**Division of Corporation Finance**

**Securities and Exchange Commission**

**Shareholder Proposals**

Staff Legal Bulletin No. 14 (CF)

 

**Action:** Publication of CF Staff Legal Bulletin

 

**Date:** July 13, 2001

 

**Summary:** This staff legal bulletin provides information for
companies and shareholders on rule 14a-8 of the Securities Exchange Act
of 1934.

 

**Supplementary Information:** The statements in this legal bulletin
represent the views of the Division of Corporation Finance. This
bulletin is not a rule, regulation or statement of the Securities and
Exchange Commission. Further, the Commission has neither approved nor
disapproved its content.

 

**Contact Person:** For further information, please contact Jonathan
Ingram,

Michael Coco, Lillian Cummins or Keir Gumbs at (202) 942-2900.

## [What is the purpose of this bulletin]{.underline}?

The Division of Corporation Finance processes hundreds of rule 14a-8
no-action requests each year. We believe that companies and shareholders
may benefit from information that we can provide based on our experience
in processing these requests. Therefore, we prepared this bulletin in
order to

-   explain the rule 14a-8 no-action process, as well as our role in
    this process;

```{=html}
<!-- -->
```
-   provide guidance to companies and shareholders by expressing our
    views on some issues and questions that commonly arise under

> rule 14a-8; and

-   suggest ways in which both companies and shareholders can facilitate
    our review of no-action requests.

Because the substance of each proposal and no-action request differs,
this bulletin primarily addresses procedural matters that are common to
companies and shareholders. However, we also discuss some substantive
matters that are of interest to companies and shareholders alike.

We structured this bulletin in a question and answer format so that it
is easier to understand and we can more easily respond to inquiries
regarding its contents. The

references to "we," "our" and "us" are to the Division of Corporation
Finance. You can find a copy of rule 14a-8 in Release No. 34-40018,
dated May 21, 1998, which is located on the Commission's website at
[www.sec.gov/rules/final/34-40018.htm](http://www.sec.gov/rules/final/34-40018.htm).

## [Rule 14a-8 and the no-action process]{.underline}.

## What is rule 14a-8?

Rule 14a-8 provides an opportunity for a shareholder owning a relatively
small amount of a company's securities to have his or her proposal
placed alongside management's proposals in that company's proxy
materials for presentation to a vote at an annual or special meeting of
shareholders. It has become increasingly popular because it provides an
avenue for communication between shareholders and companies, as well as
among shareholders themselves. The rule generally requires the company
to include the proposal unless the shareholder has not complied with the
rule's procedural requirements or the proposal falls within one of the
13 substantive bases for exclusion described in the table below.

+--------------+-------------------------------------------------------+
| ###          | ####  {#section-1 .unnumbered}                        |
|   {#section  |                                                       |
| .unnumbered} | #### Description {#description .unnumbered}           |
|              |                                                       |
| ### Su       |                                                       |
| bstantive Ba |                                                       |
| sis {#substa |                                                       |
| ntive-basis  |                                                       |
| .unnumbered} |                                                       |
+--------------+-------------------------------------------------------+
| Rule         | The proposal is not a proper subject for action by    |
| 14a-8(i)(1)  | shareholders under the laws of the jurisdiction of    |
|              | the company's organization.                           |
+--------------+-------------------------------------------------------+
| Rule         | The proposal would, if implemented, cause the company |
| 14a-8(i)(2)  | to violate any state, federal or foreign law to which |
|              | it is subject.                                        |
+--------------+-------------------------------------------------------+
| Rule         | The proposal or supporting statement is contrary to   |
| 14a-8(i)(3)  | any of the Commission\'s proxy rules, including rule  |
|              | 14a-9, which prohibits materially false or misleading |
|              | statements in proxy soliciting materials.             |
+--------------+-------------------------------------------------------+
| Rule         | The proposal relates to the redress of a personal     |
| 14a-8(i)(4)  | claim or grievance against the company or any other   |
|              | person, or is designed to result in a benefit to the  |
|              | shareholder, or to further a personal interest, which |
|              | is not shared by the other shareholders at large.     |
+--------------+-------------------------------------------------------+

  --------------- -------------------------------------------------------
  Rule            The proposal relates to operations that account for
  14a-8(i)(5)     less than 5% of the company's total assets at the end
                  of its most recent fiscal year, and for less than 5% of
                  its net earnings and gross sales for its most recent
                  fiscal year, and is not otherwise significantly related
                  to the company's business.

  Rule            The company would lack the power or authority to
  14a-8(i)(6)     implement the proposal.

  Rule            The proposal deals with a matter relating to the
  14a-8(i)(7)     company's ordinary business operations.

  Rule            The proposal relates to an election for membership on
  14a-8(i)(8)     the company's board of directors or analogous governing
                  body.

  Rule            The proposal directly conflicts with one of the
  14a-8(i)(9)     company's own proposals to be submitted to shareholders
                  at the same meeting.

  Rule            The company has already substantially implemented the
  14a-8(i)(10)    proposal.

  Rule            The proposal substantially duplicates another proposal
  14a-8(i)(11)    previously submitted to the company by another
                  shareholder that will be included in the company's
                  proxy materials for the same meeting.

  Rule            The proposal deals with substantially the same subject
  14a-8(i)(12)    matter as another proposal or proposals that previously
                  has or have been included in the company's proxy
                  materials within a specified time frame and did not
                  receive a specified percentage of the vote. Please
                  refer to questions and answers F.2, F.3 and F.4 for
                  more complete descriptions of this basis.

  Rule            The proposal relates to specific amounts of cash or
  14a-8(i)(13)    stock dividends.
  --------------- -------------------------------------------------------

## How does rule 14a-8 operate?

The rule operates as follows:

-   the shareholder must provide a copy of his or her proposal to the
    company by the deadline imposed by the rule;

-   if the company intends to exclude the proposal from its proxy
    materials, it must submit its reason(s) for doing so to the
    Commission and simultaneously provide the shareholder with a copy of
    that submission. This submission to the Commission of reasons for
    excluding the proposal is commonly referred to as a no-action
    request;

-   the shareholder may, but is not required to, submit a reply to us
    with a copy to the company; and

-   we issue a no-action response that either concurs or does not concur
    in the company's view regarding exclusion of the proposal.

## What are the deadlines contained in rule 14a-8?

Rule 14a-8 establishes specific deadlines for the shareholder proposal
process. The following table briefly describes those deadlines.

