Company Name: Sun Microsystems, Inc.
Public Availability Date: September 12, 2006
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
June 30, 2006
Via Overnight Courier
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of the Chief Counsel
100 F Street, NE
Washington D.C. 20549
Re: Sun Microsystems, Inc.Shareholder Proposal Submitted by Mr. William Steiner
Dear Sir or Madam:
In accordance with Rule 14a-8(j) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), Sun Microsystems, Inc., a Delaware corporation
(the "Company"), hereby gives notice of the Company's intention to omit from its
proxy statement for its 2006 annual meeting of stockholders (the "2006 Proxy
Statement") a shareholder proposal (the "Proposal") submitted to the Company by
Mr. William Steiner (the "Proponent") under cover of a letter dated May 22,
2006. A copy of the Proponent's proposal together with the related supporting
statement is attached as Attachment A.
We hereby request confirmation that the staff of the Division of Corporate
Finance (the "Staff") of the Securities and Exchange Commission (the
"Commission") will not recommend any enforcement action if, in reliance on the
provisions of Rule 14a-8(i)(10), the Company omits the Proposal from the 2006
Proxy Statement on the grounds that the Company has substantially implemented
the proposal.
The Company expects to file the definitive 2006 Proxy Statement with the
Commission on or about September 20, 2006. Accordingly, as contemplated by Rule
14a-8(j), this letter is being filed with the Commission more than 80 calendar
days before the date upon which the Company expects to file the definitive 2006
Proxy Statement. Pursuant to Rule 14a-8(j), we are enclosing herewith six copies
of each of this letter and the accompanying attachments. In accordance with Rule
14a-8(j) and the instructions contained in the letter accompanying the Proposal
(directing all correspondence to Mr. John Chevedden), a copy of this submission
is being forwarded simultaneously to the Proponent and Mr. Chevedden. This
letter constitutes the Company's statement of the reasons it deems the omission
of the Proposal to be proper.
The Proposal
The full text of the Proposal and supporting statement is as follows:
"3- Redeem or Vote Poison Pill
Resolved: Shareholders request that our Board adopt a rule that our Board will
redeem any current or future poison pill unless such poison pill is submitted to
a shareholder vote as a separate ballot item, as soon as may be practicable.
A sunset on a future poison pill will not substitute for a shareholder vote.
Adoption of this proposal through charter or bylaw inclusion would be required,
if this is practicable.
With our 82% vote of support in 2005 it should not be necessary to resubmit this
proposal for a second vote of support due to management non-responsiveness.
William Steiner, 112 Abbotsford Gate, Piermont, NY 10968 sponsors this proposal.
The sponsor is not responsible if management makes up its own title for this
proposal in the voting materials as it did in 2005 and gives the proposal a
biased introduction.
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
shareholders' votes and deprive them of a meaningful voice in corporate
affairs."
"Take on the Street" by Arthur Levitt, SEC Chairman, 1993-2001
Progress Begins with a First Step
It is important to take a least one step forward and adopt this proposal since
our 2006 governance was not impeccable. For instance in 2006 it was reported
(and certain (concerns are inserted):
* The Corporate Library (TCL), an independent investment research firm in
Portland, Maine, rated our company:
"D" in Accounting
* Our company has a poison pill with a low 10% trigger
* An overwhelming 75% shareholder vote was required to make certain key
improvements - entrenchment concern
* Our current CEO had a tenure of less than two years, while our former CEO
remained as Chairman. This situation can weaken our current CEO's leadership
according to The Corporate Library.
* Three directors were CEOs - Over commitment concern.
* Two directors held 4 to 6 board seats - Over commitment concern.
* The 2 million options exercised in fiscal 2004 carried a profit of only $3.54
a share-hardly a stock price appreciation to celebrate.
* Three directors had 18 to 24 years tenure- Lack of independence concern. Two
directors owned no stock - Lack of commitment concern
* The chairman of our compensation committee had 24 years tenure- lack of
independence concern.
This series of less-than-best practices reinforces the reason to take one step
forward and vote yes.
