Company Name: Electronic Data Systems Corp.
Public Availability Date: January 26, 2006
Document Sections:
INQUIRY LETTER
APPENDIX 1
APPENDIX 2
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
November 30, 2005
Securities and Exchange Commission
Division of Corporation Finance
Office of the Chief Counsel
450 Fifth Street, N.W.
Washington D.C. 20549
Re: Electronic Data Systems Corporation Shareholder Proposal Submitted by John
Chevedden re Rights Plan
Ladies and Gentlemen:
We are acting as special counsel to Electronic Data Systems Corporation ("EDS")
in connection with the matter set forth in this letter. We submit this letter on
behalf of EDS pursuant to Rule 14a-8(j) under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
On October 26, 2005, EDS received a proposed stockholder resolution (the "2006
Rights Plan Proposal") from Mr. John Chevedden, acting on behalf of Mr. Nick
Rossi (the "Proponent"), for inclusion in the proxy materials to be distributed
in connection with EDS's 2006 Annual Meeting of Stockholders ("2006 Proxy
Materials").
The Proposal requests as follows:
RESOLVED, Shareholders request our Board of Directors to redeem any future or
current poison pill, unless such poison pill is approved by the affirmative vote
of holders of a majority of shares present and voting as a separate ballot item,
to be held as soon as may be practicable. If practicable, the substance of this
proposal should be included in our charter or bylaws.
A copy of the Proposal and the accompanying supporting statement are attached
hereto as Exhibit A.
EDS does not currently have a Shareholder Rights Plan ("Rights Plan"). On
February 2, 2005, the EDS Board of Directors revised its shareholder Rights Plan
policy regarding the adoption of any future shareholder Rights Plan by EDS (the
"Policy"). As revised, the Policy provides that:
The EDS Board will obtain shareholder approval prior to adopting a shareholder
Rights Plan, unless the EDS Board, in the exercise of its fiduciary duties,
determines that, under the circumstances then existing, it would be in the best
interest of EDS and its shareholders to adopt a Rights Plan without prior
shareholder approval. If a Rights Plan is adopted by the EDS Board without prior
shareholder approval, however, the Plan must provide that it shall expire within
one year of adoption unless ratified by shareholders.
We note as a threshold matter that the Proponent's own supporting statement
inaccurately describes EDS's Rights Plan policy and omits a key element of that
Policy. The Proponent's statement does not acknowledge the prong of the EDS
Rights Plan Policy that provides that if a Rights Plan is adopted by the EDS
Board without prior shareholder approval, the Plan must provide that it will
expire within one year of adoption unless ratified by shareholders. As discussed
below, this omitted provision has been a key factor in the Staff's prior No
Action position's with respect to Rights Plan proposals, including in the last
proxy season, with respect to a Rights Plan proposal made by the Proponent to
EDS.
We respectfully request that the staff (the "Staff") of the Securities and
Exchange Commission (the "Commission") confirm that it will not recommend any
enforcement action if, in reliance on Rule 14a-8(i)(10), EDS excludes the
Proposal from the 2006 Proxy Materials.
Background
The 2006 Rights Plan Proposal is very similar to a proposal submitted by the
same Proponent in the last proxy season that was the subject of a No Action
Letter from the Staff. As further described below, last year, the Staff
confirmed that EDS could exclude the prior Rights Plan Proposal from this same
Proponent from the EDS proxy materials with respect to the 2005 Annual Meeting
of Shareholders.
Description of 2005 Rights Plan Proposals
Last year, the Proponent submitted the following Rights Plan Proposal:
RESOLVED: Shareholders request that our Board adopt a policy that any future
poison pill be redeemed or put to a shareholder vote within 4-months after it is
adopted by the Board and to formalize this as a corporate governance policy or
bylaw consistent with the governing documents of our company.
Original EDS December 2004 Policy
At the time of EDS's initial submission of a request for No Action relief from
the Staff, the following was the policy of the EDS Board of Directors with
respect to Rights Plans as adopted in December 2004 (the "Original Policy").