+------------+---------------------------------------------------------+
| 120 days   | Proposals for a regularly scheduled annual meeting must |
| before the | be received at the company's principal executive        |
| release    | offices not less than 120 calendar days before the      |
| date       | release date of the previous year's annual meeting      |
| disclosed  | proxy statement. Both the release date and the deadline |
| in the     | for receiving rule 14a-8 proposals for the next annual  |
| previous   | meeting should be identified in that proxy statement.   |
| year's     |                                                         |
| proxy      |                                                         |
| statement  |                                                         |
+------------+---------------------------------------------------------+
| 14-day     | If a company seeks to exclude a proposal because the    |
| notice of  | shareholder has not complied with an eligibility or     |
| defect(s)/ | procedural requirement of                               |
|            |                                                         |
| response   | rule 14a-8, generally, it must notify the shareholder   |
| to notice  | of the alleged defect(s) within 14 calendar days of     |
| of         | receiving the proposal. The shareholder then has 14     |
| defect(s)  | calendar days after receiving the notification to       |
|            | respond. Failure to cure the defect(s) or respond in a  |
|            | timely manner may result in exclusion of the proposal.  |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| 80 days    | If a company intends to exclude a proposal from its     |
| before the | proxy materials, it must submit its no-action request   |
| company    | to the Commission no later than                         |
| files its  |                                                         |
| definitive | 80 calendar days before it files its definitive proxy   |
| proxy      | statement and form of proxy with the Commission unless  |
| statement  | it demonstrates "good cause" for missing the deadline.  |
| and form   | In addition, a company must simultaneously provide the  |
| of proxy   | shareholder with a copy of its no-action request.       |
+------------+---------------------------------------------------------+
| 30 days    | If a proposal appears in a company's proxy materials,   |
| before the | the company may elect to include its reasons as to why  |
| company    | shareholders should vote against the proposal. This     |
| files its  | statement of reasons for voting against the proposal is |
| definitive | commonly referred to as a statement in opposition.      |
| proxy      | Except as explained in the box immediately below, the   |
| statement  | company is required to provide the shareholder with a   |
| and form   | copy of its statement in opposition no later than 30    |
| of proxy   | calendar days before it files its definitive proxy      |
|            | statement and form of proxy.                            |
+------------+---------------------------------------------------------+
| Five days  | If our no-action response provides for shareholder      |
| after the  | revision to the proposal or supporting statement as a   |
| company    | condition to requiring the company to include it in its |
| has        | proxy materials, the company must provide the           |
| received a | shareholder with a copy of its statement in opposition  |
| revised    | no later than five calendar days after it receives a    |
| proposal   | copy of the revised proposal.                           |
+------------+---------------------------------------------------------+

In addition to the specific deadlines in rule 14a-8, our informal
procedures often rely on timely action. For example, if our no-action
response requires that the shareholder revise the proposal or supporting
statement, our response will afford the shareholder seven calendar days
from the date of receiving our response to provide the company with the
revisions. In this regard, please refer to questions and answers B.12.a
and B.12.b.

## What is our role in the no-action process?

Our role begins when we receive a no-action request from a company. In
these no-action requests, companies often assert that a proposal is
excludable under one or more parts of rule 14a-8. We analyze each of the
bases for exclusion that a company

asserts, as well as any arguments that the shareholder chooses to set
forth, and determine whether we concur in the company's view.

The Division of Investment Management processes rule 14a-8 no-action
requests submitted by registered investment companies and business
development companies.

+-----------------------------------------------------------------------+
| **Rule 14a-8 no-action requests submitted by registered investment    |
| companies and business development companies, as well as shareholder  |
| responses to those requests, should be sent to**                      |
|                                                                       |
| U.S. Securities and Exchange Commission                               |
|                                                                       |
| Division of Investment Management                                     |
|                                                                       |
| Office of Chief Counsel                                               |
|                                                                       |
| 450 Fifth Street, N.W.                                                |
|                                                                       |
| Washington, D.C. 20549                                                |
|                                                                       |
| ###### All other r                                                    |
| ule 14a-8 no-action requests and shareholder responses to those reque |
| sts should be sent to {#all-other-rule-14a-8-no-action-requests-and-s |
| hareholder-responses-to-those-requests-should-be-sent-to .unnumbered} |
|                                                                       |
| U.S. Securities and Exchange Commission                               |
|                                                                       |
| Division of Corporation Finance                                       |
|                                                                       |
| Office of Chief Counsel                                               |
|                                                                       |
| 450 Fifth Street, N.W.                                                |
|                                                                       |
| Washington, D.C. 20549                                                |
+-----------------------------------------------------------------------+

## What factors do we consider in determining whether to concur in a company's view regarding exclusion of a proposal from the proxy statement?

The company has the burden of demonstrating that it is entitled to
exclude a proposal, and we will not consider any basis for exclusion
that is not advanced by the company. We analyze the prior no-action
letters that a company and a shareholder cite in support of their
arguments and, where appropriate, any applicable case law. We also may
conduct our own research to determine whether we have issued additional
letters that support or do not support the company's and shareholder's
positions. Unless a company has demonstrated that it is entitled to
exclude a proposal, we will not concur in its view that it may exclude
that proposal from its proxy materials.

## Do we base our determinations solely on the subject matter of the proposal?

No. We consider the specific arguments asserted by the company and the
shareholder, the way in which the proposal is drafted and how the
arguments and our prior no-action responses apply to the specific
proposal and company at issue. Based on these considerations, we may
determine that company X may exclude a proposal but company Y cannot
exclude a proposal that addresses the same or similar subject matter.
The following chart illustrates this point by showing that variations in
the language of a proposal, or different bases cited by a company, may
result in different responses.

As shown below, the first and second examples deal with virtually
identical proposals, but the different company arguments resulted in
different responses. In the second and third examples, the companies
made similar arguments, but differing language in the proposals resulted
in different responses.

+---------+------------------+------------+---------+----------------+
| **Co    | **Proposal**     | **Bases    | **Date  | ###            |
| mpany** |                  | for        | of our  | # Our response |
|         |                  | exclusion  | res     |  {#our-respons |
|         |                  | that the   | ponse** | e .unnumbered} |
|         |                  | company    |         |                |
|         |                  | cited**    |         |                |
+---------+------------------+------------+---------+----------------+
| PG&E    | Adopt a policy   | Rule       | Feb.    | We did not     |
| Corp.   | that independent | 14a-8(b)   | 21,     | concur in      |
|         | directors are    | only       | 2000    | PG&E's view    |
|         | appointed to the |            |         | that it could  |
|         | audit,           |            |         | exclude the    |
|         | compensation and |            |         | proposal. PG&E |
|         | nomination       |            |         | did not        |
|         | committees.      |            |         | demonstrate    |
|         |                  |            |         | that the       |
|         |                  |            |         | shareholder    |
|         |                  |            |         | failed to      |
|         |                  |            |         | satisfy the    |
|         |                  |            |         | rule's minimum |
|         |                  |            |         | ownership      |
|         |                  |            |         | requirements.  |
|         |                  |            |         | PG&E included  |
|         |                  |            |         | the proposal   |
|         |                  |            |         | in its proxy   |
|         |                  |            |         | materials.     |
+---------+------------------+------------+---------+----------------+
| PG&E    | Adopt a bylaw    | Rule       | Jan.    | We concurred   |
| Corp.   | that independent | 1          | 22,     | in PG&E's view |
|         | directors are    | 4a-8(i)(6) | 2001    | that it could  |
|         | appointed for    | only       |         | exclude the    |
|         | all future       |            |         | proposal. PG&E |
|         | openings on the  |            |         | demonstrated   |
|         | audit,           |            |         | that it lacked |
|         | compensation and |            |         | the power or   |
|         | nomination       |            |         | authority to   |
|         | committees.      |            |         | implement the  |
|         |                  |            |         | proposal. PG&E |
|         |                  |            |         | did not        |
|         |                  |            |         | include the    |
|         |                  |            |         | proposal in    |
|         |                  |            |         | its proxy      |
|         |                  |            |         | materials.     |
+---------+------------------+------------+---------+----------------+
| General | Adopt a bylaw    | Rules      | Mar.    | We did not     |
| Motors  | requiring a      | 1          | 22,     | concur in GM's |
| Corp.   | *transition to*  | 4a-8(i)(6) | 2001    | view that it   |
|         | independent      | and        |         | could exclude  |
|         | directors for    | 14         |         | the proposal.  |
|         | each seat on the | a-8(i)(10) |         | GM did not     |
|         | audit,           |            |         | demonstrate    |
|         | compensation and |            |         | that it lacked |
|         | nominating       |            |         | the power or   |
|         | committees as    |            |         | authority to   |
|         | openings occur   |            |         | implement the  |
|         | (emphasis        |            |         | proposal or    |
|         | added).          |            |         | that it had    |
|         |                  |            |         | substantially  |
|         |                  |            |         | implemented    |
|         |                  |            |         | the proposal.  |
|         |                  |            |         | GM included    |
|         |                  |            |         | the proposal   |
|         |                  |            |         | in its proxy   |
|         |                  |            |         | materials.     |
+---------+------------------+------------+---------+----------------+

