In any proxy contest, whether you are the activist shareholder or the targeted registrant, you want to be able to solicit proxy cards from shareholders at the earliest possible time. Accordingly, expediting the clearance of your proxy materials by the Securities and Exchange Commission (SEC) should always be a top strategic imperative for both the activist shareholder and the targeted registrant. Neither side wants to be "stuck at the SEC" debating comments with one of its staff attorneys or special counsel while the other party has begun to mail to shareholders definitive proxy materials, including a definitive proxy card.

Unlike with annual meeting proxy materials, in the case of a contested proxy solicitation, both sides can be very confident that the SEC will review and comment on their proxy solicitation materials. In a proxy contest, there are two types of filings that attract the SEC's attention and review and, typically result in the generation of an SEC comment letter: (i) soliciting materials filed with the SEC prior to the furnishing of a proxy statement pursuant to Rule 14a-12 of the Proxy Rules; and (ii) preliminary proxy statements filed with the SEC pursuant to Rule 14a-6 of the Proxy Rules. Under the Proxy Rules, no advance filing with the SEC is required for press releases, letters to shareholders, "fight ads," and other similar types of solicitation materials. However, pursuant to Rule 14a-12, such solicitation materials must be filed with the SEC on the date of first use. Such materials are filed with the SEC as exhibits to a Schedule 14A that has the box checked on the cover indicating that it is soliciting material being filed pursuant to Rule 14a-12. Once these Rule 14a-12 solicitation materials are filed, the SEC will typically review them and issue comment letters and will expect, in return, prompt responses to each of its comments. Since these solicitation materials most likely have already been disseminated by the time the SEC reviews and comments on them, more often than not, the response to an SEC comment on proxy solicitation materials filed pursuant to Rule 14a-12 is prospective in nature, committing to make the revision requested by the SEC in future solicitation materials. Under Rule 14a-6, in a proxy contest, a preliminary proxy statement and form of proxy must be filed with the SEC at least 10 calendar days prior to the date definitive copies of such materials are first sent or provided to security holders. Once the preliminary proxy statement is filed with the SEC, the SEC will typically review the preliminary proxy materials and issue comments. Some of these comments may be completely new to the filer; others will be a repeat of comments that the SEC had earlier issued on the Rule 14a-12 proxy solicitation materials. Until all the SEC's comments on the preliminary proxy materials have been responded to, and the SEC is satisfied with the responses, the filing party will not be able to file definitive proxy materials and begin mailing the same to security holders, even if the 10 day period has elapsed.

In some cases, the SEC will have some third-party assistance in preparing its comment letters on either Rule 14a-12 materials or preliminary proxy materials. Such help is typically provided in the form of a "poison pen" letter, which is a letter to the SEC from the opposing party that attempts to assist the SEC's in its review by providing detailed comments on the filing party's proxy materials. Basically, the opposing party scrutinizes the filing party's proxy materials for the slightest violation of the proxy rules and then prepares a detailed letter to the SEC that the SEC examiner can then look to in preparing the official comment letter. Of course, the SEC examiner will use his or her discretion and internal guidelines with respect to which comments contained in the "poison pen" letter will be included in the official SEC comment letter; but, at the very least, the "poison pen" letter gives the SEC examiner a head start and a road map concerning possible issues to focus upon. The ultimate goal of the "poison pen" letter is to ensure that the filing party receives a comprehensive SEC comment letter and is kept sufficiently busy responding to SEC comments which hopefully provides the opposing party with a timing advantage.

We have seen SEC comment letters on contested proxy materials range in length from two to eight pages and range in number of comments from as few as three to as many as 35. Even in the most carefully prepared set of proxy solicitation materials, it is hard to imagine that an SEC examiner could not find at least two or three items in the proxy solicitation materials to comment on. In some cases, irrespective of the content of its proxy materials, a filer may receive one or more comments from the SEC simply asking the filer to confirm back to the SEC its understanding of one or more requirements of Regulation 14A. An example of such an SEC comment seeking a confirmatory response would be the following:

"We note that you may employ various methods to solicit proxies, including mail, courier, services, Internet, advertising, telephone, facsimile or telecopy or by electronic mail. Please be advised that all written solicitation material, including any scripts to be used in soliciting proxies over the telephone, must be filed under cover of Schedule 14A. Refer to Rules 14a-6(b) and (c). Please confirm your understanding in this regard."