The Board will only adopt a Rights Plan if either (1) EDS' stockholders have
approved adoption of the Rights Plan or (2) the Board, including a majority of
the independent members of the Board, in the exercise of its fiduciary
responsibilities makes a determination that, under the circumstances existing at
the time, it is in the best interests of EDS' stockholders to adopt a Rights
Plan without seeking stockholder approval.
Revised EDS Rights Plan Policy
On February 2, 2005, after the receipt of the response of the Staff to the
Original No Action Letter, the EDS Board of Directors revised its policy
regarding the adoption of any future shareholder Rights Plan to the version set
forth above. This revised Rights Plan Policy differed from the prior Rights Plan
Policy principally by adding the requirement that if a Rights Plan is adopted by
the EDS Board without prior shareholder approval, the Plan must provide that it
will expire within one year of adoption unless ratified by shareholders.
EDS requested that in light of its modified policy, the Staff reconsider its
initial No Action position. The Staff did grant No Action relief on the grounds
that the Proposal was substantially implemented. See Electronic Data Systems
Corp. (March 2, 2005).
Analysis
The current proposal from the Proponent differs from the proposal last year with
respect to which No Action relief was granted only in that it requests this year
that a shareholder meeting be held "as soon as may be practicable" whereas last
year it requested that a shareholder meeting be held within four months. We
respectfully submit that this difference should not change the Staff's
conclusion. Indeed, as the Staff can see in the Proponent's attached supporting
statement, the Proponent seems to equate the "as soon as may be practicable"
requirement to a four-month requirement. The supporting statement provides:
"Since a vote would be as soon as may be practicable it accordingly could take
place within 4-months of the adoption of a poison pill by our Board." Indeed, as
a practical matter, given the need to prepare, fill, clear and mail proxy
materials, it is often not practicable to call a shareholders' meeting on a
given topic within less than four months. EDS's Rights Plan Policy remains the
same as it was when No Action relief was granted. The 2006 Rights Plan Proposal
is, as indicated above, without substantive difference from the prior proposal
and EDS still does not have a Rights Plan.
In our view, an analysis of prior No Action letters supports the conclusion that
the change in the form of the Rights Plan Proposal should not alter the Staff's
conclusion.
Rule 14a-8(i)(10) allows for the exclusion of proposals "if the company has
already substantially implemented the proposal." The Staff has consistently
taken the position that shareholder proposals are moot under Rule 14a-8(i)(10)
when the procedures or policies addressed in the proposal have been
substantially implemented by the company. In order to make the determination
that a procedure or policy has been substantially implemented, the Commission
has rejected a "formulistic" application and does not require that a company
implement every aspect of the proposal in question. See SEC Release No. 34-20091
(August 16, 1983). Rather, a company need only have appropriately addressed the
concerns underlying such a proposal. See Texaco, Inc. (March 28, 1991)
(company's environmental policies and practices rendered the proposal moot
despite some differences between the company's policies and practices and the
specific request of the proposal because the company's policy "compared
favorably" with the proposal). It is well established in Staff no-action letters
that a company need not be compliant with every detail of a proposal to exclude
it under Rule 14a-8(i)(10). Differences between a company's actions and the
proposal are permitted so long as a company's actions satisfactorily address the
underlying concerns of the proposal. See, e.g., Masco Corporation (Mar. 29,
1999) (permitting the company to exclude a proposal seeking the independence of
directors on "substantially implemented" grounds after the company adopted a
version of the proposal that included some slight modifications and a
clarification as to one of the terms). Proposals have been considered
substantially implemented where the companies had implemented part, but not all,
of a multi-pronged proposal. See, e.g., Columbia/HCA Healthcare Corp. (Feb. 18,
1998) (permitting the company to exclude a proposal on "substantially
implemented" grounds after it took steps to implement, partly or fully, three of
the four actions requested by the proposal).
The Staff has consistently taken a "no-action" position as to the exclusion,
based on Rule 14a-8(1)(10), of proposals relating to shareholder approval of
Rights Plans that differ in substance from a shareholder approval policy already
adopted by the company only with regard to the time period in which a
shareholder Rights Plan must be submitted to the shareholders for a vote. See,
for example, the No Action Letter issued to EDS, Electronic Data Systems Corp.