## Do we judge the merits of proposals?

No. We have no interest in the merits of a particular proposal. Our
concern is that shareholders receive full and accurate information about
all proposals that are, or should be, submitted to them under rule
14a-8.

## Are we required to respond to no-action requests?

No. Although we are not required to respond, we have, as a convenience
to both companies and shareholders, engaged in the informal practice of
expressing our enforcement position on these submissions through the
issuance of no-action responses. We do this to assist both companies and
shareholders in complying with the proxy rules.

## Will we comment on the subject matter of pending litigation?

No. Where the arguments raised in the company's no-action request are
before a court of law, our policy is not to comment on those arguments.
Accordingly, our

no-action response will express no view with respect to the company's
intention to exclude the proposal from its proxy materials.

## How do we respond to no-action requests?

We indicate either that there appears to be some basis for the company's
view that it may exclude the proposal or that we are unable to concur in
the company's view that it may exclude the proposal. Because the company
submits the no-action request, our response is addressed to the company.
However, at the time we respond to a no-action request, we provide all
related correspondence to both the company and the shareholder. These
materials are available in the Commission's Public Reference Room and on
commercially available, external databases.

## What is the effect of our no-action response?

Our no-action responses only reflect our informal views regarding the
application of rule 14a-8. We do not claim to issue "rulings" or
"decisions" on proposals that companies indicate they intend to exclude,
and our determinations do not and cannot adjudicate the merits of a
company's position with respect to a proposal. For example, our decision
not to recommend enforcement action does not prohibit a shareholder from
pursuing rights that he or she may have against the company in court
should management exclude a proposal from the company's proxy materials.

## What is our role after we issue our no-action response?

Under rule 14a-8, we have a limited role after we issue our no-action
response. In addition, due to the large number of no-action requests
that we receive between the months of December and February, the
no-action process must be efficient. As described in answer B.2, above,
rule 14a-8 envisions a structured process under which the company
submits the request, the shareholder may reply and we issue our
response. When shareholders and companies deviate from this structure or
are unable to resolve differences, our time and resources are diverted
and the process breaks down. Based on our experience, this most often
occurs as a result of friction between companies and shareholders and
their inability to compromise. While we are always available to
facilitate the fair and efficient application of the rule, the operation
of the rule, as well as the no-action process, suffers when our role
changes from an issuer of responses to an arbiter of disputes. The
following questions and answers are examples of how we view our limited
role after issuance of our no-action response.

## If our no-action response affords the shareholder additional time to provide documentation of ownership or revise the proposal, but the company does not believe that the documentation or revisions 

## comply with our no-action response, should the company submit a new no-action request? {#comply-with-our-no-action-response-should-the-company-submit-a-new-no-action-request .unnumbered}

No. For example, our no-action response may afford the shareholder seven
days to provide documentation demonstrating that he or she satisfies the
minimum ownership requirements contained in rule 14a-8(b). If the
shareholder provides the required documentation eight days after
receiving our no-action response, the company should not submit a new
no-action request in order to exclude the proposal. Similarly, if we
indicate in our response that the shareholder must provide factual
support for a sentence in the supporting statement, the company and the
shareholder should work together to determine whether the revised
sentence contains appropriate factual support.

## If our no-action response affords the shareholder an additional seven days to provide documentation of ownership or revise the proposal, who should keep track of when the seven-day period begins to run?

When our no-action response gives a shareholder time, it is measured
from the date the shareholder receives our response. As previously noted
in answer B.10, we send our response to both the company and the
shareholder. However, the company is responsible for determining when
the seven-day period begins to run. In order to avoid controversy, the
company should forward a copy of our response to the shareholder by a
means that permits the company to prove the date of receipt.

## Does rule 14a-8 contemplate any other involvement by us after we issue a no-action response?

Yes. If a shareholder believes that a company's statement in opposition
is materially false or misleading, the shareholder may promptly send a
letter to us and the company explaining the reasons for his or her view,
as well as a copy of the proposal and statement in opposition. Just as a
company has the burden of demonstrating that it is entitled to exclude a
proposal, a shareholder should, to the extent possible, provide us with
specific factual information that demonstrates the inaccuracy of the
company's statement in opposition. We encourage shareholders and
companies to work out these differences before contacting us.

## What must a company do if, before we have issued a no-action response, the shareholder withdraws the proposal or the company decides to include the proposal in its proxy materials?

If the company no longer wishes to pursue its no-action request, the
company should provide us with a letter as soon as possible withdrawing
its no-action request. This allows us to allocate our resources to other
pending requests. The company should also provide the shareholder with a
copy of the withdrawal letter.

## If a company wishes to withdraw a no-action request, what information should its withdrawal letter contain?

In order for us to process withdrawals efficiently, the company's letter
should contain

-   a statement that either the shareholder has withdrawn the proposal
    or the company has decided to include the proposal in its proxy
    materials;

-   if the shareholder has withdrawn the proposal, a copy of the
    shareholder's signed letter of withdrawal, or some other indication
    that the shareholder has withdrawn the proposal;

-   if there is more than one eligible shareholder, the company must
    provide documentation that all of the eligible shareholders have
    agreed to withdraw the proposal;

-   if the company has agreed to include a revised version of the
    proposal in its proxy materials, a statement from the shareholder
    that he or she accepts the revisions; and

-   an affirmative statement that the company is withdrawing its
    no-action request.

## [Questions regarding the eligibility and procedural requirements of the rule]{.underline}.

Rule 14a-8 contains eligibility and procedural requirements for
shareholders who wish to include a proposal in a company's proxy
materials. Below, we address some of the common questions that arise
regarding these requirements.

