Company Name: CET Services, Inc.
Public Availability Date: March 30, 2006
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
January 26, 2006
Via Federal Express
Office of the Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Re: CET Services, Inc.
Shareholder Proposal of Michael P. Murphy
Securities Exchange Act of 1934 - Rule 14a-8
Ladies and Gentlemen:
We are securities counsel to CET Services, Inc. (the "Company"). This letter is
to inform you that the Company intends to omit from its proxy statement and form
of proxy for its 2006 Annual Meeting of Stockholders (the "2006 Proxy
Materials") a shareholder proposal (the "Proposal") consisting of five recitals
and a resolution received from Michael P. Murphy, a shareholder (the
"Proponent"). A copy of the Proposal is attached to this letter as Attachment A.
The Proposal states:
EXECUTIVE OFFICERS shall receive wages of no more than $1,000.00 per week and
the same fringe benefits that are offered to all employees.
No other perks including, but not limited to, cash bonuses, autos, golf club
memberships, yacht club membership, stock options or any other extra
remuneration until the company is profitable for six consecutive years.
The Company hereby respectfully requests that the staff of the Division of
Corporation Finance concur in its opinion that the Proposal may be excluded from
the Company's 2006 Proxy Materials on the bases set forth below.
Pursuant to Rule 14a-8(j), enclosed are six (6) copies of this letter and the
attachment. Also in accordance with Rule 14a-8(j), a copy of this letter and the
attachment is being mailed on this date to the Proponent informing him of the
Company's intention to omit the Proposal from the 2006 Proxy Materials. The
Company expects to mail its definitive 2006 Proxy Materials on or about April
28, 2006. Accordingly, pursuant to Rule 14a-8(j), this letter is being filed
with the Commission no later than 80 calendar days before the Company files its
definitive 2006 Proxy Materials with the Commission.
The Company believes the Proposal may properly be excluded from the 2006 Proxy
Materials pursuant to the following provisions:
1. The Proposal may be excluded under Rule 14a-8(i)(1) because the Proposal is
not a proper subject for action by shareholders under California law.
Rule 14a-8(i)(1) allows a company to omit from its proxy materials a proposal
that "is not a proper subject for action by shareholders under the laws of the
jurisdiction of the company's organization." It is our opinion that California
corporation law, which applies to the Company, provides that the business and
affairs of a corporation shall be managed and all corporate powers shall be
exercised by or under the direction of its board of directors. If given effect,
the Proposal would substantially impair the Company's Board of Directors ability
to exercise its responsibilities with respect to the management of the Company,
which includes determining executive compensation as they determine to be in the
best interests of the Company. In our opinion, the Proposal is an attempt to
take away powers that, under California law, are to be held by the Board.
It should be noted that the language of the Proposal makes it clear that it
would be binding on the Company. In this regard, the Note to Rule 14a-8(i)(1)
would not apply to the Proposal in that it is not in the form of a
recommendation or request to the Board of Directors.
2. The Proposal may be excluded under Rules 14a-8(i)(2) and 14a-8(i)(6) because
the Proposal would violate the Company's listing agreement with the American
Stock Exchange.
Rule 14a-8(i)(2) allows a company to omit from its proxy materials a proposal
that "would, if implemented, cause the company to violate any state, federal, or
foreign law to which it is subject." The Company's common stock is currently
listed on the American Stock Exchange (the "Amex"). In order for its common
stock to continue to be listed on the Amex, the Company is required to comply
with a number of Amex rules including corporate governance rules relating to
executive compensation. In particular, Section 805(a) of the Amex Company Guide
states:
(a) Compensation of the chief executive officer of a listed company must be
determined, or recommended to the Board for determination, either by a
Compensation Committee comprised of independent directors or by a majority of
the independent directors on its Board of Directors. The chief executive officer
may not be present during voting or deliberations. Compensation for all other
officers must be determined, or recommended to the Board for determination,
either by such Compensation Committee or a majority of the independent directors
on the company's Board of Directors.
The Proposal would prevent the Company's Compensation Committee or Board of
Directors from determining the compensation of the executive officers of the
Company. As a result, the Proposal would cause the Company to breach the terms
of its listing agreement with the Amex, which could result in the Company's
common stock being delisting from the Amex.
Under Rule 14a-8(i)(6), a company may also exclude a proposal "if the company
would lack the power or authority to implement the proposal." The Division has
recognized that proposals that would, if implemented, cause a company to breach
existing contracts may be omitted from a company's proxy statement under Rule
14a-8(i)(6). As noted above, if implemented, the Proposal would cause the
Company to breach its listing agreement with the Amex. The directors do not have
the power or authority to undertake unlawful actions. Because the Company would
lack the power or authority to lawfully implement the Proposal, the Proposal is
properly excludable in its entirety under Rule 14a-8(i)(6) as well.
For the reasons set forth in this letter, the Company respectfully requests that
the staff concur in its opinion that the Proposal may be excluded from the 2006
Proxy Materials. We would be happy to provide you with any additional
information and answer any questions that you may have regarding this matter.
Should you disagree with the conclusions set forth in this letter, we
respectfully request the opportunity to confer with you prior to the
determination of the staff's final position. Please do not hesitate to call the
undersigned at (303) 893-2300 if you should need further assistance in this
matter.
Sincerely,
KRYS BOYLE, P.C.
By /s/
James P. Beck
JPB/va
Attachment
cc: CET Services, Inc.
