Shareholder Choice Regarding Internet Availability of Proxy Materials

A Small Entity Compliance Guide^*

Introduction

Section 14(a) of the Exchange Act subjects any solicitation of proxies in connection with securities that are registered under Section 12 of the Exchange Act to the filing and disclosure requirements of the SEC's proxy rules, unless an exemption is available. The SEC adopted amendments to its proxy rules that require companies and other soliciting parties to make their proxy materials available on an Internet site (other than the SEC's EDGAR web site). These amendments are designed to enhance the ability of investors to make informed voting decisions and to expand use of the Internet to ultimately lower the costs of proxy solicitations. The amendments are being phased-in over two years. Companies that meet the definition of a large accelerated filer under Exchange Act Rule 12b-2 are required to comply for proxy solicitations commencing on or after January 1, 2008. Other filers and soliciting parties, including registered investment companies, must comply for proxy solicitations commencing on or after January 1, 2009.

Under the amendments, a company or other party that is soliciting proxies has two options for providing the proxy materials to its shareholders—the "notice only" option or the "full set delivery" option. The "notice only" option and the "full set delivery" options are discussed in more detail below.

Notice Only Option

Under the "notice only" option, a company or other soliciting party must post its proxy materials on an Internet web site and send a Notice of Internet Availability of Proxy Materials to its shareholders to inform them of the electronic availability of the proxy materials at least 40 days before the shareholder meeting to which the proxy materials relate. The soliciting party must provide paper or electronic copies of the proxy materials to a requesting shareholder and allow shareholders to make an election to receive paper or electronic copies of proxy materials for future shareholder meetings. In addition, the Notice of Internet Availability of Proxy Materials must meet the following requirements:

• It must be written in plain English and contain a prominent legend explaining how the Internet materials may be accessed;

• Contain the date, time and location of the meeting or date of corporate action;

• Include a clear and impartial identification of each matter the shareholder is voting on; and

• Contain a toll-free number, e-mail address and website address that shareholders may use to request copies of proxy materials (which must be provided at no charge), and include information about attending the shareholder meeting and voting in person.

Companies must also provide shareholders with a means to vote the proxy, such as electronic voting, voting by phone via a toll-free telephone number or a printable or downloadable proxy card, at the time the notice is sent to shareholders.

Full Set Delivery Option

The "full set delivery" option is similar to the traditional proxy delivery process. It allows a company or other soliciting party to deliver a full set of proxy materials to shareholders along with the Notice of Internet Availability of Proxy Materials. A soliciting party is not required to send a separate notice to inform shareholders of the electronic availability of its proxy materials if it has included all of the required information in a prominent place in the proxy materials delivered to shareholders. Under the "full set delivery" option, a soliciting party is not required to provide paper or e-mail copies of its proxy materials upon the request of a shareholder since shareholders would already have the full set of proxy materials. In addition, soliciting parties are not required to send the Notice of Internet Availability of Proxy Materials and a full set of proxy materials at least 40 days before the shareholder meeting date.

The following table compares some of the key differences between the notice only and full set delivery options:

Other Resources

The adopting release for the amendments can be found on the SEC's website at http://www.sec.gov/rules/final/2007/34-56135.pdf.

The SEC's proxy rules can be accessed through the "Corporation Finance" section of the SEC's website at http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml.

Additional materials regarding the application of the proxy rules generally are available at http://www.sec.gov/divisions/corpfin/cfguidance.shtml.

Contacting the SEC

The SEC's Division of Corporation Finance is happy to assist small companies with questions regarding the amendments and the SEC's proxy rules. The Division's Office of Chief Counsel answers questions submitted by e-mail and telephone. You can submit a question by e-mail to cfletters@sec.gov and a staff member of the office will call you to discuss your question. In addition, you can contact the Office of Chief Counsel at (202) 551-3500. Questions on other corporate finance matters concerning small companies may be directed to the Division's Office of Small Business Policy by e-mail at smallbusiness@sec.gov, or by telephone at (202) 551-3460.

^* This guide was prepared by the staff of the U.S. Securities and Exchange Commission as a "small entity compliance guide" under Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996, as amended. The guide summarizes and explains rules adopted by the SEC, but is not a substitute for any rule itself. Only the rule itself can provide complete and definitive information regarding its requirements.

http://www.sec.gov/info/smallbus/secg/shareholderchoice-secg.htm