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SEC's E-Proxy Rules: New Internet Posting and Delivery Requirements

If you haven't already started to get organized for the 2008 proxy season you soon will be starting, so now is a good time to consider the SEC's new "E-Proxy" rules, including new Exchange Act Rule 14a-16. Compliance with these rules is mandatory. They require every issuer that solicits proxies to deliver soliciting material using one of two methods (or a combination of the two). "Large accelerated filers" must comply starting January 1, 2008, and all other issuers must comply starting January 1, 2009 (although they may voluntarily comply starting January 1, 2008). Intermediaries (brokers, fiduciaries, etc.) must also comply with these rules, so issuers must ensure that proxy materials are completed early enough to permit intermediaries to create their own notices and to meet the timing requirements imposed under the rules.

The following discussion summarizes the major items addressed by the new rules. These rules impose many technical requirements, so you should read the SEC's release (http://www.sec.gov/rules/final/2007/34-56135.pdf) and discuss your options and obligations with securities counsel.

As noted above, the new rules will require issuers to deliver proxy materials through either the "notice only option" or the "full set delivery option", although an issuer is not precluded from employing both methods. Either option requires the issuer to post the proxy materials on an Internet website and to implement privacy protections for that website.

Notice Only Option
Under the "notice only option", an issuer will simply send a notice to each record holder at least 40 days before the meeting of stockholders which states the date, time and location of the meeting, summarizes the matters to be acted upon and the issuer's recommendation, if any, with respect to each item, identifies each of the documents constituting the soliciting materials, provides the Internet address at which holders may access these materials, provides information about accessing the proxy card (such as any required identification or control numbers), provides information about attending the meeting and voting in person, and includes a statement that the materials are available upon request free of charge and describes how to make such a request. No other document may accompany the notice. The notice must be filed with the SEC no later than the time the issuer first sends it to stockholders. The issuer may "household" the notice pursuant to Exchange Act Rule 14a-3(e) , which permits, under certain circumstances, the issuer to deliver (by mail, e-mail, fax or similar methods) only one copy of the soliciting materials to all stockholders who share the same address.

Issuers that choose the "notice only option" must provide stockholders with a method of executing proxies at the time the notice is first sent out, which means that all soliciting materials must be finalized at the time the notice is sent. The SEC does not mandate a particular voting method, but suggests an electronic voting platform, a toll-free telephone number, or a printable or downloadable proxy card on an Internet website as examples. No paper or e-mail proxy card may be delivered to a stockholder until 10 days after the notice is sent to that stockholder, unless all proxy soliciting materials preceded or accompanied the proxy card via the same medium.

An issuer that chooses the "notice only option" must provide, free of charge, paper or e-mail copies of the soliciting materials to a requesting stockholder. The issuer must also allow a stockholder to make a permanent election to receive paper or e-mail copies of future soliciting materials.

Full Set Delivery Option
Alternatively, issuers can employ the "full set delivery method" if they do not anticipate finalizing their proxy materials at least 40 days prior to the meeting of stockholders or if they wish to stick with the traditional proxy delivery method. The "full set delivery option" contemplates the delivery of a complete copy of all soliciting materials to record holders, plus a notice which states the date, time and location of the meeting, summarizes the matters to be acted upon and the issuer's recommendation, if any, with respect to each item, identifies each of the documents constituting the soliciting materials, provides the Internet address at which holders may access these materials, provides information about accessing the proxy card (such as any required identification or control numbers), and provides information about attending the meeting and voting in person. The foregoing information may be incorporated into the proxy materials, in which case a separate notice is not required. Because the issuer will provide holders with a complete set of the proxy materials, it is not required to provide another copy upon the request of a holder and no statement to that effect is required. The issuer may "household" the soliciting materials pursuant to Exchange Act Rule 14a-3(e).

Website Requirements
Regardless of the delivery option that the issuer chooses, it must make all proxy materials publicly-accessible, free of charge, at the Internet web address specified in the notice, and these materials must remain available on the website through the conclusion of the meeting of stockholders. Unfortunately, issuers cannot rely on the SEC's EDGAR website to satisfy this requirement, so a separate site maintained by or for the issuer is required. The materials must be posted in a format that is convenient for both reading and printing. In the case of the "notice only option", the materials must be posted no later than the date the notice is first delivered to stockholders. In the case of the "full set delivery option", the materials must be posted no later than the date the proxy materials are first sent to stockholders.

The Internet website on which proxy materials are posted must be engineered in a manner that does not infringe on the anonymity of a person accessing that website. Thus, issuers must refrain from installing cookies or other tracking features on the website. This obligation may require an issuer to segregate the proxy webpage from the issuer's main website or to create a new website altogether. The issuer may not use any e-mail address provided by a stockholder solely to request a copy of proxy materials for any purpose other than to send a copy of those materials to the stockholder. The issuer also may not disclose a stockholder's e-mail address to any person, except to its agent or any employee of the issuer, and then only for the purpose of facilitating the delivery of the requested proxy materials.

If you have any questions about any of these changes, please call or e-mail your regular Gordon Feinblatt contact or one of the following members of the firm's Securities Law Practice Group:











Abba David PoliakoffMichele L. BresnickAndrew D. Bulgin
410-576-4067410-576-4216410-576-4280