Company Name: Post Properties, Inc.
Public Availability Date: March 26, 2004
Document Sections:
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
January 22, 2004
VIA HAND DELIVERY
Securities and Exchange Commission
Office of the Chief Counsel
Division of Corporation Finance
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549
Re: Post Properties, Inc. - Filing pursuant to Rule 14a-8(j) Regarding Exclusion
of Shareholder Proposal from Proxy Materials
Ladies and Gentlemen:
On behalf of Post Properties, Inc. (the "Company"), I submit this letter
pursuant to Rule 14a-8(j) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), to advise the Staff (the "Staff") of the Securities and
Exchange Commission (the "Commission") that the Company intends to exclude from
its proxy materials for its 2004 Annual Meeting of Shareholders (the "Proxy
Materials") a shareholder proposal (the "Shareholder Proposal") and supporting
statement (the "Supporting Statement," and together with the Shareholder
Proposal, the "Proposal") received from Mr. John A. Williams ("Mr. Williams") on
December 5, 2003.
The Proposal seeks to have the Company's shareholders amend the Company's Bylaws
(the "Bylaws") to require the Board to obtain shareholder approval for any form
of director compensation, other than reimbursements for reasonable expenses
incurred by directors in attending Board and committee meetings. The Company
believes that the Proposal may properly be omitted from the Proxy Materials and,
in accordance with the reasons set forth below, intends to omit the Proposal
pursuant to Rules 14a-8(i)(1), 14a-8(i)(2), 14a-8(i)(3) and 14a-8(i)(4)
promulgated under the Exchange Act.
The Company hereby respectfully requests that the Staff confirm that it will not
recommend any enforcement action against the Company based on the omission of
the Proposal from the Proxy Materials. Pursuant to Rule 14a-8(j), I am enclosing
six (6) copies of each of this letter and the Proposal (attached as Exhibit A to
this letter). I am simultaneously forwarding a copy of this letter to Mr.
Williams as notice of the Company's intention to omit the Proposal from the
Proxy Materials. In addition, we will be providing an opinion of Alston & Bird
LLP as to certain matters of Georgia law with respect to our arguments for
omitting the Proposal pursuant to Rule 14a-8(i)(1) and 14a-8(i)(2) under the
Exchange Act.
Summary of the Proposal
The Proposal calls for Article II, Section 7 of the Company's Bylaws (as amended
and restated on November 5, 2003) (the "Bylaws") to be deleted and the following
inserted in lieu thereof:
"The Board shall recommend to shareholders at each annual meeting the amount
and form of compensation proposed to be paid to Directors for service on the
Board and its committees for the year commencing at that meeting, which
recommendation shall be approved by the Corporation's shareholders holding a
majority of shares entitled to vote in the election of Directors."
"Directors also shall be reimbursed for reasonable expenses to attend Board
and committee meetings."
"This provision may not be altered, amended or repealed by the Board."
Grounds for Omission of the Proposal
A. Rule 14a-8(i)(1) and Rule 14a-8(i)(2)The Proposal is an Improper Subject for
Shareholders under Georgia Corporate Law and Would, if Implemented, Cause the
Company to Violate Georgia Corporate Law.
Rule 14a-8(i)(1) permits a company to omit a shareholder proposal that, under
the laws of the company's jurisdiction of organization, "is not a proper subject
for action by shareholders under the laws of the jurisdiction of the company's
organization." In its interpretations of this rule, the Commission has
consistently concurred in the omission of proposals that, if approved by
shareholders, would mandate corporate actions reserved by corporate law to the
Board of Directors. See Sprint Corporation (publicly available February 18,
2003) (proposal requiring the company to report the circumstances in which the
company modified a change of control provision, and the economic benefits
received by such officers and directors under such provision, was properly
excluded on the grounds that Kansas law, like the Delaware General Corporation
Law (the "DGCL"), vests management of the business affairs of the company in the
board of directors); ALLTEL Corporation (publicly available February 7, 2000)
(Staff granted exclusion of a proposal which would have required 2/3 approval of
all outstanding shares and a stock price of $1,000 before the company could
declare a stock split on the grounds that, under the DGCL, the determination to
pay dividends rests solely with the board of directors). Section 14-2-801(b) of
the Georgia Business Corporation Code (the "GBCC") provides the general rule
that all corporate powers shall be exercised by or under the authority of, and
the business and affairs of the corporation managed under the discretion of its
board of directors.
The Proposal, by its terms, abdicates the decision-making power conferred to the
Board under the GBCC and with respect to the proper actions reserved to the
directors under Georgia law. The Proposal purports to bind the Company's board
of directors to a stated course of action - the compensation of its directors -
if approved by its shareholders at each annual meeting. Directors in Georgia are
clearly given the primary management authority over a corporation, which
includes, pursuant to the terms of Section 14-2-811 of the GBCC, the
establishment of director compensation policies. The binding nature of the
Proposal purports to remove authority from the Board in a manner which is not
authorized under Georgia law.
Further, Rule 14a-8(i)(2) allows a registrant to exclude a shareholder proposal
if implementation of the proposal would "cause the company to violate any state,
federal, or foreign law to which it is subject." As a Georgia corporation, the
Company is subject to the provisions of the GBCC and must comply with the
provisions of the GBCC. Implementation of the Proposal would contravene the GBCC
in the following respects.
Section 14-2-811 of the GBCC provides that, unless the articles of incorporation
or bylaws provide otherwise, a corporation's board of directors may fix the
compensation of directors. Thus, the Board of the Company has the clear
authority to fix the compensation of its directors. The Company's articles of
incorporation and Bylaws currently contain no provision addressing the
compensation of the Company's directors.
The Proposal, by its terms, would amend the Company's Bylaws to limit the
Board's authority with respect to director compensation. Section 14-2-1020(d) of
the GBCC provides that a bylaw that limits the authority of the Board of
Directors may only be adopted pursuant to an agreement that meets the
requirements of Section 14-2-732 of the GBCC. To meet the requirements of
Section 14-2-732 of the GBCC, the agreement must be signed by all shareholders
of the Company. Mr. Williams has not proposed any such agreement in this case,
and it would be impractical for such an agreement to be signed by all of the
shareholders of a publicly traded company. Further, Section 14-2-732(d) of the
GBCC states that any shareholder agreement that meets the requirements of
Section 14-2-732 of the GBCC ceases to be effective when the company's shares
are listed on a national securities exchange or regularly traded in a market
maintained by securities dealers or brokers. A company whose shares are listed
on a national securities exchange or regularly traded in a market maintained by
securities dealers or brokers may not adopt a shareholder agreement that meets
the requirements of Section 14-2-732 of the GBCC. In any case, if a publicly
traded company purported to do so, it would immediately become ineffective.
Accordingly, because the Proposal would limit the authority of the Company's
Board of Directors in a manner not permitted by the GBCC, the Company believes
that the Proposal may be properly excluded under Rule 14a-1(i)(1) and Rule
14a-8(i)(2).
B. Rule 14a-8(i)(3)The Proposal Contains False and Misleading Statements in
Violation of Rule 14a-9 of the Exchange Act.
Rule 14a-8(i)(3) allows a company to exclude a shareholder proposal that is
"contrary to any of the Commission's proxy rules, including Rule 14a-9, which
prohibits materially false or misleading statements in proxy soliciting
materials." The Company believes the Supporting Statement contains two types of
assertions that are false and misleading within the meaning of Rule 14a-9 of the
Exchange Act.
(1) The Supporting Statement directly asserts that the Board has failed to
"fully" disclose the compensation package of the Company's current Chairman of
the Board, Mr. Goddard. According to the Supporting Statement, Mr. Williams
understands this "may violate federal securities laws." This assertion is an
accusation of improper and illegal conduct on the part of the Company's
management and directors, and Mr. Williams fails to provide any support for his
assertion that the Company has engaged in a material omission from its public
disclosures.
The Staff has routinely ruled that an assertion which alleges or implies the
violation of a law, without support for such a claim, constitutes a false and
misleading statement within the meaning of Rule 14a-9. See Citigroup Inc.
(publicly available February 18, 2003) (exclusion of proposal alleging improper
conduct on the part of members of Citigroup's board of directors, and in one
instance implying improper conduct through a "cozy relationship" with the
director of another corporation); General Electric Company (publicly available
January 24, 2003) (alleging board involvement in the receipt of "illicit
benefits" by the Chairman of the Board of General Electric); Broadway Financial
Corporation (publicly available March 6, 1991). In Broadway Financial
Corporation, the Staff required the removal of similar, "slanderous" assertions
implying violations of securities laws on the part of Broadway's officers and
directors. Specifically, the proposal and supporting statement implied that the
officers and directors of Broadway furnished erroneous or misleading information
to the shareholders and engaged in insider trading.
The Supporting Statement is akin to that presented in Broadway Financial;
however, Mr. Williams takes the extra step of directly stating that the Board
may be violating federal securities laws. Apparently, Mr. Williams' assertion is
based on his belief that the Company's directors have not "fully disclosed" the
Chairman's compensation package. In fact, in accordance with the Commission's
rules regarding periodic disclosure, the Company disclosed the material
components of Mr. Goddard's compensation package (which became effective in the
Company's third fiscal quarter of 2003) as Exhibit 10.1 and Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for its third fiscal quarter of 2003,
filed with the Commission on November 14, 2003. Mr. Williams' accusation lacks
any factual basis, and implies improper and illegal conduct on the part of the
Board, and thus, it constitutes a false and misleading statement within the
meaning of Rule 14a-9.
(2) The Supporting Statement implies the receipt of improper, undisclosed
benefits by certain members of the Board. In particular, the Supporting
Statement references the "sizable payments" received by two members of the
Board, which Mr. Williams implies are connected to the approval of the
Chairman's compensation package. In a further attempt to connect Mr. Goddard's
compensation package with these "improper" payments, Mr. Williams singles out by
name an individual member of the Company's compensation committee as having
received "substantial cash payments" from companies affiliated with the Chairman
and alleges that he may have received "possibly significantly more in carrying
interest in various business deals." Mr. Williams' assertions are false and
misleading.
The Staff has repeatedly ruled that unsubstantiated assertions implicating the
board of directors or senior executive officers of a company in the receipt of
illicit benefits constitute false and misleading statements as they impugn the
character and integrity of the accused directors or officers. See Citigroup Inc.
(publicly available February 18, 2003) (exclusion of a proposal alleging
improper conduct on the part of members of Citigroup's board of directors);
Sprint Corporation (publicly available February 18, 2003) (proponent's vague
assertions regarding when change of control payments to company's officers were
triggered were viewed as false and misleading); General Electric Company
(publicly available January 24, 2003) (exclusion of a shareholder proposal
granted where proponent made unsubstantiated accusations of "illicit benefits"
received by the Chairman of General Electric).
Mr. Williams is attempting to tarnish the reputation and integrity of the
Company's Board through unsubstantiated assertions of director complicity in the
receipt of illicit benefits. Following recent corporate scandals, these types of
accusations, whether stated directly or implied, can inflict significant,
perpetual injury to the reputation of a company and its board of directors. See
General Motors Corporation (publicly available April 3, 2002) (proponent must
delete the phrase "an Enron-type practice"); Southwest Airlines Co. (publicly
available March 25, 2002) (requiring the proponent to delete the phrase "Enron
director side deals"). Given the baseless and damaging nature of these
accusations, they impugn the character and integrity of management and the
Board, and as such, are false and misleading within the meaning of Rule 14a-9.
C. Rule 14a-8(i)(4)Mr. Williams' Proposal Relates to the Redress of a Personal
Claim or Grievance against the Company.
Pursuant to Rule 14a-8(i)(4), a shareholder proposal may be omitted if it
relates to the redress of a personal grievance against the company, or if it is
designed to further a personal interest, which interest is not shared with other
shareholders at large. This rule seeks to prevent the abuse of the shareholder
proposal system by proponents seeking to achieve personal interests that are not
necessarily in the common interests of the issuer's shareholders. See Commission
Release No. 34-20091 (publicly available August 16, 1983). Importantly, the
Staff has indicated a willingness to look beyond a proposal appearing on its
face to merely address issues of potential interest to all shareholders, if the
challenging company can show a direct link between however, it became clear to
the Board that Mr. Williams was not prepared to step back and let someone else
run the Company. The directors came to believe that Mr. Williams made it
virtually impossible for others to effectively manage the business and that his
presence negatively impacted Company morale. After discussing all of Mr.