(March 2, 2005) (policy stating that any Rights Plan which is adopted without
shareholder approval "shall expire within one year of adoption unless ratified
by shareholders" substantially implements a proposal that would have required
the plan to be submitted to a shareholder vote within four months). That is the
case here where the Policy only differs from the Rights Plan Proposal in that it
allows for a one year period for redemption or submission for a vote rather than
"as soon as may be practicable."
This was clearly confirmed in Kimberly-Clark Corp. (Dec. 22, 2004), in which the
Staff did not object to the company's exclusion under Rule 14a-8(i)(10) of a
shareholder proposal, submitted by Mr. Rossi, (the Proponent here), that sought
to require that any Rights Plan adopted by the board be submitted to a
shareholder vote "as soon as may be practicable." The Kimberly-Clark shareholder
Rights Plan policy at issue, which is substantially similar to EDS's Policy,
provided that any Rights Plan adopted without shareholder approval "shall expire
unless ratified by stockholders within one year of adoption." Although in
granting No Action relief the Staff noted that the company had redeemed its
Rights Plan, we note that EDS has similarly redeemed its Rights Plan. See also
Lear Corp. (January 10, 2005) (policy stating that, "subject to the Board's
continuing fiduciary duties, which may dictate otherwise," any future Rights
Plan would be submitted to shareholder vote substantially implemented
shareholder proposal that would have required any poison pill to be submitted to
a shareholder vote "as soon as may be practicable"). EDS similarly would like to
omit the Proposal and its supporting text because it is excludable under Rule
14a-8(i)(10), as EDS has already substantially implemented the Proposal.
Under the Policy, the EDS Board would, as a general rule, obtain shareholder
approval prior to adopting a Rights Plan. If, however, the EDS Board, in the
exercise of its fiduciary duties, determines in a particular situation that it
is in the best interest of EDS and its shareholders to adopt a Rights Plan
before shareholder approval, it could do so. In that case, however, the Plan
must be ratified within one year by the shareholders or expire within one year
of its adoption by the EDS Board.
Thus, the EDS Board does not have unfettered discretion under its Revised Policy
to adopt a Rights Plan before shareholder approval. If the EDS Board adopts a
Rights Plan without obtaining prior shareholder approval, EDS's shareholders are
assured that the plan will not have a term greater than one year unless the
shareholders have voted in favor of its continued existence. For the information
of the Staff, we note that in February 2005 EDS terminated its Rights Plan and
does not currently have a Rights Plan in effect.
Request
Based on the foregoing analysis, EDS respectfully requests that the Staff concur
that it will not recommend enforcement action if EDS omits the 2006 Rights Plan
Proposal from its 2006 Proxy Materials.
Pursuant to guidance set forth on the Commission's web site at www.sec.gov/contact/mailboxes.htm,
we are submitting this letter electronically via e-mail with confirmatory hard
copies to be filed concurrently with the Staff via mail. In addition, pursuant
to Rule 14a-8(j)(1), we are sending a copy of this letter to Mr. Chevedden, at
the Proponent's instruction, as notice of EDS's intention to omit the Rights
Plan Proposal (including the respective resolutions and supporting statements)
from its 2006 Proxy Materials.
If the Staff disagrees with the conclusions set forth in this letter, I
respectfully request the opportunity to confer with you before the determination
of the Staff's final position. Please call me at 212-403-1222 or Stephanie
Seligman at 212-403-1225 if you have any questions regarding this matter.
Very truly yours,
/s/
Richard D. Katcher
[APPENDIX1]
Nick Rossi
P.O. Box 249
Boonville, CA 95415
Mr. Michael H. Jordan
Electronic Data Systems Corporation (EDS)
5400 Legacy Dr
Plano TX 75024
Dear Mr. Jordan,
This Rule 14a-8 proposal is respectfully submltted for the 2006 Annual
shareholder meeting to support the long-term performance of our company. Rule
14a-8 requirements are intended to be met including ownership of the required
stock value until after the date of the applicable shareholder meeting. This
submitted format, with the shareholder-supplied emphasis, is intended to be used
for definitive proxy publication.
