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Stephensackschoice022513 14a8

  1. 1. UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549DIVISION OFCORPORATION FINANCEJohn B. BeckmanHogan Lovells US LLPjohn.beckman@hoganlovells.comRe: Choice Hotels International, Inc.Incoming letter dated January 8, 2013Dear Mr. Beckman:February 25, 2013This is in response to your letters dated January 8, 2013 and January 22,2013concerning the shareholder proposal submitted to Choice Hotels by Stephen Sacks andHinda Sacks. We also have received letters from the proponents dated January 13,2013and January 24, 2013. Copies ofall ofthe correspondence on which this response isbased will be made available on our website at http://www.sec.gov/ divisions/cor.pfin/cf­noaction/14a-8.shtml. For your reference, a briefdiscussion ofthe Divisions informalprocedures regarding shareholder proposals is also available at the same website address.Enclosurecc: Stephen SacksHinda SacksSincerely,TedYuSenior Special Counsel*** FISMA & OMB Memorandum M-07-16 ***
  2. 2. February 25, 2013Response ofthe Office of Chief CounselDivision ofCorporation FinanceRe: Choice Hotels International, Inc.Incoming letter dated January 8, 2013The proposal requests a "report" on showerheads that deliver no more than 1.75gallons per minute offlow.We are unable to concur in your view that Choice Hotels may exclude theproposal under rule 14a-8(i)(7). In arriving at this position, we note that the proposalprimarily focuses on the significant policy issue of global warming and does not seek tomicromanage the company to such a degree that exclusion ofthe proposal would beappropriate. Accordingly, we do not believe that Choice Hotels may omit the proposalfrom its proxy materials in reliance on rule 14a-8(i)(7).Sincerely,Tonya K. AldaveAttorney-Adviser
  3. 3. DIVISION OF CORPORATION FINANCEINFORMAL PROCEDURES REGARDING SHAREHOLDER PROPOSALSThe Division ofCorporation Finance believes that its responsibility with respect tomatters arising under Rule 14a-8 [17 CFR 240.14a-8], as with other matters under the proxy.rilles, is to aid those :who must comply with the rule by offering informal advice and ~uggestionsand to determine, initially, whether or not it may be appropriate in a particular matter to_recommend enforcement action to the Commission. In connection with a shareholder proposal~der Rule 14a-8, the Divisions staffconsiders the information furnished to it by the Companyin support ofits intention to exclude the proposals from the Companys proxy materials, a<; wellas ariy infonn~tion furnished by the proponent or the proponents representative.Although Rule 14a-8(k) does not require any communications from shareholders to theCommissions s~, the staff will always consider information concerning alleged violations ofthe statutes administered by the Commission, including argument as to whether or not activitiesproposed to be taken ·would be violative of the statute or nile involved. The receipt by the staffofsuch in~onnation; however, should not be construed as changing the staffs informalprocedures and· proxy review into a formal or adversary procedure.It is important to note that the staffs and Commissions no-action responses toRule l4a:-8G) submissions reflect only informal views. The determinations·reached in these no­action letters do not and cannot adjudicate the merits ofa companys position with respect to theproposal. Only a court such as a U.S. District Court can decide whethe~ a company is obligatedto include shareholder.proposals in its proxy materials. Accordingly a discretionary ·determination not to recommend or take Commission enforcement action, does not preclude aproponent, or any shareholder ofa-company, from pursuing any rights he or she may have againstthe company in court, should the management omit the proposal from·the companys proxy·material.
  4. 4. •• -"·.From:Sent:To:Subject:By Electronic MailStephen SacksThursday, January 24, 2013 4:31 PMshareholderproposals; john.beckman@hoganlovells.com;Simone_Wu@Choicehotels.comProponent Comments, Choice Hotels International, Inc. ProposalJanuary 24, 2013U.S. Securities and Exchange CommissionDivision ofCorporate FinanceOffice ofChiefCounselWashington, D.C. 20549Re: Choice Hotels International, Inc. -Shareholder Proposal Submitted by Stephen and Hinda SacksLadies and Gentlemen:This letter is written by one ofthe proponents ofthe subject proposal and is in response to the January 22,2013 follow up letter from Hogan Lovells. Comments made will be briefand hopefully will sum up.In his previous letter the proponent indicated that the thrust ofthe proposal is global warming, a significantsocial policy issue, and as such would transcend ordinary business concerns. Indeed the significance ofglobalwarming was made clear this week when the subject constituted a paragraph ofthe inauguration speech. Forpurposes ofgetting to the heart ofthe matter per the Hogan Lovells letter the proponent will agree thatshowerheads are ordinary business. The discussion then comes down to the Hogan Lovells contention that theproposal is about low flow shower heads that could indirectly (emphasize mine ) affect global warming andnot about global warming.Indeed there are indirect and direct issues. Indirect can refer to mitigation of impacts by say building a wallaround Manhattan Island. Direct refers to mitigation by doing something about the warming by reducinggreenhouse gas emissions. Wikipedia under global warming mitigation mentions increased energy efficiency.The website Ecomall states that "whenever you save energy you also reduce the demand for...fossil fuels...lessburning of fossil fuels also means lower emissions of