Engelhard Corp.Mar. 01, 1983 INQUIRY LETTER 1ENGELHARD CORPORATION MENLO PARK CN 40 EDISON, NEW JERSEY 08818 (201) 632-6010 January 21, 1983 Securities and Exchange Commission Division of Corporation Finance 450 5th Street, N.W. Judiciary Plaza Washington, D.C. 20549 Re: Engelhard - Shareholder Proposal Gentlemen: Pursuant to Rule 14a-8(d) of the General Rules and Regulations under the Securities Exchange Act of 1934, we enclose herewith for filing five copies of a proposed stockholders resolution relating to the May 5, 1983 Annual Meeting of Stockholders of Engelhard Corporation (the "Company") and the related statement in support of such proposal. The Company believes that the proposal may properly be omitted from its 1983 Proxy Statement and form of Proxy and therefore intends to omit it from them. We also enclose five copies of this letter and a supporting Opinion of Counsel. The proponent, Henry S. Wright, has submitted to the Company a form of shareholder resolution which he apparently wishes to have included in the Proxy Statement for the Companys Annual Meeting, and has expressed his intention to introduce the proposal personally at the meeting. The preliminary copies of the Companys Proxy Statement and form of Proxy are expected to be mailed to the Commission on or about March 14, 1983, and this letter is being filed more than 50 days prior thereto. The Company believes that Mr. Wrights proposal and the statements in support thereof may properly be omitted from the Companys Proxy Statement for the following substantive reasons: 1. The proposal may be omitted pursuant to Rule 14a-8(c)(8) because it relates to an election to office. The Companys Restated Certificate of Incorporation, Article Fifth, provides for the election of the Companys Board of Directors on a staggered term basis. The Board of Directors of the Company consist of three classes, Class I, Class II and Class III, each class serving for a three-year term except for their respective initial terms which were staggered for one, two and three years respectively. At the Companys Annual Meeting in May, 1982, three Class I directors were elected for three-year terms expiring in May, 1985. At the forthcoming Annual Meeting in May, 1983, four Class II directors will be considered for reelection to three-year terms expiring in May, 1986. Similarly, at the Companys May, 1984 Annual Meeting, four Class III directors will be considered for reelection to three-year terms expiring May, 1987. If the shareholder proposal were to be adopted, it would constitute a request to disqualify the present directors, whose terms expire subsequent to 1982, from completing their respective terms on the Board for which they have been duly elected. In addition, the proposal creates confusion as to, and affects, the number and identity of nominees for election at the Annual Meeting. Thus, the proposal clearly relates to an "election to office" and may be omitted pursuant to Rule 14a-8(c)(8). 2. The proposal may be omitted pursuant to Rule 14a-8(c)(3) because it is vague and misleading in violation of Rule 14a-9. Mr. Wrights proposal requests that the Board of Directors take the steps necessary to eliminate the "Staggering System of Annual Election of Directors" and adopt the system of electing all directors annually. His proposal is misleading because it fails to set forth a plan or means for effectuating the proposed change and it fails to specify the time at which the change is to be fully effectuated. Accordingly, management is placed in the position of having to speculate concerning the intention of the proposal as to the means and effective date for carrying out the proposal. Furthermore, the stockholders will not know the effect, if any, which their vote may be expected to have upon the present election. In these respects, the proposal is vague and misleading in its application, and may therefore be omitted pursuant to Rule 14a-8(c)(3). Moreover, the two reasons given in support of the proposal are also misleading and inaccurate. The first reason is inaccurate and misleading when it states that "most other first class companies... have adopted the annual election of all directors system". The second reason is misleading and/or irrelevant when it states, "No one took over Engelhard when we had it". Management is in the process of preparing its preliminary proxy material and requests that you convey as soon as possible any questions or comments you may have to the undersigned or to counsel, Alan B. Koslow, Cahill Gordon & Reindel, 80 Pine Street, New York, N.Y. 10005 (212 825-0100). Sincerely yours, Engelhard Corporation By Irving D. Isko President and Chief Executive Officer Enclosure cc: Mr. Henry S. Wright DR9-2562 53 Colfax Road Springfield, New Jersey 07081 (Certified Mail, Return Receipt Requested) INQUIRY LETTER 2CAHILL GORDON & REINDEL EIGHTY PINE STREET NEW YORK, N.Y. 10005 Irving D. Isko President and Chief Executive Officer Engelhard Corporation Menlo Park CN 40 