This is the proxy for Mr. John Chevedden and/or his designe? to act on my behalf
in shareholder matters, including this shareholder proposal for the forthcoming
shareholder meeting before, during and after the forthcoming shareholder
meeting. Please direct all future communication to Mr. John Chevedden at:
PH: 310-371-7872
2215 Nelson Ave., No. 205
Redondo Beach, CA 90278
Your consideration and the consideration of the Board of Directors is
appreciated to support the long-term performance of our company.
Sincerely,
/s/
cc: Bruce N. Hawthorne
Corporate Secretary
PH: 972 604-6000
FX: 972 605-2643
David Hollander
Fax: 972-605-6033
[APPENDIX2]
[October 30, 2005]
3Redeem or Vote Polson Pill
RESOLVED, Shareholders request our Board of Directors to redeem any future or
ourrent poison pill, unless such poison pill is approved by the affirmative vote
of holders of a malority of shares present and voting as a separate ballot item,
to be held as soon as may be practicable. If practicable the substance of this
proposal should be included in our charter or bylaws.
According to this proposal there would be no loophole to allow a claimed
clrournstance or a claimed duty to override the scheduling of a shareholder vote
as soon as may be practicable. Since a vote would be as soon as may be
practicable it accordingly could take place within 4-months of the adoption of a
poison pill by our Board. To give our board valuable insight on our views of
their poison pill, a vote would occur even if our board had promptly terminated
their poison pill because our board could turnaround and readopt their poison
pill once terrninating it.
Nick Rossi, P.O. Box 249, Boonville, Calif. 95415 submitted this proposal.
According to The Corporate Library (TCL), an independent invesiment research
firm in Portland, Maine, EDS shareholders 4-times approved proposals in favor of
putting any poison pill to shareholder vote. Then the EDS board finally
announced that it would terrninate EDS' existing poison pill in February 2005.
Then the board took a huge step backwards according to TCL, and included the
following caveat:
"The Board further adopted the following policy regarding the adoption of a
rights plan in the future: The Board will only adopt a rights plan if either
1. EDS' stockholders have approved adoption of the rights plan or
2. the Board, including a majority of the independent members of the Board, in
the exercise of its fiduciary responsibilities makes a devermination that, under
the circumstances existing at the time, it is in the best interests of EDS'
stockholders to adopt a rights plan without seeking stockholder approval."
According to The Corporate Library this is known as a fiduciary out and reserves
the right of the board to implement a poison pill, without shareholder approval,
under vaguely described circumstances. What is even more disappointing is that
shareholders were not given the opportunity to approve this policy and approve
the issuance of a pill in the exercise of fiduciary duty. By implementing a pill
policy, the board avoided another vote on poison pills altogether.
Pills Entrench Current Management
"Poison pills ... prevent shareholders, and the overall market, from exercising
their right to discipline management by turning it out. They entrench the
current management, even when it's doing a poor job. They water down
sharsholders' votes and deprive thern of a meaningful voice in corporate afialrs."
"Take on the Street" by Arthur Levitt, SEC Chairman, 1993-2001
Stock Value
If a poison pill makes our stock difficult to sell at a profitthe value of our
stock could suffer.
Notes:
The above format is the format submitted and intended for publication.
The company is requested to assign a proposal number (represented by "3" above)
based on the chronological order in which proposals are submitted. The requested
designation of "3" or higher number allows for ratification of auditors to be
item 2.
This proposal is believed to conform with Staff Legal Bulletin No. 14B (CF),
September 15, 2004 including:
Accordingly, going forward, we believe that it would not be appropriate for
companies to exclude supporting statement language and/or an entire proposal in
reliance on rule 14a-8(i)(3) in the following circumstances:
the company objects to factual assertions because they are not supported;
the company objects to factual assertions that, while not materlally false or
misleading, may be disputed or countered;
the company objects to factual assertions because those assertions may be
interpreted by shareholders in a manner that is unfavorable to the company, its
directors, or its officers: and/or
the company objects to statements because they represent the opinion of the
shareholder proponent or a referenced source, but the statements are not
identified specifically as such.