carbon dioxide ...the primary contributor to globalwarming". In a mention in About.com, under environmental, issues listing the top ten things you can do toreduce global warming-one is "Use Less Hot Water". In an issue of the journal Technology Review (recentlyrenamed MIT Technology Review) discussing high impact energy research (to the proponents recollection thiswas motivated at least in part by global warming) one esteemed researcher indicated that energy conservationhas a place. A recent January 18, 2013 page A19 column in the Washington Post titled "A climate Manhattan·Project" discussed having the National Labs focus on global warming. Several s specific topics werementioned including carbon capture, alternative energy and social obstacles to energy efficiency. Clearly if youreduce greenhouse gas emissions by means of improved generation of usable energy, carbon capture andstorage in the ground or reducing the need for production by reducing energy usage through better efficiencyyou are having the same impact and are in the same basket- a direct first order impact on global warming.Low flow shower heads significantly reduce the need. This is direct, not indirect.As a minor point Hogan Lovells writes that there are thousands ofother products that may result in reducedenergy consumption... Clearly this is a tad ofa number exaggeration but is in any case oflittle importance.1*** FISMA & OMB Memorandum M-07-16 ****** FISMA & OMB Memorandum M-07-16 ***
  5. 5. Tqr.pro~nent will mention though that he is not aware ofother items (technologies) that rise to the samerelevance as shower heads and are appropriate for a stockholder proposal (e.g.not vague).One other minor point. Hogan Lovellss indicate that they do not doubt the sincerity ofthe proponentsconcern. The proponent will take this as a compliment and state in return that he does not doubt the sincerity ofHogan Lovells arguments. The proponent humbly believes though that beyond being a well intentioned personhe knows something about the issues.For reasons set forth above, in his prior letter and in the proposal, the proponent remains ofthe view that theCompany should include the proposal in its 2013 proxy materials. The proposal addresses a significant socialpolicy issue in a reasonable manner and as a significant social policy issue transcends any ordinary businessconcerns. Perhaps global warming should be called the significant social policy issue ofour times. Clearly thegoal posts have moved in the last several years. Ifyou have any questions or need additional information,please feel free to contact me atSincerely,Stephen Sacks, Ph.D.2*** FISMA & OMB Memorandum M-07-16 ***
  6. 6. .- . Hogan Lovelis US LLPColumbia Square555 Thirteenth Street, NWWashington. DC 20004T +I 202 637 5600F +I 202 637 5910www.hoganlovells.eomJanuary 22, 2013BYELECTRONIC MAILU.S. Securities and Exchange CommissionDivision ofCorporation FinanceOffice ofChiefCounsel100 F Street, N.E.Washington, D.C. 20549shareholderproposals@sec.govRe: Choice Hotels International, Inc. - Shareholder Proposal Submitted byStephen and Hinda SacksLadies and Gentlemen:We are writing in response to the letter from Stephen Sacks (the "Proponent") to the staffdated January 13, 2013 (the "Response Letter"), in which he expresses his disagreement with ourview that Choice Hotels International, Inc. (the "Company") may exclude his proposal (the"Proposal") from the Companys 2013 proxy materials on the ground that the Proposal dealswith matters relating to the Companys ordinary business operations.The Proposal requests that the Company prepare a report on "showerheads that deliver nomore than 1.75 gallons per minute (gpm) of flow-or a lower number" and to consider "energyusage, anticipated guest and hotel owner reaction, installation logistics and related factors." Asdescribed in our letter ofJanuary 8, 2013 (the "No Action Request"), because the Proposal dealswith matters relating to the Companys ordinary business operations, the Proposal is excludableunder Rule 14a-8(i)(7). The Proponents letter provides no basis for a different conclusion.A. The Focus and Thrust of the Proposal is Not Global Warming.The Proponent states in his Response Letter that "[t]he thrust of the subject proposal isglobal wanning." This statement is inaccurate. The Proposal is about low-flow showerheads,which like thousands of other products that may result in reduced energy consumption, couldindirectly affect global warming. Arguing in the supporting statement that a particular product is DC · 0310911000001 · 4107558 vS
  7. 7. U.S. Securities and Exchange CommissionDivision ofCorporation FinanceOffice ofthe ChiefCounselJanuary 22,2013Page2one ofthe possible "contributors to a solution" to global warming does not transform a proposalseeking to micro-manage the Companys business operations into a proposal about globalwarming. In Marriott International, Inc. (March 17,2010, recon denied April19, 2010), whichwe cited in our No-Action Request, in considering a proposal substantially similar to theProposal, the staff concluded that "although the proposal raises concerns with global warming,the proposal seeks to micromanage the company to such a degree that exclusion ofthe proposalis appropriate." The same reasoning and conclusion are appropriate here.We do not doubt the sincerity of the Proponents concern about and interest in globalwarming, but the invocation ofconcerns about global warming as a motivation for a shareholderproposal does not remove its subject from the realm of ordinary business operations. See BestBuy (March 21, 2008) (allowing exclusion ofa proposal requesting the board to prepare a reporton the goals and timeframes for