Williams' behavior, the Board ultimately unanimously concluded that Mr. Williams
could not continue as Chairman. Members of the Board met privately with Williams
and urged him to resign from his position of Chairman of the Board. All of the
other directors believed that it was in the best interests of Mr. Williams and
the Company for Mr. Williams to leave. Only by resigning could Mr. Williams
preserve his legacy as a real estate pioneer in the southeastern United States
and the value of the Post brand name.
A Board meeting was convened by conference call on January 7, 2003 to discuss
and approve a variety of proposals that had been previously reviewed at a
December 2002 Board meeting. The directors, other than Mr. Williams, expected
the resolutions to be adopted at the meeting. Mr. Williams opened the meeting by
announcing that he had hired a law firm to review the proposals presented at the
December 2002 meeting and that he was vehernently opposed to the Company
adopting the resolutions. Several directors noted that Mr. Williams had been in
favor of adopting the resolutions at the December 2002 meeting. Mr. Williams
denied that he had ever been in favor of such resolutions. While the other Board
members were in favor of the resolutions, the meeting was ultimately adjourned,
and the Board agreed to continue to study the recommendations.
The next Board meeting was held on February 20, 2003. Prior to that meeting, the
other directors had met several times to discuss Mr. Williams' behavior. In
addition, certain members of the Board had met with Mr. Williams to discuss his
resignation as Chairman. After these discussions, Mr. Williams told one of the
directors that he would resign as Chairman under certain conditions. On the
morning of the meeting, however, Mr. Williams denied that he had agreed to any
terms, which resulted in an impromptu negotiation regarding the terms of his
resignation as Chairman. As part of this negotiation, Mr. Williams demanded that
John Glover, his long-time partner at the Company, resign as Vice Chairman and
move out of the office space Mr. Glover shared on the first floor of the
Company's headquarters building with Mr. Williams. The Company believes that
these matters had no real impact on Mr. Williams' professional situation;
rather, that it was an opportunity to strike back at those thought by Mr.
Williams to have deserted him. The Board agreed to the basic terms that Mr.
Williams requested, and he resigned as Chairman. Robert Goddard was then
appointed as the new Chairman, with Mr. Williams' concurrence.
Immediately following the February 2003 meeting, Mr. Williams sent the Company a
letter outlining the terms that were agreed upon at the meeting. However, Mr.
Williams' summary differed in many respects from what the other directors
believed was discussed at the meeting. The Board continued to negotiate with Mr.
Williams following the meeting, but ultimately, the other members of the Board
concluded that Mr. Williams had a very different view of what had happened at
the meeting than they did and that they could not do anything to convince him
otherwise. The minutes of the meeting were ultimately adopted over Mr. Williams'
objections. The Company continued to negotiate with Mr. Williams over some form
of global settlement of his employment arrangement after the Board meeting. The
parties continued to negotiate into April 2003 when it became clear that
agreement as to the material terms of a settlement agreement was impossible.
During late February and early March 2003, the relationship between Mr. Williams
and the other directors became further strained. Part of Mr. Goddard's charge as
the new Chairman was to evaluate senior management and report back to the Board
on their performance. During Mr. Goddard's interviews and meetings with senior
management and other Company employees, it became clear to Mr. Goddard that the
senior management team was performing well, but that Mr. Williams was going to
continue to be disruptive. On multiple occasions, Mr. Williams called employees
to his office and put them in a position of "choosing sides" in the fight.
During this time, senior management also received a number of reports from Mr.
Williams criticizing their performance to employees. In addition, employees that
had been contacted by Mr. Williams reported that Mr. Williams told them that he
was going to buy back the Company and that they would have a job in the new
company. His actions created significant leadership problems within the
organization.
In addition, Mr. Williams made burdensome requests for Company information. The
Company believes that Mr. Williams' requests had more to do with making life
difficult for management and the other directors and obtaining information that
he could use in a proxy fight or a lawsuit against the Company and the other
directors than it did with satisfying his fiduciary duties as a director. The
officers and directors of the Company were spending a significant amount of time
simply trying to respond to Mr. Williams' demands, which took time away from
managing the business. In order to stop this behavior, the other members of the
Board discussed adopting resolutions that would have restricted Mr. Williams'
access to employees and certain Company information (subject to the Chairman's
approval) and required him to relocate his office. Drafts of these resolutions
were shared with Mr. Williams and his counsel. On Monday, March 17, 2003 the
Company distributed a notice for a special Board meeting to be held on Saturday,
March 22, 2003 to discuss the proposed resolutions. On Friday, March 21, 2003,
the day before the meeting was scheduled, Mr. Williams filed a complaint for
injunctive relief and damages, naming each of the directors individually. As a
result, a temporary restraining order was issued by the Superior Court of Cobb
County, Georgia. The Board held the meeting to discuss other matters, but was
enjoined from adopting the proposed resolutions.
In April 2003, the disputes between Mr. Williams and the Board of Directors
culminated in a proxy fight to elect directors at the Company's annual meeting
of stockholders. Mr. Williams proposed a slate of five directors in opposition
to management's nominees. Management's nominees were overwhelmingly approved by
all segments of the Company's shareholders.
The Company hoped that the proxy contest would bring closure to this story, but
Mr. Williams indicated that he would continue. When asked if he would leave the
Board after the proxy contest if he lost, he is quoted in a May 2003 Atlanta
Journal Constitution article as saying: "I would regard this as the first inning
... of a nine-inning game." When asked whether he will ever put this behind him,
he is quoted in a June 2003 Atlanta Journal Constitution article as saying, "How
do you ever get over being stabbed in the back by people you thought were your
friends ... I think I'll carry a grudge probably to my grave."
Following the conclusion of the proxy fight, the Company and many of its
employees began to receive anonymous telecopies. These telecopies contained
false and defamatory comments regarding the Company, senior management and the
Board. In order to protect itself and end the distribution of these telecopies,
the Company filed a lawsuit to obtain videotapes from the Kinkos stores from
which these telecopies were being distributed. The videotapes showed that the
telecopies were being sent by Mr. Williams' executive assistant, who was an
employee of the Company. This employee was subsequently fired by the Company for
the wrongdoing, but the Company understands that Mr. Williams continues to
employ this individual.
During September 2003 and at the September 2003 Board meeting, Mr. Williams made
a number of false accusations regarding the fairness of the bidding process for
certain asset sales. For example, he claimed that a former director was given
information in the bidding process that was not provided to other bidders or
unitholders of Post Apartment Homes, L.P. This accusation was false. He also
demanded that the Company extend the bidding period for certain assets, claiming
that he did not know they were being sold and that he had not been given an
opportunity to bid on the assets. When a contract for one of the assets was
terminated and Mr. Williams was given the opportunity to bid, he refused to do
so. In each case, the Company believes that Mr. Williams' focus was disrupting
the Company's operations and getting back at the Company's directors and
officers.
During a break in the November 2003 Board meeting, Mr. Williams commented that
he was going to make things as difficult as possible for the other directors.
During another break in the meeting, as the directors were reassembling, Mr.
Williams inappropriately berated a Company officer who had been invited to make
a presentation at the meeting because Mr. Williams blamed the officer for a
problem that he had with the security gate at his home.
In the fourth quarter of 2003, Mr. Williams and the Company began disputing Mr.
Williams' requests for reimbursement of a number of expenses and fees. The
Company believes that many of the expenses are not reimbursable under Mr.
Williams' employment contract or are excessive. The Company also believes that
Mr. Williams is seeking reimbursement to make things difficult for the Company
and its staff.
Since Mr. Williams' tenure as the Company's Chief Executive Officer ended
effective July 1, 2002, Mr. Williams has undertaken a series of activities that
the Company believes are designed to disrupt Company activities and to satisfy a
personal grievance with the existing directors and officers. The Company
believes the Proposal is simply another example of an attempt to satisfy a
personal grievance. The Company does not believe compensation is truly an issue.
Instead, the Company believes that Mr. Williams is disguising his longstanding
personal grievance against the Company and the Board as a compensation issue.
Analysis
The Staff has previously taken the position that proposals submitted by
disgruntled former employees which related to or emanated from the former
employee's personal grievance against the registrant may be properly excluded on
Rule 14a-8(i)(4) grounds. See Pyramid Technology Corporation (publicly available
November 4, 1994) (proponent was a former employee whose proposal would have
precluded the company's payment of certain legal expenses on behalf of officers
and directors); Sigma-Aldrich Corporation (publicly available March 4, 1994)
(proposal purporting to limit executive pay determined by the Staff to be a
personal grievance and properly excludable); Westinghouse Electric Corporation
(publicly available December 6, 1985) (proposal requiring the company to make
certain public pledges of ethical conduct properly excludable when company
established the proponent was a former longtime employee who was recently fired
upon short notice). The Staff has also recognized that where a shareholder
proponent has a long-standing history of a confrontation with a company and that
history is indicative of a personal claim or grievance within the meaning of
Rule 14a-8(i)(4), such proposal may be excludable on this ground even though the
proposal, on its face, does not reveal the underlying dispute or grievance. See
Texaco, Inc. (publicly available February 15, 1994 and March 18, 1993) (proposal
which would place a cap on executive compensation was deemed a personal
grievance and properly excludable).
In AmVestors Financial Corporation (publicly available March 31, 1992),
AmVestors received a shareholder proposal requesting the board of directors to
contact and negotiate with potential buyers for a sale or merger of AmVestors.
The shareholder proponent, a former employee and Chairman Emeritus of AmVestors,
was terminated based partially due to his divisive conduct in an effort to
undermine the management of the company; and his interference with the duties
and responsibilities delegated to other management officials by the board of
directors.
Upon his termination from AmVestors, the proponent engaged in a systematic
course of harassment against AmVestors designed to achieve his re-instatement.
In carrying out such harassment, the proponent: (i) filed multiple lawsuits
against the company, alleging breach of contract, RICO violations and common law
fraud; (ii) directed letters to third party regulatory agencies indicating that
he had been removed from AmVestors and needed to be re-instated because of board
actions which constituted a "serious breach" of applicable law; and (iii)
offered to settle one of his multiple lawsuits against the company in exchange
for reinstatement of his Chairman Emeritus position, his appointment as Of
Counsel of AmVestors and the power to name a director. Further, the proponent
engaged legal counsel to advise him on how to conduct a proxy contest for the
election of directors. The proponent was advised that, if the board continued to
rebuff him, he could either wage an election campaign in opposition of
AmVestors' board, or he could decide to tender a shareholder proposal. The
proponent opted for the shareholder proposal. In response, AmVestors sought, and
the Staff granted, exclusion of the proposal based on the proponent's personal
grievance against the company.
In Crown Central Petroleum Corporation (publicly available March 4, 1999), the
Staff granted an issuer's no action request based on the issuer's claim of
personal grievance. In Crown Central, the company sought the Staff's approval in
excluding a proposal requesting the company's board to commission a study on the
relationship between the work performed by, and the compensation paid to, a
senior executive officer of the company. In successfully asserting a personal
grievance claim, the company relied on harassing actions on the part of the
proponent, which actions evidenced ulterior, personal motives for the proposal.
Specifically, the company noted that the proponent was a former member of a
labor organization involved in a protracted labor dispute with the company, and
that in connection with such dispute, the proponent and other members of the
labor organization filed a derivative action against the company. The proposal
sought the disclosure of information relevant to both the labor dispute and the
derivative action.
As further evidence that the proposal was related almost exclusively to the
proponent's personal grievance, the company directed the Staff's attention to
proxy results from the immediately preceding year's annual meeting. The company
included in the prior year's proxy statement a proposal from the proponent which
was "substantially identical" to the proposal at issue. The proposal received
slightly over 5% of the votes actually cast on the proposal.