Redeem or Vote Poison Pill Yes on 3"
Basis for ExclusionRule 14a-8(i)(10)
The Company respectfully requests the Staff's confirmation that the Proposal may
properly be excluded from the 2006 Proxy Statement in accordance with Rule
14a-8(i)(10), which allows for the exclusion of proposals "if the company has
already substantially implemented the proposal." Significantly, in considering
requests pursuant to this section, the Staff has not required that a company
take the action requested by a proposal in all details but has been willing to
issue no-action letters in situations where the essential objective of the
proposal as has been satisfied. See, e.g., Masco Corporation (April 19 and March
29, 1999); MacNeal-Schwendler Corporation (April 2, 1999); General Motors
Corporation (March 4, 1996); Northern States Power Company (February 16, 1995);
E.I duPont de Nemours and Company (February 14, 1995). To be excluded under this
rule, the Proposal need not be implemented in full or precisely as presented by
the Proponent. Instead, the standard is one of substantial implementation. See
Rel. No. 34-20091 (August 16, 1983).
The Company does not currently have a poison pill in place and has no current
intention of adopting a poison pill. In May 2006, the Company's Board of
Directors terminated the Company's then-existing Stockholder Rights Agreement
(the "Rights Agreement") and adopted the following formal policy statement (the
"Policy") regarding stockholder rights plans in its Corporate Governance
Guidelines, which are available on its website:
"H. POLICY STATEMENT ON POISON PILLS
The Company no longer has a stockholder rights plan, or "poison pill." The Board
must obtain stockholder approval prior to adopting a poison pill, unless the
Board, including a majority of the independent members of the Board, in the
exercise of its fiduciary responsibilities, determines that, under the
circumstances then existing, it would be in the best interests of the Company
and its stockholders to adopt a poison pill without prior stockholder approval.
If a poison pill is adopted by the Board without prior stockholder approval, the
poison pill must provide that it will expire within one year of adoption unless
ratified by stockholders."
Although the Proponent has not clearly indicated where the Proposal ends and his
supporting statement begins, the Company submits that it has implemented all
elements of the Proposal with the adoption of the Policy. There are two
immaterial differences between the Proposal and the Policy, both of which have
been considered by the Staff in previous no action requests in which the Staff
concurred with the companies' exclusions of proposals on the basis of Rule
14-8(i)(10). First, the Policy is more restrictive than the Proposal, in that it
sets a definitive period of twelve months for submission of any future poison
pill to a stockholder vote, while the Proposal only requires such a vote "as
soon as may be practicable." In General Motors Corporation (March 14, 2005), the
Staff considered an identical distinction and concurred with the company's
position that the proposal had been substantially implemented. See also PPL
Corporation (March 14, 2004) (concurring with company's conclusion that proposal
calling for a stockholder vote on the adoption of a poison pill "as soon as may
be practical" could be excluded pursuant to Rule 14a-8(i)(10) where company's
policy provided for a vote at the earliest next special or annual meeting).
Second, the Policy contains the limited fiduciary out required under Delaware
law but not expressly set forth in the Proposal. In both Radioshack Corporation
(March 14, 2005) and Tiffany & Co (March 14, 2005) the Staff concurred with the
companies' conclusion that the fiduciary out was required under Delaware law,
and as such, that the companies had substantially implemented the proposals to
the maximum extent permissible by law.
While the Proposal states that adoption of the poison pill restriction is
required through charter or bylaw inclusion "if practicable," the Company's
implementation of the proposal via a Policy meets the requirements of Rule
14a-8(i)(10). See Tiffany & Co. (March 14, 2006) (excluding a poison pill
redemption proposal on the basis that the company had substantially implemented
by adopting a corporate policy despite the proposal's stated preference for
adoption of a bylaw amendment "if practicable"). Although the Staff did not
concur that the company could exclude a proposal under Rule 14a-8(i)(10) under
similar circumstances in The Boeing Company (February 3, 2006), the Company
believes a different result is warranted here for the reasons set forth below.
The procedures set forth in the Policy (including that any stockholder rights
plan adopted without shareholder approval must provide that it will expire
within one year of adoption unless ratified by shareholders) (the "Procedures")
operate in the same manner regardless of whether they are set forth in a policy
or in the Company's bylaws or charter. In addition, a bylaw setting forth the
Procedures, like a policy, can be changed by future Board action without
shareholder approval. The Board could not include the Procedures in the charter
without first obtaining shareholder approval.
By adopting the Policy, the Board has already determined that the most
practicable way of implementing the Procedures is to place them in the Corporate
Governance Guidelines. Inserting provisions in the Company's bylaws or charter
imposes additional regulatory burdens on the Company in the event that the
provisions ever need to be altered. Even immaterial amendments to the Company's
Bylaws require the filing of a Form 8-K. Although the Company has no present
intention of amending the Procedures, as the adoption of such Procedures by
companies is a relatively new phenomenon, it is not difficult to imagine that
minor modification to the Procedures may be appropriate as new best practices
emerge.