increasing the use ofFSC-certified fiber and recycled fiber, andestimating avoided greenhouse gas emissions from such activities, as relating to ordinarybusiness operations); General Motors Corporation (March 30, 2005) (allowing exclusion of aproposal recommending the board publish annually a report regarding global wanning whichwould include information on temperatures, atmospheric gases, sun effect, carbon dioxideproduction, carbon dioxide absorption, and costs and benefits at various degrees of heating orcooling, as relating to ordinary business operations); Ford Motor Company (March 2, 2004)(allowing exclusion of a proposal recommending that the board publish annually a reportregarding global warming which would include information on temperatures, atmospheric gases,sun effect, carbon dioxide production, carbon dioxide absorption, and costs and benefits atvarious degrees of heating or cooling, as relating to ordinary business operations); and SprintCorporation (February 6, 2002) (allowing exclusion of a proposal for a report on the feasibilityofusing recycled paper, as relating to ordinary business operations).B. The Proposal Targets Matters Relating to the Companys Ordinary BusinessOperations.The Proponent is mistaken regarding what activities are and are not part of theCompanys ordinary business operations. The Proponent states:"The business model of Choice Hotels is that of franchising hotels andundertaking other related functions such as maintaining an online reservationsystem and removing from the Choice Hotel family nonperforming hotels...What[the Company] do[esnt] do to the proponents knowledge is manage or ownhotels. This is unlike the Marriott International example discussed by HoganLowells [sic] - Marriott manages hotels and can direct hotels to install newplumbing items of a certain type and when to install them. Choice franchisedhotels can decide what to install. What is described in the proposal is somethingof concern to Choice, something they can influence and something, if they wish,they can give increased oversight and guidance. But details like final shower2"DC· 0310911000001 • 41075M v5
  8. 8. U.S. Securities and Exchange CommissionDivision ofCorporation FinanceOffice ofthe ChiefCounselJanuary 22, 2013Page3head selection are not to the proponents knowledge now a core businessfunction." (emphasis added)In essence, the Proponent is trying to distinguish the Marriott International precedent byclaiming that showerhead selection at the Companys franchised hotels is not within theCompanys ordinary business operations since the Company does not own or manage the hotels.While we disagree with the legal proposition and conclusion that a proposal cannot be excludedunder Rule 14a-8(i)(7) if the matter to which the proposal relates is not currently a core businessfunction, that issue is not presented here because, contrary to the Proponents assertion, theCompany is involved in the selection of showerheads for use in its franchised hotels. In fact, theCompany is involved in many aspects of room design, furnishings and fixtures (including theestablishment of criteria regarding the selection of showerheads and other bathroom fixtures) inits franchised hotels. In order to establish and maintain brand standards among its franchisedhotels, the Company has developed detailed policies, procedures, programs, and guidelines forthe appearance and functionality of its franchised hotel rooms which are different for each of theCompanys hotel brands. These proprietary policies, procedures, programs, and guidelines use avariety of methods, including financial or other incentives and, in some cases, fmancial or otherpenalties, to ensure that the hotel rooms in its franchised hotels adhere to detailed specificationsas to room design, furnishing and fixtures. This includes certain minimum specifications forshowerheads.For the reasons set forth above and in our prior letter, we remain of the view that theCompany may exclude the Proposal from its 2013 proxy materials. ·Ifyou have any questions or need additional information, please feel free to contact me at(202) 637-5464 orjohn.beckman@hoganlovells.com.cc: Stephen and Hinda Sacks Simone Wu (Choice Hotels International, Inc.) 3DC· 0310911000001· 4107558 v5
  9. 9. From:Sent:To:Stephen SacksSunday, January 13, 2013 5:04 PMshareholderproposalsCc:SubjectSimone_Wu@Choicehotels.com; john.beckman@hoganlovells.comChoice Hotel Proposal; Proponent Comments to Hogan Lovells Jan 8 Ltr.By Electronic Mail--Six Additional Copies by Conventional MailU.S. Securities and Exchange CommissionDivision ofCorporate FinanceOffice ofChiefCounselWashington, D.C.January 13,2013Re: Choice Hotels International --Shareholder Proposal submitted by Stephen and Hinda SacksLadies and· Gentlemen:This letter is written by one ofthe proponents --comments are provided on a January 8 letter by HoganLovells..The thrust of the subject proposal is global warming. Global warming is almost unarguably themost important current social policy issue. The social policy concern is the health and welfare ofthe earth. Thediscussion in the proposal states-- "Most scientists and engineers who have studied the data....have concludedthat global warming is a major problem ofour times. Greenhouse gasses resulting from burning fossil fuels usedto heat water are a major contributor to global warming.....Typical showers require much more hot water andconsume a significant fraction ofthe energy used in hotels....Times have changed. The latest studies ofglobalwarming indicate that proactive efforts are required." The "resolved" part ofthe proposal concerns the proactiveeffort that would make a contribution to doing something