As AmVestors and Crown Central demonstrate, the Staff has granted no action
requests regarding proposals which appear to relate to common interests of the
issuer's shareholders when the challenging company demonstrates a contentious
relationship between the proponent and the company, which relationship possesses
a direct connection with the proposal. International Business Machines
Corporation (publicly available December 28, 1994) (exclusion of a proposal
relating to the company's tax treatment of workers' compensation payments, where
the company established multiple disputes between the company and proponent,
including disputes over worker's compensation claims); Dow Jones & Company, Inc.
(publicly available January 24, 1994) (proposal seeking to cap the Chief
Executive Officer's compensation was properly excluded after the company
established that the true purpose of the proposal was to put pressure on the
company to settle a labor dispute); Texaco, Inc. (publicly available March 18,
1993) (exclusion of proposal seeking to cap executive and former employee
compensation, where company established a history of disputes between the
company and the proponent regarding company business practices); Medalist
Industries, Inc. (publicly available February 17, 1989) (proposal requiring that
certain anti-takeover measures be submitted to a vote of shareholders designed
to result in a benefit to a particular shareholder); American Telephone &
Telegraph Co. (publicly available January 26, 1981) (proposal requesting a
report detailing the Company's employment and recruitment practices for male
employees in certain employment positions, such as secretary, typist and
receptionist, was linked to the proponent's personal bias against female
officers and directors, and was being used to further his personal grievance
against female employees and directors of the company).
While the Proposal is couched in broad terms - namely, calling for a Bylaw
amendment to mandate director compensation be approved by the Company's
shareholders, the Commission noted in its Release No. 34-19135 (October 14,
1982) that the Staff will take a more "subjective analysis" in order to thwart
the misuse of the shareholder proposal process by "increasingly sophisticated
proponents and their counsel." As such, the Staff has analyzed proposals, such
as the ones presented in the no-action letters referenced above, which, while
drafted in a way that might relate to matters of general interest to all
securityholders, are properly excluded if it is clear from the facts the issuer
presents that the proponent is using the proposal as a tactic designed to
redress a personal grievance. See Texaco, Inc. (publicly available March 18,
1993) (exclusion of proposal seeking to cap executive and former employee
compensation, where company established a history of disputes between the
company and the proponent regarding company business practices); Core
Industries, Inc. (publicly available November 23, 1982) (exclusion of a proposal
to request company's board to distribute to its shareholders information
regarding equal opportunity, where company established a history of labor and
other disputes between the proponent, a labor union, and management).
The Company believes that Mr. Williams has attempted to undermine the incumbent
directors and management of the Company for almost two years. In addition to his
unsuccessful proxy fight staged in the spring of 2003, Mr. Williams has used the
media and the courts as a vehicle to convey his disagreements with how his
former company is being operated. The Staff has previously granted issuers'
requests for exclusion of proposals on the grounds of personal grievance where
the factual scenarios closely resemble that of Mr. Williams' historical
relationship with the Company. The Company believes that the Proposal is yet
another attempt on the part of Mr. Williams to undermine the proper authority of
the Board to manage the Company in a responsible manner and as such, should be
properly excluded from the Proxy Materials.
Conclusion
For the reasons specified above, the Company respectfully requests the
concurrence of the Staff that it will not recommend any enforcement action if
the Proposal were excluded from the Proxy Materials. Alternatively, if the Staff
is unable to concur that the Proposal may be omitted in its entirety, the
Company requests the Staff's concurrence that the portions of the Proposal
discussed in this letter may be excluded from the Proxy Materials. Further, the
Company hereby requests that Mr. Williams copy me on any correspondence he may
choose to make to the Staff in connection with the Proposal.
The Company presently anticipates filing its definitive proxy materials for the
2004 Annual Meeting of Shareholders on or about April 12, 2004. The Company
would greatly appreciate a response from the Staff in time for us to meet this
schedule. If you have any questions or require additional information concerning
this request, please call me at (404) 846-5025. If possible, I would appreciate
a copy of the Staff's response to this request via facsimile to my attention at
(404) 504-9388. Thank you for your attention and interest in this matter.
Very truly yours,
/s/
Sherry W. Cohen
Corporate Secretary
Enclosures
cc: John A. Williams (w/encl.)
[APPENDIX]
RESOLVED:
Article II, Section 7 of the Corporation's Bylaws be deleted and the following
inserted in lieu thereof:
"The Board shall recommend to shareholders at each annual meeting the amount and
form of compensation proposed to be paid to Directors for service on the Board
and its committees for the year commencing at that meeting, which recommendation
shall be approved by the Corporation's shareholders holding a majority of shares
entitled to vote in the election of Directors. Directors also shall be
reimbursed for reasonable expenses to attend Board and committee meetings. This
provision may not be altered, amended or repealed by the Board."
Proponent's Supporting Statement
Currently, the Bylaws grant the Board the authority to determine Director
compensation for service on the Board and its committees, and to reimburse
Directors for reasonable expenses to attend Board and committee meetings. I
believe the Board's recent actions in establishing Board compensation, however,
have abused the trust previously afforded to it by shareholders.
During last year's proxy contest and prior to the annual Shareholder's Meeting
on May 22, 2003, I requested that the Corporation disclose any discussions among
Directors regarding Robert Goddard's proposed compensation as Chairman of the
Board. The Corporation publicly responded that Mr. Goddard was receiving the
same $20,000 compensation as each other non-management Director and that there
had been no discussions and no contract for other compensation. May 6, 2003 Post
Earnings Conference Call Transcript.
On July 17, 2003, the Board's Compensation Committee authorized paying Mr.
Goddard as non-management Chairman of the Board a one year package of cash,
stock and stock options worth approximately $450,000, retroactive to February
20, 2003, the period including the proxy contest. The Board, including two
Directors who have received sizable payments from Mr. Goddard's affiliated
companies, ratified this package on September 8, 2003, with only John Williams
voting against ratification. As of December 4, 2003, the Corporation still had
not fully disclosed Mr. Goddard's compensation arrangement to shareholders,
which I understand may violate federal securities laws.
When compared to the compensation paid in 2002 to all non-management Chairmen
of the Boards of publicly-held, multi-family REITs having a market
capitalization of over $1 Billion, Mr. Goddard's package would have been second
only to Sam Zell of Equity Residential (which has approximately six times the
market value of Post) and double the next highest paid person in this group,
according to publicly available records.
Robert Anderson, a member of the Compensation Committee approving Mr.
Goddard's compensation, has received substantial cash payments for "consulting
services" from Mr. Goddard's affiliated companies since 2000 and possibly
significantly more in carrying interests in various business deals.
This proposal is intended to preclude Board activities similar to those
described above. If this proposal is approved, I believe shareholders will act
responsibly and approve future Board compensation recommendations, if properly
justified. To take advantage of shareholders, I believe, is just plain wrong.
Let's fix it now.
Vote FOR amending Article II, Section 7 of the Bylaws.
[INQUIRY LETTER]
February 16, 2004
VIA OVERNIGHT DELIVERY
Securities and Exchange Commission
Office of the Chief Counsel
Division of Corporate Finance
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Post Properties, Inc. - Submission of legal opinion Regarding Exclusion of
Shareholder Proposal from Proxy Materials
Ladies and Gentlemen:
In a letter dated January 22, 2004 (the "Letter"), Post Properties, Inc. (the
"Company"), pursuant to Rule 14a-(8)(j) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), advised the Staff of the Securities Exchange
Commission that the Company intended to exclude from its proxy materials for its
2004 Annual Meeting of Shareholders (the "Proxy Materials") a shareholder
proposal and supporting statement (together, the "Proposal") received from Mr.
John A. Williams. The Letter mentioned that the Company would be providing an
opinion of Alston & Bird LLP with respect to the Company's argument's for
omitting the Proposal pursuant to Rules 14a-8(i)(1) and 14a-8(i)(2) of the
Exchange Act as an improper subject for shareholders under Georgia law. Enclosed
herein is the opinion of Alston & Bird LLP referenced in the Letter.
If you have any questions or require additional information, please call me at
(404) 846-5025. Thank you for your attention and interest in this matter.
Very truly yours,
/s/
Sherry W. Cohen
Executive Vice President and
Corporate Secretary
cc: John A. Williams (w/enclosures)
[INQUIRY LETTER]
February 19, 2004
Via Hand Delivery
Grace K. Lee, Esq.
Securities and Exchange Commission
Office of Chief Counsel
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Post Properties, Inc. Shareholder Proposal submitted by John A. Williams
Dear Ms. Lee:
We are counsel for John A. Williams ("Mr. Williams") and are writing in response
to the letter dated January 22, 2004 by Post Properties, Inc. ("Post
Properties") to the Securities and Exchange Commission (the "Commission")
requesting the Staff's position on Post Properties' proposed exclusion of Mr.
Williams' proposal (the "Proposal") from Post Properties' solicitation materials
for its 2004 Annual Meeting of Shareholders. Mr. Williams' Proposal requests
that Post Properties' Bylaws be amended to require shareholder approval of the
Board of Directors' recommendations for director compensation for service on the
Board and its committees. Post Properties suggests that the Proposal is
excludable pursuant to Rules 14a-8(i)(1), 14a-8(i)(2), 14a-8(i)(3) and
14a-8(i)(4) promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). We believe that Post Properties has failed to meet its
burden of showing that it is entitled to omit the Proposal in reliance on these
exclusions.
Pursuant to Rule 14a-8(k) promulgated under the Exchange Act, we are enclosing
six copies of each of this letter and the Proposal, including the correspondence
forwarded to Post Properties to which the Proposal was attached. The Proposal,
Supporting Statement and related correspondence are attached to this letter as
Exhibit A. We are simultaneously forwarding a copy of this letter to Post
Properties, to the attention of its corporate secretary as requested in her
letter to the Commission of January 22, 2004.
We note that Post Properties' January 22, 2004 letter indicates that it is
forwarding to the Commission an opinion of Alston & Bird LLP on its behalf as to
certain matters of Georgia law with respect to Post Properties' arguments for
omitting the Proposal pursuant to Rules 14a-8(i)(1) and 14a-8(i)(2). We
understand that as of the date of this letter, Post Properties has failed to
comply with the requirements of Rule 14a-8(j) promulgated under the Exchange
Act. As a matter of law, we request that Post Properties' reliance on its
request to exclude Mr. Williams' Proposal pursuant to Rules 14a-8(i)(1) and
14a-8(i)(2) be disallowed. Should the Commission receive the legal opinion of
Alston & Bird LLP referenced in Post Properties' January 22, 2004 letter
subsequent to the delivery of this letter to the Commission, and should the
Staff waive compliance with Rule 14a-8(j) by Post Properties, then we
respectfully reserve the right to respond to Alston & Bird's legal opinion as
well as any future correspondence by Post Properties. Regardless, and for the
reasons set forth below, we believe that Post Properties has failed to meet its
burden of showing that it is entitled to omit the Proposal in reliance on Rules
14a-8(i)(1), 14a-8(i)(2), 14a-8(i)(3) and 14a-8(i)(4) promulgated under the
Exchange Act.
Background
Mr. Williams founded Post Properties in 1971. Mr. Williams worked diligently in
managing Post Properties for over 30 years, during which time Mr. Williams
served as a director, Chairman of the Board and Chief Executive Officer of Post
Properties. On March 25, 2002, Mr. Williams agreed to resign as Chief Executive
Officer, effective as of July 1, 2002. He remained as Chairman of the Board of
Post Properties until February 20, 2003, at which time Mr. Williams agreed to
change his title from Chairman of the Board of Post Properties to Chairman
Emeritus. Mr. Williams remains a director of Post Properties. In addition, Mr.
Williams is one of the largest individual beneficial holders of common stock of
Post Properties, including both Post Properties common stock and Post Apartment
Homes, L.P. partnership units immediately convertible into Post Properties
common stock, having acquired his original stake at the time he founded Post
Properties. Mr. Williams is a strong advocate for good corporate governance
benefiting all shareholders of Post Properties, and he has recently strengthened
his advocacy in light of the recent actions by the Commission, Congress and the
New York Stock Exchange, Inc. In this regard, Mr. Williams' Proposal is intended
to provide Post Properties shareholders with the ability to exercise governance
rights clearly afforded to them under Georgia law.
Response to Post Properties' Grounds for Omission of the Proposal
Post Properties advances three flawed arguments to support its request to
exclude Mr. Williams' Proposal from Post Properties' 2004 proxy materials.
