Broadridge published report on experience of "early adopters" with notice and access model

• A Frank Discussion on Notice & Access  February 2008

• Interviews with Sara Lee, Pharmos Corp., and Microsoft
• Firms report cost savings but low response rate from retail investors
• E-proxy notice used by Broadridge was not user friendly
• SEC regulatory requirements for e-proxy notice are too restrictive

• IR Web Report  2.20.08

• Includes query whether companies using different notice designs had better participation rates from retail investors

• See also information posted Broadridge on its
  Notice and Access Resource Center
• See Early Adopters below

Employee Benefit Plans   Open Issue

• Plan sponsors are evaluating potential for conflict between e-proxy rules of SEC and Department of Labor (DOL)
• Query whether SEC's notice and access model will satisfy ERISA requirements for delivery of proxy materials
• Commentary

• Faegre & Benson  February 2008

SEC voted to approve universal availability model for proxy distribution

• See Universal Availability below

SEC adopted notice and access model for Internet delivery of proxy materials in January 2007

• Alternative method for delivery

• Voluntary
• Doesn't affect existing SEC filing requirements
• Not available in context of a business combination

• Notice and access model

• Requires 40 days' prior notice about Internet availability
• Shareholders can request physical paper delivery
• Non-issuers can exclude these shareholders
  from their solicitation ("electronic only" solicitation)

• See Notice and Access below

Potential for conflict with state corporation laws

• Adopting release for notice and access model states new rules are not intended to affect any applicable state law requirement concerning the delivery of any document related to a shareholder meeting proxy solicitation
• See California Conflict below

ERISA §404(c) compliance issue
with notice and access model

• Companies may be required to obtain participant consent before this electronic delivery will be effective under ERISA §404(c)

• Haynes & Boone  3.10.08

Intended to reduce costs of proxy solicitation

• Including for contested elections

Initial proposal by SEC in December 2005

• SEC press release  10.11.06

• SEC press release  11.29.05
• Chairman Cox speech  11.29.05
• SEC summary  12.01.05
• See Notice and Access below to access SEC proposal release dated 12.08.05

Final release 34-56135  7.26.07

• Provides shareholders with ability to choose means     (paper copy or Internet website) by which they access proxy materials
• Requires issuers and other soliciting persons to post proxy materials on Internet website and to provide shareholders with Notice of Internet Availability of Proxy Materials
• Shareholder may request paper copy at no charge to shareholder

• Clarifying amendment with regard to shareholder requests for paper or e-mail copies that are received by issuer after meeting:  issuer not required to use First Class mail or to respond within three business days  Rule 14a-16(j)

• Issuer or soliciting person may choose to furnish paper copies of proxy materials along with notice
• 1.01.08 effective date, except Rule Rule 14a-16(d)(3) and Rule 14a-16(j)(3) are effective 10.01.07

• E-proxy notice must identify each matter to be acted on and soliciting person's recommendations (but no supporting statements)  Rule 14a-16(d)(3)
• Obligation to provide copies of proxy materials for one year after meeting  Rule 14a-16(j)(3)

• 1.01.08 compliance date for large accelerated filers (excluding registered investment companies)
• 1.01.09 compliance date for all other issuers (including registered investment companies) and persons other than issuers

• However, voluntary compliance is allowed for proxy solicitations commencing on or after 1.01.08

• Not applicable to business combination transactions
• See Notice and Access below for information on voluntary model for Internet delivery of proxy materials

SEC voted to approve its universal availability model at SEC Open Meeting held in June 2007

• Approved adoption of universal availability model, with staggered implementation

• SEC opening statement  6.20.07
• Archived video webcast  6.20.07

• Proposal release 34-55147  1.22.07

• Click on Table of Contents and expand to               access text of release by section heading

Model provides two options for companies and other soliciting persons  

• Notice only option, which has same requirements             as under notice and access model

• Send Notice of Internet Availability of Proxy Materials to shareholders at least 40 days before meeting date
• Post proxy materials on Internet website 40 days before meeting date
• Send copies of proxy materials to shareholders upon request, at no charge

• Full set delivery option

• Send full set of proxy materials to shareholders
• Provide information required in Notice of Internet Availability of Proxy Materials in its proxy materials or in a separate Notice accompanying full set of proxy materials
• Post proxy materials on Internet website when company distributes proxy materials to shareholders