about global warming. The nexus ofglobal warmingto shower heads is that less hot water waste in showers results in a reduced need to produce energy and reducedgreenhouse gas emissions. Hypothetically the offending sources ofgreenhouse gases could come offline first-­the impact may therefore be nonlinear. Obviously some thousands ofhotel rooms are but a small increment tothis end. But it is a start.Writing in section E Hogan Lovells appear to recognize the proposals public policy implications butsay that it touches upon such a matter. They do not present any discussion as to why it just touches. Justsaying this does not make it true. The trust ofthe proposal is global warming. It does however touch on severalother issues such a saving water--another social policy issue.To know that global warming is accelerating in significance one only has to read the daily paper. Or ifonedoubts the scientific basis one only has to look at changing weather patterns and 2012 being the hottest year onrecord. Also global warming is ofdistinct interest to the Administration. Specifically the SEC (TheCommission) has indicated an interest in a different context through requirements for company disclosures(New York Times, January 27,2010, SEC Adds Climate Risk to Disclosure List).It is the proponents understanding that significant and overriding social policy issues can transcendordinary business concerns. Global warming, the thrust ofthis proposal, is a significant and overriding1*** FISMA & OMB Memorandum M-07-16 ****** FISMA & OMB Memorandum M-07-16 ***FISMA & OMB Memorandum M-07-16 ***
  10. 10. sclcial policy issue. It is far more significant than it was just a few years ago. It is hard to imagine in 2013one more significant.Hogan Lovells comments A-F all are based on the Ordinary Business concern and as indicated above aretherefore transcended by the significant social policy concern ofglobal warming. Some discussion however willstill be provided.The business model ofChoice Hotels is that offranchising hotels and undertaking other related functionssuch as maintaining an online reservation system and removing from the Choice Hotel family nonperforminghotels.They do this very well. What they dont do to the proponents knowledge is manage or own hotels. This isunlike the Marriott International example discussed by Hogan Lowells --Marriott manages hotels and can directhotels to install new plumbing items ofa certain type and when to install them. Choice franchised hotels candecide what to install. What is described in the proposal is something ofconcern to Choice, something they caninfluence and something, ifthey wish, they can give increased oversight and guidance. But details like fmalshower head selection are not to the proponents knowledge now a core business function. It is the proponentsunderstanding that ordinary business functions mean core business functions. The proponent is not going towrite about what he does not understand--can a core business exclusion pertain to a non core business function?Ifit cant the Hogan Lowells argument is not valid.Items A and B together. Item A ofHogan Lovells discussion pertains to ordinary business as related toR&D. Item B relates to ordinary business concerns as to choice oftechnology. A and B will be addressedtogether. To the proponents knowledge the Choice business model does not include significant R&D. Showerhead research is left to manufacturers. To the proponents knowledge selection oftechnology products in theChoice Hotels business model is in the final analysis is left the hotels. The proponent recognizes, however, thatthe main focus here is the resolved part ofthe proposal. Hogan Lovells presents this as micromanagement andindicates it is substantially similar to the Marriott International case. The proponents believe that the proposaljust touches on micromanagement. There are significant differentiation from the Marriott case including the factthat in the Marriott International case the proposal revolved around Marriott undertaking a specific physicalaction--testing shower heads with specific characteristics. The Choice proposal revolves around writing areport. Logic says there are differences. In writing a report you can say that such and such is not pertinent. Youcan say you can do a better analysis on paper showing savings from a continuous distribution ofshower headsofdecreasing flows. When you actually test something you have to test something specific. Writing a report isfar less onerous and far more flexible. A report ofthis nature just touches on micromanagement.Re item C--ordinary business because it relates to the companys franchise operations as to guest opinionsetc. Since the proposal asks the company to write a report rather than specifically take an action a report couldsimply say that it is inappropriate to address this matter. The same logic pertains to other concerns. In this case,however, hotels basically do this now when they ask guests via email for comments and ratings includingcomments on the bathroom.Item D. The proponent did not say in the proposal that it should not be exempt from the ordinary businessbecause it relates to a report.The item under review is just the proposal. The proponent will state, however, thathe was incorrect in his thinking regarding the relationship ofa report to the ordinary business exclusion. Theproponent is appreciative ofHogan Lovell pointing out the 1983 Commission Release on the matter. There arehowever significant differences between requesting a report and asking that a specific action be taken such asthe previous mention that in a report one can simply write that it is inappropriate to query quests on a subject.This becomes part ofthe report.Item E--Ordinary business as relates to a significant policy issue. This is already addressed in the discussionofsocial policy concerns.CONCLUSIONThe importance ofglobal warming, a social policy issue, has magnified in recent weeks and months. It hasbecome even more clear that this issue transcends any ordinary business concerns. In any case, per the2