Moreover, by virtue of conditioning the bylaw amendment requirement on its
practicability, the Proponent has recognized that implementation through the
Bylaws is not a critical element of the Proposal. Significantly, had the
Proponent viewed the bylaw amendment as material, he could have drafted the
Proposal to request a bylaw amendment rather than leaving discretion as to the
practicable means of implementing the Proposal. Of note, the Proponent and his
representative, Mr. Chevedden, have drafted hundreds of proposals between them
and are very well versed in the impact of drafting the Proposal in this manner.
Given the flexibility in the Proposal's language and the Company's determination
that the practicable means of implementing the subject matter of the proposal
was via the Policy, the Proposal should be excluded under Rule 14(a)-8(i)(10).
As the Staff has previously recognized, determination of whether a company has
substantially implemented a proposal should depend upon "whether [the company's]
particular policies, practices and procedures compare favorably with the
guidelines of the proposal," not on where those policies, practices or
procedures are embodied. See Texaco, Inc. (March 28, 1991).
For the reasons stated above and consistent with the Staff's prior
interpretations of Rule 14a-8(i)(10), the Company believes that the Proposal may
be excluded.
Conclusion
For the foregoing reasons, the Company respectfully requests that the Staff
confirm that it would not recommend enforcement action if the Company omits the
Proposal from its 2006 Proxy Statement.
If you have any questions or require any additional information, please do not
hesitate to call Craig Norris or me at (650) 960-1300. If the Staff is unable to
agree with our conclusions without additional information or discussions, we
respectfully request the opportunity to confer with members of the Staff prior
to issuance of any written response to this letter.
Please acknowledge receipt of this letter and its attachment by date-stamping
the enclosed copy of the first page of this letter and returning it in the
enclosed self-addressed stamped envelope.
Sincerely,
/s/
Michael Dillon
Executive Vice President and General Counsel
Sun Microsystems, Inc.
[APPENDIX]
[May 22, 2006]
3Redeem or Vote Poison Pill
RESOLVED: Shareholders request that our Board adopt a rule that our Board will
redeem any current or future poison pill unless such poison pill is submitted to
a shareholder vote as a separate ballot item, as soon as may be practicable.
A sunset on a future poison pill will not substitute for a shareholder vote.
Adoption of this proposal through charter or bylaw inclusion would be required,
if this is practicable.
With our 82% vote of support in 2005 it should not be necessary to resubmit this
proposal for a second vote of support due to management non-responsiveness.
William Steiner, 112 Abbottsford Gate, Piermont, NY 10968 sponsors this
proposal. The sponsor is not responsible if management makes up its own title
for this proposal in the voting materials as it did in 2005 and gives the
proposal a biased introduction.
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
shareholders' votes and deprive them of a meaningful voice in corporate
affairs."
"Take on the Street" by Arthur Levitt, SEC Chairman, 1993-2001
Progress Begins with a First Step
It is important to take at least one step forward and adopt this proposal since
our 2006 corporate governance was not impeccable. For instance in 2006 it was
reported (and certain concerns are noted):
The Corporate Library (TCL), an independent investment research firm in
Portland, Maine, rated our company:
"F" in Accounting.
Our company had a poison pill with a low 10% trigger.
An overwhelming 75% shareholder vote was required to make certain key
improvementsentrenchment concern.
Our current CEO had a tenure of less than two years, while our former CEO
remained as Chairman. This situation can weaken our current CEO's leadership
according to The Corporate Library.
Our company's overall Board Effectiveness Rating was lowered by TCL due to our
management's decision to accelerate the vesting of options to avoid recognizing
related expenses in our company's financial statements.
Three directors were CEOsOver-commitment concern.
Two directors held 4 to 6 board seatsOver-commitment concern.
The 2 million options exercised in fiscal 2004 carried a profit of only $3.54
a sharehardly a stock price appreciation to celebrate.
Three directors had 18 to 24 years tenureLack of independence concern.
Two directors owned no stockLack of commitment concern.
The chairman of our compensation committee had 24 years tenureLack of
independence concern.
This series of less-than-best practices reinforces the reason to take one step
forward and vote yes.
[INQUIRY LETTER]
2215 Nelson Avenue, No. 205
Redondo Beach, CA 90278 310-371-7872
July 5, 2006
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Sun Microsystems, Inc. (SUNW)
Shareholder Position on Company No-Action Request Rule 14a-8 Proposal: Poison
Pill
Shareholder: Nick Rossi
Ladies and Gentlemen:
This responds to the Sun Microsystems June 30, 2006 no action request.
