Company Name: Time Warner Inc.
Public Availability Date: March 22, 2004Document Sections:
INQUIRY LETTER
STAFF REPLY LETTER [INQUIRY LETTER]
VIA OVERNIGHT MAIL U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Time Warner Inc. - Proposal Submitted by Richard Westin
Ladies and Gentlemen: This letter respectfully requests that the staff of the Division of Corporation
Finance (the "Staff") of the Securities and Exchange Commission (the "SEC")
advise Time Warner Inc. (the "Company") that it will not recommend any
enforcement action to the SEC if the Company omits from its proxy statement and
proxy to be filed and distributed in connection with its 2004 regularly
scheduled annual meeting of stockholders (the "Proxy Materials") the proposal
(the "Proposal") it received from Richard Westin ("Proponent") who purports to
be a stockholder of the Company. The Company does not intend to include the
Proposal in its Proxy Materials because: (A) the Proponent has failed to satisfy
(i) the procedural requirements of Rules 14a-8(e) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), by failing to submit the Proposal
to the Company in a timely manner and (ii) the eligibility requirements of Rules
14a-8(b)(1) and (2) under the Exchange Act by failing to provide adequate proof
of stockholder status and (B) even if the Proponent were able to cure these
deficiencies, the Proposal relates to the Company's ordinary business operations
and is, therefore, excludable under Rule 14a-8(i)(7) under the Exchange Act.
Pursuant to Rule 14a-8(j) of the Exchange Act, we are enclosing six copies of
each of the following: (i) this letter, (ii) a letter dated January 23, 2004
from the Proponent to the Company containing the Proposal (Exhibit A), (iii) a
letter to the Proponent dated February 4, 2004 from Susan A. Waxenberg,
Assistant General Counsel and Assistant Secretary to the Company (the "Company's
Assistant Secretary"), sent pursuant to Rule 14a-8(f) (Exhibit B, the "First
Rule 14a-8(f) Letter") regarding the Proponent's failure to comply with the
provisions of Rule 14a-8(b) and (e), with a confirmation of receipt by the
Proponent, (iv) a facsimile dated February 9, 2004 from the Proponent providing
a brokerage statement dated January 11, 2004 (Exhibit C) and (v) a letter dated
February 19, 2004 to the Proponent from the Company's Assistant Secretary again
requesting proper support of stockholder status (Exhibit D, the "Second Rule
14a-8(f) Letter"), with a confirmation of facsimile transmission to the
Proponent. By copy of this letter, the Company hereby notifies the Proponent as
required by Rule 14a-8(j) of its intention to exclude the Proposal from its
Proxy Materials. The Company currently intends to file its definitive 2004 Proxy Materials with
the SEC on or about March 24, 2004, and the regularly scheduled annual meeting
of stockholders of the Company is scheduled to occur on or about May 21, 2004.
Discussion I. The Proponent Has Failed to Satisfy the Procedural and Eligibility
Requirements of Rule 14a-8(b) and (e). A. The Proponent has not complied with the procedural requirements of Rule
14a-8(e). The Company believes that the Proposal may be excluded from its Proxy Materials
because the Company received the Proposal on February 2, 2004, several months
after the Company's December 4, 2003 deadline for the submission of stockholder
proposals. Rule 14a-8(e)(2) under the Exchange Act establishes the deadline by which
proposals from stockholders must be submitted for inclusion in a proxy statement
to be considered at an annual meeting as: "not less than 120 calendar days
before the date of the company's proxy statement released to shareholders in
connection with the prior year's annual meeting." The Company disclosed this
deadline, as required by Rule 14a-5(e), in the Company's 2003 proxy statement
under the heading "Procedures for Submitting Stockholder Proposals." This
section of the 2003 proxy statement states that to be included in the Company's
proxy materials "for the 2004 Annual Meeting, stockholder proposals must be
received by the Company no later than December 4, 2003, and must otherwise
comply with the requirements of Rule 14a-8." The Company's proxy statement for its 2003 annual meeting was released to
stockholders on or about April 2, 2003, and the annual meeting was held on May
16, 2003. This proxy statement is also posted on the Company's website. The
Company's regularly scheduled 2004 annual meeting is currently scheduled for May
21, 2004, which date is within 30 days of the date on which the Company held its
2003 annual meeting of stockholders. Therefore, pursuant to Rule 14-8(e), the
Proposal was required to be received by the Company no later than 120 days
before the date that definitive proxy materials were distributed, i.e., December
4, 2003. The Proposal, which the Company received on February 2, 2004, does not
comply with this requirement. Because the Proponent has failed to satisfy the
timeliness requirement of Rule 14a-8(e), the Proposal may be omitted from the
Proxy Materials. See United Technologies Corporation (February 8, 2004).
