On May 20, 2009, the United States Securities and Exchange Commission (the “SEC”) announced that it will propose a comprehensive series of rule amendments to facilitate the rights of shareholders to nominate directors on corporate boards of domestic reporting companies. [1] According to the announcement, the SEC will propose:

• A new Rule 14a-11 under the Securities Exchange Act of 1934 (the “Exchange Act”), providing that certain shareholders could include a nominee or nominees for director in company proxy materials.
• Shareholders could have their nominee included if they own:
  • At least 1% of the outstanding voting stock of a large accelerated filer [2] or a registered investment company with net assets of $700 million or more.
  • At least 3% of the outstanding voting stock of an accelerated filer [3] or a registered investment company with net assets between $75 and $700 million.
  • At least 5% the outstanding voting stock of a non-accelerated filer or a registered investment company with net assets of less than $75 million.
• Shareholders would also need to have owned such amount of stock, individually or in the aggregate, for at least one year.
• The number of shareholder nominees that could be included in the proxy materials would be the greater of one director nominee or a number that equals up to 25% of the Company’s board. A nominating shareholder would not be able to rely on the new rule to gain majority representation on a board of directors.
• The nominating shareholder would be required to submit to the company and file with the SEC a new Schedule 14N, to report the amount and percentage of shares beneficially owned, the length of ownership and to certify an intent to continue to hold the securities through the date of the meeting.
• An amendment to Exchange Act Rule 14a-8(i)(8), would narrow the current provision excluding shareholder proposals in proxy materials, so as to allow inclusion of shareholder proposals that would amend, or request the amendment of, provisions of a company’s governing documents concerning the company’s nomination procedures or other director nomination disclosure provisions, unless they conflict with proposed Rule 14a-11.

The SEC proposal follows recent changes to the Delaware General Corporation Law (“DGCL”). An April 10, 2009 amendment to the DGCL specifically enables:

• A company’s bylaws to require that the company’s official shareholder voting, or proxy materials, include shareholder nominees for director positions.

A company’s bylaws to require the company to reimburse a shareholder’s expense for proxy materials related to the election of a shareholder’s director nominee .

The DGCL law allows for, but does not require, a company’s bylaws to contain these provisions.

Public comments on the proposed rule amendments must be received by the SEC within 60 days after their publication in the federal register. We will continue to monitor developments in the SEC’s rulemaking concerning the right of shareholders to have shareholder director nominees included in proxy materials and we will provide further updates for material developments.

If you have any questions concerning these proposed rule amendments, please contact an attorney in the Investment Management or Capital Markets groups at Seward & Kissel.