For those of us that actively practice in the shareholder activism area, keeping SEC comments on proxy solicitation materials to a minimum is not only a strategic objective so as to clear such materials through the SEC at the earliest possible time, but also a source of professional pride. Up until relatively recently, SEC comment letters and response letters related to proxy contests were not publicly available in the absence of a request made under the Freedom of Information (FOIA) Act. However, on May 9, 2005, the SEC announced that, three days later, it would begin publicly releasing through its EDGAR system its comment letters and the related letters of response with respect to disclosure filings, including those made in connection with proxy contests, made after August 1, 2004 and reviewed by the SEC's Division of Corporation Finance and the SEC's Division of Investment Management. The SEC has indicated that it has no plans to release letters related to reviewed filings made prior to August 1, 2004. Presently, the comment letters and responses thereto are not released on a real-time basis but rather are made publicly available no earlier than 45 days after the review of the disclosure filing is complete. SEC comment letters are coded in the EDGAR system as "UPLOAD" and filerresponse letters outside of amended filings are coded as "CORRESP." Either of these new forms of correspondence filings can be searched through EDGAR though, as the SEC points out on its website (http://www.sec.gov/ answers/edgarletters.htm), searching for filer response letters that are included as part of another filing cannot be searched for directly using the current EDGAR interface, though they may appear on some search results pages under the term "[Cover] in the document description.

The public release of SEC comment letters and the written responses thereto, even if delayed until 45 days after the review of the subject disclosure filing is completed, provides numerous benefits to those practitioners who focus a significant amount of time and energy on drafting and/or reviewing and commenting on proxy solicitation materials in connection with contested solicitations. For the first time, we can gain access to and review previous SEC comment letters and understand which issues are likely to be a source of concern for the SEC, and we can proactively revise our proxy solicitation materials to preempt a number of the more likely SEC comments. In addition, by having access to the response letters, we can also gain insight into how others have been able to address the same comments in the past. In this article, based on our review of numerous SEC comment letters received by both activist shareholders and registrants in a number of recent proxy contests and based on our own recent experience with the SEC in connection with our representation of both activist shareholders and registrants, we provide 25 tips for receiving fewer SEC comments in your next proxy contest, whether you are the activist shareholder or the registrant.

1. Avoid issuing statements that directly or indirectly impugn character, integrity or personal reputation or make charges of illegal, improper or immoral conduct without factual foundation and disclose the factual support for all such assertions. Rule 14a-9 of the Proxy Rules provides that no solicitation "shall be made by means of any proxy statement, form of proxy, notice of meeting or other communication, written or oral, containing any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of a proxy for the same meeting or subject matter which has become false or misleading." The note to Rule 14a-9 provides some examples of what, depending upon particular facts and circumstances, may be misleading within the meaning of the Rule and includes, as an example, material which directly or indirectly impugns character, integrity or personal reputation, or directly or indirectly makes charges concerning improper, illegal or immoral conduct or associations, without factual foundation. For example, among the statements that the SEC has cited as impugning character, integrity of personal reputation are statements by an activist shareholder that suggest (i) that a registrant is misleading its shareholders; (ii) that a registrant's actions towards its employees have been deceitful; (iii) that a registrant's board is not capable of acting rationally; (iv) that a registrant's board lacks the ability to negotiate in good faith; (v) that a registrant's board is seeking to entrench itself; (vi) that a registrant's board has adopted a "cut and run" approach; (vii) that a registrant's board has failed miserably to maximize value for the registrant's shareholders; and (viii) that a registrant's board is seeking to deprive shareholders of the opportunity to realize the benefits from value maximizing initiatives.

2. Avoid making claims prior to a meeting regarding the results of a solicitation. The note to Rule 14a-9 of the Proxy Rules lists claims made prior to a meeting regarding the result of a solicitation as a potentially misleading proxy statement disclosure. In other words, prior to the meeting you should avoid making a statement that suggests that you have the vote "in the bag."