First, Post Properties incorrectly claims that the Proposal is an improper
subject for shareholders under Georgia corporate law and would, if implemented,
cause Post Properties to violate Georgia corporate law. Second, Post Properties
incorrectly claims that the Proposal contains false and misleading statements in
violation of Rule 14a-9 of the Exchange Act. Third, Post Properties incorrectly
claims Mr. Williams' Proposal relates to the redress of a personal claim or
grievance against the Company.
I. Rule 14a-8(i)(1) and Rule 14a-8(i)(2)The Proposal does not violate Georgia
law and its implementation would not cause Post Properties to violate Georgia
law.
A. General.
As noted above, as of the date of this letter, we understand Post Properties has
not yet submitted the legal opinion of Alston & Bird LLP to support its claim
that the Proposal violates Georgia law. We therefore request that the Commission
exclude Post Properties' claim that the Proposal violates Rules 14a-8(i)(1) and
14a-8(i)(2) because of Post Properties' failure to timely comply with Rule
14a-8(j).
Should Post Properties subsequently submit the required legal opinion of Alston
& Bird LLP and should the Commission choose to permit the late filing of this
opinion, we nevertheless believe that Mr. Williams' Proposal is clearly
permitted by Georgia law and does not violate Rules 14a-8(i)(1) and 14a-8(i)(2).
B. Post Properties' position that a shareholder-adopted bylaw requiring
shareholder approval of directors' compensation is invalid under Georgia law
involves an improper reading of the provisions of Georgia law.
Post Properties argues that Mr. Williams' Proposal should be excluded because
"the Proposal is an improper subject for shareholders under Georgia corporate
law and would, if implemented, cause the Company to violate Georgia corporate
law." This is not correct.
Post Properties' argument is that although the Bylaws of Post Properties provide
that the "Board of Directors shall have the authority to determine from time to
time the amount of compensation that shall be paid to its members ..." (Article
II, Section 7), and that "[t]hese Bylaws may be ... amended ... by the
shareholders ..." (Article X), the corporate law of the State of Georgia has
somehow removed from the shareholders of a Georgia corporation the traditional
right to amend the bylaws of a Georgia corporation.
The Proposal, of course, seeks to amend the Bylaws to require that the Board of
Directors recommend compensation for members of the Board to the shareholders of
Post Properties each year and that the shareholders approve such compensation
after full disclosure. The reasons for the Proposal are stated in great detail
in the Proposal and Supporting Statement and will not be repeated here, but it
is important to emphasize that the Proposal seeks to shine light upon and
specifically call to the attention of the shareholders of Post Properties an
area of corporate governance which inherently involves self dealing on the part
of directors: the setting of their own compensation. The need for such a
provision at Post Properties was highlighted because compensation adjustments
for the Chairman of the Board of Post Properties, which became effective in
February 2003, were not fully disclosed to the shareholders, all in
circumstances more particularly described in the Proposal and the Supporting
Statement.
It is true that Section 7 of Article II of the Bylaws of Post Properties gives
permissive power to the Board of Directors to determine compensation for its
members. But it is also true that Article X of the Bylaws specifically provides
that the Bylaws may be altered, amended, repealed or any new Bylaws adopted by
the shareholders at an annual or special meeting of the shareholders. Thus, the
ultimate authority in Post Properties is and remains with its shareholders, and
the shareholders have specifically reserved to themselves in the Bylaws of Post
Properties the power to amend those Bylaws.
Post Properties contends that the Georgia Business Corporation Code ("GBCC") has
somehow removed from the shareholders of Post Properties the power to amend its
Bylaws, notwithstanding the specific provisions of Post Properties' Bylaws which
allow such amendment. Post Properties correctly starts its analysis with GBCC
14-2-811, which states that "unless the Articles of Incorporation or Bylaws
provide otherwise, the Board of Directors may fix the compensation of
directors." [emphasis provided] The reason for this statute is that director
compensation historically has been a suspect area. Various state statutes have
sought to address the question. In 1982, the GBCC was amended to provide that,
while the board of directors had authority to fix its own compensation, this
authority could be limited by either the articles of incorporation or the bylaws
of the corporation. The official comment stated: "The authority of the board to
fix its own compensation may be limited in the bylaws as well as in the articles
of incorporation. The idea here is that if a board abuses its power to fix the
compensation of its members, shareholders would probably find it easier to curb
that power through a bylaw amendment than through an amendment of the articles
of incorporation [which requires board approval]." Comment to GBCC 14-2-140(d)
(1982). Georgia corporate law has long struggled with this area and generally
provides today in 14-2-861 for approval of a director's conflicting interest
transactions in three ways: by directors who have no interest in the transaction
(impossible with respect to directors' compensation itself); or by shareholders'
approval; or by establishing in a judicial forum that the transaction was "fair
to the corporation." GBCC 14-2-861. A comment to a 1989 amendment to that code
section stated in pertinent part: "The effect is to admit that decisions
involving compensation of directors inevitably involve conflicts of interest,
and to return to traditional approaches to legitimating these transactions,
which is either to seek shareholder approval or to establish the fairness of the
transactions."
Against the clear preference for shareholders' democracy in Georgia,
particularly in areas of inherent conflict such as directors setting their own
compensation, Post Properties argues that an amended section of the GBCC has
somehow removed this traditional power of the shareholders. Post Properties
cites 14-2-1020(d) of the GBCC and declares that it "provides that a bylaw that
limits the authority of the Board of Directors may only be adopted pursuant to
[a closely held corporation's shareholders' agreement] meeting the requirements
of 14-2-732 [of the GBCC]." Such a reading of GBCC 14-2-1020 is clearly in
error. GBCC 14-2-1020 provides, first, that a corporation's board of directors
may ordinarily amend its bylaws unless prohibited by shareholder action, and
then provides specifically that a corporation's shareholders may amend or repeal
the corporation's bylaws or adopt new bylaws. The section then goes on to
provide in subsection (c) that a bylaw establishing staggered terms may only be
adopted, amended or repealed by the shareholders, and in subsection (d) that a
bylaw providing for the extraordinary, partnership-like, limitations on the
board of directors' authority in closely-held corporations may only be adopted
pursuant to an agreement meeting the unanimous shareholder consent requirements
of GBCC 14-2-732. A complete copy of 14-2-1020 is attached as Exhibit B to
this letter. Under 14-2-732 of the GBCC (as admitted by Post Properties in its
January 22, 2004 letter), such shareholders' agreements may not be utilized by a
corporation such as Post Properties, whose shares are listed on a national
securities exchange. Therefore, the provisions of 14-2-732 of the GBCC and the
corresponding provisions of 14-2-1020(d) of the GBCC have no application
whatsoever to a publicly traded corporation such as Post Properties.
Section 14-2-732(a) of the GBCC is patterned after the Model Act to provide a
safe harbor provision that validates shareholder-approved limitations on board
powers in non-public corporations in a variety of settings specified therein.
These are the actions specified in GBCC 14-2-732(a) that require unanimous
shareholder consent and that, pursuant to GBCC 14-2-732(d), become invalid when
the corporation's shares are publicly traded.
The cross reference to 14-2-732 in 14-2-1020(d) of the GBCC must be understood
in that contextas limiting the adoption of extraordinary limits on board
authority in closely-held corporations to shareholder agreements that have been
unanimously adopted in the manner specified in GBCC 14-2-732. Section
14-2-732(a) of the GBCC specifies these extraordinary limits in a way that makes
clear their exclusive application to non-public, closely-held companies. GBCC
14-2-732(a) allows an agreement which:
"(1) Eliminates the board of directors or restricts the discretion or powers of
the board of directors;
(2) Governs the authorization or making of distributions whether or not in
proportion to the ownership of shares...;
(3) Establishes the directors or officers of the corporation, or their terms of
office or manner of selection or removal;
(4) Governs, in general or in regard to specific matters, the exercise or
division of voting power by or between the shareholders and directors or by or
among any of them, including use of weighted voting rights or director proxies;
(5) Establishes the terms and conditions of any agreement for the transfer or
use of property or the provision of services between the corporation and any
shareholder, director, officer, or employee of the corporation or among any of
them;
(6) Transfers to one or more shareholders or other persons all or part of the
authority to exercise the corporate powers or to manage the business and affairs
of the corporation, including the resolution of any issue about which there
exists a deadlock among directors or shareholders;
(7) Requires dissolution of the corporation at the request of one or more of the
shareholders or upon the occurrence of a specified event or contingency; or
(8) Otherwise governs the exercise of the corporate powers or the management of
the business and affairs of the corporation or the relationship among the
shareholders, the directors, and the corporation, or among any of them, and is
not contrary to public policy."
It is inconceivable, for example, that shareholders of a publicly-traded company
such as Post Properties would attempt to eliminate the board of directors
entirely, to designate an outside person to manage its business, or to give to
one of its shareholders the power to cause corporate dissolution. These limits
are totally incompatible with public ownership, and quite naturally,
14-2-732(d) of the GBCC provides for their extinction once the company becomes
publicly traded.
Section 14-2-1020(d) of the GBCC, when read in context, only applies to
corporations that are permitted to adopt shareholder agreements under 14-2-732
of the GBCC (i.e., nonpublicly traded corporations), and that the types of
limitations enumerated in 14-2-732 of the GBCC must be approved by all
shareholders and not by majority action permitted by 14-2-1020(b) of the GBCC.
That this is the proper interpretation of the GBCC can be seen not only by the
clear statement in 14-2-1020(b) that the shareholders have the power to amend
or repeal a corporation's bylaws, but also by looking at numerous other
provisions of the GBCC, which would be made ineffective by the broad and
unwarranted construction of 14-2-1020(d) that Post Properties suggests. For
instance, GBCC 14-2-810(a) allows a bylaw approved by the shareholders of the
corporation to limit the power of directors to fill vacancies on the board. GBCC
14-2-811, noted above, specifically authorizes the bylaws to limit the power of
the directors to set their own compensation. GBCC 14-2-820 allows the bylaws to
limit the power of the board to permit directors to participate in meetings by
electronic means. GBCC 14-2-825(a) permits bylaws to limit the power of the
board to create committees and to specify or limit the power of board
committees. If, however, the Staff follows Post Properties' interpretation of
14-2-1020(d) of the GBCC, then shareholders of a publicly-held corporation
would never be permitted to amend a corporation's bylaws to limit director
authority in these or any other area. Consequently, Post Properties'
interpretation of 14-2-1020(d) would render moot and superfluous each of the
above specifically identified sections that authorize director authority to be
limited in a corporation's bylaws.
It has long been the rule in Georgia, as well as elsewhere, that a statute such
as the GBCC will be construed to make its parts harmonize and not to presume
that the legislature intended a part in such a way as to have no meaning. The
Supreme Court of Georgia in Brown v. Liberty County, 271 Ga. 634, 522 S.E. 2d
466 (1999) has stated this rule succinctly: "It is a basic rule of construction
that a statute or constitutional provision shall be construed to make all its
parts harmonize and to give a sensible and intelligent effect to each part(, as
i)t is not presumed that the legislature intended that any part would be without
meaning."
Section 14-2-1020(d) of the GBCC applies only to closely held corporations which
are eligible to adopt shareholders' agreements under 14-2-732 of the GBCC. The
general rule remains that shareholders of a publicly-traded Georgia corporation
may amend corporate bylaws pursuant to the authority of 14-2-1020(b) which
states: "A corporation's shareholders may amend or repeal the corporation's
bylaws or adopt new bylaws...."
II. Rule 14a-8(i)(3)The Proposal does not contain false and misleading
statements in violation of Rule 14a-9 of the Exchange Act.
A. Post Properties failed to timely disclose all material terms of Mr. Goddard's
compensation package.
Post Properties improperly cites Rule 14a-8(i)(3) as grounds for excluding Mr.
Williams' Proposal. This rule allows a company to exclude a shareholder proposal
that is contrary to any of the Commission's proxy rules. Post Properties
attempts to link Rule 14a-8(i)(3) with Rule 14a-9. Rule 14a-9 provides that no
solicitation shall be made containing any statement which, at the time and in
light of the circumstances under which it is made, is false or misleading with
respect to any material fact. We believe that Mr. Williams' Supporting Statement
does not contain any false and misleading statements within the meaning of Rule
14a-9 and the following information is provided in direct response to Post
Properties' allegations.