## To be eligible to submit a proposal, rule 14a-8(b) requires the shareholder to have continuously held at least \$2,000 in market value, or 1%, of the company's securities entitled to be voted on the proposal at the meeting for at least one year by the date of submitting the proposal. Also, the shareholder must continue to hold those securities through the date of the meeting. The following questions and answers address issues regarding shareholder eligibility.

## How do you calculate the market value of the shareholder's securities? 

Due to market fluctuations, the value of a shareholder's investment in
the company may vary throughout the year before he or she submits the
proposal.

In order to determine whether the shareholder satisfies the \$2,000
threshold, we look at whether, on any date within the 60 calendar days
before the date the shareholder submits the proposal, the shareholder's
investment is valued at \$2,000 or greater, based on the average of the
bid and ask prices. Depending on where the company is listed, bid and
ask prices may not always be available. For example, bid and ask prices
are not provided for companies listed on the New York Stock Exchange.
Under these circumstances, companies and shareholders should determine
the market value by multiplying the number of securities the shareholder
held for the one-year period by the highest *selling* price during the
60 calendar days before the shareholder submitted the proposal.

For purposes of this calculation, it is important to note that a
security's highest selling price is not necessarily the same as its
highest closing price.

## What type of security must a shareholder own to be eligible to submit a proposal?

A shareholder must own company securities entitled to be voted on the
proposal at the meeting.

+-----------------------------------------------------------------------+
| **Example**                                                           |
|                                                                       |
| **A company receives a proposal relating to executive compensation    |
| from a shareholder who owns only shares of the company's class B      |
| common stock. The company's class B common stock is entitled to vote  |
| only on the election of directors. Does the shareholder's ownership   |
| of only class B stock provide a basis for the company to exclude the  |
| proposal?**                                                           |
|                                                                       |
| Yes. This would provide a basis for the company to exclude the        |
| proposal because the shareholder does not own securities entitled to  |
| be voted on the proposal at the meeting.                              |
+-----------------------------------------------------------------------+

## How should a shareholder's ownership be substantiated? 

Under rule 14a-8(b), there are several ways to determine whether a
shareholder has owned the minimum amount of company securities entitled
to be voted on the proposal at the meeting for the required time period.
If the shareholder appears in the company's records as a registered
holder, the company can verify the shareholder's eligibility
independently. However, many shareholders hold their securities
indirectly through a broker or bank. In the event that the shareholder
is not the registered holder, the shareholder is responsible for proving
his or her eligibility to submit a proposal to the company. To do so,
the shareholder must do one of two things. He or she can submit a
written statement from the record holder of the securities verifying
that the shareholder has owned the securities continuously for one year
as of the time the shareholder submits the proposal. Alternatively, a
shareholder who has filed a Schedule 13D, Schedule 13G, Form 4 or Form 5
reflecting ownership of the securities as of or before the date on which
the one-year eligibility period begins may submit copies of these forms
and any subsequent amendments reporting a change in ownership level,
along with a written statement that he or she has owned the required
number of securities continuously for one year as of the time the
shareholder submits the proposal.

## Does a written statement from the shareholder's investment adviser verifying that the shareholder held the securities continuously for at least one year before submitting the proposal demonstrate sufficiently continuous ownership of the securities?

The written statement must be from the record holder of the
shareholder's securities, which is usually a broker or bank. Therefore,
unless the investment adviser is also the record holder, the statement
would be insufficient under the rule.

## Do a shareholder's monthly, quarterly or other periodic investment statements demonstrate sufficiently continuous ownership of the securities?

No. A shareholder must submit an affirmative written statement from the
record holder of his or her securities that specifically verifies that
the shareholder owned the securities *continuously* for a period of one
year as of the time of submitting the proposal.

## If a shareholder submits his or her proposal to the company on June 1, does a statement from the record holder verifying that the shareholder owned the securities continuously for one year as of May 30 of the same year demonstrate sufficiently continuous ownership of the securities as of the time he or she submitted the proposal?

No. A shareholder must submit proof from the record holder that the
shareholder continuously owned the securities for a period of one year
as of the time the shareholder submits the proposal.

##  {#section-2 .unnumbered}

## Should a shareholder provide the company with a written statement that he or she intends to continue holding the securities through the date of the shareholder meeting?

Yes. The shareholder must provide this written statement regardless of
the method the shareholder uses to prove that he or she continuously
owned the securities for a period of one year as of the time the
shareholder submits the proposal.

## In order for a proposal to be eligible for inclusion in a company's proxy materials, rule 14a-8(d) requires that the proposal, including any accompanying supporting statement, not exceed 500 words. The following questions and answers address issues regarding the 

## 500-word limitation. {#word-limitation. .unnumbered}

## May a company count the words in a proposal's "title" or "heading" in determining whether the proposal exceeds the 500-word limitation?

Any statements that are, in effect, arguments in support of the proposal
constitute part of the supporting statement. Therefore, any "title" or
"heading" that meets this test may be counted toward the 500-word
limitation.

## Does referencing a website address in the proposal or supporting statement violate the 500-word limitation of rule 14a-8(d)?

No. Because we count a website address as one word for purposes of the

500-word limitation, we do not believe that a website address raises the
concern that

rule 14a-8(d) is intended to address. However, a website address could
be subject to exclusion if it refers readers to information that may be
materially false or misleading, irrelevant to the subject matter of the
proposal or otherwise in contravention of the proxy rules. In this
regard, please refer to question and answer F.1.

## Rule 14a-8(e)(2) requires that proposals for a regularly scheduled annual meeting be received at the company's principal executive offices by a date not less than 120 calendar days before the date of the company's proxy statement released to shareholders in connection with the previous year's annual meeting. The following questions and answers address a number of issues that come up in applying this provision.

## How do we interpret the phrase "before the date of the company's proxy statement released to shareholders?"

##  {#section-3 .unnumbered}

We interpret this phrase as meaning the approximate date on which the
proxy statement and form of proxy were first sent or given to
shareholders. For example, if a company having a regularly scheduled
annual meeting files its definitive proxy statement and form of proxy
with the Commission dated April 1, 2001, but first sends or gives the
proxy statement to shareholders on April 15, 2001, as disclosed in its
proxy statement, we will refer to the April 15, 2001 date as the release
date. The company and shareholders should use April 15, 2001 for
purposes of calculating the 120-day deadline in rule 14a-8(e)(2).

## How should a company that is planning to have a regularly scheduled annual meeting calculate the deadline for submitting proposals?

> The company should calculate the deadline for submitting proposals as
> follows:

-   start with the release date disclosed in the previous year's proxy
    statement;

-   increase the year by one; and

-   count back 120 calendar days.