3. Identify your proxy statement, form of proxy and other soliciting material so as to clearly distinguish it from the soliciting material of any other person or persons soliciting for the same meeting or subject matter. The note to Rule 14a-9 of the Proxy Rules lists the failure to identify a proxy statement, form of proxy and other soliciting material so as to clearly distinguish it from the soliciting material of any other person or persons soliciting for the same meeting or subject matter as a potentially misleading proxy statement disclosure. To address this proscription, we often see proxy statements include two prominent legends, either in all-caps, bold or both. The first legend appears at the top of the first page of the proxy statement such as "PROXY STATEMENT OF JOHN DOE." The second legend appears towards the front of the proxy statement, either on the first or second page, and provides as follows: "THIS SOLICITATION IS BEING MADE BY JOHN DOE AND NOT ON BEHALF OF THE BOARD OF DIRECTORS OF ACME WIDGETS INCORPORATED." In addition, at the top of the proxy card, there is a similar legend that provides as follows: "THIS PROXY IS SOLICITED BY JOHN DOE." In addition to the use of prominently-featured legends, the registrant and the activist shareholder will often use different color proxy cards to distinguish their proxy solicitation materials.

4. Avoid predictions as to specific future market values. The note to Rule 14a-9 of the Proxy Rules lists predictions as to specific future market values as a potentially misleading proxy statement disclosure. Accordingly, if you are the activist shareholder and you indicate in your proxy statement that the registrant's stock should be trading at a specific share price, you should expect to receive a comment from the SEC. The SEC's comment may refer the filing party to Exchange Act Release No. 16833 (May 23, 1980) and may indicate that the inclusion of valuations in soliciting materials is only appropriate and consistent with Rule 14a-9 when made in good faith and on a reasonable basis and where accompanied by disclosure which facilitates shareholders' understanding of the basis for and the limitations on the projected realizable values. The SEC's comment may also request that the filing party provide an analysis supporting its valuation of the registrant.

5. Provide support for all statements, opinions and beliefs that are not self-evident and refrain from making any insupportable statements. For example, if a registrant includes in its proxy statement its belief that the re-election of its nominees is in the best interest of the registrant's security holders; or that it believes that the election of Mr. Doe's slate could result in the substantial loss of shareholder value, the SEC can be expected to require that—since such statements are not ordinarily self-evident—support for such statements be provided. Likewise, the statement that a particular person has a proven track record of taking actions that are in the best interests of all shareholders would also be expected to elicit an SEC comment seeking appropriate support.

6. Characterize each statement or assertion of opinion or belief as such. This is a frequent SEC comment on proxy solicitation materials filed pursuant to Rule 14a-12 where a statement that is merely one's opinion or belief is written as though it is an indisputable statement of fact. For example, an activist shareholder may reasonably believe that the registrant's management is overpaid but it may not be an indisputable fact that management is overpaid. In such a case, a statement suggesting unequivocally that management is overpaid, even where such a statement is accompanied by appropriate support, may elicit a comment from the SEC asking the filer to re-characterize such a statement as a statement of opinion or belief.

7. Avoid statements that refer to the opinions and beliefs of other unnamed shareholders. If you make statements in your proxy solicitation materials that refer to the beliefs or opinions of other unnamed shareholders, you can expect to elicit a comment from the SEC seeking factual support for such statements, the names of the shareholders and the date that your conversations with such shareholders occurred.