  11. 11. ptoponents discussion ofitems A-E, there may not in actuality be any ordinary business concerns.Theproponents request that the staffand Commission allow the proposal to go forward.Ifyou have any questions or need additional information please do not hesitate to contact me (StephenSacks) at When a written response on this matter is available it wouldbe appreciated ifyou could send a copy to the above email address.Sincerely yours,Stephen Sackscc. Simone Wu (Choice Hotels International)John Beckman (Hogan Lovell)3*** FISMA & OMB Memorandum M-07-16 ***
  12. 12. January 8, 2013BYELECTRONIC MAILU.S. Securities and Exchange CommissionDivision of Corporation FinanceOffice ofChiefCounsel100 F Street, N.E.Washington, D.C. 20549shareholderproposals@sec.govHogan Lovells US LLPColumbia Square555 Thineenth Street, NWWashington, DC 20004T +I 202 637 5600F +I 202 637 5910www.hoganlovells.comRule 14a-8(i)(7)Re: Choice Hotels International, Inc.- Shareholder Proposal Submitted byStephen and Hinda SacksLadies and Gentlemen:On behalf of Choice Hotels International, Inc. (the "Company"), we are submitting thisletter pursuant to Rule 14a-8(j) under the Securities Exchange Act of 1934 (the "Exchange Act")to notify the Securities and Exchange Commission (the "Commission") of the Companysintention to exclude from its proxy materials for its 2013 annual meeting of stockholders (the"2013 proxy materials") a shareholder proposal and statement in support thereof(the "Proposal")received from Stephen and Hinda Sacks (the "Proponents"). We also request confirmation thatthe staff of the Division of Corporation Finance will not recommend to the Commission thatenforcement action be taken if the Company omits the Proposal from its 2013 proxy materialsfor the reasons discussed below.A copy ofthe Proposal and related correspondence is attached hereto as Exhibit A.DC· OJ10911000001 • 4101937 ~
  13. 13. U.S. Securities and Exchange CommissionDivision ofCorporation FinanceOffice ofthe ChiefCounselJanuary 8, 2013Page2In accordance with StaffLegal Bulletin No. 14D (November 7, 2008) ("SLB No. 14D"),this letter and its exhibits are being delivered by e-mail to shareholderproposals@sec.gov.Pursuant to Rule 14a-8(j), a copy of this letter and its exhibits also is being sent to theProponents. Rule 14a-8(k) and SLB No. 14D provide that a shareholder proponent is required tosend the company a copy of any correspondence which the proponent elects to submit to theCommission or the staff. Accordingly, we hereby infonn the Proponents that the Company andthe undersigned should receive a concurrent copy ofany additional correspondence submitted tothe Commission or the staffrelating to the Proposal.The Company currently intends to file its definitive 2013 proxy materials with theCommission on or about March 29,2013.THE PROPOSALThe Proposal requests that the Companys shareholders approve the following resolution:"Resolved: Choice Hotels International Inc. shall write a report on showerheadsthat deliver no more than 1.75 gallons per minute (gpm) of flow-or a lowernumber (such as 1.6 and/or 1.5 gpm). A mechanical switch that will allow for fullwater flow to almost no flow shall be considered. Energy usage, anticipated guestand hotel owner reaction, installation logistics and related factors shall beconsidered."Rule 14a-8(i)(7)- The Proposal Deals with Matters Relatingto the Companys Ordinary Business OperationsRule 14a-8(i)(7) permits the exclusion ofa shareholder proposal that "deals with a matterrelating to the companys ordinary business operations." In the Commissions releaseaccompanying the 1998 amendments to Rule 14a-8, the Commission identified two centralconsiderations that underlie the ordinary business exclusion. The first was that "[c]ertain tasksare so fundamental to managements ability to run a company on a day-to-day basis that theycould not, as a practical matter, be subject to direct shareholder oversight." The secondconsideration related to the degree to which the proposal seeks to micro-manage the companyby probing too deeply into matters of a complex nature upon which shareholders, as a group,would not be in a position to make an informed judgment" See Exchange Act Release No. 40018(May 21, 1998) (the "1998 Release") (citing Exchange Act Release No. 12999 (November 22,1976)). As discussed below, the Proposal implicates both of these considerations and may beomitted from the Companys 2013 proxy materials as relating to the Companys ordinarybusiness operations.DC-031091/000001-41019376