See also: Sun Microsysterns, Inc. (July 21, 2005).
Please note that the title of the proposal is part of the argument in favor of
the proposal. In the interest of clarity and to avoid confusion the title of
this and each other ballot item is requested to be consistent throughout the
proxy materials.
Please advise if there is any typographical question.
If there is any question on the accuracy of the proposal text please advise by
email within 14-dsays to this email address: olmsted 7 p @ earthlink. net (use
this address with no spaces).
Stock will be held until after the annual meeting. Verification of stock
ownership will be forwarded.
[INQUIRY LETTER]
December 6, 2005
Division of Corporation Finance
Office of the Chief Counsel
450 Fifth Street, N.W.
Washington D.C. 20549
Electronic Data Systems Corporation (EDS) Shareholder Position on Company
No-Action Request Rule 14a-8 Proposal: Poison Pill Shareholder: Nick Rossi
Ladies and Gentlemen:
This is an initial response to the EDS 8-page no action request including
exhibits.
The following is direct text from the proposal. It is uninterrupted, except for
notations in brackets, on the text that the company fails to address in its no
action letter. The non-addressed text makes this proposal distinct from anything
the company has done.
3 Redeem or Vote Poison Pill
"RESOLVED, Shareholders request our Board of Directors to redeem any future or
current poison pill, unless such poison pill is approved by the affirmative vote
of holders of a majority of shares present and voting as a separate ballot item,
to be held as soon as may be practicable. [Not addressed>] If practicable the
substance of this proposal should be addressed>included in our charter or
bylaws.
"[Not addressed>] According to this proposal there would be no loophole to allow
a claimed circumstance or a claimed duty to override the scheduling of a
shareholder vote as soon as may be practicable. Since a vote would be as soon as
may be practicable it accordingly could take place within 4-months of the
adoption of a poison pill by our Board. [Not addressed>] To give our board
valuable insight on our views of their poison pill, a vote would occur even if
our board had promptly terminated their poison pill because our board could
turnaround and readopt their poison pill once terminating it.
"Nick Rossi, P.O. Box 249, Boonville, Calif. 95415 submitted this proposal.
"According to The Corporate Library (TCL), an independent investment research
firm in Portland, Maine, EDS shareholders 4-times approved proposals in favor of
putting any poison pill to shareholder vote. Then the EDS board finally
announced that it would terminate EDS' existing poison pill in February 2005.
Then the board took a huge step backwards according to TCL, and included the
following caveat:
"The Board further adopted the following policy regarding the adoption of a
rights plan in the future: The Board will only adopt a rights plan if either
1. EDS' stockholders have approved adoption of the rights plan or 2. the Board,
including a majority of the independent members of the Board, in the exercise of
its fiduciary responsibilities makes a determination that, under the
circumstances existing at the time, it is in the best interests of EDS'
stockholders to adopt a rights plan without seeking stockholder approval.\1/
"[Not addressed>] According to The Corporate Library this is known as a
fiduciary out and reserves the right of the board to implement a poison pill,
without shareholder approval, under vaguely described circumstances. [Not
addressed>] What is even more disappointing is that shareholders were not given
the opportunity to approve this policy and approve the issuance of a pill in the
exercise of fiduciary duty. [Not addressed>] By implementing a pill policy, the
board avoided another vote on poison pills altogether."
Thus the company does not address these sentences in the proposal:
[Not addressed>] If practicable the substance of this proposal should be
included in our charter or bylaws.
[Not addressed>] According to this proposal there would be no loophole to allow
a claimed circumstance or a claimed duty to override the scheduling of a
shareholder vote as soon as may be practicable.
[Not addressed>] To give our board valuable insight on our views of their poison
pill, a vote would occur even if our board had promptly terminated their poison
pill because our board could turnaround and readopt their poison pill once
terminating it.