The rule 14a-8 proposal states:
"RESOLVED: Shareholders request that our Board adopt a rule that our Board will
redeem any current or future poison pill unless such poison pill is submitted to
a shareholder vote as a separate ballot item, as soon as may be practicable.
"A sunset on a future poison pill will not substitute for a shareholder vote.
Adoption of this proposal through charter or bylaw inclusion would be required,
if this is practicable."
The company, on the other hand, says that it should get full implementation
credit regarding this rule 14a-8 proposal although it fails to meet three key
items called for in the above concise 71-words:
1) S[caron accent on letter S] redeem any current or future poison pill unless
such poison pill is submitted to a shareholder vote as a separate ballot item,
as soon as may be practicable.
2) A sunset on a future poison pill will not substitute for a shareholder vote.
[The company implicitly claims that contradiction of this provision still
entitles it to full implementation credit.]
3) Adoption of this proposal through charter or bylaw inclusion would be
required, if this is practicable. [The company does not argue that a charter or
bylaw inclusion would not be practicable. Also the company argument ignores the
word "required" in this text.]
Furthermore in the Borders Group, Inc. (March 9, 2006) Reconsideration the Staff
stated:
"We note that there is a substantive distinction between a proposal that seeks a
policy and a proposal that seeks a bylaw or charter amendment."
The company does not explain how a proposal asking for a long-term solution
("charter or bylaw inclusion") can purportedly be implemented by a potentially
short-term response ("Policy").
The company does not explain a premise of its argument: How it might occur that
there could typically be a 12-month period in which shareholders had no
opportunity to vote.
There are no Radio Shack or Tiffany Staff Response Letters with the dates given
by the company.
The company cites no precedents where the following text was in a rule 14a-8
proposal:
"A sunset on a future poison pill will not substitute for a shareholder vote.
Adoption of this proposal through charter or bylaw inclusion would be required,
if this is practicable."
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:
William Steiner
Michael Dillon<Michael.Dillon@Sun.COM>
[INQUIRY LETTER]
July 14, 2006
Via Overnight Courier
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of the Chief Counsel
100 F Street, NE
Washington D.C. 20549
Re: Sun Microsystems, Inc.-Shareholder Proposal Submitted by Mr. William
Steiner.
Dear Sir or Madam:
On June 30, 2006, Sun Microsystems, Inc. (the "Company") submitted to your
office a request for no-action pursuant to Rule 14a-8(j) of the Securities
Exchange Act of 1934, relating to a shareholder proposal (the "Proposal") from
Mr. William Steiner (together with his representative, Mr. John Chevedden, the
"Proponents"), for inclusion in the Company's 2006 Proxy Statement. The Company
has received a letter from Mr. John Chevedden dated July 5, 2006 and setting
forth the Proponents' response (the "Response"), and is submitting this letter
in reply to the Response. In accordance with Rule 14a-8(j), we are enclosing
herewith six hard copies of this letter. Also in accordance with Rule 14a-8(j),
we are simultaneously providing a copy of this letter to the Proponents.
In the Response, Mr. Chevedden takes the position that the Company is not
entitled to "full implementation credit" under Rule 14a-8(i)(10). As a
preliminary matter, the standard for excluding a proposal under Rule
14a-8(i)(10) does not require "full" implementation of each detail of the
proposal, but rather an evaluation of whether [the company's] particular
policies, practices and procedures compare favorably with the guidelines of the
proposal. See Texaco, Inc. (March 28, 1991). A company's actions need not
precisely correspond to the actions sought by the stockholder proponent. See,
e.g., Nordstrom. Inc. (February 8, 1995); Masco Corporation (March 29, 1999).
The main point of the Response appears to be that the Company has not
implemented the Proposal because it has adopted its shareholder rights plan
policy as a Corporate Governance Guideline (the "Policy"), as opposed to
amending the Company's bylaws. In taking this position, the Proponents neglect
the fact that the Proposal only requires an amendment to the Company's bylaws
"if practicable." The Proponents' statement that the "Company does not argue
that a charter or bylaw inclusion would not be practicable" is incorrect. To the
contrary, the Company dedicated a portion of its June 30, 2006 letter to the
reasoning behind its decision that a bylaw amendment was not practicable (See p.