At December 5, 2003 when Mr. Williams submitted his Proposal to Post Properties,
Post Properties had not fully disclosed to its shareholders Mr. Goddard's
compensation arrangement as non-management Chairman of the Board. More
importantly, Post Properties has yet to disclose all of the material terms of
Mr. Goddard's compensation package. During the 2003 proxy contest, Post
Properties publicly stated in its May 6, 2003 earnings conference call that Mr.
Goddard, as Post Properties' non-management Chairman of the Board, was receiving
the same $20,000 compensation as any other non-management director of Post
Properties and that there had been no discussions and no contract for other
compensation. On July 17, 2003, Post Properties' Compensation Committee approved
a one year compensation package for Mr. Goddard consisting of 7,672 shares of
restricted stock of Post Properties, non-qualified stock options to acquire
100,000 shares of common stock of Post Properties, $100,000 in cash, and made
this compensation package retroactive to February 20, 2003, almost two months
prior to Post Properties' Definitive Proxy Statement dated April 4, 2003 for its
2003 Annual Shareholders Meeting held on May 22, 2003. The Compensation
Committee determined that this package had a value of approximately $450,000.
Post Properties announced on November 4, 2003 during its earnings conference
call reporting its financial results for the third quarter ended September 30,
2003, that Mr. Goddard received a stock grant and stock options for his service
as non-management Chairman of the Board. Post Properties, indeed, filed a copy
of the agreements reflecting the stock grant and the option grant as exhibits to
Post Properties' Form 10-Q for the third fiscal quarter filed with the
Commission on November 14, 2003 ("Third Quarter Form 10-Q").
Mr. Williams' understanding that Post Properties' failure to fully disclose the
material terms of Mr. Goddard's compensation package may violate federal
securities laws is proper and properly supportable. Post Properties claims it
"disclosed the material components of Mr. Goddard's compensation package (which
became effective in the Company's third fiscal quarter 2003) as Exhibit 10.1 and
Exhibit 10.2 to [Post Properties' Third Quarter Form 10-Q]." Mr. Williams
strongly disagrees with Post Properties' claim. Mr. Williams believes that a
$100,000 cash payment, constituting almost 23% of the total value of Mr.
Goddard's compensation package, and making Mr. Goddard's compensation package
retroactive to February 20, 2003, especially in light of Post Properties'
statements made during last year's proxy contest, are material terms that Post
Properties has failed to properly disclose under the federal securities laws.
Post Properties conveniently notes that Mr. Goddard's compensation package
"became effective in the Company's third fiscal quarter 2003" without clearly
disclosing to the Staff its retroactivity to February 2003. Both Mr. Goddard's
personal Form 4 filing on August 27, 2003 and Exhibits 10.1 and 10.2 to Post
Properties' Third Quarter Form 10-Q indicate that the grant date of the
restricted stock and stock options, respectively, is July 17, 2003. July 17,
2003 is the date of the Board's Compensation Committee meeting at which the
Compensation Committee approved the completed compensation package for Mr.
Goddard. In addition, Post Properties' 2003 Incentive Stock Plan, under which
the Compensation Committee granted Mr. Goddard's restricted stock and stock
option, states in Section 7.3 that the option price shall be no less than the
fair market value per share of Post Properties common stock on the date the
option is granted. The 2003 Incentive Stock Plan further states in Sections 7.1
and 9.1 that the "Committee acting in its absolute discretion shall have the
right to make Stock Grants to Key Employees and to Directors." It is clear,
then, that the actions taken by the Compensation Committee, having absolute
discretion, on July 17, 2003 were conclusive and binding.
Paragraph (b)(10)(iii)(A) of Item 601 of Regulation S-K states:
"any management contract or any compensatory plan, contract or arrangement,
including but not limited to plans relating to options, warrants or rights,
pension, retirement or deferred compensation or bonus, incentive or profit
sharing (or if not set forth in any formal document, a written description
thereof) in which any director or any of the named executive officers of the
registrant, as defined by Item 402(a)(3), participates shall be deemed material
and shall be filed; ..." (emphasis supplied).
Instruction 2 to Paragraph (b)(10) states:
"If a material contract is executed or becomes effective during the reporting
period reflected by a Form 10-Q or Form 10-K, it shall be filed as an exhibit to
the Form 10-Q or Form 10-K filed for the corresponding period. See paragraph
(a)(4) of this item. With respect to quarterly reports on Form 10-Q, only those
contracts executed or becoming effective during the most recent period reflected
in the report shall be filed."
Because it is uncontroverted that the grant date of Mr. Goddard's compensation
package is July 17, 2003, retroactive to February 20, 2003, Mr. Williams
believes that all of the material terms of Mr. Goddard's compensation package
should have been disclosed in Post Properties' Quarterly Report on Form 10-Q for
the second fiscal quarter of 2003, filed with the Commission on August 14, 2003
("Second Quarter Form 10-Q"), and certainly in Post Properties' Third Quarter
Form 10-Q filed on November 14, 2003. Mr. Williams notes that Post Properties
filed as Exhibit 10.1 to the Second Quarter Form 10-Q a copy of the employment
agreement entered into on July 18, 2003 with David P. Stockert, the Chief
Executive Officer of Post Properties. Post Properties also filed as Exhibit 10.2
to the Second Quarter Form 10-Q a copy of Amendment No. 1 to the Employment
Agreement with Thomas Senkbeil, the Executive Vice President and Chief
Investment Officer of Post Properties, dated as of August 1, 2003. Query why
Post Properties would file with its Second Quarter Form 10-Q a copy of Mr.
Stockert's employment agreement and a copy of Mr. Senkbeil's employment
agreement amendment entered into one day and almost two weeks, respectively,
after the Board's Compensation Committee granted Mr. Goddard his compensation
package and not similarly disclose Mr. Goddard's arrangement with Post
Properties. Should Post Properties take the position that the arrangement with
Mr. Goddard was not "consummated" until after the filing of the Second Quarter
Form 10-Q, then by definition, Mr. Goddard's Form 4 Report appears untimely
filed according to Section 403 of the Sarbanes-Oxley Act of 2002 and Section
16(a) of the Exchange Act, and Post Properties appears to have violated federal
securities law disclosure rules promulgated under Regulation S-K.
Mr. Williams believes that the information provided above clearly supports his
statements that Post Properties had not fully disclosed to its shareholders the
material terms of Mr. Goddard's compensation arrangement, which he understands
may violate federal securities laws.
B. Post Properties' assertions that Mr. Williams' statements are "slanderous"
and impugn the character of the Board are completely without merit.
Post Properties argues that the Proposal's connection of the approval of Mr.
Goddard's compensation package to the "substantial cash payments" received by
Mr. Anderson, a member of the Board and of the Compensation Committee of the
Board, and "sizable payments" received by two Board members (one of whom is Mr.
Anderson) from Mr. Goddard's affiliated companies is an attempt to impugn the
character of the Board. We disagree. These statements are truthful and are
included to show the conflict of interest backdrop against which the
Compensation Committee and the Board of Directors acted. At a regularly
scheduled meeting of the Board of Directors of Post Properties on September 8,
2003, Mr. Williams learned that the Compensation Committee had granted Mr.
Goddard his compensation package on July 17, 2003. The full Board ratified Mr.
Goddard's compensation package, with only Mr. Williams voting against the
ratification. Following this meeting, at the request of Mr. Williams, outside
counsel for Post Properties advised us, as counsel for Mr. Williams, that Mr.
Goddard's affiliated companies expected to pay Mr. Anderson approximately
$200,000 for "consulting services" from 2000-2003. Post Properties' counsel
indicated that it also would provide information on the value of various
carrying interests that Mr. Anderson held in various business deals affiliated
with Mr. Goddard. Post Properties' counsel has failed to provide that
information. In addition, another director of Post Properties also serves as a
director of one or more companies affiliated with Mr. Goddard. In that capacity,
this director receives compensation both directly as a director, and indirectly
as a partner in the law firm that provides legal services to Mr. Goddard's
affiliated entities. Mr. Williams believes this director has received in excess
of approximately $20,000 for director fees from Mr. Goddard's affiliated
companies since 2001. Mr. Williams, however, does not know the aggregate amount
of legal fees paid by Mr. Goddard's affiliated companies to this director's law.
firm, but believes them to be sizable.
Post Properties has cited a long list of no-action letters to support its claim
for exclusion under Rule 14a-8(i)(3) without taking a close look at the facts of
those cases or the Staff's actual responses. The proposals in all the cases
cited by Post Properties are easily distinguishable from Mr. Williams' Proposal.
We refer the Staff to Exhibit C for a discussion of each of these no-action
letters and a clarification of why they are easily distinguishable from Mr.
Williams' Proposal and Supporting Statement. In addition, despite any initial
shortcomings in the cited no-action letters, the Staff did not concur to exclude
any of the proposals; rather, the Staff allowed each of the proposals to be
included if timely revised. Based on the supporting facts in Mr. Williams'
Proposal and included in this letter, Mr. Williams' Proposal is not excludable
under Rule 14a-(i)(3). However, if the Staff believes otherwise with regard to
any statements in the Proposal, we would like the opportunity to revise the
Proposal and do not believe that the entire Proposal should be excluded.
III. Rule 14a-8(i)(4)Mr. Williams' Proposal relates solely to actions recently
taken by Post Properties that affect all shareholders and not to any alleged
personal claim or grievance against Post Properties.
A. General.
Mr. Williams' Proposal clearly relates to a matter of serious concern to all
shareholders of Post Properties and does not relate to any personal claim or
grievance by Mr. Williams against Post Properties. Rule 14a-8(i)(4) permits a
company to exclude a shareholder's proposal "[i]f the proposal relates to the
redress of a personal claim or grievance against the company or any other
person, or if it is designed to result in a benefit to [the proponent], or to
further a personal interest, which is not shared by other shareholders at
large." The Staff has indicated that a proponent's proposal may be excluded (1)
when the proposal is directly related to the proponent's personal grievance; and
(2) when the proposal is of general interest to all security holders but the
issuer demonstrates that it was submitted to redress a personal grievance.
Commission Release No. 34-19135 (publicly available October 14, 1982) (emphasis
supplied). The Staff adds that a proposal of general interest to all security
holders may be excluded under Rule 14a-8(i)(4) (formerly Rule 14a-8(c)(4)) "if
it is clear from the facts presented by the issuer that the proponent is using
the proposal as a tactic designed to redress a personal grievance or further a
personal interest." Id. (emphasis supplied). Post Properties has failed to
clearly demonstrate that Mr. Williams' Proposal is directly related to a
personal grievance that Mr. Williams may have with Post Properties and that Mr.
Williams submitted the Proposal to address this personal grievance. In fact,
Post Properties has not even clearly identified the supposed personal grievance
on which Post Properties bases the crux of its claim for exclusion.
We believe that Post Properties' "Summary of Mr. Williams' Statements and
Actions" is replete with inaccuracies and, more importantly, omissions of
material fact specifically designed to give the Staff the impression that Mr.
Williams is harassing the Board and management and being disruptive to Post
Properties for personal gain. Moreover, Post Properties routinely references the
Staff's position in the numerous no-action letters it cites for support to
exclude Mr. Williams' Proposal without explaining to the Staff that, in almost
all cases, the facts underlying the cited no-action letters are clearly
distinguishable from Mr. Williams' reasons for submitting his Proposal.
For example, Post Properties cites Texaco, Inc. (publicly available March 18,
1993) four times in support of its argument that Mr. Williams' Proposal may be
excluded as a personal grievance. In Texaco, significant portions of the
proposal and supporting statement dealt with the same topic about which the
proponent had extensive on-going disputes with the company. The facts presented
evidence that the proponent, who was an independent retailer for Texaco, desired
an increase in compensation for lower paid employees and a decrease in executive
compensation. This proposal, if approved, would have directly benefited the
proponent by eliminating the perceived disadvantage to independent retailers of
labor costs in relation to company-operated retail facilities. Texaco also
presented supplemental documentation that contained statements by the proponent
that "his purpose (in the proposal) was to restate his often-repeated position
that the Petroman employees operating Texaco's stations in [his] competitive
market area and elsewhere should be paid higher salaries and benefits." In the
same documentation, the proponent indicated that he was not concerned with
imposing a cap on compensation paid to Texaco's executives. The proposal was
clearly designed to benefit the proponent and further his personal interests.
