Company Name: Enzo Biochem, Inc.
Public Availability Date: October 27, 2006
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
September 8, 2006
Re: Omission of Shareholder Proposal by Enzo Biochem, Inc. Pursuant to Rule
14a-8
VIA ELECTRONIC MAIL
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Ladies and Gentlemen:
Enzo Biochem, Inc. (the "Company") has received from Kinder Investments, LP (the
"Proponent"), a letter requesting, pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934, as amended, that the Company include a proposal (the
"Proposal") in the Company's proxy statement for its 2007 Annual Meeting of
Shareholders (the "Annual Meeting"). A copy of the Proposal is enclosed herewith
as Exhibit A. Subsequent to its receipt of the Proposal, the Company sent the
Proponent a notice of defect, enclosed herewith as Exhibit B, and the Proponent
responded by sending the Company a letter from the record holder of the common
stock of the Company held on behalf of the Proponent, enclosed herewith as
Exhibit C.
On behalf of the Company, we hereby notify the Securities and Exchange
Commission (the "Commission") and, by copy hereof, the Proponent, of the
Company's intention to omit the Proposal from its notice of meeting, proxy
statement and form of proxy (the "Proxy Materials") for the Annual Meeting
pursuant to Rule 14a-8(j) for the reasons hereinafter set forth. The Company
would like to assure the Commission that it is cognizant of its obligation to be
responsive to its shareholders but feels that because of the reasons cited below
it is not in a position to responsibly consider and act upon the Proposal. A
copy of this letter has been e-mailed to cfletters@sec.gov in compliance with
the instructions found at the Commission's website and in lieu of our providing
six additional copies of this letter pursuant to Rule 14a-8(j)(2).
I. The Proposal
The Proposal states that the Proponent "hereby submits the following proposal to
be voted upon by shareholders at the next meeting of Enzo shareholders...":
"Resolved, that no individual may serve as outside director of Enzo Biochem,
Inc. for more than three terms or a maximum of nine years (as any director
serving longer essentially becomes a de facto insider)."
The Proposal does not contain any supporting statement.
II. Summary
As discussed more fully below, the Company believes that it may properly omit
the Proposal from the Proxy Materials for the following reasons:
1. Pursuant to Rule 14a-8(i)(1), in that the Proposal violates the proxy rules
because the Proposal is not a proper subject for action by shareholders under
New York law.
2. Pursuant to Rule 14a-8(i)(3), in that the Proposal violates the proxy rules
because the Proposal is so vague, indefinite and misleading as to violate Rule
14a-9.
III. The Proposal Is Not a Proper Subject for Action by Shareholders under New
York Law and May, Therefore, Be Omitted Pursuant to Rule 14a-8(i)(1).
Rule 14a-8(i)(1) permits a company to omit a shareholder proposal from its proxy
materials if the proposal is "not a proper subject for action by shareholders
under the jurisdiction of the company's organization." Thus, a proposal may be
omitted if the proposal would require shareholders to mandate action on matters
that, under state law, fall within the powers of a corporation's directors.
The Company is a New York corporation. In the absence of a specific provision
granting power directly to the shareholders, a New York corporation's business
is under the direction of its board of directors. See Section 701 of the New
York Business Corporation Law ("BCL"). No provision of the BCL confers such
power on the shareholders directly, and no provision in the Company's
Certificate of Incorporation or By-laws does so either.
The note to Rule 14a-8(i)(1) states that "[d]epending on the subject matter,
some proposals are not considered proper under state law if they would be
binding on the company if approved by shareholders." In addition, Division of
Corporation Finance: Staff Legal Bulletin No. 14 (July 13, 2001) states that "[w]hen
drafting a proposal, shareholders should consider whether the proposal, if
approved by shareholders, would be binding on the company. In our experience, we
have found that proposals that are binding on the company face a much greater
likelihood of being improper under state law and, therefore, excludable under
rule 14a-8(i)(1)." See, e.g., International Paper Company (March 1, 2004)
(proposal requiring that none of the five highest paid executives and any
non-employee directors of a New York corporation be eligible to receive future
stock options).
The Proposal is not stated as a recommendation or request; rather, if approved,
would prohibit an individual from serving as an "outside" director of the
Company for more than three terms or a maximum of nine years. Shareholders do
not have authority under the BCL to adopt the proposal.
For the foregoing reasons, we believe that the Proposal is excludable from the
Company's proxy materials under Rule 14a-8(i)(1) because it deals with a matter
inappropriate for shareholder action under the BCL.
IV. The Proposal is Contrary to Rule 14a-9 Because It is Vague, Indefinite and
Misleading, and May, Therefore, Be Omitted Pursuant to Rule 14a-8(i)(3).
Under Rule 14a-8(i)(3), a proposal may be omitted from the registrant's proxy
materials "if the proposal or the supporting statement is contrary to any of the
Commission's proxy rules and regulations, including Rule 14a-9, which prohibits
false or misleading statements in proxy soliciting materials." Rule 14a-9
provides that no solicitation may be made by means of a communication 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 or which
omits to state any material fact necessary in order to make the statements
therein not false or misleading."