5 of the Company's letter). The Response fails to reply to the Company's
reasoning on this point and does not set forth an explanation of how the
Proponents' view of the practicability of a bylaw amendment differs from that of
the Company's Board of Directors. In so doing, the Proponents essentially ignore
the "if practicable" language of the Proposal and recast the Proposal as
requiring a bylaw amendment. As the Company has considered the practicability of
a bylaw amendment and has adopted the Policy, which compares favorably with the
requirements of the Proposal, the Company respectfully submits that it is
entitled to exclude the Proposal from its 2006 Proxy Statement in accordance
with Rule 14a-8(i)(10).
The Response also seems to take issue with the portion of the Policy that
provides for the expiration of any shareholder rights plan adopted by the Board
without prior shareholder approval, but not ratified by a shareholder vote
within twelve months. Contrary to the Proponents' assertions, this "sunset"
provision does not take the place of a shareholder vote in the Company's
implementation of the Proposal. In fact, the Policy is more restrictive than the
Proposal, as it requires that any shareholder rights plan be submitted to a
stockholder vote before adoption unless the Board, in the exercise of its
fiduciary responsibilities, determines that it would be in the best interests of
the Company and its stockholders to adopt a plan without prior stockholder
approval. The "sunset" provision is only included in the Policy as a safety net
in the event that the Board, in exercising its fiduciary responsibilities,
adopts a new shareholder rights plan without first obtaining shareholder
approval. As such, the sunset provision is part and parcel of the limited
fiduciary out that the Board was required to maintain in the Policy under
Delaware law, and does not provide a basis for finding that the Company has not
substantially implemented the objectives of the Proposal. The Staff has
concurred that other companies substantially implemented proposals nearly
identical to the one at issue here by adopting corporate governance guidelines
which contained a limited fiduciary out and sunset provision (See RadioShack
Corporation (March 14, 2006) and Tiffany & Co (March 14, 2006)). The Proponents
fail to articulate how use of a sunset provision, which is intended to limit the
impact of a necessary exercise of fiduciary responsibility, is detrimental the
Company's implementation of the objectives of the Proposal. As such, the
Proponents' vague objections to the existence of this sunset provision do not
present a sound basis for deviating from the Staff's opinions in the recent
RadioShack and Tiffany & Co. letters.
Finally, the Response points out a typographical error in the Company's June 30,
2006 letter. The Company inadvertently cited the RadioShack and Tiffany Staff
response letters as having been issued on March 14, 2005. The correct citation
for both letters is March 14, 2006. Of course, Mr. Chevedden is familiar with
both of these letters, as he was the proponent of the proposals at issue in both
letters.
For the foregoing reasons, the Company respectfully renews its request that the
Staff confirm that it would not recommend enforcement action if the Company
omits the Proposal from its 2006 Proxy Statement. If you have any questions or
require additional information with respect to this request, please do not
hesitate to call Craig Norris or me at (650) 960-1300. Please acknowledge
receipt of this letter by date-stamping the enclosed copy of the first page of
this letter and returning it in the enclosed self-addressed stamped envelope.
Sincerely,
/s/
Michael Dillon
Executive Vice President and General Counsel
Sun Microsystems, Inc.
[INQUIRY LETTER]
July 17, 2006
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Sun Microsystems, Inc. (SUNW)
#2 Shareholder Position on Company No-Action Request Rule 14a-8 Proposal: Poison
Pill
Shareholder: Nick Rossi
Ladies and Gentlemen:
To begin, Mr. Michael Dillon's July 14, 2006 letter fails to address every point
in the July 5, 2006 shareholder position letter. For instance, the Borders
Group, Inc. (March 9, 2006) Reconsideration in which the Staff stated:
"We note that there is a substantive distinction between a proposal that seeks a
policy and a proposal that seeks a bylaw or charter amendment."
Also clever distortions in Mr. Dillon's letter need to be corrected. For
instance, the "dedicated portion" of Mr. Dillon's June 30, 2006 letter could
only best be characterized as claiming that the company had used an easier
practicable way to attempt to address the issue of this proposal. The June 30,
2006 company letter did not answer whether a bylaw amendment on this topic was
practicable for the company.
Mr. Dillon suggests that since the Staff has concurred on dissimilar proposals
on this topic that the Staff should concur here in spite of the specifically
distinctive text of this proposal which calls for:
"A sunset on a future poison pill will not substitute for a shareholder vote."
"Adoption of this proposal through charter or bylaw inclusion would be required,
if this is practicable."
Mr. Dillon does not claim that the RadioShack or Tiffany rule 14a-8 proposals
had the same text as this proposal.