The Staff concluded that it would not take enforcement action if Texaco excluded
the proposal pursuant to Rule 14a-8(c)(4) (now known as 14a-8(i)(4)).
Although Post Properties cites Texaco to support its position, Post Properties
has not presented any clear evidence to show a direct link that the Proposal
will benefit Mr. Williams individually or further his personal interests within
the meaning of Rule 14a-8(i)(4). Rather, Post Properties has attempted to
obfuscate the true purpose of Mr. Williams' Proposal by trying to link Mr.
Williams' historical concerns over Post Properties' day-to-day business
activities with a recently occurring event that formed the basis of his
Proposal.
B. Mr. Williams' Proposal is not a redress of a personal claim or grievance.
On July 17, 2003, the Compensation Committee of the Board of Directors of Post
Properties unilaterally and with full and absolute authority approved a
compensation package for Mr. Goddard as non-management Chairman of the Board.
This compensation package includes at least four material terms: a stock grant,
an option grant, a cash payment, and a retroactivity to February 20, 2003. The
Compensation Committee advised that it utilized information received from an
independent third party to establish the dollar value of Mr. Goddard's
compensation package. The Board of Directors ratified the Compensation
Committee's action on September 8, 2003, with Mr. Williams voting against
ratification. As Mr. Williams explains in his Supporting Statement, when
compared to the compensation paid in 2002 to all non-management Chairmen of the
Boards of publicly-held, multi-family REITs having a market capitalization of
over $1 billion, Mr. Goddard's package would have been second only to Sam Zell
of Equity Residential (which has approximately six times the market value of
Post Properties) and double the next highest paid person in this group,
according to publicly available records.
In Post Properties' 2003 proxy materials dated April 4, 2003, Post Properties
stated that its non-employee directors receive an annual retainer of $20,000,
with additional cash equal to $1,000 for attending Board meetings and Audit
Committee meetings, $500 for attending other committee meetings, and a special
stipend in the amount of $7,500 for the Chairman of the Audit Committee. In
addition, each non-employee director who is serving in that capacity on December
31 of a year and who has served as a director for more than one year
automatically receives a grant of options to purchase 3,000 shares of common
stock at an exercise price equal to 100% of the fair market value of the common
stock on the date of the grant. Each non-employee director receives a grant of
options to purchase shares of common stock of Post Properties at the time of his
initial appointment to the Board of Directors in an amount equal to $10,000
divided by the fair market value per share of the common stock on the date of
grant, such grant being at an exercise price equal to 100% of the fair market
value of the common stock on that date. During the 2003 proxy contest, Post
Properties announced that Mr. Goddard, who became the non-employee Chairman of
the Board on February 20, 2003, was only receiving the same compensation as any
other non-management director of the Board.
It quickly becomes obvious that Mr. Williams' Proposal in no sense is trying to
seek redress of any personal claim or grievance, but rather is seeking to
curtail the egregious actions by the Compensation Committee and the Board of
Directors of Post Properties in granting Mr. Goddard a compensation package as
non-management director in an amount equal to approximately $450,000. Although
the current Bylaws of Post Properties grants the Board of Directors the
discretionary authority to establish director compensation, Mr. Williams
believes that both the Compensation Committee and the Board have fundamentally
abused this privilege by granting Mr. Goddard a compensation package in an
amount and having the terms described above that are so blatantly contrary to
any prior description or disclosure of Board compensation to shareholders of
Post Properties. Mr. Williams believes that amending the Bylaws to require the
Board to present to shareholders for approval the Board's recommendation for
director compensation will preclude future similar Board abuses.
We believe Post Properties' citation to a litany of Staff no-action letters to
support its claim that Mr. Williams' Proposal is simply seeking redress of a
personal claim or grievance is misguided. We have attached as Exhibit D a
description of these no-action letters cited by Post Properties (other than
Texaco, Inc., publicly available March 18, 2003, described above), together with
a more complete analysis of the facts underlying each of these no-action
letters. The facts underlying each of these no-action letters vary significantly
from the facts underlying why Mr. Williams submitted his Proposal for inclusion
in Post Properties' 2004 proxy materials.
Moreover, Post Properties' attempt to demonstrate a "direct link" between Mr.
Williams' Proposal and a supposed personal grievance or interest is completely
without merit. Post Properties alleges Mr. Williams submitted his Proposal to
seek "revenge" against Post Properties. This is simply untrue. Mr. Williams did
not recommend or approve Mr. Goddard's compensation package. Mr. Williams voted
against ratifying Mr. Goddard's compensation package because he believed it was
not in the best interests of all shareholders and so stated at the September 8,
2004 Board meeting. Post Properties previously had disclosed to shareholders the
amount and methodology for granting compensation to non-management directors for
their service on the Board. Post Properties also previously had publicly stated
that Mr. Goddard was only receiving the same compensation (i.e., $20,000) as
each other non-management director for his service as Chairman of the Board. The
compensation package unilaterally granted to Mr. Goddard is so egregious and so
out of proportion with respect to Post Properties' own prior public disclosure
to its shareholders and to the compensation packages granted to non-management
Chairmen of the Boards of similarly situated multi-family REITs that Mr.
Williams believed the only way to curtail future similar abuses was through
amending the Bylaws of Post Properties as reflected in his Proposal.
Post Properties ineffectively attempts to link Mr. Williams' Proposal with his
ongoing concerns about the business operations of Post Properties following his
resignation as Chief Executive Officer of Post Properties. As shown above, Mr.
Williams' concerns about business operations has absolutely no connection to his
reasons underlying his Proposal. Perhaps some in management believe that Mr.
Williams asks too many questions of management and the Board, but hindsight has
demonstrated that he has asked the right questions. For example, Post Properties
notes that Mr. Goddard, as Chairman of the Board, interviewed and conducted
meetings with senior management and other employees of Post Properties during
late February and early March, 2003. Post Properties states that "it became
clear to Mr. Goddard that the senior management team was performing well, but
that Mr. Williams was going to continue to be disruptive." Post Properties'
statement appears disingenuous. If the senior management team were truly
performing as well as Post Properties states in its letter to the Staff, then
why did Post Properties fire its Chief Financial Officer and the Executive Vice
President of Asset Management of Post Properties in early April 2003 with no
rational explanation given to the public? Post Properties states that Mr.
Williams "made burdensome requests for [Company] information." What Post
Properties fails to disclose is that this is the same information Mr. Williams
had been requesting and receiving previously for years. Post Properties states
that Mr. Williams, as the then Chairman of the Board, opened the January 7, 2003
Board meeting by announcing he had hired a law firm to review proposals
presented at the December 2002 meeting and that he was vehemently opposed to
Post Properties adopting those resolutions. Post Properties fails to disclose
that the discussion at the December 2002 Board meeting to approve changes to the
Bylaws to add anti-takeover provisions was tabled because of the complexity of
the subject matter. Post Properties also fails to disclose that Mr. Williams
requested that Mr. Stockert, the Chief Executive Officer, and outside counsel to
Post Properties advise him on the extensive anti-takeover proposals that
management and outside counsel submitted to the Board for approval only days
before the January 7, 2003 Board meeting. Neither Post Properties nor its
outside counsel ever provided this advice. At the January 2003 Board meeting,
Mr. Williams challenged each of the directors on whether they understood the
complex anti-takeover provisions being presented to them for consideration and
approval, especially in light of the preexisting anti-takeover provisions
included in Post Properties' Article of Incorporation by virtue of its status as
a real estate investment trust, and the potential implications to all
shareholders. Ultimately, the Board again tabled the discussion because, Mr.
Williams believes, a majority of the directors were not properly informed about
the details or implications of the proposals on which they were being requested
to consider and vote.
Post Properties further attempts to buttress its claim that Mr. Williams'
Proposal seeks to redress a personal claim or grievance by disclosing that the
Board sought to approve resolutions restricting Mr. Williams' access to
employees and certain company information and to relocate his office. What Post
Properties fails to disclose is that the Board initially called a special
meeting of directors in violation of the Bylaws of Post Properties to vote on
these resolutions and that outside counsel for Post Properties had informed our
firm, as counsel for Mr. Williams, that there were enough votes to approve the
resolutions unless Mr. Williams wanted to negotiate a resolution of the matter.
After Mr. Williams objected to the illegally-called Board meeting, the Board
issued a new notice calling for a special meeting to vote on these resolutions.
Mr. Williams believed the facts underlying the resolutions were materially false
and misleading and sought to enjoin the Board from approving the pre-packaged
action. One of the byproducts of the Board's actions in approving the proposed
resolutions could have been a termination of Mr. Williams' employment agreement
with Post Properties, resulting in a termination of Mr. Williams' life insurance
policies. Because Mr. Williams previously had undergone heart bypass surgery, it
was doubtful Mr. Williams would be eligible to receive comparable life insurance
on reasonable terms, if at all, if he had to obtain new coverage. Mr. Williams
sought injunctive relief. After hearing all of the facts, the Superior Court of
Cobb County, Georgia granted a temporary restraining order against the Board of
Directors from voting on the proposed resolutions. Mr. Williams in no way
challenged the Board's authority to consider other unrelated matters relative to
the business of Post Properties.
Post Properties also incorrectly references Mr. Williams' proxy contest last
spring as evidence supporting Post Properties' claim that Mr. Williams' Proposal
is seeking to redress a personal claim or grievance. Although Mr. Williams'
slate was not elected, he received approximately 35% of the outstanding vote
and, according to IVS Associates, Inc., approximately 54% of all shares voted by
Post Properties employees in the Post Properties 401(k) plan. When asked about
the results of the proxy contest, Mr. Williams replied, "I consider our effort a
strong victory. [Post Properties] has adopted virtually our entire platform. I
am confident our board's governance decisions will be more open and more
thoughtful in the future. I am also confident that the board knows, without
question, that the shareholders own this company." Atlanta Business Chronicle,
May 22, 2003. In the same article, Mr. Williams added, "If [the Board]
thoughtfully look[s] at proposals that enhance shareholder value and quickly
implement the committed governance changes, we will have a smooth and functional
board. That is certainly my hope." Again, Post Properties' efforts to link the
proxy contest to Mr. Williams' Proposal are fallacious. It is clear that Mr.
Williams launched the proxy contest for the benefit of all shareholders to
pursue needed corporate governance changes. This was not about Mr. Williams
personally.
Finally, Post Properties alleges Mr. Williams made false accusations regarding
the fairness of the bidding process for certain asset sales with the intent of
disrupting the sales process. Mr. Williams presented information to the Board
and management of Post Properties indicating that, based on information he had
received, management had failed to fulfill its fiduciary duties to holders of
common partnership units in Post Apartment Homes, L.P. in connection with
management's proposed sale of various apartment assets of Post Properties. Post
Properties acknowledged these shortcomings by providing the unitholders with
additional time with which to consider and bid on these properties. Post
Properties also has committed to keep the unitholders better informed of the
asset sales process as a direct result of Mr. Williams' request. Post
Properties' attempt to blame Mr. Williams for the decision by Barry Teague, a
former director of Post Properties, to retract his bid to purchase from Post
Properties the Post Lane apartment assets in Atlanta also is without any merit.
According to Mr. Teague, he withdrew his bid for these assets principally
because he based his bid price on certain assumptions as to the quality of the
assets, which proved materially untrue after conducting a further due diligence
investigation.
All in all, the attempts by Post Properties to try to link historical disputes
between Mr. Williams and Post Properties with Mr. Williams' Proposal is clearly
misplaced. This listing of items by Post Properties is simply an attempt to
sidestep the real issue underlying Mr. Williams' Proposal and to try to
manipulate a series of events to draw a specious correlation between these
events and Mr. Williams' Proposal. We believe Post Properties has failed to
demonstrate that there is a direct link between Mr. Williams' Proposal and his
historical concerns with management. Mr. Williams' Proposal is intended to curb
future abuses by the Board of Directors in establishing director compensation.