8. Avoid the use of hedging language as to who is a "participant" in a proxy solicitation. It is not a rare occurrence for proxy statements filed in connection with contested solicitations to include language implying that the filing party's nominees may be "deemed to be" participants in their solicitation rather than a definitive statement that they are participants. The term "participant" is defined in Instruction 3 to Item 4 of Schedule 14A and it leaves no doubt those nominees for directors are participants. In addition to nominees, participants also include the following: (i) the registrant; (ii) any director of the registrant; (iii) any committee or group which solicits proxies, any member of such committee or group, and any person whether or not named as a member who, acting alone or with one or more other persons, directly or indirectly takes the initiative (or engages) in organizing, directing, or arranging for the financing of any such committee or group; (iv) any person who finances or joins with another to finance the solicitation of proxies, except persons who contribute not more than $500 and who are not otherwise participants; (v) any person who lends money or furnishes credit or enters into any other arrangements, pursuant to any contract or understanding with a participant, for the purpose of financing or otherwise inducing the purchase, sale, holding or voting of securities of the registrant by any participant or other persons, in support of or in opposition to a participant (except that such terms do not include a bank, broker or dealer who, in the ordinary course of business, lends money or executes orders for the purchase or sale of securities and who is not otherwise a participant); and (vi) any person who solicits proxies. The terms "participant" and "participant in a solicitation" do not include any of the following: (i) any person or organization retained or employed by a participant to solicit security holders and whose activities are limited to the duties required to be performed in the course of such employment; (ii) any person who merely transmits proxy soliciting material or performs other ministerial or clerical duties; (iii) any person employed by a participant in the capacity of attorney, accountant, or advertising, public relations or financial adviser, and whose activities are limited to the duties required to be performed in the course of such employment; (iv) any person regularly employed as an officer or employee of the registrant or any of its subsidiaries who is not otherwise a participant; or (v) any officer or director of, or any person regularly employed by, any other participant, if such officer, director or employee is not otherwise a participant.

9. Identify on the Schedule 14A cover page of the proxy statement all of the participants in the solicitation as the persons filing the proxy statement. If the proxy statement is being filed by a party other than the registrant, the SEC expects the Schedule 14A cover page to include, as the persons filing the proxy statement, all the participants in the solicitation. Typically, that means, at a minimum the activist shareholder leading the proxy contest and all of its nominees for election as directors.

10. Use the correct EDGAR tags. There are different EDGAR tags depending on whether you are the activist shareholder or the registrant, whether you are filing Rule 14a-12 soliciting materials or a preliminary, revised preliminary or definitive proxy statement. If you are the activist shareholder and you are filing proxy materials prior to the furnishing of a proxy statement pursuant to Rule 14a-12, the correct EDGAR tag would be DFAN14A. If you are the registrant making the same filing, the correct EDGAR tag would be DEFA14A. If you are the activist shareholder and you are filing a preliminary proxy statement, the correct EDGAR tag would be PREC14A. If you are the registrant, the correct EDGAR tag is also PREC14A. If you are the registrant and you file your proxy statement for a contested solicitation, using the EDGAR tag, PRE14A, you can expect an SEC comment asking you to contact EDGAR filer support to make the necessary header tag correction. EDGAR tags do matter and using the wrong EDGAR tags can have adverse consequences. If you are the activist shareholder, you may seek to gain a timing advantage over the registrant by filing your preliminary proxy statement with the SEC prior to the registrant's filing of its preliminary proxy statement so you can receive and respond to the SEC's comments at the earliest possible time. For the initial filing of its preliminary proxy statement, the activist shareholder should use EDGAR tag, PREC14A. That would alert the Staff at the SEC's Division of Corporation Finance that a preliminary proxy statement has been filed in connection with a proxy contest and they can be expected to move expeditiously to provide comments on the filed proxy statement prior to the expiration of the 10-day period following the date of the filing of the preliminary proxy statement. However, if instead of using EDGAR tag, PREC14A, the activist shareholder had used the EDGAR tag, PREN14A, the SEC's Staff may not be alerted that a proxy contest has been commenced and, accordingly, there may be a delay in the proxy statement being assigned for review and comment.

11. If applicable, indicate that the proxy statement and the form of proxy are preliminary copies. Rule 14a-6(e)(1) of the Proxy Rules requires that all preliminary proxy statements and forms of proxy filed pursuant to Rule 14a-6(a) be clearly marked "Preliminary Copies." To comply with this requirement, we would suggest placing a legend, "PRELIMINARY COPY—SUBJECT TO COMPLETION" at the top of the Schedule 14A cover page, the first page of the proxy statement and at the top of the form of proxy card. When you filed revised preliminary proxy materials, you should include a similar legend to indicate that you are filing revised preliminary copy.

