Federal Proxy Rules

A. Introduction

1. Nomenclature

   1. Proxy holder: person authorized to vote shares on a shareholder’s behalf;

   2. Proxy or proxy form: written instrument in which such authorization is embodied

   3. Proxy solicitation: process by which shareholders are asked to give their proxies

   4. Proxy statement: written statement sent to shareholders as a means of proxy solicitation

   5. Proxy materials: proxy statement and proxy form

2. Securities Exchange Act of 1934

   1. What is subject to the rule

      1. CORPORATION must be subject to the SEC rules

         1. The corporation has issued securities that are EXCHANGE LISTED OR

            • EXCHANGE is something such as the NYSE, NASDAQ

         2. The corporation is

            • Engaged in interstate commerce

            • Has assets valued at more than $10 million, and

            • Has 2000 or more RECORD HOLDERS

              • Registered holder (banks, broker), not beneficial holder.

              • This means the second prong of SEC rule application is extremely unlikely to trigger.

         3. 15(d) firm has registered securities pursuant to a public offering of its securities and there are not less than 300 holders of that class of security

      2. Must be a proxy solicitation

         1. Rule 14a-1(f): “proxy” is “every proxy, consent, or authorization within the meaning of § 14(a) of the Act”; consent or authorization of a proxy “may take the form of failure to object or to dissent”

            • Includes advising someone to not vote for something or encouraging someone to vote for something

         2. Rule 14a-1(l): proxy solicitation includes “any request for a proxy whether or not accompanied by or included in a form of proxy,” “any request to execute or not to execute, or to revoke a proxy” or “the furnishing of a form of proxy or other communication to security holders under circumstances reasonably calculated to result in the procurement, withholding, or revocation of a proxy”

      3. Must not fall in the following exceptions:

         1. 14a-1(l)(2) The terms [“solicit” and “solicitation”] do not apply … to … (iv) A communication by a security holder who does not otherwise engage in a proxy solicitation (other than a solicitation exempt under Rule 14a-2) stating how the security holder intends to vote and the reasons therefor, provided that the communication: (A) Is made by means of speeches in public forums, press releases, published or broadcast opinions, statements, or advertisements appearing in a broadcast media, or newspaper, magazine or other bona fide publication disseminated on a regular basis, (B) Is directed to persons to whom the security holder owes a fiduciary duty in connection with the voting of securities of a registrant held by the security holder, or (C) Is made in response to unsolicited requests for additional information with respect to a prior communication by the security holder made pursuant to this paragraph (l)(2)(iv)

         2. 14a-2(b) [Proxy] Rules … do not apply to the following: (1) Any solicitation by or on behalf of any person WHO DOES NOT, at any time during such solicitation, SEEK directly or indirectly, either on its own or another’s behalf, THE POWER TO ACT AS PROXY for a security holder and does not furnish or otherwise request, or act on behalf of a person who furnishes or requests, a form of revocation, abstention, consent, or authorization.

            • “THE ISS EXCEPTION”: ALLOWS PROXY ADVISORY FIRMS TO ISSUE OPINIONS

         3. (2) Any solicitation made otherwise than on...

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