As previously shown, the Board's ability to establish director compensation
under the existing terms of the Bylaws is not a right, but rather a privilege.
Mr. Williams believes the Board of Directors and the Compensation Committee have
abused that privilege. As one of the largest individual beneficial owners of
common stock of Post Properties, Mr. Williams, for himself and for all
shareholders, is seeking to prevent a reoccurrence of this apparent abuse.
C. Post Properties fails to clearly demonstrate that Mr. Williams' Proposal is
intended to pursue a personal goal.
It is abundantly clear that Mr. Williams' Proposal is not intended, and in fact
does not, support any personal goal. Mr. Williams is not seeking to use the
Proposal as greenmail to force a resolution of any litigation or any other
dispute between himself and Post Properties. The Proposal does not on its face
and is not intended to advance any non-shareholder interest. Furthermore, the
Proposal does not contain inflammatory or embarrassing statements about Post
Properties. Mr. Williams believes that any critical statements included in the
Supporting Statement to the Proposal are truthful and are adequately supported,
both in the Proposal, the Supporting Statement and as set forth in this letter.
D. The Proposal does not benefit Mr. Williams any differently than all other
shareholders of Post Properties at large.
Because the Proposal does not seek to redress or further a personal claim or
interest, the Staff's analysis under Rule 14a-8(i)(4) requires Post Properties
to supply direct evidence that Mr. Williams is abusing the shareholder proposal
process by submitting the Proposal to obtain a benefit that is not shared by all
Post Properties shareholders. On numerous occasions, the Staff has indicated
that it would not grant no-action relief to a company requesting exclusion of a
proponent's proposal unless the company demonstrated a clear intent between the
proposal and a matter pertaining solely to the proponent and not to shareholders
generally. See Waste Management, Inc. (publicly available March 11, 2002) in
which the Staff concluded that evidence of an active campaign against the
company was insufficient to exclude the proposal; Crown Central Petroleum
Corporation (publicly available March 10, 1998), in which the proponent
successfully argued that the Staff "has generally permitted exclusion of
shareholder proposals ... only when the registrant proves such intent through
direct evidence;" Consolidated Freightways, Inc. (publicly available February 1,
1996), in which the Staff indicated that the proponent's coordination of "a
campaign by all levels of the union to get CF back on the right road" was
insufficient to demonstrate that the proposals were submitted to redress a
personal claim or grievance of the proponent's. It is important to note that the
Staff has consistently only granted relief under Rule 14a-8(i)(4) when a company
presents evidence that a proponentor an entity on whose behalf a proponent is
actingadmits that it submitted the proposal in order to pressure the company.
See Dow Jones & Company, Inc. (publicly available January 24, 1994) in which the
company successfully argued that the proponents, both union members, had
submitted their shareholder proposal in order to put pressure on the company
during contract negotiations with the union on a new collective bargaining
agreement. More importantly, the following year, the Staff declined to grant
no-action relief to Dow Jones with respect to the same proposal submitted by
different proponents, explaining, "In reaching this position, we note the
absence of factors such as the existence of contract negotiations and
documentary evidence from the union acknowledging that the proposal was intended
to enhance the union's bargaining power." Dow Jones & Company, Inc. (publicly
available February 8, 1995).
In its supporting citations, Post Properties fails to identify a no-action
letter containing underlying facts parallel Mr. Williams' reasons for submitting
the Proposal. Despite the disagreements on how best to manage Post Properties'
day-to-day business that Mr. Williams and the Board of Directors or management
of Post Properties may have had in the past, none can be linked to Mr. Williams'
Proposal to show a personal interest or grievance. The bottom line is simply
that the Proposal is not intended to further any personal interest or grievances
with Post Properties and Mr. Williams will not recognize any separate benefits
from the Proposal that will not be shared by all Post Properties shareholders.
IV. Conclusion.
For the foregoing reasons, Mr. Williams' Proposal is in full compliance with the
letter and spirit of Rule 14a-8. We believe Post Properties has failed to meet
its burden of persuading the Staff under Rule 14a-8 that Mr. Williams' Proposal
may be excluded under Rules 14a-8(i)(1), 14a-8(i)(2), 14a-8(i)(3) or
14a-8(i)(4). Therefore, Post Properties should not be permitted to omit Mr.
Williams' Proposal from its 2004 proxy materials.
Should the Staff decide that any portion of the Proposal or Supporting Statement
is not in compliance with Rule 14a-8, Mr. Williams respectfully requests the
opportunity to make any such changes to the Proposal or the Supporting Statement
that the Staff may deem necessary in order for the Proposal to be included in
Post Properties' 2004 proxy materials. Should the Staff preliminarily determine
not to recommend any enforcement action if Post Properties omits the Proposal
from its 2004 proxy materials, we respectfully request the opportunity to
discuss the Staff's determination prior to issuance of the Staff's position.
If you have any questions or require any additional information concerning this
response, please call the undersigned at (404) 527-4390. Kindly forward any
written communications to my attention at (404) 527-4198. We appreciate your
consideration of Mr. Williams' response.
Very truly yours,
/s/
Leonard A. Silverstein
McKenna Long & Aldridge LLP
(on behalf of John A. Williams)
Enclosures
cc: John A. Williams (w/enc.)
Sherry W. Cohen, Corporate Secretary, Post Properties, Inc. (w/enc.)
[INQUIRY LETTER]
March 5, 2004
VIA HAND DELIVERY
Grace K. Lee, Esq.
Securities and Exchange Commission
Office of the Chief Counsel
Division of Corporation Finance
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549
Re: Post Properties, Inc. - Filing pursuant to Rule 14a-8(j) Regarding Exclusion
of Shareholder Proposal from Proxy Materials
Dear Ms. Lee:
Post Properties, Inc., a Georgia corporation (the "Company"), is submitting this
letter in response to the points raised in the letter, dated February 19, 2004
(the "Proponent's Letter"), from Mr. Leonard A. Silverstein of McKenna, Long &
Aldridge LLP, counsel to Mr. John A. Williams, relating to the shareholder
proposal (the "Shareholder Proposal") and supporting statement (the "Supporting
Statement," and together with the Shareholder Proposal, the "Proposal")
submitted by Mr. Williams on December 5, 2003 for inclusion in the Company's
proxy materials for its 2004 Annual Meeting of Shareholders (the "Proxy
Materials"). For the convenience of the Staff, the Company has attached the
letter dated January 22, 2004 (the "Original Request Letter"), requesting that
the Staff confirm that it will not recommend any enforcement action against the
Company based on the omission of the Proposal from the Proxy Materials.
The Proposal seeks to have the Company's shareholders amend the Company's Bylaws
(the "Bylaws") to require the Board to obtain shareholder approval for any form
of director compensation, other than reimbursements for reasonable expenses
incurred by directors in attending Board and committee meetings. The Company
continues to believe that the Proposal may properly be omitted from the Proxy
Materials pursuant to Rules 14a-8(i)(1), 14a-8(i)(2), 14a-8(i)(3) and
14a-8(i)(4) promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
A. Rule 14a-8(i)(1) and Rule 14a-8(i)(2)The Proposal is an Improper Subject for
Shareholders under Georgia Corporate Law and Would, if Implemented, Cause the
Company to Violate Georgia Corporate Law.
The Proponent's Letter asserts that the "ultimate authority in Post Properties
is and remains with its shareholders, and the shareholders have specifically
reserved to themselves in the Bylaws of Post Properties the power to amend those
Bylaws." The Company believes this is a summary, simplistic and inaccurate
reading of the relative powers afforded to a Georgia corporation's board of
directors and shareholders under Georgia law. The Company does not dispute the
fact that, pursuant to Article VII, Section 1 of its Bylaws (as amended and
restated on November 5, 2003, the "Bylaws"), the shareholders of the Company
generally have the power to amend such Bylaws. The Company believes that it is
the subject matter of the proposed Bylaw amendment set forth in the Proposal
which makes the Proposal improper as a matter of Georgia law. Significantly, the
Company's view is supported by an unqualified legal opinion of Alston & Bird
LLP, a law firm expert in matters of Georgia law. The Company notes that, as of
the date of this letter, Mr. Williams' counsel has not provided a legal opinion
in support of the assertions or conclusions advanced in the Proponent's Letter
concerning the rule of law in the state of Georgia. Further, the Company will be
filing a letter from Alston & Bird LLP that confirms its prior legal opinion in
support of the Company's position and rejects the conclusions contained in the
Proponent's Letter.
As indicated in the Original Request Letter, Section 14-2-801(b) of the Georgia
Business Corporation Code (the "GBCC") sets forth the general rule that all
corporate powers shall be exercised by or under the authority of, and the
business and affairs of the corporation managed under the discretion of, its
board of directors. Limitations on this power may only be set forth either in
(i) the articles of incorporation, (ii) rights, options or warrants permitted by
the GBCC or (iii) an agreement among the corporation's shareholders meeting the
requirements of Section 14-2-732 of the GBCC. In 2000, the GBCC was amended to
eliminate a reference to "bylaws approved by the shareholders" as a permissible
manner by which the board's corporate powers and authority may be limited. As
such, it is clear on the face of Section 14-2-801(b) that shareholders may not
limit the authority of the board of directors through a bylaw amendment.
As the Proponent's Letter indicates, Section 14-2-811 of the GBCC provides that,
unless the articles of incorporation or bylaws provide otherwise, a
corporation's board of directors may fix the compensation of directors. The
Company's Articles of Incorporation and Bylaws currently contain no provision
addressing the compensation of the Company's directors. These facts are
uncontroverted in the Proponent's Letter. The next proper analysis (which is an
analysis that goes unaddressed in the Proponent's Letter) is whether this
proposed Bylaw amendment is proper under Georgia law, or whether it
impermissibly limits the authority of the board of directors.
In Invacare Corporation v. Healthdyne Technologies, Inc., 968 F. Supp. 1578
(1997), the U.S. District Court for the Northern District of Georgia
unequivocally held that the shareholders of a publicly-traded Georgia
corporation may not restrict the power or authority of the board of directors by
amending the corporation's bylaws. In Invacare, plaintiff proposed a bylaw
amendment, which would have effectively required defendant's board of directors
to redeem a shareholder rights plan then in effect. The rights plan contained a
"continuing directors" (or "dead hand") provision, which had provided that any
redemption or amendment of the rights plan be approved by one or more directors
who were members of the board of directors prior to the adoption of the rights
plan, or who were subsequently elected to the board with the recommendation and
approval of the other continuing directors. As plaintiff had announced its
intention to nominate a completely new slate of directors at defendant's next
annual shareholders' meeting, it proposed this bylaw amendment, to be approved
by the shareholders, to override the "continuing director" provision. The Court
stated that the proposed bylaw was "an attempt to limit the board's discretion
to set the terms and conditions of the shareholders rights plan and ultimately
runs afoul of the board fiduciary obligations to the corporation." Id.
The Invacare case was decided in 1997, at a time when Section 14-2-801(b) of the
GBCC expressly permitted limitations on the board's authority to be set forth in
bylaws approved by the corporation's shareholders. Against this backdrop, the
Invacare court still reasoned that proposed bylaw amendment at issue was "an
attempt to control the board of directors" which "directly interefere[d] with
the board's authority...." Id. The Proposal, by requiring the Company's
shareholders approve director compensation at each annual meeting, purports to
bind the Company's board of directors to a stated course of action. The Invacare
court held that such a limitation on the board's authority ran afoul of Georgia
law.
Further, in response to the Invacare case, the Georgia legislature (i) amended
the provisions of Section 14-2-801 to make bylaw amendments impermissible as a
mechanism to limit the authority of the board of directors and (ii) adopted
Section 14-2-732 relating to shareholders agreements, providing in a new Section
14-2-732(d) that such shareholders agreements cease to be effective when the
corporation becomes publicly held. As the Official Comment to Section 14-2-732
states, this provision "essentially adopts" the interpretation of the Invacare
court with respect to such matter.