The Staff of the Division of Corporation Finance of the Commission has concluded
that shareholder proposals that are so vague, indefinite and misleading that
shareholders voting upon the proposal would not be informed as to how the
proposals would be implemented if adopted are misleading under Rule 14a-9 and,
thus, may be excluded from a registrant's proxy materials pursuant to Rule
14a-8(i)(3). A proposal is sufficiently vague and indefinite to justify its
exclusion where "neither the stockholders voting on the proposal, nor the
company in implementing the proposal (if adopted), would be able to determine
with any reasonable certainty exactly what actions or measures the proposal
requires." Division of Corporation Finance: Staff Legal Bulletin No. 14B
(September 15, 2004). Such proposals are properly excluded given the fact that
any actions or measures ultimately taken upon implementation of the proposals
could be quite different from those envisioned by shareholders at the time their
votes were cast.
The Proposal is vague on its face in several respects. The reference in the
Proposal to "outside" directors is unclear. The Company believes, but is not
certain, that the intent of the Proponent is to refer to the determination as to
whether a particular director is or is not "independent" under the applicable
rules of the Commission and the New York Stock Exchange, but a shareholder not
well-versed in corporate governance developments in recent years will likely not
understand the reference in the absence of a supporting statement by the
Proponent. In addition, the parenthetical "(as any director serving longer
essentially becomes a de facto insider)" is confusing, as it is unclear whether
the shareholder must agree with that justification if it wishes to vote in favor
of the term limitation proposal. Finally, the Proposal does not make clear the
effect on current directors that have already served longer than the prescribed
periods. It does not state whether such directors are grandfathered and
therefore excluded from the Proposal, and it also does not address whether such
directors could be removed prior to the expiration of their current term or
would be permitted to serve out the balance of their current term. Consequently,
shareholders may not be able reasonably to determine the changes envisioned by
the Proposal. Moreover, at the time that they cast their vote, some shareholders
may believe that the Proposal envisions changes different from those that other
shareholders believe the Proposal envisions.
The Proposal is vague, indefinite and misleading because from the face of the
Proposal, shareholders will not be certain what they are being asked to consider
and upon what they are being asked to vote. Accordingly, the Proposal makes
material omissions and thereby violates Rule 14a-9.
V. Conclusion
For the reasons set forth above, we respectfully request your confirmation that
the Division of Corporation Finance will not recommend any enforcement action to
the Commission if the Proposal is omitted from the Proxy Materials.
If you have any questions with respect to this matter, please telephone,
collect, Robert H. Cohen (212-801-6907) or Andrew H. Abramowitz (212-801-6752)
of this office.
Very truly yours,
/s/
GREENBERG TRAURIG, LLP
Enclosures
cc: Kinder Investments, LP
[INQUIRY LETTER]
July 27, 2006
VIA DHL
Mr. Barry Weiner
President
Enzo Biochem, Inc.
527 Madison Avenue
New York, NY 10022
Dear Mr. Weiner:
As a shareholder of Enzo Biochem, Inc. ("Enzo"), Kinder Investments LP
("Kinder") hereby submits the following proposal to be voted upon by
shareholders at the next meeting of Enzo shareholders. Kinder hereby confirms
that it has held more than $2,000 in market value of Enzo's securities
continuously for more than one year and intends to hold these securities through
the date of the next shareholders' meeting.
"Resolved, that no individual may serve as outside director of Enzo Biochem,
Inc. for more than three terms or a maximum of nine years (as any director
serving longer essentially becomes a de facto insider)."
Sincerely,
KINDER INVESTMENTS LP
By: Nesher LLC, general partner
By: /s/
Dov Perlysky, manager
[INQUIRY LETTER]
September 21, 2006
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: Shareholder proposal with respect to Enzo Biochem, Inc. by Kinder
Investments, LP pursuant to Rule 14a-8 of the Securities Exchange Act of 1934
Ladies and Gentlemen:
This letter is being submitted in response to the letter dated September 8,
2006, which was received by our client, Kinder Investments, LP (the
"Shareholder"), on September 13, 2006, from Greenberg Traurig, LLP ("Greenberg
Traurig"), as counsel to Enzo Biochem, Inc. (the "Company"), with respect to a
shareholder proposal (the "Original Proposal") submitted by the Shareholder,
pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), for inclusion in the Company's proxy statement (the "Proxy
Statement") for its 2007 Annual Meeting of Shareholders (the "Meeting"). A copy
of the Original Proposal is attached hereto as Exhibit A and a copy of the
letter from Greenberg Traurig (the "Greenberg Traurig Letter") is attached
hereto as Exhibit B.
In response to the statement in the Greenberg Traurig Letter that the Company
believes that it may properly omit the Original Proposal from the Proxy
Statement because it violates New York law and because it is vague, indefinite
and misleading, we hereby submit a revised proposal (the "Revised Proposal") on
behalf of the Shareholder to address the Company's concerns. A copy of this
letter has been e-mailed to cfletters@sec.gov in compliance with the
instructions found on the Securities and Exchange Commission's (the
"Commission") website and in lieu of our providing six additional copies of this
letter pursuant to Rule 14a-8(j)(2) of the Exchange Act.