Michael P. Murphy
[INQUIRY LETTER]
December 12, 2005
CET Services Inc.
7032 South Revere Parkway
Englewood, Colorado 80112
To Whom It May Concern:
I would like to propose that the following motion be included in the 2006 proxy
materials for the 2006 annual shareholders meeting.
SHAREHOLDER MEETING
EXECUTIVE OFFICERS shall receive wages of no more than $1,000.00 per week and
the same fringe benefits that are offered to all employees.
No other perks including, but not limited to, cash bonuses, autos, golf club
memberships, yacht club membership, stock, options or any other extra
remuneration until the company is profitable for six consecutive years.
As a self employed business owner, and shareholder, I realize good profitable
business management has a direct affect on my financial rewards.
Sincerely,
/s/
Michael P. Murphy
Shareholder
[INQUIRY LETTER]
February 21, 2006
Office of the Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Re: CET Services, Inc.
Request for Inclusion in 2006 proxy material
Ladies and Gentlemen:
The enclosed information relative to my dealings with CET Services, Inc. and
erroneous material from their counsel, Krys Boyle, P.C. is provided for your
files.
I apologize for the inconvenience caused you by this matter. Hopefully this will
be the end of it.
Sincerely,
/s/
Michael P. Murphy
Shareholder
CET Services, Inc.
Enclosures This graphic not available in DOS This graphic not available in DOS
[INQUIRY LETTER]
March 10, 2006
Office of the Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Re: CET Services, Inc.
Request for Inclusion in 2006 proxy material
Ladies and Gentlemen:
I am writing once again regarding CET Services, Inc., requesting your review of
the following items:
1. Pursuant to Rule 14a-8(j), enclosed are six (6) copies of this letter and the
attachments.
2. Due to the error by Krys Boyle, P.C. (Exhibit A), their failure to timely
notify me of their intent to omit the Proposal from the 2006 Proxy Materials has
severely limited the time for me to correct the defect in my original proposal.
3. The Board of Directors of CET Services, Inc. has the fiduciary
responsibility, bestowed by law, to amend any contracts with any executives to
benefit the best interest of the Company and to conduct the business of this
company in a manner that best benefits the shareholders.
4. I am therefore, submitting my amended proposal (Exhibit B) with this letter.
I would welcome the opportunity to discuss any questions you may have prior to
the determination of the final position.
Sincerely,
/s/
Michael P. Murphy
Shareholder
CET Services, Inc.
Cc: CET Services, Inc.
Krys Boyle, P.C.
Enclosures
[INQUIRY LETTER]
March 10, 2006
CET Services Inc.
7032 South Revere Parkway
Englewood, Colorado 80112
To Whom It May Concern:
I would like to propose that the following motion be included in the 2006 proxy
materials for the 2006 annual shareholders meeting.
SHAREHOLDER MEETING
RESOLVED: that stockholders of CET Services, Inc. urge the Compensation
Committee of the Board of Directors (the "Committee") to adopt a policy
requiring mandatory review of all executive compensation, and that until such
time as the company is profitable for six (6) consecutive years, such
compensation shall be limited to no more than $1,000.00 per week with the same
fringe benefits that are offered to all employees. No other perks including, but
not limited to, cash bonuses, autos, memberships, stock, options or any other
extra remuneration shall be given executive personnel.
SUPPORTING STATEMENT
CET Services, Inc. has continuing operations and/or net losses for three out of
its four most recent fiscal years. Additionally on September 20,2005, CET
Services, Inc. received a written notice from the American Stock Exchange
advising that the Company was not in compliance with the AMEX's listing
requirements (contained in Section 1003(s) (ii) of the AMEX Company Guide)
because its has a shareholders equity of less than $4,000,000.
Despite the lack of profits and AMEX's notice of non-compliance, CET Services
Inc. board continues to reward leaders that have consistently failed to meet the
shareholders minimum expectations.
Since so many gross corporate abuses have come to light recently shareholders
are taking a closer look at executive compensation practices in an attempt to
avoid rewarding bad management and poor performance.
Hoping to improve the financial transparency and accountability to shareholders,
CET Services, Inc. should reform its compensation practices and policies.
For these reasons, please vote for this resolution.
Sincerely,
/s/
Michael P. Murphy
Shareholder
[STAFF REPLY LETTER]
March 30, 2006
Response of the Office of Chief Counsel Division of Corporation Finance
Re: CET Services, Inc.
Incoming letter dated January 26, 2006
The proposal limits the wages and fringe benefits of executive officers and
eliminates perquisites and other remuneration until the company is profitable
for six consecutive years.
We are unable to conclude that CET Services has met its burden of establishing
that CET Services may exclude the proposal under rule 14a-8(i)(1) as an improper
subject for shareholder action under applicable state law. Accordingly, we do
not believe that CET Services may omit the proposal from its proxy materials in
reliance on rule 14a-8(i)(1).
We are unable to concur in your view that CET Services may exclude the proposal
under rule 14a-8(i)(2). Accordingly, we do not believe that CET Services may
omit the proposal from its proxy materials in reliance on rule 14a-8(i)(2).
We are unable to concur in your view that CET Services may exclude the proposal
under rule 14a-8(i)(6). Accordingly, we do not believe that CET Services may
omit the proposal from its proxy materials in reliance on rule 14a-8(i)(6).
Sincerely,
/s/
Greg Belliston
Attorney-Adviser
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