[Not addressed>] According to The Corporate Library this is known as a fiduciary
out and reserves the right of the board to implement a poison pill, without
shareholder approval, under vaguely described circumstances.
[Not addressed>] What is even more disappointing is that shareholders were not
given the opportunity to approve this policy and approve the issuance of a pill
in the exercise of fiduciary duty.
[Not addressed>] By implementing a pill policy, the board avoided another vote
on poison pills altogether."
Implementation by Doing the Exact Opposite ?
The astonishing company theory is that if a company does the exact opposite (no
shareholder vote allowed) of what a proposal calls for it actually implements
the proposal. Just as long as the company does such exact opposite (no
shareholder vote allowed) for no more than one-year.
Then after a year is up the company makes no claim that it could not adopt a new
pill, without a shareholder vote and repeat the cycle.
EDS One-year Vote Black-Out
The company policy thus allows a one-year black-out on a shareholder vote,
further compounded by the option of a complete elimination of any vote
whatsoever after one-year.
Passage of Time Is Not a Substitute For a Shareholder Vote Passage of time is
erroneously claimed to be a substitute for an explicitly called-for shareholder
vote. No precedent is given under rule 14a-8 where the passage of time is a
stand-in for a shareholder vote.
It would seem all the more consist with the concluding argument of the company
to have a vote as soon as practicable. On the final page of the company letter
the company claims it would usually obtain a vote prior to adopting a poison
pill. Then why would the company want to delay a vote to a year later especially
since an expensive special meeting might have to be called simply because the
vote was not held as soon as practicable.
The following "Analyst Comments" is from The Corporate Library on the poor
shareholder responsiveness of EDS at
http://www.boardanalyst.com/companies/company_profile.asp?ID=13410
"ANALYST COMMENTS
"EDS shareholders four times approved proposals in favor of putting any poison
pill to shareholder vote, and approved four times proposals in favor of simple
majority voting. On May 5, 2004, before the 2004 annual meeting (where both
proposals were overwhelmingly approved for the fifth time), the board announced
it would ask shareholders at the 2005 annual meeting to approve resolutions
removing the classified board, instituting simple majority voting, and asking
shareholders to approve EDS's rights plan.
Ideally, the board would have put those resolutions before the shareholders
three affirmative votes ago, but this was a big step in the right direction for
EDS.
"Then, on December 8, 2004, the EDS board took another step forward, announcing
in an 8-K it OEdetermined that it would terminate EDS' existing rights plan in
February 2005 and will not propose any rights plans for approval by stockholders
at EDS' 2005 Annual Meeting of Stockholders.\1/ Then the board took a huge step
backwards, and included the following caveat:
"OEThe Board further adopted the following policy regarding the adoption of a
rights plan in the future: The Board will only adopt a rights plan if either
1. EDS' stockholders have approved adoption of the rights plan or
2. the Board, including a majority of the independent members of the Board, in
the exercise of its fiduciary responsibilities makes a determination that, under
the circumstances existing at the time, it is in the best interests of EDS'
stockholders to adopt a rights plan without seeking stockholder approval."
"OEThis is known as a fiduciary out', and reserves the right of the board to
implement a poison pill, without shareholder approval, under unspecified but
vaguely described circumstances. What is even more disappointing is that
shareholders were not given the opportunity to approve this policy and approve
the issuance of a pill in the exercise of fiduciary duty. By implementing a pill
policy', the board avoided another vote on poison pills altogether. (12/20/2004
- JP)"
It is respectfully requested that concurrence not be granted to the company. It
is also respectfully requested that there be an opportunity for additional
material in support of the inclusion of this shareholder proposal. Also that the
shareholder have the last opportunity to submit material since the company had
the first opportunity.
Sincerely,
John Chevedden
cc:
Nick Rossi
Richard Katcher via David Hollander<david.hollander@eds.com>
[INQUIRY LETTER]
January 11, 2006
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Electronic Data Systems Corporation (EDS)
#2 Shareholder Position on Company No-Action Request Rule 14a-8 Proposal:
Poison Pill
Shareholder: Nick Rossi
Ladies and Gentlemen:
This adds further information to the December 6, 2005 shareholder response to
the company no action request.