12. Indicate whether each of your nominees for election as directors has consented (i) to serve as a nominee, (ii) to serve as a director if elected, and (iii) to being named as a nominee in the proxy statement. Rule 14a-4(d) of the Proxy Rules provides that a person shall not be deemed to be a bona fide nominee for election as director and shall not be named in a proxy statement as being a nominee unless he has consented to (i) being named in the proxy statement and (ii) serving as a director of the registrant if elected.

13. Include an explanation as to why you intend to vote for or against a particular proposal. For example, if you are recommending that shareholders grant you a proxy to vote against the registrant's proposal to amend its stock option plan, you should provide an explanation as to why you intend to vote against the proposal.

14. Indicate on the form of proxy card how security holders can withhold authority to vote for each nominee. Rule 14a-4(b)(2) of the Proxy Rules requires that a proxy card clearly provide any of the following means for security holders to withhold authority to vote for each nominee: (i) a box opposite the name of each nominee which may be marked to indicate that authority to vote for such nominee is withheld; (ii) an instruction in bold-face type which indicates that the security holder may withhold authority to vote for any nominee by lining through or otherwise striking out the name of any nominee; (iii) designated blank spaces in which the security holder may enter the names of nominees with respect to whom the security holder chooses to withhold authority to vote; or (iv) any other similar means, provided that clear instructions are furnished indicating how the security holder may withhold authority to vote for any nominee. In addition, a proxy card may also provide a means for the security holder to grant authority to vote for the nominees set forth, as a group, provided that there is a similar means for the security holder to withhold authority to vote for such group of nominees.

15. Indicate for each proposal discussed in the proxy statement and included on the proxy card, whether such proposal was proposed by the registrant or by security holders. Rule 14a-4(a)(3) of the Proxy Rules requires that the proxy card state clearly whether the matter was proposed by the registrant or by security holders.

16. If you are the shareholder activist, disclose whether you will seek reimbursement from the registrant for your expenses and whether the question of reimbursement will be submitted to a vote of security holders. Item 4(b)(5) of Schedule 14A requires a party other than the registrant to disclose whether it will seek reimbursement from the registrant for its expenses and whether the question of reimbursement will be submitted to a vote of security holders. Where a filing party has indicated that it will not seek reimbursement from the registrant for costs if it is successful in its solicitation, the SEC has issued a comment seeking disclosure of whether the filing party would seek reimbursement from the registrant if it is not successful in seeking election to the registrant's board of directors and whether the question of such reimbursement would be submitted to a vote of security holders.

17. Avoid implying in solicitation materials filed pursuant to Rule 14a-12 that the filing of a nonmanagement definitive proxy statement is not a foregone conclusion. The SEC takes the position that parties intending to rely upon Rule 14a-12 of the Proxy Rules may only do so to the extent that they intend to file a proxy statement and to solicit proxies. This issue can arise in a number of circumstances, including when an activist shareholder wants to be able to file with the SEC its letter to a registrant's board of directors or a related press release. If the activist shareholder owns more than 5% of the registrant's common stock, it can file the materials as exhibits to an amendment to its Schedule 13D. However, if the activist shareholder is not a Schedule 13D filer and wants a vehicle to file its materials with the SEC, it may believe that it can file such materials with the SEC under Rule 14a-12 even if it does not then have an intention of later filing a proxy statement and delivering the same to security holders. According to interpretation I.D.3 in the SEC's July 2001 Interim Supplement to the Telephone Interpretation Manual, in order to rely on Rule 14a-12, soliciting parties must intend to furnish a proxy statement to security holders. While soliciting parties do not have a technical requirement to deliver a proxy statement should the solicitation be discontinued for any reason, they must intend to deliver a proxy statement at the time they rely on Rule 14a-12. The SEC notes in the interpretation that one of the justifications for permitting free communications under Rule 14a-12 was that security holders will receive a complete disclosure document containing all material information before having to make a voting decision. An SEC comment can be expected where the activist shareholder includes language in its Rule 14a-12 filing that references a future proxy statement "when and if completed" in, among other places, the "Important Information" paragraph that references where participant information can be found. The SEC's comment here would typically ask the filing parties to either (i) refrain from including such non-committal language in future communications by affirmatively stating their intention to file a definitive proxy statement; (ii) find an appropriate exemption under Rule 14a-2 from the application of Section 14(a) and Regulation 14A to future communications; or (iii) refrain from further public solicitation activities of the registrant's security holders.