  14. 14. U.S. Securities and Exchange CommissionDivision ofCorporation FinanceOffice ofthe ChiefCounselJanuary 8, 2013Page3Further, the fact that the Proposal requests a report rather than specific action does notsave it from exclusion. As discussed below, the Commission and the staffwill consider whetherthe underlying subject matter of the report involves ordinary business matters in assessing itsexcludability. Therefore, to the extent the Proposal requests a report rather than direct action, it isnevertheless subject to exclusion under Rule 14a-8(i)(7) as relating to the Companys ordinarybusiness.A. The Proposal involves ordinary business operations because it relates to themanner in which the Company conducts product research, development andtesting.The Proposal requests the Company to report to shareholders on showerheads involvingspecific technology. That is, showerheads that "deliver no more than 1.75 gallons per minute(gpm) offlow..." and include a "mechanical switch that will allow for full water flow to almostno flow." Accordingly, the Proposal relates to the Companys research, development and testingwith respect to products that are provided to guests at the Companys franchised hotels.The staff has consistently allowed exclusion of proposals that relate to product research,development and testing. Recently, in considering a proposal substantially similar to theProposal, the staffagreed that a proposal requiring the installation ofshowerheads that deliver nomore than 1.6 gallons per minute of flow in several test properties "seeks to micromanage thecompany to such a degree that exclusion ofthe proposal is appropriate." Marriott International,Inc. (March 17, 2010, recon. denied April 19, 2010). The staff in that case noted that theproposal would require the company to test specific technologies that may be used to reduceenergy consumption." The Proposal would require the Company to do precisely the same thing.See also PepsiCo, Inc. (February 28, 2012) (excluding a proposal requesting a corporate policythat recognizes human rights and employs specific ethical standards in both private andcollaborative research and development agreements because "proposals concerning productresearch, development, and testing are generally excludable under rule 14a-8(i)(7)"); AppliedDigital Solutions {April 25, 2006) (excluding a proposal requesting a report on the sale and useofRFID technology and its impact on the publics privacy, personal safety and fmancial securitywas excludable as relating to ordinary business operations (i.e., product development)); PfizerInc. (January 23, 2006) (excluding a proposal requesting a report on the effects of certainmedications on ordinary business grounds as relating to "product research, development andtesting"); Burlington Northern Santa Fe Corp. (January 22, 1997) (excluding a proposalrequesting a report on the status of the research and development of a new safety system forrailroads because the proposal concerned the development and adaptation of new technology);Union Pacific Corp. (December 16, 1996) (excluding a proposal seeking a report on the researchand development ofa train management and safety system as relating to the development ... ofDC. 0310911000001 • 4101937 v6
  15. 15. U.S. Securities and Exchange CommissionDivision ofCorporation FinanceOffice ofthe ChiefCounselJanuary 8, 2013Page4new technology"); E. 1 duPont de Nemours & Co. (March 8, 1991) (excluding a proposalseeking to accelerate the elimination of the companys use of certain chemicals and the researchof alternatives because "the thrust ofthe proposal appears directed at those questions concerningthe timing, research and marketing decisions that involve matters relating to the conduct of the[c]ompanys ordinary business operations"); and Chrysler Corp. (March 3, 1988) (excluding aproposal seeking information on the feasibility of developing an electric vehicle for massproduction as relating to "determining to engage in product research and development").The research and testing of low-flow showerheads involve complex matters about whichshareholders are not in a position to make an informed judgment. As such, the Proposal is anattempt to micro-manage the Companys product research and development, which is part oftheCompanys ordinary business operations. Accordingly, the Proposal may be excluded pursuantto Rule 14a-8(i)(7).B. The Proposal involves ordinary business operations because it relates to theCompanys decisions regarding choice oftechnology.In addition, the Proposal may be excluded pursuant to Rule 14a-8(i)(7) because it seeksto involve shareholders in decisions regarding technologies which the Company uses in itsbusiness. Complex business decisions relating to the types of technologies a company shoulduse in its business operations are no less appropriate for shareholder consideration than decisionsconcerning product research, development and testing. Decisions concerning technologies to beused in a companys business operations require the judgment of experienced management andexperts to evaluate the complex operational and business considemtions. Such matters fall withinthe purview of management, which has the necessary skills, knowledge and resources to makeinformed decisions. Accordingly, the staff has agreed that such proposals may be excludedunder Rule 14a-8(i)(7). See, e.g., AT&T Inc. (February 13, 2012) (excluding a proposalrequesting a report on actions the company is taking to address public concern about inefficientconsumption of electricity by set-top boxes and the companys efforts to develop new energyefficient set-top boxes because "proposals that concern a companys choice oftechnologies...aregenerally excludable under rule 14a-8(i)(7)"); CSX Corp. (January 24, 2011) (excluding aproposal requesting that the company develop a kit that would allow CSX to convert the majorityof its locomotive fleet to a more efficient system as relating to the companys ordinary businessbecause "proposals that concern a companys choice of technologies for use in its operations aregenemlly excludable under rule 14a-8(i)(7)"); and WPS Resources Corp. (February 16, 2001)(excluding a proposal requesting that the company develop some or all of eight specified plansincluding "deploying small-scale cogeneration technologies" because the proposal related to thechoice oftechnologies").DC. 0310911000001.4101937¥6