+-----------------------------------------------------------------------+
| ##  {#section-4 .unnumbered}                                          |
|                                                                       |
| ## Examples {#examples .unnumbered}                                   |
|                                                                       |
| **If a company is planning to have a regularly scheduled annual       |
| meeting in**                                                          |
|                                                                       |
| **May of 2003 and the company disclosed that the release date for its |
| 2002 proxy statement was April 14, 2002, how should the company       |
| calculate the deadline for submitting rule 14a-8 proposals for the    |
| company's 2003 annual meeting?**                                      |
|                                                                       |
| -   The release date disclosed in the company's 2002 proxy statement  |
|     was                                                               |
|                                                                       |
| April 14, 2002.                                                       |
|                                                                       |
| -   Increasing the year by one, the day to begin the calculation is   |
|     April 14, 2003.                                                   |
|                                                                       |
| -   "Day one" for purposes of the calculation is April 13, 2003.      |
|                                                                       |
| -   "Day 120" is December 15, 2002.                                   |
|                                                                       |
| -   The 120-day deadline for the 2003 annual meeting is December 15,  |
|     2002.                                                             |
|                                                                       |
| -   A rule 14a-8 proposal received after December 15, 2002 would be   |
|     untimely.                                                         |
|                                                                       |
| ## If the 120^t                                                       |
| h^ calendar day before the release date disclosed in the previous yea |
| r's proxy statement is a Saturday, Sunday or federal holiday, does th |
| is change the deadline for receiving rule 14a-8 proposals? {#if-the-1 |
| 20th-calendar-day-before-the-release-date-disclosed-in-the-previous-y |
| ears-proxy-statement-is-a-saturday-sunday-or-federal-holiday-does-thi |
| s-change-the-deadline-for-receiving-rule-14a-8-proposals .unnumbered} |
|                                                                       |
| No. The deadline for receiving rule 14a-8 proposals is always the     |
| 120^th^ calendar day before the release date disclosed in the         |
| previous year's proxy statement. Therefore, if the deadline falls on  |
| a Saturday, Sunday or federal holiday, the company must disclose this |
| date in its proxy statement, and rule 14a-8 proposals received after  |
| business reopens would be untimely.                                   |
+-----------------------------------------------------------------------+

## How does a shareholder know where to send his or her proposal? 

The proposal must be received at the company's principal executive
offices. Shareholders can find this address in the company's proxy
statement. If a shareholder sends a proposal to any other location, even
if it is to an agent of the company or to another company location, this
would not satisfy the requirement.

## How does a shareholder know if his or her proposal has been received by the deadline? 

##   {#section-5 .unnumbered}

A shareholder should submit a proposal by a means that allows him or her
to determine when the proposal was received at the company's principal
executive offices.

## Rule 14a-8(h)(1) requires that the shareholder or his or her qualified representative attend the shareholders' meeting to present the proposal. Rule 14a-8(h)(3) provides that a company may exclude a shareholder's proposals for two calendar years if the company included one of the shareholder's proposals in its proxy materials for a shareholder meeting, neither the shareholder nor the shareholder's qualified representative appeared and presented the proposal and the shareholder did not demonstrate "good cause" for failing to attend the meeting or present the proposal. The following questions and answers address issues regarding these provisions. 

## Does rule 14a-8 require a shareholder to represent in writing before the meeting that he or she, or a qualified representative, will attend the shareholders' meeting to present the proposal?

No. The Commission stated in Release No. 34-20091 that shareholders are
no longer required to provide the company with a written statement of
intent to appear and present a shareholder proposal. The Commission
eliminated this requirement because it "serve\[d\] little purpose" and
only encumbered shareholders. We, therefore, view it as inappropriate
for companies to solicit this type of written statement from
shareholders for purposes of rule 14a-8. In particular, we note that
shareholders who are unfamiliar with the proxy rules may be misled, even
unintentionally, into believing that a written statement of intent is
required.

## What if a shareholder provides an unsolicited, written statement that neither the shareholder nor his or her qualified representative will attend the meeting to present the proposal? May the company exclude the proposal under this circumstance?

Yes. Rule 14a-8(i)(3) allows companies to exclude proposals that are
contrary to the proxy rules, including rule 14a-8(h)(1). If a
shareholder voluntarily provides a

written statement evidencing his or her intent to act contrary to rule
14a-8(h)(1),

rule 14a-8(i)(3) may serve as a basis for the company to exclude the
proposal.

## If a company demonstrates that it is entitled to exclude a proposal under rule 14a-8(h)(3), can the company request that we issue a no-action response that covers both calendar years?

Yes. For example, assume that, without "good cause," neither the
shareholder nor the shareholder's representative attended the company's
2001 annual meeting to present the shareholder's proposal, and the
shareholder then submits a proposal for inclusion in the company's 2002
proxy materials. If the company seeks to exclude the 2002 proposal under
rule 14a-8(h)(3), it may concurrently request forward-looking relief for
any proposal(s) that the shareholder may submit for inclusion in the
company's 2003 proxy materials. If we grant the company's request and
the company receives a proposal from the shareholder in connection with
the 2003 annual meeting, the company still has an obligation under rule
14a-8(j) to notify us and the shareholder of its intention to exclude
the shareholder's proposal from its proxy materials for that meeting.
Although we will retain that notice in our records, we will not issue a
no-action response.

## In addition to rule 14a-8(h)(3), are there any other circumstances in which we will grant forward-looking relief to a company under rule 14a-8?

Yes. Rule 14a-8(i)(4) allows companies to exclude a proposal if it
relates to the redress of a personal claim or grievance against the
company or any other person or is designed to result in a benefit to the
shareholder, or to further a personal interest, that is not shared by
the other shareholders at large. In rare circumstances, we may grant
forward-looking relief if a company satisfies its burden of
demonstrating that the shareholder is abusing rule 14a-8 by continually
submitting similar proposals that relate to a particular personal claim
or grievance. As in answer C.4.c, above, if we grant this relief, the
company still has an obligation under rule 14a-8(j) to notify us and the
shareholder of its intention to exclude the shareholder's proposal(s)
from its proxy materials. Although will retain that notice in our
records, we will not issue a no-action response.

## What must a company do in order to exclude a proposal that fails to comply with the eligibility or procedural requirements of the rule?

If a shareholder fails to follow the eligibility or procedural
requirements of rule 14a-8, the rule provides procedures for the company
to follow if it wishes to exclude the proposal. For example, rule
14a-8(f) provides that a company may exclude a proposal from its proxy
materials due to eligibility or procedural defects if

-   within 14 calendar days of receiving the proposal, it provides the
    shareholder with written notice of the defect(s), including the time
    frame for responding; and

```{=html}
<!-- -->
```
-   the shareholder fails to respond to this notice within 14 calendar
    days of receiving the notice of the defect(s) or the shareholder
    timely responds but does not cure the eligibility or procedural
    defect(s).

Section G.3 -- Eligibility and Procedural Issues, below, contains
information that companies may want to consider in drafting these
notices. If the shareholder does not timely respond or remedy the
defect(s) and the company intends to exclude the proposal, the company
still must submit, to us and to the shareholder, a copy of the proposal
and its reasons for excluding the proposal.

## Should a company's notices of defect(s) give different levels of information to different shareholders depending on the company's perception of the shareholder's sophistication in rule 14a-8? 

##  {#section-6 .unnumbered}

## No. Companies should not assume that any shareholder is familiar with the proxy rules or give different levels of information to different shareholders based on the fact that the shareholder may or may not be a frequent or "experienced" shareholder proponent.  {#no.-companies-should-not-assume-that-any-shareholder-is-familiar-with-the-proxy-rules-or-give-different-levels-of-information-to-different-shareholders-based-on-the-fact-that-the-shareholder-may-or-may-not-be-a-frequent-or-experienced-shareholder-proponent. .unnumbered}

## Should companies instruct shareholders to respond to the notice of defect(s) by a specified date rather than indicating that shareholders have 14 calendar days after receiving the notice to respond?