Mr. Dillon incredulously claims that a policy that allows an escape hatch
regarding a shareholder vote on a poison pill is more restrictive than the rule
14a-8 proposal submitted that requires a shareholder vote in every instance.
Mr. Dillon claims that when the company policy calls for a strict provision, to
require a shareholder vote prior to adopting a poison pill, and follows this
provision with a loophole to avoid this provision altogether that it still has a
strict policy.
Additionally the company has no provision that this topic be submitted to
shareholders as a separate ballot item as called for in the rule 14a-8 proposal.
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:
William Steiner
Michael Dillon<Michael.Dillon@Sun.COM>
[INQUIRY LETTER]
July 25, 2006
Via Overnight Courier
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of the Chief Counsel
100 F Street, NE
Washington D.C. 20549
Re: Sun Microsystems, Inc.- Shareholder Proposal Submitted by Mr. William
Steiner
Dear Sir or Madam:
On June 30, 2006, Sun Microsystems, Inc. (the "Company") submitted to your
office a request for no-action pursuant to Rule 14a-8(j) of the Securities
Exchange Act of 1934, relating to a shareholder proposal (the "Proposal") from
Mr. William Steiner (together with his representative, Mr. John Chevedden, the
"Proponents"), for inclusion in the Company's 2006 Proxy Statement. This letter
is in reply to the Proponents' latest response to the Staff dated July 17, 2006
(the "Second Response"). In accordance with Rule 14a-8(j), we are enclosing
herewith six hard copies of this letter. Also in accordance with Rule 14a-8(j),
we are simultaneously providing a copy of this letter to the Proponents.
In the Second Response, the Proponents continue to attempt to recast the
Proposal as one requiring a bylaw amendment, despite the fact that the plain
language of the Proposal only requires a bylaw amendment "if practicable." While
the Company appreciates the Proponents' nod to its clever nature, the Company's
July 14, 2006 does not distort the facts surrounding the Company's
implementation of the Proposal. The Company has evaluated the possibility of a
bylaw amendment at this time and, in light of the procedural burdens associated
with an amendment on this issue, determined that it was not practicable. If the
Proponents wanted to preclude the Company from engaging in such an analysis, the
Proposal should not have included the phrase "if practicable." A detailed
discussion of the Company's and Proponents' views on practicability is not
required here, as the test for substantial implementation under Rule
14a-8(i)(10) (as set forth more fully in the Company's June 30, 2006 and July
14, 2006 letters) does not require an exact correlation between each element of
a shareholder proposal and the Company's implementation of the proposal.
Further, the Proponents cite to a Borders Group, Inc. reconsideration letter
dated March 9, 2006. The Company has searched extensively for this letter to no
avail. Nevertheless, the language the Proponents cite does not directly apply to
the Proposal at issue here, as it does not address the case where a bylaw
amendment is only required "if practicable."
The Proponents' arguments around the "sunset" provision and the "escape hatch"
for a shareholder vote on a poison pill directly contradict the Staff's guidance
in RadioShack Corporation (March 14, 2006) and Tiffany & Co (March 14, 2006).
Given that the Proponents have failed to distinguish the facts surrounding the
sunset provision in the Company's policy and the policies at issue in those two
no action requests, there is no justification for a different result in the
instant request. Likewise, the Proponents' argument that the Proposal requires
that any shareholder vote be conducted as a "separate ballot item" was raised
and dismissed in the letters exchanged in the Tiffany & Co. no action request,
and there is no basis for a different result here. Finally, the Proponents seem
to argue that the fact that a proposal containing exactly the same language as
the Proposal has never been the subject of a no-action letter is a reason for
declining the Company's request for no-action. However, the mere novelty of
select phrases in the Proposal does not preclude an analysis of the effect of
these phrases relative to existing precedents.
For the foregoing reasons, the Company respectfully renews its request that the
Staff confirm that it would not recommend enforcement action if the Company
omits the Proposal from its 2006 Proxy Statement. If you have any questions or
require additional information with respect to this request, please do not
hesitate to call Craig Norris or me at (650) 960-1300. Please acknowledge
receipt of this letter by date-stamping the enclosed copy of the first page of
this letter and returning it in the enclosed self-addressed stamped envelope.
Sincerely,
/s/
Michael Dillon
Executive Vice President and General Counsel
Sun Microsystems, Inc.
