Smaller Reporting Company Hot Issues— Volume 1

NASDAQ and NYSE Continued Listing Requirements: NASDAQ has extended its suspension of the rules requiring a minimum $1 closing bid price and a minimum market value of publicly held shares until July 19, 2009. Rel. No. 34-59661; File No. SR-NASDAQ-2009-026: www.sec.gov.rules/sro/nasdaq.shtml

The NYSE temporary suspension of its minimum $1 stock price listing requirement and extension of the rule lowering the global market capitalization requirement to $15 million ends June 30, 2009. NYSE Rules 802.01B and C of the Manual. The expiration date of each such temporary suspension of listing requirements means that as of those dates, the grace period for compliance with such requirements will begin. The actual duration of such grace periods remains unchanged from those provided prior to such suspension.

Pending NYSE Rule: Elimination of Discretionary Broker Voting on Director Elections: The NYSE has a pending rule change with the SEC to eliminate broker discretionary voting for the election of directors. If this proposed rule change is adopted, brokers who do not receive voting instructions from the beneficial owners of shares will no longer have discretion to cast a vote for the election of directors of the issuer of such shares. Under the current NYSE and SEC proxy rules, brokers must deliver proxy materials to beneficial owners and request voting instructions in return. If voting instructions have not been received by the tenth day preceding the meeting date, NYSE Rule 452 provides that brokers may vote on certain matters deemed "routine" by the NYSE. Among the other matters which the current NYSE Rule 452 treats as routine is an "uncontested" election for a company's board of directors. Depending on the date, and assuming it receives SEC approval, the proposed amendment will be applicable to proxy voting for shareholder meetings held on or after January 1, 2010. The impact of this proposed rule is one of cost; by eliminating broker votes from the equation, public companies must be certain that they receive sufficient votes to meet the voting requirements for the election of directors pursuant to the issuer's governing documents and applicable law. This may mean increased expenses associated with direct shareholder campaigning and follow-up. NYSE Rule 452, and NYSE Listed Company Manual Section 402.08.

Proxy Access: the Election Exclusion: SEC Rule 14a-8 provides an opportunity for a shareholder that owns a certain amount of a company's securities to submit a proposal for inclusion in a company's proxy materials, provided that the shareholder complies with certain procedural requirements and the proposal does not fall within one of 13 substantive bases for exclusion. SEC Rule 14a8(i)(8) is one of the 13 substantive bases upon which a company may rely to exclude a shareholder proposal. The "election exclusion" permits a company to omit from its proxy materials any shareholder proposal that would result in an immediate election contest or would set up a process for shareholders to conduct an election contest in the future by requiring the company to include shareholders' director nominees in the company's proxy materials. The text of Rule 14a-8 can be accessed through the "Rules, Regulations and Schedules" section of the SEC's Web site at:

www.sec.gov/divisions/corpfin/ecfrlinks.shtml.

E-Proxy Posting and Shareholder Choice: The proxy rules now require companies and other soliciting parties to make their proxy materials available to shareholders directly on an Internet site (other than the SEC'S EDGAR Web site). Small Reporting Companies, or "SRC"s, must comply by providing Internet access to proxy solicitation materials commencing on or after January 1, 2009. The SRC or other party soliciting proxies on behalf of the SRC has two options for complying with this Internet availability requirement — the "notice only option" or the "full set delivery option." There are cost and time considerations for each — but SRCs should be aware when making the decision about how to proceed, that the rules require that the proxy materials must be posted on the Web site on or prior to the date the proxy materials are sent out to shareholders.

The "notice only option" requires a posting of proxy materials on an Internet Web site and the provision of a Notice of Internet Availability of Proxy Materials (the "Notice") to shareholders to inform them of the electronic availability of the proxy materials. The Notice must be provided to the shareholders at least 40 days prior to the shareholder meeting to which the proxy materials relate — this allows shareholders time to request, if they desire, a paper or electronic copy of the materials. The rules require that shareholders must be permitted to elect to receive paper or electronic copies for future shareholder meetings. The final rule provides specific language which must be set forth in a prominent legend, which explains how the Internet materials may be accessed, the date, time and location of the meeting or date of corporate action, an impartial identification of each matter the shareholder is voting on; and a toll-free number, e-mail address and Web site address that shareholders may use to request paper copies of proxy materials (at no charge). Information about attending the meeting and voting in person must also be included.

The "full set delivery option" allows the issuer to follow procedures that are substantially similar to the traditional methods of delivery, but adds the requirements that (i) the issuer either send a copy of the Notice, as described pursuant to the "notice only option," or incorporate all the same information required to be included in the Notice into the hard copy of the proxy materials being delivered, and (ii) the issuer post the materials on an Internet Web site, as specified in the Notice, no later than the date the Notice was first sent to shareholders. Since the "full set delivery option" involves providing a full hard copy of set of proxy materials, there is no requirement that the Notice (or the incorporation of the Notice information in the proxy materials) include information about how to request hard copies. Under this option a soliciting party is not required to provide the Notice and full set of proxy materials at least 40 days before the meeting date, because the shareholders will not need any extra time to request hard copies of materials.

Adopting Release: www.sec.gov/rules/final/2007/34-56135.pdf.

To see the SEC's proxy rules, go to: www.sec.gov/divisions/corpfin/cfguidance.shtml

For additional information, please see:

www.sec.gov/info/smallbus/sharejholderchoice-secg.html

This Hot Issues Newsletter is designed to highlight some of the more important developments impacting the legal and business considerations of today's Small Reporting Company, or SRC. Please watch for additional newsletters to follow each month, which will highlight key developments critical for smaller public companies, and those considering going public. For more information about the issues discussed in this Hot Issues Newsletter, or to find out more about the Small Reporting Company group at Epstein Becker Green, please contact: Lola Miranda Hale [email protected] at (312) 499 1437 or Lisa J. Matyas [email protected] at (312) 499-1437. This newsletter was generated from the Epstein Becker Green office located at 150 North Michigan Avenue, Chicago, Illinois, 60601, and is intended for general information purposes only. Nothing contained in this document should be construed as legal advice or legal opinion on any specific facts or circumstances. An attorney-client relationship is not created or continued by reading this Hot Issues Newsletter.