18. Include in your proxy statement all the required participant information. In addition to including in the proxy statement a description of the business experience of each director nominee for the past five years in accordance with the requirements of Item 401(e) of Regulation S-K, Item 5(b) of Schedule 14A requires the inclusion for each director nominee and other participants in the proxy solicitation a number of fairly detailed disclosures. These disclosures are often included in the form of an annex or appendix to the proxy statement titled "Certain Participant Information." Among the disclosures required with respect to each participant in the solicitation are the following: (i) the name and business address of the participant; (ii) the participant's present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is carried on; (iii) whether or not, during the past ten years, the participant has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) and, if so, the dates, nature of conviction, name and location of court, and penalty imposed or other disposition of the case; (iv) the amount of each class of securities of the registrant which the participant owns beneficially, directly or indirectly; (v) the amount of each class of securities of the registrant which the participant owns of record but not beneficially; (vi) with respect to all securities of the registrant purchased or sold within the past two years, the dates on which they were purchased or sold and the amount purchased or sold on each such date; (vii) if any part of the purchase price or market value of any of the shares purchased is represented by funds borrowed or otherwise obtained for the purpose of acquiring or holding such securities, the amount of the indebtedness as of the latest practicable date; (viii) whether or not the participant is, or was within the past year, a party to any contracts, arrangements or understandings with any person with respect to any securities of the registrant, including, but not limited to joint ventures, loan or option arrangements, puts or calls, guarantees against loss or guarantees of profit, division of losses or profits, or the giving or withholding of proxies and, if so, the name the parties to such contracts, arrangements or understandings and the details thereof; (ix) the amount of securities of the registrant owned beneficially, directly or indirectly, by each of the participant's associates and the name and address of each such associate; (x) the amount of each class of securities of any parent or subsidiary of the registrant which the participant owns beneficially, directly or indirectly; and (xi) whether or not the participant or any associates of the participant have any arrangement or understanding with any person (a) with respect to any future employment by the registrant or its affiliates; or (b) with respect to any future transactions to which the registrant or any of its affiliates will or may be a party and, if so, a description of such arrangement or understanding and the names of the parties thereto.

19. Include in your proxy statement information with respect to the total amount estimated to be spent and the total expenditures to date for, in furtherance of, or in connection with the solicitation of security holders. Item 4(b)(4) of Schedule 14A requires the proxy statement to include the total amount estimated to be spent and the total expenditures to date for, in furtherance of, or in connection with the solicitation of security holders. The instructions to Item 4 further provide that with respect to contested solicitations, costs and expenditures shall include fees for attorneys, accountants, public relations or financial advisers, solicitors, advertising, printing, transportation, litigation and other costs incidental to the solicitation, except that the registrant may exclude the amount of such costs represented by the amount normally expended for a solicitation for an election of directors in the absence of a contest, and costs represented by salaries and wages of regular employees and officers, provided that a statement to that effect is included in the proxy statement.

20. Ensure that your proxy statement, when disclaiming liability for information contained in thirdparty reports, indicates that the participants are responsible for the information in filings made by them. The SEC can be expected to issue a comment if the participants attempt to disclaim liability for any misinformation contained in any SEC filing or third-party report where the wording of the disclaimer implies that the participants are not accepting responsibility for the information contained in filings made by them. The SEC's comment will likely seek confirmation that the participants are responsible for the information contained in filings made by them.

21. Avoid suggesting in your proxy statement that discretionary authority can be used to adjourn a shareholders' meeting for the purpose of soliciting additional votes. The SEC takes the position that a soliciting party cannot use discretionary authority pursuant to Rule 14a-4(c) of the Proxy Rules to adjourn a shareholders' meeting for the purpose of soliciting additional votes. If you suggest in your proxy statement that such is your intention, you should expect to elicit an SEC comment advising you that you need to include a separate proposal on the proxy card for shareholders to vote on whether to grant the proxy holder the authority to adjourn the meeting to seek additional votes.