[INQUIRY LETTER]
July 27, 2006
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Sun Microsystems, Inc. (SUNW)
#3 Shareholder Position on Company No-Action Request Rule 14a-8 Proposal: Poison
Pill
Shareholder: Nick Rossi
Ladies and Gentlemen:
Since it took the company 10-days to give the shareholder party its response to
the July 17, 2006 shareholder party letter, it is respectfully requested that
10-days be allowed to respond to the latest company letter before the Staff
issues its letter.
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:
William Steiner
Michael Dillon<Michael.Dillon@Sun.COM>
[INQUIRY LETTER]
August 6, 2006
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Sun Microsystems, Inc. (SUNW)
#4 Shareholder Position on Company No-Action Request Rule 14a-8 Proposal: Poison
Pill
Shareholder: William Steiner
Ladies and Gentlemen:
This further responds to the Sun Microsystems no action request.
The rule 14a-8 proposal states:
"RESOLVED: Shareholders request that our Board adopt a rule that our Board will
redeem any current or future poison pill unless such poison pill is submitted to
a shareholder vote as a separate ballot item, as soon as may be practicable.
"A sunset on a future poison pill will not substitute for a shareholder vote.
Adoption of this proposal through charter or bylaw inclusion would be required,
if this is practicable."
The company, on the other hand, says that it should get full implementation
credit regarding this rule 14a-8 proposal although it fails to meet three key
items called for in the above concise 71-words:
1) S[caron accent on letter S] redeem any current or future poison pill unless
such poison pill is submitted to a shareholder vote as a separate ballot item,
as soon as may be practicable.
2) A sunset on a future poison pill will not substitute for a shareholder vote.
[The company implicitly claims that contradiction of this provision still
entitles it to full implementation credit.]
3) Adoption of this proposal through charter or bylaw inclusion would be
required, if this is practicable. [The company does not argue that a charter or
bylaw inclusion would not be practicable. Also the company argument ignores the
word "required" in this text.]
The company claim also seems to contradict the Borders Group, Inc. (March 9,
2006) Reconsideration which stated:
"We note that there is a substantive distinction between a proposal that seeks a
policy and a proposal that seeks a bylaw or charter amendment."
There is also a reference to Borders Group, Inc. (March 9, 2006) in Mr. Martin
P. Dunn's March 22, 2006 letter.
The company apparently claims that it is the sole authority on whether a bylaw
is practicable without giving any detailed analysis whatsoever. ("A detailed
discussion of the Company's and Proponents' views on practicability is not
required hereS[caron accent on letter S]"). Thus the company is essentially
claming without support that its easy way to implement part of this rule 14a-8
proposal is the only way.
Furthermore, the company does not analyze whether the rule 14a-8 proposal text
in the RadioShack (March 14, 2006) or Tiffany & Co. (March 14, 2006) is
materially different from the rule 14a-8 proposal submitted to Sun Microsystems.
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:
William Steiner
Michael Dillon<Michael.Dillon@Sun.COM>
[INQUIRY LETTER]
August 11, 2006
Via Overnight Courier
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of the Chief Counsel
100 F Street, NE
Washington D.C. 20549
Re: Sun Microsystems, Inc.- Shareholder Proposal Submitted by Mr. William
Steiner
Dear Sir or Madam:
On June 30, 2006, Sun Microsystems, Inc. (the "Company") submitted to your
office a request for no-action pursuant to Rule 14a-8(j) of the Securities
Exchange Act of 1934, relating to a shareholder proposal (the "Proposal") from
Mr. William Steiner (together with his representative, Mr. John Chevedden, the
"Proponents"), for inclusion in the Company's 2006 Proxy Statement. This letter
is in reply to the Proponents' latest response to the Staff dated August 6, 2006
(the "Third Response"). In accordance with Rule 14a-8(j), we are enclosing
herewith six hard copies of this letter. Also in accordance with Rule 14a-8(j),
we are simultaneously providing a copy of this letter to the Proponents.
While the Company does not wish to belabor the points made in its previous
communications with the Staff regarding the Proposal, it has obtained a copy of
the Commission's unpublished reconsideration letter cited in the Proponents'
Second and Third Responses and must correct the Proponents' misleading use of
language from that letter. Given that the reconsideration letter cited by the
Proponents (Borders Group Inc., March 9,2006), was one of a group of letters
issued by the Commission permitting six companies to exclude proposals advanced
by the Proponents that were nearly identical to the one at issue here, it was
disingenuous of the Proponents to invoke that letter in support of their
argument. In fact, in concluding that those companies could exclude the
Proponents' stockholder rights plan proposals on the basis that they had been
substantially implemented, the Commission concluded as follows:
We note that there is a substantive distinction between a proposal that seeks a
policy and a proposal that seeks a bylaw or charter amendment. In this regard,
however, we further note that the action contemplated by the subject proposal is
qualified by the phrase "if practicable" and that the company has otherwise
substantially implemented the proposal.