B. The Proponent has not demonstrated eligibility under Rule 14a-8(b).
Rule 14a-8(b)(1) under the Exchange Act requires, among other things, that to be
eligible to submit a proposal, the proponent "must have continuously held at
least $2,000 in market value, or 1%, of the company's securities entitled to be
voted on the proposal at the meeting for at least one year" prior to the date on
which the proponent submitted the proposal. The Proponent indicated in his
letter to the Company that he holds "600 shares of Time Warner Inc." in a
brokerage account. Rule 14a-8(b)(2)(i) requires that any proponent who is not a
registered owner must (i) present a written statement from the record holder
with respect to the proponent's ownership of the required shares on the date the
Proposal was submitted and continuously for the prior year and (ii) submit a
written statement of his intent to hold such shares through the date of the
meeting of the shareholders. The Proponent did not include the required proof of share ownership with his
Proposal, nor did he include a statement of intent with respect to maintenance
of ownership of the required Company shares. In light of the deficiencies in the
Proposal and in accordance with the provisions of Rule 14a-8(f), on February 4,
2004, the Company sent the First Rule 14a-8(f) Letter (Exhibit B) to the
Proponent by overnight mail service notifying the Proponent that the Proposal
did not comply with the provisions of Rule 14a-8(b) and (e). Specifically, the
Rule 14a-8(f) Letter requested that the Proponent provide the Company within 14
calendar days of Proponent's receipt of the First Rule 14a-8(f) Letter: (i)
documentary proof of ownership of $2,000 of Company shares as of January 23,
2004 and for the year prior to that and (ii) a written statement of the
Proponent's intent to continue ownership of the required shares. In addition,
the First Rule 14a-8(f) Letter noted that the Proposal had been submitted to the
Company after the deadline. In response to the First Rule 14a-8(f) Letter, the Proponent sent to the Company
on February 9, 2004 a facsimile containing a message indicating his intent to
hold "the stock at least until the annual stockholders' meeting" and providing a
brokerage statement dated January 11, 2004 identifying holdings as of December
31, 2003. Such a brokerage statement does not satisfy the requirements of Rule
14a-8(b)(2). See Section C.1.c of the Division of Corporation Finance: Staff
Legal Bulletin No. 14 (Shareholder Proposals) (July 13, 2001) ("SLB No. 14"). In
its Second Rule 14a-8(f) Letter dated February 19, 2004, the Company explained
to the Proponent that his proof of ownership was deficient, provided relevant
excerpts to SLB No. 14 and provided the Proponent until February 25, 2004 to
provide proof of ownership in compliance with Rule 14a-8(c). As of the date
hereof, the Company has not received such proof from the Proponent.