Edison, New Jersey 08818 Dear Mr. Isko: At your request, we have reviewed the stockholders proposal submitted to Engelhard Corporation ("Company") by Henry S. Wright by letter dated May 8, 1982 for inclusion in the Companys Proxy Statement ("Proxy Statement") for its Annual Meeting of Stockholders in 1983, pursuant to Rule 14a-8 under the Securities Exchange Act of 1934. We have also reviewed the Companys letter to the Securities and Exchange Commission in which the Company states that it intends to omit Mr. Wrights proposal from its Proxy Statement and, in accordance with Rule 14a-8(d) sets forth the reasons why it deems such omission to be proper. In our opinion, the Company may properly omit Mr. Wrights proposal from the Proxy Statement pursuant to Rule 14a-8(c)(8) because the proposal relates to "an election to office", as discussed below. The proposal not only attempts to improperly shorten or terminate the uncompleted terms of those previously, duly elected Class I and Class III directors of the Company whose terms expire subsequent to 1983, but it also has a direct impact on the number and identity of nominees required to be elected at the upcoming Annual Meeting of Shareholders in May of 1983. A strikingly similar proposal was reviewed by the Commissions staff in Chicago Milwaukee Corporation (February 14, 1978). The proponent was seeking to abolish the staggered board system and to have an annual election for the Board of Directors. The Commission found the proposal could properly be omitted from the proxy statement on the ground that the proposal, if adopted, "would disqualify certain directors previously elected from completing their terms on the Board and would effect the number of nominees to the Board at the 1978 Annual Meeting in contravention of Rule 14a-8(c)(8)." We are also of the opinion that the Company may properly omit Mr. Wrights proposal from the Proxy Statement pursuant to Rule 14a-8(c)(3) because the proposal is vague and misleading in violation of Rule 14a-9, as discussed below. The omission of vague or misleading shareholder proposals from proxy materials is a well established principle. As drafted, the proposal fails to set forth a plan or means for effectuating the proposed change in the method for electing directors and because it fails to specify the time at which the desired change is to be fully effectuated. In Chicago Milwaukee Corporation, supra, the Commissions staff found that a virtually identical proposal could also properly be omitted from the proxy statement, under Rule 14a-8(c)(3) on the ground that the proposal "may be misleading because it fails to set forth the means for effectuating the proposal for the change in the method for electing directors, such as by an amendment of the Companys Certificate of Incorporation and By-Laws and because it fails to specify the time at which the desired change is to be fully effected." In addition, the "Reasons" section of Mr. Wrights proposal contains ambiguous, misleading and inaccurate implications. For example, the statement that ". . . most other first class companies both large and small in the United States of America have adopted the annual election of all directors system" is a broad and unsupported statement, the inclusion of which in a proxy statement would produce the misleading implication that there is a trend among U.S. corporations to eliminate staggered boards; when, in fact, the trend may be towards the adoption of a staggered system for the election of directors. The reference to "first class" companies also has false and misleading implications. In many instances the staff of the Commission has indicated in no-action letters that vague, indefinite, ambiguous or misleading shareholders proposals violate Rule 14a-9 and may properly be omitted from proxy materials, e.g., Firestone Tire & Rubber Co. (December 20, 1978), Occidental Petroleum Corp. (March 16, 1978), Chemical New York Corp. (March 3, 1978), Automation Industries, Inc., (March 1, 1978), and Chicago Milwaukee Corporation, supra. Very truly yours, CAHILL GORDON & REINDEL INQUIRY LETTER 3Henry Wright DR9-2562-07081, 53 Colfax Rd. Springfield, N.J. Charles L. Gifford, Secretary to the Board of Directors Engelhard (Industries) Corp Menlo Park CN 40 Edison, N. J. 08818 Pursuant to Rule X-14 of the S.E.C., this letter is formal notice to the management of Engelhard Corp that at the 1983 Annual Meeting, or any Special Meeting of shareowners, Henry S. Wright, owner of 51 shares of voting stock will introduce from the floor this resolution. I ask if management chooses to oppose my resolution that both name and address above together with shares owned be printed in the proxy statement and notice of meeting with the text of resolution and statement of reasons. RESOLVED: That the shareowners of Engelhard Corp, assembled in Annual Meeting and by proxy or in person, respectfully request their Board of Directors to take steps necessary to eliminate the Staggering System of