
intends to omit the Proposal from its proxy materials being prepared for its
2004 annual shareholders meeting. Tenet argues that the Proposal is excludable
under Rule 14a-8(i)(8) because it would establish a procedure that would result
in contested elections of directors. Additionally, Tenet has requested that the
Commission waive its 80-day requirement set forth in Rule 14a-8(j). On behalf of
the Fund, we are writing in response to the points raised by Tenet's counsel in
its above-referenced letter. As discussed below, Tenet should not be able to
rely on such exclusion, has not shown good cause for waiver of the 80-day
requirement and should be required to include the Proposal in its upcoming proxy
materials so that the owners of Tenet, the shareholders, may rightfully decide
whether to adopt this amendment to Tenet's bylaws. Rule 14a-8(i)(8)
Tenet argues that Rule 14a-8(i)(8) allows exclusion of the Proposal because it
"relates to an election for membership on the company's board of directors". We
see no need to repeat previously cited Staff no-action letter determinations and
are aware of the Division's positions taken in recent years with respect to this
issue. To the extent that the Staff determines that the Proposal is similar to
prior proposals reviewed by the Staff, however, we believe the Staff's position
should be reconsidered, especially in light of the Proposed Shareholder Access
Rules currently under consideration by the Commission (even after consideration
of the statement made by the Commission in footnote 74). The Proposal would have
the same effect as the Proposed Shareholder Access Rules in that the Proposal
will allow a group of long-term securities holders of Tenet with significant
holdings to be included in Tenet's proxy materials where there are indications
that the proxy process has been ineffective or that security holders are
dissatisfied with that process. On the other hand, we respectfully submit that the Proposal is distinguishable
from previously excluded shareholder proposals. Unlike excluded proposals, the
Proposal requires a significant threshold of shareholder support (35% rather
than 3%) before a shareholder or group of shareholders even have access to the
proxy materials. The intended effect is to bring a representative shareholder
committee and Tenet's nominating committee together to agree mutually on an
appropriate slate of directors to be submitted to all shareholders. The Proposal
will require Tenet to be responsive to concerns about the proxy process raised
by a significant percentage of security holders. In its analysis Tenet argues that the Fund, through the Proposal, is attempting
to circumvent proxy rules by fostering contested elections. One very important
point needs to be made here in response to this assertion. Please notice that
the original Proposal attached to the cover letter dated February 6, 2004 (a
copy of which is attached hereto) provides that (i) the Stockholder Committee
consist of only 20% or more of the outstanding shares of the Tenet and (ii) the
Stockholder Slate be in lieu of any other proposed slate of directors submitted
by the Board. Under the Proposal as originally drafted, there could be no
resulting "contested election" because Tenet's nominating committee would submit
only one slate for election-the slate mutually agreed upon by the nominating
committee and the Stockholders Committee. This assumes of course that no other
slate is submitted by other shareholders outside the company's own proxy (which
can take place now whether or not the Proposal is adopted). Only after good
faith discussions between the Chairman of Tenet and Mr. Patton did the Fund
decide to amend the Proposal as indicated by the Fund's letter dated February 9,
2004 (a copy of which is attached hereto). The Fund is willing to withdraw its
February 9, 2004 letter notwithstanding Mr. Patton's discussions with Tenet's
Chairman in order to avoid the "contested election" possibility.
Waiver of 80-day Requirement With respect to Tenet's request for waiver of Rule 14a-8(j), we request that the
Staff deny such waiver. Tenet lacks the good cause element required for waiver
of such rule. Tenet was fully aware of the timing issues it created when it
decided to hold the 2004 annual shareholders meeting outside the 30 day window
related to last year's meeting. In its 2003 proxy materials, Tenet stated that
the deadline for submission to Tenet of shareholder proposals to be included in
its proxy materials be received by Tenet by February 10, 2004, which is
consistent with the date set forth in Tenet's press release on January 26, 2004.
Tenet must have been aware that the date of February 10 was only 86 calendar
days prior to the revised meeting date and that there was no practical way it
could comply with the 80-day rule for proposals it received on February 10 if it
wanted to exclude any shareholder proposals from its proxy materials. In fact,
in its letter to the SEC, Tenet's counsel stated that Tenet intends to file its
proxy materials on or about April 6, 2004, just 56 days from the shareholder
proposal deadline it set. Such circumstances clearly show an attempt to stymie
submissions of shareholder proposals. Accordingly, Tenet has not shown good
cause for a waiver. Conclusion The Fund is willing to continue to discuss the Proposal with Tenet, has
communicated such willingness to Tenet, and will continue to work toward
refinements that make the Proposal agreeable to both parties. The Fund has
recently been notified by Tenet that it is forwarding the Proposal to its
governance committee for review. In the spirit of further good faith
negotiations and based upon conversations between Tenet's outside counsel
(Gibson, Dunn & Crutcher LLP) and the Fund's general counsel, the Fund would be
willing to modify further the Proposal to establish that the number of directors
on Tenet's board be set at ten and a Stockholders Committee would have the
ability to place up to four nominees who meet the Qualifications on Tenet's
slate of directors to be elected at annual shareholders meetings. The resulting
Proposal, as modified by this further refinement, would (i) eliminate the
"contested election" possibility, (ii) eliminate the change of control concerns
voiced by Tenet through its outside counsel to the Fund's general counsel and
(iii) align the Proposal more closely with the concepts of the Proposed
Shareholder Direct Access Rules. In the meantime, in order to promote good faith
negotiations and consideration by Tenet of the further revised Proposal, we
request that the Staff not allow Tenet to exclude the Proposal and not grant the
waiver of the 80-day requirement for the reasons outlined above.
In accordance with SEC rules, I herewith enclose five additional copies of this
letter with attachments and have simultaneously delivered this letter with
attachments to Tenet. We would be happy to provide you with any additional
information and answer any questions. Please do not hesitate to contact either
Paul Mercer, the Fund's general counsel, at (615) 298-8315 or me at (615)
726-5607 if we can be of further assistance. Sincerely,
/s/ Tonya Mitchem Grindon
cc: Paul Mercer, Esq.
E. Peter Urbanowicz, Esq.
Dennis J. Friedman, Esq. TMG/mah
[STAFF REPLY LETTER]
March 15, 2004 Response of the Office of Chief Counsel
Division of Corporation Finance Re: Tenet Healthcare Corporation Incoming letter dated February 12, 2004
The proposal would amend Tenet's bylaws to permit a shareholder holding 35% or
more of the company's outstanding shares to submit to Tenet a list of candidates
to be nominated as directors. There appears to be some basis for your view that Tenet may exclude the proposal
under rule 14a-8(i)(8), as relating to an election for membership on its board
of directors. Accordingly, we will not recommend enforcement action to the
Commission if Tenet omits the proposal from its proxy materials in reliance on
rule 14a-8(i)(8). We note that Tenet 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
planned to file definitive proxy materials as required by rule 14a-8(j)(1).
Noting the circumstances of the delay, we grant Tenet's request that the 80-day
requirement be waived. Sincerely, /s/
John J. Mahon
Attorney-Advisor
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