No. Rule 14a-8(f) provides that shareholders must respond within 14
calendar days of receiving notice of the alleged eligibility or
procedural defect(s). If the company provides a specific date by which
the shareholder must submit his or her response, it is possible that the
deadline set by the company will be shorter than the 14-day period
required by rule 14a-8(f). For example, events could delay the
shareholder's receipt of the notice. As such, if a company sets a
specific date for the shareholder to respond and that date does not
result in the shareholder having 14 calendar days after receiving the
notice to respond, we do not believe that the company may rely on rule
14a-8(f) to exclude the proposal.

## Are there any circumstances under which a company does not have to provide the shareholder with a notice of defect(s)? For example, what should the company do if the shareholder indicates that he or she does not own at least \$2,000 in market value, or 1%, of the company's securities?

The company does not need to provide the shareholder with a notice of
defect(s) if the defect(s) cannot be remedied. In the example provided
in the question, because the

shareholder cannot remedy this defect after the fact, no notice of the
defect would be required. The same would apply, for example, if

-   the shareholder indicated that he or she had owned securities
    entitled to be voted on the proposal for a period of less than one
    year before submitting the proposal;

-   the shareholder indicated that he or she did not own securities
    entitled to be voted on the proposal at the meeting;

-   the shareholder failed to submit a proposal by the company's
    properly determined deadline; or

-   the shareholder, or his or her qualified representative, failed to
    attend the meeting or present one of the shareholder's proposals
    that was included in the company's proxy materials during the past
    two calendar years.

In all of these circumstances, the company must still submit its reasons
regarding exclusion of the proposal to us and the shareholder. The
shareholder may, but is not required to, submit a reply to us with a
copy to the company.

## [Questions regarding the inclusion of shareholder names in proxy statements]{.underline}.

## If the shareholder's proposal will appear in the company's proxy statement, is the company required to disclose the shareholder's name?

No. A company is not required to disclose the identity of a shareholder
proponent in its proxy statement. Rather, a company can indicate that it
will provide the information to shareholders promptly upon receiving an
oral or written request.

1.  **May a shareholder request that the company not disclose his or her
    name in the proxy statement?**

Yes. However, the company has the discretion not to honor the request.
In this regard, if the company chooses to include the shareholder
proponent's name in the proxy statement, rule 14a-8(l)(1) requires that
the company also include that shareholder proponent's address and the
number of the company's voting securities that the shareholder proponent
holds.

2.  **If a shareholder includes his or her e-mail address in the
    proposal or supporting statement, may the company exclude the e-mail
    address?**

Yes. We view an e-mail address as equivalent to the shareholder
proponent's name and address and, under rule 14a-8(l)(1), a company may
exclude the shareholder's name and address from the proxy statement.

## [Questions regarding revisions to proposals and supporting statements]{.underline}.

In this section, we first discuss the purpose for allowing shareholders
to revise portions of a proposal and supporting statement. Second, we
express our views with regard to revisions that a shareholder makes to
his or her proposal before we receive a company's no-action request, as
well as during the course of our review of a no-action

request. Finally, we address the circumstances under which our responses
may allow shareholders to make revisions to their proposals and
supporting statements.

## Why do our no-action responses sometimes permit shareholders to make revisions to their proposals and supporting statements?

There is no provision in rule 14a-8 that allows a shareholder to revise
his or her proposal and supporting statement. However, we have a
long-standing practice of issuing no-action responses that permit
shareholders to make revisions that are minor in nature and do not alter
the substance of the proposal. We adopted this practice to deal with
proposals that generally comply with the substantive requirements of the
rule, but contain some relatively minor defects that are easily
corrected. In these circumstances, we believe that the concepts
underlying Exchange Act section 14(a) are best served by affording an
opportunity to correct these kinds of defects.

Despite the intentions underlying our revisions practice, we spend an
increasingly large portion of our time and resources each proxy season
responding to no-action requests regarding proposals or supporting
statements that have obvious deficiencies in terms of accuracy, clarity
or relevance. This is not beneficial to all participants in the process
and diverts resources away from analyzing core issues arising under rule
14a-8 that are matters of interest to companies and shareholders alike.
Therefore, when a proposal and supporting statement will require
detailed and extensive editing in order to bring them into compliance
with the proxy rules, we may find it appropriate for companies to
exclude the entire proposal, supporting statement, or both, as
materially false or misleading.

## If a company has received a timely proposal and the shareholder makes revisions to the proposal before the company submits its no-action request, must the company accept those revisions?

No, but it *may* accept the shareholder's revisions. If the changes are
such that the revised proposal is actually a different proposal from the
original, the revised proposal could be subject to exclusion under

-   rule 14a-8(c), which provides that a shareholder may submit no more
    than one proposal to a company for a particular shareholders'
    meeting; and

-   rule 14a-8(e), which imposes a deadline for submitting shareholder
    proposals.

## If the shareholder decides to make revisions to his or her proposal after the company has submitted its no-action request, must the company address those revisions?

No, but it *may* address the shareholder's revisions. We base our
no-action response on the proposal included in the company's no-action
request. Therefore, if the company indicates in a letter to us and the
shareholder that it acknowledges and accepts the shareholder's changes,
we will base our response on the revised proposal. Otherwise, we will
base our response on the proposal contained in the company's original
no-action request. Again, it is important for shareholders to note that,
depending on the nature and timing of the changes, a revised proposal
could be subject to exclusion under

rule 14a-8(c), rule 14a-8(e), or both.

## If the shareholder decides to make revisions to his or her proposal after the company has submitted its no-action request, should the shareholder provide a copy of the revisions to us?

Yes. All shareholder correspondence relating to the no-action request
should be sent to us and the company. However, under rule 14a-8,
no-action requests and shareholder responses to those requests are
submitted to us. The proposals themselves are not submitted to us.
Because proposals are submitted to companies for inclusion in their
proxy materials, we will not address revised proposals unless the
company chooses to acknowledge the changes.

## When do our responses afford shareholders an opportunity to revise their proposals and supporting statements?

We may, under limited circumstances, permit shareholders to revise their
proposals and supporting statements. The following table provides
examples of the

rule 14a-8 bases under which we typically allow revisions, as well as
the types of permissible changes:

+-------------+--------------------------------------------------------+
| ###  {#     | ####  {#section-8 .unnumbered}                         |
| section-7 . |                                                        |
| unnumbered} | #### Type of revision that we may per                  |
|             | mit {#type-of-revision-that-we-may-permit .unnumbered} |
| ### Basi    |                                                        |
| s {#basis . |                                                        |
| unnumbered} |                                                        |
+-------------+--------------------------------------------------------+
| Rule        | When a proposal would be binding on the company if     |
| 14a-8(i)(1) | approved by shareholders, we may permit the            |
|             | shareholder to revise the proposal to a recommendation |
|             | or request that the board of directors take the action |
|             | specified in the proposal.                             |
+-------------+--------------------------------------------------------+

  -------------- --------------------------------------------------------
  Rule           If implementing the proposal would require the company
  14a-8(i)(2)    to breach existing contractual obligations, we may
                 permit the shareholder to revise the proposal so that it
                 applies only to the company's future contractual
                 obligations.