Due to the Proponent's failure to rectify the deficiencies of the Proposal
within 14 calendar days of his receipt of the First Rule 14a-8(f) Letter and
subsequent extension provided in the Second Rule 14a-8(f) Letter, the Company
believes that it may exclude the Proposal from its Proxy Materials for failure
to comply with the eligibility requirements of Rule 14a-8(b). See Sections
C.1.c. of SLB No. 14. See also USEC Inc. (July 19, 2002) (permitting exclusion
where proponent did not provide proof of beneficial ownership of required
shares); Catalyst Semiconductor, Inc. (June 14, 2002) (permitting exclusion
because of proponent's failure to provide within 14 days of the company's
request evidence of "minimum ownership requirement for the one-year period
required by Rule 14a-8(b)"). II. The Proposal Deals with a Matter Relating to the Company's Ordinary Business
Operations, and, Therefore, the Proposal is Excludable Under Rule 14a-8(i)(7).
The Proposal may be excluded for substantive, as well as procedural
deficiencies. The subject matter of the Proposalthe spin-off or sale of "one or
more elements of the Company" relates to the Company's ordinary business
operations. Accordingly, the Proposal may be omitted from the Company's Proxy
Materials under Rule 14a-8(i)(7). Rule 14a-8(i)(7) provides for the exclusion of a shareholder proposal where the
proposal addresses a matter relating to a company's ordinary business
operations. The SEC has explained that the "general underlying policy of this
exclusion is consistent with the policy of most state corporate laws: to confine
the resolution of ordinary business problems to management and the board of
directors." Exchange Act Release No. 34-40018 (May 21, 1998). The proposal, if
adopted, would require that the Board of Directors of the Company "consider
spinning off to shareholders one or more elements of the Company, selling one or
more elements of the Company, or both combined, in order to increase overall
value to shareholders." Section 141 of the Delaware General Corporation Law ("DGCL") provides that "The
business and affairs of every corporation organized under this chapter shall be
managed by or under the direction of a board of directors, except as may be
otherwise provided in this chapter or in its certificate of incorporation."
Pursuant to the DGCL, unless otherwise provided for by the DGCL or a
corporation's certificate of incorporation, the board of directors of such
corporation conducts the ordinary business of the corporation. The Company is a
Delaware corporation and its certificate of incorporation does not contain any
limitation on the Board's authority to so manage the Company. Furthermore,
pursuant to Sections 251 and 271 of the DGCL, shareholder approval for the sale
of assets of a corporation is required only with respect to extraordinary
transactions such as (1) a merger or consolidation involving the corporation or
(2) the sale or other disposition of "all, or substantially all," of the assets
of a corporation. The Company's Board of Directors retains, in accordance with
its authority to manage the business and affairs of the Company, the power to
engage in acquisitions and other strategic alternatives, including divestments,
that are not extraordinary transactions requiring stockholder approval.
It is clear that the scope of corporate transactions addressed by the Proposal
are ordinary business operations, not extraordinary corporate transactions. The
Proposal calls for the Company's Board of Directors to explore alternatives to
"increase overall value to shareholders." The Proposal refers to potential
sales, spin-offs or both for maximizing shareholder value. It is precisely the
role of the Board of Directors of the Company to take steps to maximize
shareholder value, and the Board continually oversees the strategic activities
of the Company for the benefit of stockholders. As such, these activities must
be considered part of the Company's ordinary business operations.
Unlike proposals that relate to the sale of an entire business, which the Staff
has viewed as outside the scope of a company's ordinary business operations, the
Proposal relates only to the sale or spin-off of "one or more elements of the
Company" not to sale of the entire Company. Thus, the Proposal relates to an
ordinary business matter, not an extraordinary event that would be subject to
stockholder approval. Even if the Staff interprets the Proposal as including the
potential for extraordinary transactions, because it also clearly includes
potential sales that would not be extraordinary, the Proposal may still be
excluded. Sears, Roebuck & Co. (February 7, 2000) (proposal related to retention
of investment bank to prepare for a sale of all or parts of the company
excludable as relating to ordinary business). The Staff has consistently granted
requested no-action relief pursuant to Rule 14a-8(i)(7) where the shareholder
proposal was determined to relate to non-extraordinary matters, such a sale of
part of a business, that constituted part of the company's ordinary business
operations even though, in some cases, the proposals suggested both ordinary and
extraordinary courses of action. See, e.g., Telular Corporation (December 5,
2003) (proposal requesting a review of strategic alternatives for maximizing
shareholder value, including sale, merger, spin-off, split-off or divestiture of
the Company or a division thereof excludable as relating to ordinary business);
Archon Corporation (March 10, 2003) (proposal related to appointing a committee
of independent, non-management directors to explore strategic alternatives to
maximize shareholder value excludable as relating to ordinary business).