The 2005 company policy additionally fails to address "as a separate ballot
item" in the 2006 rule 14a-8 proposal text. Hence a vote on a pill could, under
the 2005 policy, be bundled with a vote on another ballot item that is actually
attractive to shareholders. In other words a carrot and stick approach to obtain
a favorable shareholder vote on a pill that a majority of shareholders oppose
but will tolerate to obtain an attractive part of a bundle.
The vague company "Policy" is unworkable and unenforceable as anything other
than a blank-check. The company does not define or give examples of the vague
text in its "policy":
"in the exercise of its fiduciary duties"
"under the circumstances then existing"
"best interests" Does this mean any trivial or conceivable best interests.
"unless ratified by shareholders" Which shareholders? All shareholders in
existence, shareholders who vote, or shareholders who vote either yes or no.
Also the company does not address whether it can make solicitations or multiple
solicitations to obtain the shareholder vote.
Furthermore this policy can apparently be triggered by a mere 5-to-4 vote of
directors compounded by inside directors potentially forming an alliance with
outside directors having non-director links to the company. Hence based on this
vague policy a pill could be adopted by a 5-4 vote with the Chairman casting the
deciding vote with assists from inside directors and directors having
non-director links to the company. Thus this policy could potentially deny
shareholders an initial vote based on a bare 5-to-4 vote by directors not all of
whom are independent.
It is respectfully requested that concurrence not be granted to the company.
It is also respectfully requested that the shareholder have the last opportunity
to submit material since the company had the first opportunity.
Sincerely,
John Chevedden
cc:
Nick Rossi
David Hollander<david.hollander@eds.com>
[INQUIRY LETTER]
January 18, 2006
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Electronic Data Systems Corporation (EDS)
#3 Shareholder Position on Company No-Action Request Rule 14a-8 Proposal:
Poison Pill
Shareholder: Nick Rossi
Ladies and Gentlemen:
Potentially related to this rule 14a-8 proposal is that the Staff in January
2006 rejected Hewlett-Packard's argument that its majority voting policy
"substantially implemented" a shareholder proposal seeking to establish a
majority vote standard for the election of directors. The proposal was submitted
by the United Brotherhood of Carpenters Pension Fund, who requested that the
company's board of directors "initiate the appropriate process" to amend
Hewlett-Packard's governance documents to provide that director nominees be
elected by the affirmative vote of the majority of votes cast.
Under Hewlett-Packard's majority voting policy, a director who received a
greater number of votes withheld from his or her election than votes "for" such
election was required to tender his or her resignation to Hewlett-Packard's
Nominating and Corporate Governance Committee. The Staff rejected the
Hewlett-Packard argument that this policy compared favorably with the proposal.
One interpretation of this no-action letter is that a company would henceforth
have to adopt a bylaw amendment or obtain shareholder approval of a charter
amendment in order to substantially implement a majority vote shareholder
proposal under Rule 14a-8(i)(10). A policy statement would not be sufficient.
EDS has not addressed whether its policy statements compare favorably in
durability to its charter and bylaws.
It is respectfully requested that concurrence not be granted to the company.
It is also respectfully requested that the shareholder have the last opportunity
to submit material since the company had the first opportunity.
Sincerely,
John Chevedden
cc:
Nick Rossi
David Hollander<david.hollander@eds.com>
[STAFF REPLY LETTER]
January 26, 2006
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Electronic Data Systems Corporation Incoming letter dated November 30, 2005
The proposal requests that the board amend its charter or bylaws to require that
any future poison pill be redeemed unless it is approved by the affirmative vote
of holders of a majority of shares after the poison pill is adopted by the
board.
We are unable to concur in your view that EDS may exclude the proposal under
rule 14a-8(i)(10). Accordingly, we do not believe that EDS may omit the proposal
from its proxy materials in reliance on rule 14a-8(i)(10).
Sincerely,
/s/
Mary Beth Breslin
Special Counsel
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