  Rule           If the proposal contains specific statements that may be
  14a-8(i)(3)    materially false or misleading or irrelevant to the
                 subject matter of the proposal, we may permit the
                 shareholder to revise or delete these statements. Also,
                 if the proposal or supporting statement contains vague
                 terms, we may, in rare circumstances, permit the
                 shareholder to clarify these terms.

  Rule           Same as rule 14a-8(i)(2), above.
  14a-8(i)(6)    

  Rule           If it is unclear whether the proposal focuses on senior
  14a-8(i)(7)    executive compensation or director compensation, as
                 opposed to general employee compensation, we may permit
                 the shareholder to make this clarification.

  Rule           If implementing the proposal would disqualify directors
  14a-8(i)(8)    previously elected from completing their terms on the
                 board or disqualify nominees for directors at the
                 upcoming shareholder meeting, we may permit the
                 shareholder to revise the proposal so that it will not
                 affect the unexpired terms of directors elected to the
                 board at or prior to the upcoming shareholder meeting.

  Rule           Same as rule 14a-8(i)(8), above.
  14a-8(i)(9)    
  -------------- --------------------------------------------------------

## [Other questions that arise under rule 14a-8]{.underline}.

## May a reference to a website address in the proposal or supporting statement be subject to exclusion under the rule?

Yes. In some circumstances, we may concur in a company's view that it
may exclude a website address under rule 14a-8(i)(3) because information
contained on the website may be materially false or misleading,
irrelevant to the subject matter of the proposal or otherwise in
contravention of the proxy rules. Companies seeking to exclude a website
address under rule 14a-8(i)(3) should specifically indicate why they
believe information contained on the particular website is materially
false or misleading, irrelevant to the subject matter of the proposal or
otherwise in contravention of the proxy rules.

## Rule 14a-8(i)(12) provides a basis for a company to exclude a proposal dealing with substantially the same subject matter as another proposal or proposals that previously has or have been included in the company's proxy materials. How does rule 14a-8(i)(12) operate?

## Rule 14a-8(i)(12) operates as follows: {#rule-14a-8i12-operates-as-follows .unnumbered}

## First, the company should look back three calendar years to see if it previously included a proposal or proposals dealing with substantially the same subject matter. If it has not, rule 14a-8(i)(12) is not available as a basis to exclude a proposal from this year's proxy materials.

## If it has, the company should then count the number of times that a proposal or proposals dealing with substantially the same subject matter was or were included over the preceding five calendar years.

## Finally, the company should look at the percentage of the shareholder vote that a proposal dealing with substantially the same subject matter received the last time it was included. 

## If the company included a proposal dealing with substantially the same subject matter only once in the preceding five calendar years, the company may exclude a proposal from this year's proxy materials under rule 14a-8(i)(12)(i) if it received less than 3% of the vote the last time that it was voted on.

## If the company included a proposal or proposals dealing with substantially the same subject matter twice in the preceding five calendar years, the company may exclude a proposal from this year's proxy materials under rule 14a-8(i)(12)(ii) if it received less than 6% of the vote the last time that it was voted on.

## If the company included a proposal or proposals dealing with substantially the same subject matter three or more times in the preceding five calendar years, the company may exclude a proposal from this year's proxy materials under rule 14a-8(i)(12)(iii) if it received less than 10% of the vote the last time that it was voted on.

##  {#section-9 .unnumbered}

##  {#section-10 .unnumbered}

## Rule 14a-8(i)(12) refers to calendar years. How do we interpret calendar years for this purpose?

Because a calendar year runs from January 1 through December 31, we do
not look at the specific dates of company meetings. Instead, we look at
the calendar year in which a meeting was held. For example, a company
scheduled a meeting for April 25, 2002. In looking back three calendar
years to determine if it previously had included a proposal or proposals
dealing with substantially the same subject matter, any meeting held in
calendar years 1999, 2000 or 2001 -- which would include any meetings
held between January 1, 1999 and December 31, 2001 -- would be relevant
under rule 14a-8(i)(12).

+-----------------------------------------------------------------------+
| Examples                                                              |
|                                                                       |
| A company receives a proposal for inclusion in its 2002 proxy         |
| materials dealing with substantially the same subject matter as       |
| proposals that were voted on at the following shareholder meetings:   |
|                                                                       |
|   -                                                                   |
| ------------- ------- ------- ------- ------- ------- ------- ------- |
|   Calendar Year  1997    1998    1999    2000    2001    2002    2003 |
|                                                                       |
|   Voted on?      Yes     No      No      Yes     No      \-      \-   |
|                                                                       |
|   Percentage     4%      N/A     N/A     4%      N/A     \-      \-   |
|   -                                                                   |
| ------------- ------- ------- ------- ------- ------- ------- ------- |
|                                                                       |
| May the company exclude the proposal from its 2002 proxy materials in |
| reliance on rule 14a-8(i)(12)?                                        |
|                                                                       |
| Yes. The company would be entitled to exclude the proposal under      |
|                                                                       |
| rule 14a-8(i)(12)(ii). First, calendar year 2000, the last time the   |
| company included a proposal dealing with substantially the same       |
| subject matter, is within the prescribed three calendar years.        |
| Second, the company included proposals dealing with substantially the |
| same subject matter twice within the preceding five calendar years,   |
| specifically, in 1997 and 2000. Finally, the proposal received less   |
| than 6% of the vote on its last submission to shareholders in 2000.   |
| Therefore, rule 14a-8(i)(12)(ii), which permits exclusion when a      |
| company has included a proposal or proposals dealing with             |
| substantially the same subject matter twice in the preceding five     |
| calendar years and that proposal received less than 6% of the         |
| shareholder vote the last time it was voted on, would serve as a      |
| basis for excluding the proposal.                                     |
+-----------------------------------------------------------------------+

+-----------------------------------------------------------------------+
| If the company excluded the proposal from its 2002 proxy materials    |
| and then received an identical proposal for inclusion in its 2003     |
| proxy materials, may the company exclude the proposal from its 2003   |
| proxy materials in reliance on                                        |
|                                                                       |
| rule 14a-8(i)(12)?                                                    |
|                                                                       |
| No. Calendar year 2000, the last time the company included a proposal |
| dealing with substantially the same subject matter, is still within   |
| the prescribed three calendar years. However, 2000 was the only time  |
| within the preceding five calendar years that the company included a  |
| proposal dealing with substantially the same subject matter, and it   |
| received more than 3% of the vote at the 2000 meeting. Therefore, the |
| company would not be entitled to exclude the proposal under rule      |
| 14a-8(i)(12)(i).                                                      |
+-----------------------------------------------------------------------+

## How do we count votes under rule 14a-8(i)(12)?

Only votes for and against a proposal are included in the calculation of
the shareholder vote of that proposal. Abstentions and broker non-votes
are not included in this calculation.