Annual Election of Directors, and adopt the system of electing all Directors each year as was done when Charles Engelhard was Chairman. Reasons: Other Chemical and Metal corporations such as Dupont, Kodak, and most other first class companies both large and small in the United States of America have adopted the annual election of all directors system. No one took over Engelhard when we had it. If you agree, please mark your proxy card FOR otherwise it will automatically be cast against by management. Henry Wright CC: S.E.C. Washington, D.C. The Gilberts, N.Y.C. Evelyn Y. Davis, Washington, D.C. Wiama Soss, Federation of Woman Shareowners, N.Y.C. STAFF REPLY LETTERMarch 1, 1983 Irving D. Isko President and Chief Executive Officer Engelhard Corporation Menlo Park, CN 40 Edison, New Jersey 08818 Re: Engelhard Corporation Dear Mr. Isko: This is in regard to your letter, dated January 21, 1983, concerning a request made to Engelhard Corporation ("Company") by Henry S. Wright ("Proponent") to include one shareholder proposal in the Companys proxy soliciting material for its 1983 annual meeting of security holders. Pursuant to Rule 14a-8(d) under the Securities Exchange Act of 1934, your letter indicated the managements intention to exclude this proposal from the Companys proxy material. Your submission included an opinion of counsel on certain legal questions encompassed by the managements position on the proposal. The proposal, the text of which is set forth in the enclosure to your letter of January 21, 1983, requests the Board to take the steps necessary to eliminate the election of Directors on a staggered basis. In your letter, and that of your counsel, the opinion is expressed that the proposal is excludable from the Companys proxy material under paragraphs (c)(8) and (c)(3) of Rule 14a-8, as well as under Rule 14a-9, and certain reasons are cited in support of that opinion. There appears to be some basis for your opinion that the proposal, as presently drafted, may be omitted under Rule 14a-8(c)(8). In this regard, it appears that the proposal, if adopted, would disqualify certain directors previously elected from completing their terms on the Board and would affect the number of nominees to the Board at the 1983 annual meeting in contravention of Rule 14a-8(c)(8), which states that the management may omit a proposal if it "relates to an election to office". Accordingly, unless the Proponent promptly revises the proposal so that it will not be applicable to the election of the directors at the 1983 annual meeting and so that it does not affect the directors who have been elected for terms which do not expire until sometime in the future, this Division will not recommend enforcement action to the Commission if the management omits the proposal from the Companys proxy material. We have the following comments with respect to each of your statements regarding the applicability of Rule 14a-8(c)(3) to the proposal and its supporting statement. 1. There appears to be some basis for your opinion and that of counsel that the proposal is misleading because it fails to set forth the means by which the proposed change in electing directors should be effected, such as an amendment to the Companys Certificate of Incorporation or By-Laws, and because it fails to specify the time at which the desired change is to be implemented. It appears, however, that this first defect could be cured if the Proponent promptly revised the proposal to indicate the proposal is to be effected by an amendment to the Certificate of Incorporation of By-Laws, and that the second defect could be cured if the proposal is revised in accordance with the previous discussion of Rule 14a-8(c)(8). Accordingly, unless the Proponent promptly revises the proposal in the manner indicated, this Division will not recommend enforcement action to the Commission if management omits the proposal from the Companys proxy material. 2. There also appears to be some basis for your opinion that the first paragraph of the supporting statement is misleading unless revised to delete the words "most" and "first class". Assuming that the Proponent revises this paragraph in the manner described, we do not believe that management may rely on Rule 14a-8(c)(3) as a basis for omitting the first paragraph of the supporting statement. 3. There does appear to be some basis for your opinion that the second paragraph of the supporting statement is misleading. Under the circumstances, this Division will not recommend any enforcement action to the Commission if the Company omits the second paragraph of the supporting statement from its proxy material. In connection with the foregoing, your attention is directed to the enclosure, which sets forth a brief discussion of the Divisions informal procedures regarding shareholder proposals. Sincerely, John J. Gorman Attorney Adviser Enclosure cc: Mr. Henry S. Wright 53 Colfax Road Springfield, NJ |
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