  16. 16. U.S. Securities and Exchange CommissionDivision ofCorporation FinanceOffice ofthe ChiefCounselJanuary 8, 2013PageSFor the reasons set forth above, the Proposal is excludable under Rule 14a-8(i)(7).C. The Proposal involves ordinary business operations because it relates to theCompanysfranchisee relations.The Proposal requests that the Company prepare a report on "showerheads that deliver nomore than 1.75 gallons per minute (gpm) of flow-or a lower number and to consider "energyusage, anticipated guest and hotel owner reaction, installation logistics and related factors." Byrequesting that the Company "anticipate guest and hotel owner reaction" the Proposal wouldforce the Company to consider and assess opinions, preferences and concerns of both guests ofthe Companys franchised properties, and franchisees that own such properties. In essence, theCompanys hotel franchisees are its customers and the Proposal seeks to interfere with how theCompany manages the relationship between the Company and its hotel franchisee customers.Because the Company is a hotel franchisor, and generates revenues, income and cashflows primarily from initial, relicensing and continuing royalty fees attributable to its franchiseagreements, establishing and maintaining relationships with hotel franchisees is a fundamentalpart ofthe Companys business operations. Like a companys relationships with employees andcustomers, the Companys relationships with its franchisees is a central and ongoingmanagement function that requires the consideration of complex business decisions beyond thescope of matters to be addressed by shareholders. By seeking to interfere with the Companysrelationship with its franchisees the Proposal seeks to micro-manage the Companys ordinarybusiness operations. The staffhas routinely permitted exclusion ofproposals that interfere with acompanys customer or employee relations. See, e.g., Wor/dCom, Inc. (April4, 2002) (excludinga proposal requesting disclosures regarding customer billing disputes and the retention of anindependent auditor to contact and audit each customers account because the proposal related tovarious ordinary business matters, including "customer relations"); Wa/-Mart Stores, Inc. (March27, 2001) (excluding a proposal requesting annual customer meetings because the proposalrelated to Wal-Marts customer relations); OjjiceMax, Inc. (April 17, 2000) (excluding of aproposal requesting that OfficeMax retain an independent consulting firm to measure customerand employee satisfaction because the proposal related to customer (and employee) relations);and AMERCO (July 21, 2000) (excluding of a proposal requesting a "U-Haul Dealer Forum" to,among other things, "gain valuable feedback on customer perceptions and problems" because theproposal related to "customer and dealer relations").The Proposal seeks to impede upon the Companys relations with its franchisees whichare the Companys customers. Accordingly, the Proposal is excludable under Rule 14a-8(i)(7).DC-0)10911000001 -4101937v6
  17. 17. U.S. Securities and Exchange CommissionDivision ofCorporation FinanceOffice ofthe ChiefCounselJanuary 8, 2013Page6D. The Proposal is excludable as relating to ordinary business operations eventhough it asksfor a report.Although the Proposal seeks a report on low-flow showerheads, as opposed to seeking torequire the installation oflow-flow showerheads, the Proposal is still excludable under Rule 14a­8(i)(7). As the Commission noted in Exchange Act Release No. 20091 (August 16, 1983) (the"1983 Release"), discussing the predecessor to Rule 14a-8(i)(7):"The Commission did not propose any change to existing [Rule 14a-8(i)(7}], butdid propose a significant change in the staffs interpretation of that rule. In thepast, the staff has taken the position that proposals requesting issuers to preparereports on specific aspects oftheir business orto form special committees to studya segment of their business would not be excludable under [Rule 14a-8(iX7)].Because this interpretation raises form over substance and renders the provisionsof paragraph [(i)(7)] largely a nullity, the Commission has determined to adoptthe interpretative change set forth in the Proposing Release. Henceforth, the staffwill consider whether the subject matter ofthe special report or the committeeinvolves a matter of ordinary business; where it does, the proposal ·will beexcludable under Rule [14a-8(i)(7)]." 1983 Release. (emphasis added)As the precedent cited in Section A above makes clear, the staff has routinely permittedexclusion of proposals that request a report concerning ordinary business operations.Accordingly, the Proposal is excludable under Rule 14a-8(i)(7).E. The Proposal is excludable as relating to ordinary business operationsregardless ofwhether it involves a significantpolicy issue.Moreover, the fact that a proposal may touch upon a matter with possible public policyimplications does not preclude exclusion under Rule 14a-8(i)(7). Consistent with the 1998Release, the staff has permitted exclusion of a proposal when it relates to micro-managing acompanys ordinary business operations, even ifit also touches on a significant policy issue.In the Marriott letter discussed in Section A above, the proponent argued that low-flowshowerheads would help address global wanning. However, the company pointed out that theproposal, if adopted, would affect a range of management practices beyond those relating toglobal warming. The staff concluded that "although the proposal raises concerns with globalwarming, the proposal seeks to micromanage the company to such a degree that exclusion oftheproposal is appropriate." /d.DC- 0310911000001-4101937 v6