+-----------------------------------------------------------------------+
| ##  {#section-11 .unnumbered}                                         |
|                                                                       |
| ## Example {#example .unnumbered}                                     |
|                                                                       |
| A proposal received the following votes at the company's last annual  |
| meeting:                                                              |
|                                                                       |
| -   5,000 votes for the proposal;                                     |
|                                                                       |
| -   3,000 votes against the proposal;                                 |
|                                                                       |
| -   1,000 broker non-votes; and                                       |
|                                                                       |
| -   1,000 abstentions.                                                |
|                                                                       |
| How is the shareholder vote of this proposal calculated for purposes  |
| of                                                                    |
|                                                                       |
| rule 14a-8(i)(12)?                                                    |
|                                                                       |
| This percentage is calculated as follows:                             |
|                                                                       |
| ####                                                                  |
| #  [V]{.underline}otes For the Proposal \_\_\_\_\_\_\_ = Voting Perce |
| ntage {#votes-for-the-proposal-_______-voting-percentage .unnumbered} |
|                                                                       |
| ##### (Votes Against the Proposal + Votes For the Propo               |
| sal) {#votes-against-the-proposal-votes-for-the-proposal .unnumbered} |
|                                                                       |
| Applying this formula to the facts above, the proposal received 62.5% |
| of the vote.                                                          |
|                                                                       |
| [5,000]{.underline} = .625                                            |
|                                                                       |
| 3,000 + 5,000                                                         |
+-----------------------------------------------------------------------+

## [How can companies and shareholders facilitate our processing of no-action requests or take steps to avoid the submission of no-action requests]{.underline}?

## [Eligibility and Procedural Issues]{.underline} {#eligibility-and-procedural-issues .unnumbered}

1.  Before submitting a proposal to a company, a shareholder should look
    in the company's most recent proxy statement to find the deadline
    for submitting rule 14a-8 proposals. To avoid exclusion on the basis
    of untimeliness, a shareholder should submit his or her proposal
    well in advance of the deadline and by a means that allows the
    shareholder to demonstrate the date the proposal was received at the
    company's principal executive offices.

2.  A shareholder who intends to submit a written statement from the
    record holder of the shareholder's securities to verify continuous
    ownership of the securities should contact the record holder before
    submitting a proposal to ensure that the record holder will provide
    the written statement and knows how to provide a written statement
    that will satisfy the requirements of rule 14a-8(b).

3.  Companies should consider the following guidelines when drafting a
    letter to notify a shareholder of perceived eligibility or
    procedural defects:

-   provide adequate detail about what the shareholder must do to remedy
    all eligibility or procedural defects;

-   although not required, consider including a copy of rule 14a-8 with
    the notice of defect(s);

-   explicitly state that the shareholder must respond to the company's
    notice within 14 calendar days of receiving the notice of defect(s);
    and

-   send the notification by a means that allows the company to
    determine when the shareholder received the letter.

4.  Rule 14a-8(f) provides that a shareholder's response to a company's
    notice of defect(s) must be postmarked, or transmitted
    electronically, no later than 14 days from the date the shareholder
    received the notice of defect(s). Therefore, a shareholder should
    respond to the company's notice of defect(s) by a means that allows
    the shareholder to demonstrate when he or she responded to the
    notice.

5.  Rather than waiting until the deadline for submitting a no-action
    request, a company should submit a no-action request as soon as
    possible after it receives a proposal and determines that it will
    seek a no-action response.

6.  Companies that will be submitting multiple no-action requests should
    submit their requests individually or in small groups rather than
    waiting and sending them all at once. We receive the heaviest volume
    of no-action requests between December and February of each year.
    Therefore, we are not able to process no-action requests as quickly
    during this period. Our experience shows that we often receive 70 to
    80 no-action requests a week during our peak period and, at most, we
    can respond to 30 to 40 requests in any given week. Therefore,
    companies that wait until December through February to submit all of
    their requests will have to wait longer for a response.

7.  Companies should provide us with all relevant correspondence when
    submitting the no-action request, including the shareholder
    proposal, any cover letter that the shareholder provided with the
    proposal, the shareholder's address and any other correspondence the
    company has exchanged with the shareholder relating to the proposal.
    If the company provided the shareholder with notice of a perceived
    eligibility or procedural defect, the company should include a copy
    of the notice, documentation demonstrating when the company notified
    the shareholder, documentation demonstrating when the shareholder
    received the notice and any shareholder response to the notice.

8.  If a shareholder intends to reply to the company's no-action
    request, he or she should try to send the reply as soon as possible
    after the company submits its no-action request.

9.  Both companies and shareholders should promptly forward to each
    other copies of all correspondence that is provided to us in
    connection with no-action requests.

10. Due to the significant volume of no-action requests and phone calls
    we receive during the proxy season, companies should limit their
    calls to us regarding the status of their no-action request.

11. Shareholders who write to us to object to a company's statement in
    opposition to the shareholder's proposal also should provide us with
    copies of the proposal as it will be printed in the company's proxy
    statement and the company's proposed statement in opposition.

## [Substantive Issues]{.underline} {#substantive-issues .unnumbered}

1.  When drafting a proposal, shareholders should consider whether the
    proposal, if approved by shareholders, would be binding on the
    company. In our experience, we have found that proposals that are
    binding on the company face a much greater likelihood of being
    improper under state law and, therefore, excludable under rule
    14a-8(i)(1).

2.  When drafting a proposal, shareholders should consider what actions
    are within a company's power or authority. Proposals often request
    or require action by the company that would violate law or would not
    be within the power or authority of the company to implement.

3.  When drafting a proposal, shareholders should consider whether the
    proposal would require the company to breach existing contracts. In
    our experience, we have found that proposals that would result in
    the company breaching existing contractual obligations face a much
    greater likelihood of being excludable under rule 14a-8(i)(2), rule
    14a-8(i)(6), or both. This is because implementing the proposals may
    require the company to violate law or may not be within the power or
    authority of the company to implement.

4.  In drafting a proposal and supporting statement, shareholders should
    avoid making unsupported assertions of fact. To this end,
    shareholders should provide factual support for statements in the
    proposal and supporting statement or phrase statements as their
    opinion where appropriate.

5.  Companies should provide a supporting opinion of counsel when the
    reasons for exclusion are based on matters of state or foreign law.
    In determining how much weight to afford these opinions, one factor
    we consider is whether counsel is licensed to practice law in the
    jurisdiction where the law is at issue. Shareholders who wish to
    contest a company's reliance on a legal opinion as to matters of
    state or foreign law should, but are not required to, submit an
    opinion of counsel supporting their position.

## [Conclusion]{.underline}

##  {#section-12 .unnumbered}

Whether or not you are familiar with rule 14a-8, we hope that this
bulletin helps you gain a better understanding of the rule, the
no-action request process and our views on some issues and questions
that commonly arise during our review of no-action requests. While not
exhaustive, we believe that the bulletin contains information that will
assist both companies and shareholders in ensuring that the rule
operates more effectively. Please contact us with any questions that you
may have regarding information contained in the bulletin.