See SEC Comment Letters below

Full text of approved amendments  IX

Changes approved to following rules

• Rule 14a-3  Information to be furnished to security holders
• Rule 14a-7  Obligations of Registrants
• Rule 14a-16  Internet availability of proxy materials 
• Rule 14a-101  Item 4 to Schedule 14A
• Rule 14b-1  Obligation of Registered Brokers and Dealers
• Rule 14b-2  Obligation of entities that exercise fiduciary powers
• Rule 14c-2  Distribution of information statement
• Rule 14c-3  Annual report to be furnished security holders

SEC has posted final Release No. 34-55146A
with technical amendments to e-proxy rules  1.22.07

• Notice and access model not applicable to business combination transactions

Final release 34-55146   1.22.07

• SEC adopted final rules to enable Internet
  delivery of proxy materials

• Voluntary
• Doesn't affect existing SEC filing requirements
• Shareholder consent not required to furnish materials via notice of Internet availability

• Investors can opt-out and continue to receive paper
• Not available in context of business combination
• Cannot be used before 7.01.07

• Adopting release states the new rules are not intended to affect any applicable state law requirement concerning the delivery of any document related to a shareholder meeting proxy solicitation

• See California Conflict

• Rule 14a-16 outlines notice and access model, including content and other requirements with regard to notice and Internet website used by issuer

• SEC rules also address

• Use and delivery of proxy card
• SEC filing requirements for notice
• "Householding" of notice, with separate proxy voting for each household account
• Timing requirements for issuers
• Requirements for intermediary notices and delivery of proxy materials

• Issuer and intermediary records of shareholder requests to receive materials in paper or e-mail for future solicitations
• Use of notice and access model by other soliciting persons

• SEC has also approved universal availability model for delivery of proxy materials, with staggered implementation

• See Universal Availability

Proposal release 34-52926   12.08.05

• SEC press release   12.13.06
• SEC commissioner statement  12.13.06

See SEC Comment Letters

Full text of amendments  IX

Full text of amended rules
Source: e-CFR

Full text of new rule
Source: e-CFR

SEC_CODE_REF_0090001192884

Full text of amended forms
Source: SEC Forms List

Potential for conflict with state corporation laws

• Adopting release for notice and access model states new rules not intended to affect any state law requirement for delivery of proxy materials

• For example, if state law requires paper delivery of proxy materials to shareholders
• Notice and access model does not provide issuer with alternative means (posting on Internet website) to satisfy state law requirement for paper delivery

California law presents such potential for conflict         with e-proxy initiative by SEC

• California Corporations Code 1501(a) requires board to send annual report to shareholders not later than 120 days after close of fiscal year

• Exception for corporations with less than 100 shareholders of record that have expressly waived the requirement in corporate bylaws
• Applicable to domestic corporations as well as foreign corporations that have principal executive offices or hold board meetings on regular basis in California

• Permits delivery by "electronic transmission by corporation"

• Defined in California Corporations Code 20
• However, it requires unrevoked consent from recipient
• If recipient is an individual, consent must satisfy requirements for consumer consent under E-SIGN Act

• California companies may need to amend stock plans with terms that require delivery of financial statements to shareholders

Sen. Ackerman has introduced bill to resolve conflict

• Senate Bill No. 1409  2.21.08

RRD sample timeline  June 2007

We will be tracking early adopters of "notice and access" procedures for Internet delivery of proxy materials

Security holder information  Privacy

Security holder access  Access

Comments on Universal Availability proposal

• Comments received on Release No. 55147

Comments on Notice and Access proposal

• Comments received on Release No. 52926

Prior comments to SEC

• Comments recommending "access equals delivery"
  for proxy materials
• Society of Corporate Secretaries  1.29.05
• Intel Corp  1.28.05

• McKenna Long & Aldridge  11.13.07
• Paul Weiss  6.20.07
• Proskauer Rose  Jan 2007
• Morgan Lewis  1.24.07
• Paul Weiss  1.26.07
• Nixon Peabody  1.26.07
• DLA Piper  1.26.07

• Hogan & Hartson  1.31.07
• Skadden Arps  Feb 2007
• Covington & Burling  3.19.07
• Haynes & Boone  3.10.08

• For defined contribution plans that are ERISA 404(c) plans and contain company stock with pass-through voting rights
• Companies may be required to obtain participant consent before electronic delivery will be effective under 404(c)