Moreover, the Staff has consistently taken the position that it will not allow
revisions under Rule 14a-8(i)(7) and has found that if any portion of a proposal
is excludable because it relates to a company's ordinary business activities,
the entire proposal may be excluded. Archon Corporation (March 10, 2003)
(allowing for the omission of a proposal relating to the retention of an
investment bank to advise an independent board committee on strategic
alternatives because portions of the proposal related to ordinary business
operations). In summary, the Proposal relates to a variety of transactions, including matters
that would constitute the ordinary business operations of the Company.
Therefore, the Proposal may properly be omitted from the Company's Proxy
Materials pursuant to Rule 14a-8 (i)(7). III. Waiver of Rule 14a-8(j)(1).
The Company also respectfully requests that the Staff of the Commission waive
the requirement under Rule 14a-8(j)(1) under the Exchange Act that the Company
file its reasons for excluding the Proposal no later than 80 calendar days
before it files its definitive proxy statement and form of proxy with the
Commission. Rule 14a-8(j)(1) provides that the Staff may permit the company to
make its submission later if the company demonstrates good cause for not meeting
this deadline. Since the Company did not receive the Proposal until February 2,
2004, and then gave the Proponent the opportunity to prove stockholder status as
required, the Company was unable to submit its request for no action relief no
later than 80 calendar days before its planned Proxy Materials filing date of
March 24, 2004. We, therefore, believe the Company's no-action request falls
within the good-cause exception to Rule 14a-8(j)(1). The Staff has granted such
relief under similar circumstances in the past. See United Technologies
Corporation (February 8, 2004) and other no-action letters cited therein.
****** For the foregoing reasons, the Company respectfully requests that the Staff
confirm that it would not recommend enforcement action if the Company omits the
Proposal from its Proxy Materials and requests that the Staff waive compliance
by the Company with the 80-day requirement of Rule 14a-8(j)(1). If you have any
questions or if the Staff is unable to concur with our conclusions without
additional information or discussions, we respectfully request the opportunity
to confer with members of the Staff prior to the issuance of any written
response to this letter. Please do not hesitate to contact the undersigned by
telephone at (212) 484-7350 or by facsimile at (212) 258-3157
Please acknowledge receipt of this letter and its attachments by date stamping
the enclosed copy of the first page of this letter and returning it in the
addressed stamped envelope provided for your convenience. Very truly yours,
/s/ Susan A. Waxenberg
Assistant General Counsel and Assistant Secretary cc: Professor Richard Westin
3141 Warrenwood Wynd
Lexington, KY 40502
FAX: 859-268-8017 Attachments [STAFF REPLY LETTER]
March 22, 2004 Response of the Office of Chief Counsel Division of Corporation Finance
Re: Time Warner Inc. Incoming letter dated March 4, 2004
The proposal relates to spinning off or selling one or more elements of the
company. There appears to be some basis for your view that Time Warner may exclude the
proposal under rule 14a-8(e)(2) because Time Warner received it after the
deadline for submitting proposals. Accordingly, we will not recommend
enforcement action to the Commission if Time Warner omits the proposal from its
proxy materials in reliance on rule 14a-8(e)(2). In reaching this position, we
have not found it necessary to address the alternative bases for omission upon
which Time Warner relies. We note that Time Warner 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-(j)(1).
Noting the circumstances of the delay, we grant Time Warner's request that the
80-day requirement be waived. Sincerely,
/s/ Michael R. McCoy
Attorney-Advisor
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