[emphasis added]. Bristol-Myers Squibb Co. (March 9,2006) Therefore, the
Commission's position is clear. When, as here, a company has substantially
implemented a shareholder proposal, implementation of that proposal in the form
of a corporate guideline rather than a bylaw amendment does not preclude a
finding of substantial implementation when a proposal only calls for a bylaw
amendment "if practicable." The Proponents' attempt to circumvent this decision
by omitting a key sentence from its citation to the Commission's unpublished
opinion (which was readily available to the Proponents but difficult for the
Company to obtain) is nothing short of an abuse of the shareholder proposal
process under Rule 14a-8.
For the foregoing reasons, the Company respectfully renews its request that the
Staff confirm that it would not recommend enforcement action if the Company
omits the Proposal from its 2006 Proxy Statement. If you have any questions or
require additional information with respect to this request, please do not
hesitate to call Craig Norris or me at (650) 960-1300. Please acknowledge
receipt of this letter by date-stamping the enclosed copy of the first page of
this letter and returning it in the enclosed self-addressed stamped envelope.
Sincerely,
/s/
Michael Dillon
Executive Vice President and General Counsel
Sun Microsystems, Inc.
[INQUIRY LETTER]
August 16, 2006
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Sun Microsystems, Inc. (SUNW)
#5 Shareholder Position on Company No-Action Request Rule 14a-8 Proposal: Poison
Pill
Shareholder: William Steiner
Ladies and Gentlemen:
This is to respectfully request that there be ample time to respond to the 4th
company letter regarding its no action request. This letter was received last
weekend.
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:
William Steiner
Michael Dillon<Michael.Dillon@Sun.COM>
[INQUIRY LETTER]
September 4, 2006
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Sun Microsystems, Inc. (SUNW)
#6 Shareholder Position on Company No-Action Request Rule 14a-8 Proposal: Poison
Pill
Shareholder: William Steiner
Ladies and Gentlemen:
The company does not claim that Borders Group, Inc, March 9, 2006, and similar
cases at that time-period, included the same text as this proposal:
"A sunset on a future poison pill will not substitute for a shareholder vote."
On the other hand the new Sun Microsystems non-bylaw calls for the substitution
of a "sunset" for a "shareholder vote."
In the Borders Group, Inc. (March 9, 2006) Reconsideration the Staff stated: "We
note that there is a substantive distinction between a proposal that seeks a
policy and a proposal that seeks a bylaw or charter amendment."
And previously the company has only been able to establish that a non-bylaw
imitation of this proposal is easier to implement than a genuine bylaw adoption.
The TheCorporateCounsel.net, March 17, 2006 commented on the Borders Group, Inc,
series of Staff Reconsiderations:
"S[caron accent on letter S] a company would still have to convince the Staff
that it is not practicable to adopt the poison pill change requested by the
proposal."
TheCorporateCounsel.net Blog
The Practical Corporate & Securities Law Blog March 17, 2006
"Poison Pill Proposals Found Excludable Upon Reconsideration
"From my DealLawyers.com Blog: Last week, the SEC Staff issued a batch of
no-action responses, where on reconsideration the Staff said that Bristol Myers
(and other companies) could exclude John Chevedden's poison pill shareholder
proposals.
S[caron accent on letter S]
"I think a fairer reading is that the Staff simply changed its mind on this one,
but that it still believes that a policy is not as binding as a bylaw.
The truth of the matter is that the phrase "as practicable" is pretty subjective
- and a company would still have to convince the Staff that it is not
practicable to adopt the poison pill change requested by the proposal."
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:
William Steiner
Michael Dillon<Michael.Dillon@Sun.COM>
[STAFF REPLY LETTER]
September 12, 2006
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Sun Microsystems, Inc. Incoming letter dated June 30, 2006
The proposal requests that the board of directors adopt a rule that the board
will redeem any current or future poison pill unless it is submitted to a
shareholder vote as soon as may be practicable.
There appears to be some basis for your view that Sun may exclude the proposal
under rule 14a-8 (i)(10). Accordingly, we will not recommend enforcement action
to the Commission if Sun omits 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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