The following is the Revised Proposal:
"RESOLVED, that Company's By-Laws (the "By-Laws") be amended to add the
following as Article II, Section 17 of the By-Laws:
'Section 17. TERM LIMITS. Notwithstanding anything contained herein to the
contrary, commencing on ______, 2007 [date of meeting], the total cumulative
length of time that any Outside Director may serve on the Board shall be limited
to a maximum of nine years, whether consecutively or in total. An "Outside
Director" shall mean a member of the Company's Board who is not an officer or
employee of the Company.'
The nine year term limit shall apply to any existing Outside Director upon
expiration of his present term in office.
Supporting Statement
The Company has five Outside Directors, two of whom have been on the Company's
board of directors (the "Board") for more than twenty years. The Shareholder
believes that establishing term limits for Outside Directors will enable the
Board, and thus, the Company, to increase its effectiveness by exposing the
Board to fresh and innovative ideas, new critical thinking and outlook and
diversification of expertise that accompany the regular election of new
directors. Moreover, in the Shareholder's view, long-term Board members are more
likely to support maintaining the status quo at the Company, rather than being
able to more effectively address needed changes at the Company to respond to,
among other things, changes in market conditions, competition, and the industry
in which the Company operates. Furthermore, the Shareholder believes that
viewpoints may become stale over time and no director should be entitled to hold
his or her directorship until retirement. For the foregoing reasons, the
Shareholder believes that the Revised Proposal is both an important and proper
proposal to be considered at the Meeting."
Even though the Shareholder believes that the argument made by Greenberg Traurig
on behalf of the Company in the letter dated September 8, 2006 that the Original
Proposal violates the proxy rules because it is not a proper subject for action
by shareholders in New York is without merit, it has provided the Company with
the Revised Proposal in order to satisfy the Company's concerns, and the
following is responsive to such concerns in relation to the Revised Proposal.
With respect to Rule 14a-8(i)(1) of the Exchange Act ("Rule 14a-8(i)(1)"), the
Revised Proposal does not violate New York law. The Company is a New York
corporation. Pursuant to Section 701 of the New York Business Corporation Law,
the certificate of incorporation or the by-laws of a corporation may prescribe
the qualifications for directors. Furthermore, in order to address the Company's
concerns, the Shareholder has revised the Original Proposal to have the action
taken by the Company's shareholders pursuant to Article XI of the By-Laws, which
provides the shareholders with the power to amend the By-Laws. Therefore, the
Shareholder does not believe that the Revised Proposal is excludable from the
Proxy Statement by virtue of Rule 14a-8(i)(1).
The only other rationale presented in the Greenberg Traurig Letter for the
exclusion of the Original Proposal from the Company's Proxy Statement is that
the Original Proposal is vague, indefinite and misleading under Rule 14a-8(i)(3)
of the Exchange Act ("Rule 14a-8(i)(3)"). The Shareholder has revised the
Original Proposal in response to the Company's concerns and based on the
foregoing, the Shareholder believes that the Revised Proposal is not vague,
indefinite or misleading and therefore is not excludable from the Proxy
Statement by virtue of Rule 14a-8(i)(3). However, if the Commission determines
that the Revised Proposal should be more precise, the Shareholder would be
willing to amend the language of the Revised Proposal to comply with the
Commission's determination. Permitting an amended Revised Proposal (whose intent
is quite clear) to be presented to the shareholders of the Company in the Proxy
Statement would be preferable to allowing the Company to omit the Revised
Proposal from the Proxy Statement and, thus, disenfranchising shareholders with
respect to this important proposal.
For the foregoing reasons, we believe that the Company should include the
Revised Proposal in the Proxy Statement.
If you have any questions or need any additional information with respect to the
foregoing, please contact me at 212-715-9204.
Very truly yours,
/s/
Richard Marlin
cc: Enzo Biochem, Inc.
[STAFF REPLY LETTER]
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Enzo Biochem, Inc.
Incoming letter dated September 8, 2006
The proposal requires that no individual serving as an outside director may
serve for more than three terms or a maximum of nine years.
There appears to be some basis for your view that Enzo Biochem may exclude the
proposal under rule 14a-8(i)(1), as an improper subject for shareholder action
under applicable state law. It appears that this defect could be cured, however,
if the proposal was recast as a recommendation or request to the board of
directors. Accordingly, unless the proponent provides Enzo Biochem with a
proposal revised in this manner, within seven calendar days after receiving this
letter, we will not recommend enforcement action to the Commission if Enzo
Biochem omits the proposal from its proxy materials in reliance on rule
14a-8(i)(1).
We are unable to concur in your view that Enzo Biochem may exclude the proposal
under rule 14a-8(i)(3). Accordingly, we do not believe that Enzo Biochem may
omit the proposal from its proxy materials in reliance on rule 14a-8(i)(3).
Sincerely,
/s/
Ted Yu
Special Counsel
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