The Proponent's Letter states that shareholders agreements contemplated by
Section 14-2-732 of the GBCC "may not be utilized by a corporation such as Post
Properties, whose shares are listed on a national securities exchange." Again,
the Company does not refute this premise and in fact, advanced this argument in
the Original Request Letter. In the next sentence of the Proponent's Letter,
however, the conclusion is somehow reached that the provisions of Sections
14-2-732 and 14-2-1020(d) of the GBCC have no application to the Company. This
argument is advanced later in Proponent's Letter, with the following summary
statement: "Section 14-2-1020(d) of the GBCC applies only to closely held
corporations which are eligible to adopt shareholders' agreements under Section
14-2-732 of the GBCC." This is incorrect. The Proponent's Letter provides no
statutory basis for such conclusion, nor any case law citation supporting this
assertion. In fact, the Invacare court expressly validated the applicability of
these sections of the GBCC to public companies, as the court's construing such
sections together was essential to its holding. Subsequent to the Invacare
decision, when the Georgia legislature amended Section 14-2-732 to "essentially
adopt" the interpretation of the Invacare court, the Georgia legislature could
have amended either Section 14-2-732 or 14-2-1020 to eliminate their
applicability to public companies, but it did not. Once again, the Company
reiterates that Mr. Williams' counsel has failed to provide a legal opinion in
support of these, or any, assertions or conclusions advanced in the Proponent's
Letter.
Similarly, the Proponent's Letter states that "Georgia corporate law has long
struggled" with the area of director compensation. Once again, there is no basis
for this statement and the attempt to tie the Company's policies concerning the
compensation of directors to directors' conflicting interest transactions is
curious and improper. This line of reasoning does not pass muster for a number
of reasons. First, the Company does not believe that any state law takes the
view that director compensation is a conflicting interest transaction. If one
followed this logic, then all public companies would put director compensation
issues to a shareholder vote. Second, no publicly traded company, to the
Company's knowledge, submits the issue of director compensation to its
shareholders for approval. The mechanism most often used to determine director
compensation is an independent committee of the Board of Directors.
The Proponent's Letter next argues that certain provisions of the GBCC would
become immediately "moot and superfluous" given the Company's line of reasoning
advanced in the Original Request Letter. The Company fails to see how this would
be so. One of the sections of the GBCC cited in the Proponent's Letter, Section
14-2-810(a), states that "[u]nless the articles of incorporation or a bylaw
approved by the shareholders provides otherwise, ... [t]he shareholders may fill
the vacancy; [or] [t]he board of directors may fill the vacancy...." (emphasis
added). Clearly, the GBCC has contemplated that shareholders may permissibly
adopt a bylaw addressing director vacancies. This forms a key distinction from
Section 14-2-811 of the GBCC, which simply states that "[u]nless the articles of
incorporation or bylaws provides otherwise, the board of directors may fix the
compensation of directors." Section 14-2-811, importantly, contains no specific
reference to shareholder-adopted bylaws. Similarly, the other GBCC sections
cited in this section of the Proponent's Letter, Section 14-2-820 and Section
14-2-825, contain no specific reference to shareholder-adopted bylaws.
In Invacare, the court found the proposed bylaw to "directly interfere[] with
the board's authority ... to set the terms and conditions of the rights
agreement," adding that the proposed bylaw amendment was "inimical to the
corporate structure contemplated by the [GBCC], which separates the rights and
duties of directors from those of the shareholders." One of the rights that
shareholders of a Georgia corporation clearly possess is the right to nominate,
elect and remove members of the board of directors. Section 14-2-810(a), cited
in the Proponent's Letter and directly relating to matters involving the
composition of the board of directors, is clearly within this purview. As
indicated in the Original Request Letter, Mr. Williams sought to avail himself
of this right in the Spring of 2003, during the proxy contest in connection with
the Company's 2003 Annual Meeting of Shareholders. That result not having gone
to Mr. Williams' liking, he is attempting to circumvent that method by way of
the Proposal, which, under Georgia law, impermissibly crosses that line which
separates the rights and duties of directors from those of shareholders.
In conclusion, the Proponent's Letter, while crafted in lofty tones referencing
"shareholder democracy" and reciting an unsupportable parade of horribles that
would ensue as a result of the Company's assertions, has manufactured an
argument with specious and wholly incorrect reasoning behind it. In contrast, in
accordance with Rule 14a-8(j)(2) of the Exchange Act, the Company has provided
the Staff with an unqualified legal opinion from expert Georgia counsel as to
the improper nature of the Proposal under Georgia law. If the statements and
assertions set forth in the Proponent's Letter are intended to qualify as a
"legal opinion," the Company notes that there is no express representation as to
this fact anywhere in the Proponent's Letter. The Company also notes the
Division of Corporation Finance: Staff Legal Bulletin No. 14, released on July
13, 2001 ("SLB 14"). Section G.5. of SLB 14 states that "Shareholders who wish
to contest a company's reliance on a legal opinion as to matters of state or
foreign law should, but are not required to, submit an opinion of counsel
supporting their position."
Accordingly, because the Proposal would limit the authority of the Company's
Board of Directors in a manner not permitted by the GBCC, the Company continues
to believe that the Proposal may be properly excluded under Rule 14a-8(i)(1) and
Rule 14a-8(i)(2).
B. Rule 14a-8(i)(3)The Proposal Contains False and Misleading Statements in
Violation of Rule 14a-9 of the Exchange Act.
1. Disclosure of Mr. Goddard's Compensation Package
The Proponent's Letter contains many assertions with respect to Mr. Williams'
belief or understanding that the Company violated the federal securities laws in
the course of its public disclosure of Mr. Goddard's compensation package. While
it is possible he may "believe" it or "understand" it, there has been no
violation. A thorough chronology of events will show this. This chronology, and
subsequent discussion, will establish that the Company has fully complied with
all disclosure obligations under the federal securities laws.
On May 6, 2003, the Company held its earnings call for its first fiscal
quarter, on which call the Company disclosed that Mr. Goddard, as a director of
the Company, was receiving $20,000 in compensation for his services.
During June and July 2003, the members of the Compensation Committee of the
Company's Board of Directors (the "Committee") commenced discussions as to
whether, in light of the significant time commitment that Mr. Goddard had made
and was expected to make as a non-executive Chairman, a different compensation
package was appropriate.
On July 17, 2003, the Committee reviewed the work of a third-party consultant
hired by the Committee to assist in Mr. Goddard's compensation matter, discussed
Mr. Goddard's role with the Company and discussed appropriate compensation for
Mr. Goddard. The Committee approved both the stock option grant (the "Option
Grant") and the restricted stock grant (the "Stock Grant") to be effective as of
July 17, 2003, subject to terms and conditions to be agreed upon by the
President of the Company, David P. Stockert, and Mr. Goddard. At this meeting,
the Committee also approved the $100,000 annual retainer payable to Mr. Goddard,
retroactive to February 20, 2003, the date on which Mr. Goddard became Chairman
of the Board. However, as of July 17, 2003, there was no agreement, arrangement
or understanding with Mr. Goddard - the compensation package was expressly
subject to agreement between Mr. Stockert and Mr. Goddard.
On July 18, 2003, the Company entered into an Employment Agreement with Mr.
Stockert (the "Stockert Employment Agreement").
On August 1, 2003, the Company entered into Amendment Number One to an
Employment Agreement with Mr. Thomas Senkbeil, the Company's Executive Vice
President and Chief Investment Officer (the "Senkbeil Amendment").
On August 14, 2003, the Company filed its Quarterly Report on Form 10-Q for
its second fiscal quarter ended June 30, 2003 (the "Second Quarter 10-Q"). The
Company filed, among other things, both the Stockert Employment Agreement and
the Senkbeil Amendment as exhibits to the Second Quarter 10-Q, which were both
executed and binding agreements at this point.
On August 27, 2003, Mr. Goddard and Mr. Stockert agreed on the compensation
package conditionally approved by the Committee on July 17, 2003.
On August 29, 2003, Mr. Goddard filed a Form 4 with the Commission, which,
pursuant to Commission rules, was properly filed within two business days
"following the day on which a transaction resulting in a change in beneficial
ownership has been executed."
On November 4, 2003, the Company issued its earnings release for its third
fiscal quarter, and in that release the Company disclosed the terms of Mr.
Goddard's compensation package.
On November 14, 2003, the Company filed its Quarterly Report on Form 10-Q for
its third fiscal quarter ended September 30, 2003 (the "Third Quarter 10-Q"),
filing, among other things, the Stock Grant and the Option Grant as exhibits
thereto.
The Company intends to file its definitive Proxy Materials with the Commission
in early April 2004.
The Proponent's Letter states that the July 17, 2003 action of the Committee in
approving the Option Grant and Stock Grant was "conclusive and binding" by
citing Sections 7.1 and 9.1 of the Company's 2003 Incentive Stock Plan (the
"Stock Plan"). While Sections 7.1 and 9.1 of the Stock Plan grant the Committee
the absolute discretion to make grants in accordance with its terms, by the
clear text of its July 17, 2003 resolution, the Committee approved the Option
Grant and Stock Grant "subject to terms and conditions to be agreed upon" by Mr.
Stockert and Mr. Goddard. Thus, to imply that July 17, 2003 was the proper
execution date for these agreements is incorrect and misleading. In fact, it was
not until August 27, 2003 that Mr. Goddard and Mr. Stockert agreed on the terms
of the package. That the Committee established the exercise price of the Option
Grant on July 17, 2003 is not relevant as to the date these agreements became
binding on each of the Company and Mr. Goddard. Also, the retroactivity of the
cash portion of the compensation package to February 20, 2003 is irrelevant;
such retroactivity does not alter the fact that the agreement was not assented
to until the Company's third fiscal quarter in 2003.
The Proponent's Letter also asserts that, notwithstanding the assent of the
parties to Mr. Goddard's compensation package subsequent to the filing of the
Second Quarter 10-Q, there was something improper with the Company's filing of
the Stock Grant and Option Grant with the Third Quarter 10-Q.
As cited in the Proponent's Letter, Instruction 2 to Item 601(b)(10) of
Regulation S-K states that:
"If a material contract is executed or becomes effective during the reporting
period reflected by a Form 10-Q or Form 10-K, it shall be filed as an exhibit to
the Form 10-Q or Form 10-K filed for the corresponding period ... With respect
to quarterly reports on Form 10-Q, only those contracts executed or becoming
effective during the most recent period reflected in the report shall be filed."
Accordingly, even if July 17, 2003 was deemed the proper execution date for the
Stock Grant and Option Grant, these documents would not be required to be filed
as exhibits until the Third Quarter 10-Q. That the Stockert Employment Agreement
and the Senkbeil Amendment were filed with the Second Quarter 10-Q, even though
they were not required to be filed until the Third Quarter 10-Q, is, again,
irrelevant to the discussion. Had the Stock Grant and Option Grants been
assented to prior to the filing of the Second Quarter 10-Q, the Company would
have likely filed each document as an exhibit to the Second Quarter 10-Q, but
there would have been no requirement to do so.
The Proponent's Letter also emphasizes that Mr. Williams "believes" that the
"$100,000 cash payment, constituting almost 23% of the total value of Mr.
Goddard's compensation package ... are material terms that Post Properties has
failed to properly disclose under the federal securities laws." First, as the
Company has stated, Mr. Williams' mere "belief" or "understanding" that a
securities law violation has occurred is not relevant to the analysis of whether
such a violation has occurred and, more importantly, highlights the fact that he
does not advance a sufficient factual basis to substantiate or establish a basis
for the statements made.
Second, as to the merits of this erroneous belief, the Company's management did
not deem the cash payment of $100,000 to be a material event that required
immediate disclosure. Form 10-Q and Item 601(b)(10) of Regulation S-K require a
registrant to file, as exhibits thereto, any "management contract or
compensatory plan" between the registrant and its directors. As such, the
Company filed the Stock Grant and Option Grant with the Third Quarter 10-Q.
However, neither Form 8-K nor Form 10-Q contains a line item requirement to
disclose cash compensation payable to a public company's directors. While this
information may have been "material" to Mr. Williams, the Company did not
believe and does not believe that the information would be material to the
investment decision of a reasonable investor in the Company's securities.
Accordingly, the Company did not immediately disclose this cash compensation.
Further, notwithstanding Mr. Williams' "a |