22. Indicate in your proxy statement and proxy card if you do not intend to provide shareholders with the opportunity to vote on certain matters. If your proxy card does not permit shareholders to vote on certain matters included on the other party's proxy card (e.g., ratification of auditors) you may elicit an SEC comment requiring that you inform shareholders, both in the proxy statement and on the proxy card, that they will be disenfranchised as to their ability to vote on these matters if they choose to vote using your proxy card.

23. If you have included in your proxy statement a proposal seeking the repeal of any provision of the registrant's bylaws adopted after a fixed date and prior to the shareholders' meeting, disclose all of the potential effects of this proposal on shareholders. If you are the activist shareholder, one of the proposals you may include in your proxy statement may be a proposal to repeal all amendments to the registrant's bylaws approved by the registrant's board after a fixed date, typically the last date of public disclosure of any amendment to the registrant's bylaws, and prior to the shareholders' meeting. The purpose of such a proposal is to prevent the registrant's board from approving and making effective any amendments to the bylaws that could have the effect of impeding, delaying or nullifying the activist shareholder's proxy contest. While the SEC is used to seeing this type of proposal, such a proposal will elicit an SEC comment if the proxy statement does not (i) disclose the purpose of the proposal; (ii) disclose whether any potential new bylaws or amendments to existing bylaws will be repealed that are wholly unrelated to impeding or nullifying the proxy contest; (iii) disclose whether the proposal could be used to repeal bylaw amendments that may be aligned with the interests of shareholders; (iv) disclose any other potential unintended consequences from such a proposal; and (v) disclose how such a proposal may otherwise be detrimental to shareholders.

24. If you are seeking minority representation on the registrant's board of directors, ensure that you have included the disclosure that is required before you can seek authority to vote for the nominees named in the registrant's proxy statement. Rule 14a-4(d) of the Proxy Rules permits a soliciting party seeking minority representation on the registrant's board of directors to seek authority to vote for nominees named in the registrant's proxy statement so long as the soliciting party: (i) seeks authority to vote in the aggregate for the number of director positions then subject to election; (ii) represents that it will vote for all the registrant nominees, other than those registrant nominees specified by the soliciting party; (iii) provides the security holder an opportunity to withhold authority with respect to any other registrant nominee by writing the name of that nominee on the form of proxy; and (iv) states on the form of proxy and in the proxy statement that there is no assurance that the registrant's nominees will serve if elected with any of the soliciting party's nominees.

25. If, as the activist shareholder, you have determined to omit information from your proxy statement in reliance on Rule 14a-5(c) of the Proxy Rules, include the disclosure required by Rule 14a-5(c). Rule 14a-5(c) of the Proxy Rules provides that any information contained in any other proxy soliciting material which has been furnished to each person solicited in connection with the same meeting or subject matter may be omitted from the proxy statement, if a clear reference is made to the particular document containing such information. An example of such a reference would be the following: "John Doe has omitted from this proxy statement certain disclosures required by applicable law that will be contained in the Company's proxy statement. These disclosures include, among other things, information concerning the compensation of the Company's executive officers, an analysis of cumulative total returns on an investment in the Company's shares during the past five years and the procedures for submitting proposals for inclusion in the Company's proxy statement at the next annual meeting. Shareholders should refer to the Company's proxy statement in order to review this disclosure. John Doe does not make any representation as to the accuracy or completeness of the information contained in the Company's proxy statement." Please also note that the SEC takes the position that reliance upon Rule 14a-5(c) before the registrant distributes the information to security holders is inappropriate. Accordingly, the SEC has indicated in its comment letters to activist shareholders, that if the activist shareholder determines to disseminate its proxy statement prior to the distribution of the registrant's proxy statement, the information that has been omitted from the activist shareholder's proxy statement in reliance on Rule 14a-5(c) must be provided to security holders by the activist shareholder.

Conclusion

We continue to believe that there is a significant strategic advantage to be gained in a proxy contest by being able to clear your proxy solicitation materials through the SEC at the earliest possible time so that, subject to Rule 14a-5(c), you are able to be the first to mail your definitive proxy statement and proxy card to security holders. We hope that the 25 tips we discussed above are helpful to the reader in being able to do just that—pre-empting many of the more common SEC comments that are received in contested proxy solicitations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.