  18. 18. U.S. Securities and Exchange CommissionDivision ofCorporation FinanceOffice ofthe ChiefCounselJanuary 8, 2013Page7The same reasoning and conclusion are appropriate here. Although the Proponents seek areport on specific low-flow showerheads, and the Proposals supporting statement discussesglobal wanning (similar to Ma"iott), the subject matter of the Proposal still seeks tomicromanage complex issues that are inappropriate for shareholder action. Accordingly, as inMa"iott, the Proponents attempt to use a social policy argument in the supporting statement ofthe Proposal in order to require the Company to report on specific research and developmentactivities, which involve the Companys ordinary business operations.CONCLUSIONFor the reasons stated above, it is our view that the Company may exclude the Proposalfrom its 2013 proxy materials under Rule 14a-8(i)(7). We request the staffs concurrence in ourview or, alternatively, confirmation that the staffwill not recommend any enforcement action tothe Commission ifthe Company excludes the Proposal.If you have any questions or need additional information, please feel free to contact me at(202) 637-5464. When a written response to this letter is available, I would appreciate yoursending it to me by e-mail at john.beckman@hoganlovells.com or by fax at (202) 637-5910.Stephen and Hinda SacksSimone Wu (Choice Hotels International, Inc.)C. Alex Bahn (Hogan Lovells US LLP)EnclosuresDC· OJ 10911000001 • 4101937 VIS
  19. 19. Exhibit A Copy ofthe Proposal and Related Correspondence DC-0310911000001·4101937v6
  20. 20. Simone Wu, Corporate SecretaryChoice Hotels International, IncSilver Spring, MD 2090lDearMsWu:OctoberIf. 2012.,Please find enclosed my stockholderp~oposal to be voted on at the next annualmeeting ofChoice Hotels International. In accord with SEC regulations, the proposal anddiscussion are under 500 words. Also, on the date ofthis mailing I along with my wife,own 80 shares ofChoice Hotels with a market value over $2,000. The value has notfallen below $2,000 in the past 60 days. We have owned these shares for over one yearas required by the SEC. A letter from Fidelity Investments that is attached will confirmthis ownership. Also in accord with SEC requirements we will not buy or sell sharesbefore the annual meeting. I plan to present the proposal at the next annual meeting inany format you require. This is being submitted in advance ofthe November r~uiredsubmission date, November 28, 2012, indicated in an April 30, 2012 email to me fromMr.Limage.The proposal deals with global warming and climate change which are ofgreatconcern to me. The proposal provides for the company to write a report on the use ofshowerheads with a maximum flow rate of 1.75 gallons per minute or a lower flow ratewith or without an integral on-mostly offswitch. Note that the proposal calls for writinga report rather than undertaking an action such as installing showerheads. The proposal isformulated in this manner so as not to address ordinary business ofthe company whichcould concern the SEC. Also, since global warming and climate change are clearly socialwelfare issues, I am confident the SEC will find this proposal acceptable ifacceptabiiitybecomes an issue.I would be delighted to have this proposal receive a favorable recommendation fromthe Board ofDirectors. I believe the board would want to look at this proposal in thatmannerfor three reasons. First, global warming is one ofthe most important issues ofourtime. A reduction ofthe energy needed to heat hot water for a shower (a significant use ofwaterin hotels) will impact global warming. Incidentally there are showerheads on themarket that give a good shower experience comparable to higher flow rate products. Thes~n~.J"eason is that a reduction in water usage and a reduction in energy used to heatwater wiJI be cost savings for hotels. The third reason is good public relations since it isquite possible that the media will take an interest in the proposal. Please note for therecord note that while I dont believe it is an SEC concern, I do not have any business,financial, investment or similar relationships to showerheads.For phone discussion my home number isSincerely you;~, LJ~~,=Stephen Sacks, Ph.D.IIi!1IlIIi!!jIIiIjIIiIfI*** FISMA & OMB Memorandum M-07-16 ****** FISMA & OMB Memorandum M-07-16 ***
  21. 21. Shareholder Proposal, Stephen and Hinda SacksShareholder Proposal ofStephen Sacks and Hinda Sacks ofClifton, Virginia whojointly own 80 shares ofChoice Hotels InternationalResolved: Choice Hotels International Inc. shall write a report on showerheadsthat deliver no more than I.75 gallons per minute (gpm) offlow-or a lower number (suchas 1.6 and/or 1.5gpm). A mechanical switch that will allow for full water flow to almostno flow shall be considered..Energy usage, anticipated guest and hotel owner reaction,installation logistics and related factors shall be considered.Discussion: Most scientists and engineers who have studied the data and thetechnical underpinnings have concluded that global warming is a major problem ofourtime. Greenhouse gasses resulting from burning fossil fuels used to heat water are amajor contributor to global warming. Think how long a stove burner takes to heat a pot ofwater. Typi~l showers require much more hot water and consume a significant fractionofthe energy used in hotels. Additionally, fossil fuel usage has strategic, balance ofpayments and environmental implications. Simply reducing water consumption is also abenefit.The hotel industry has reduced energy consumption. Indeed, saved energy is acost savings. But has enough been done? Changes made to date have generally beentransparent to the guest. Understandably, perhaps because ofundue concern withanticipated perceptions ofsome guests, concerns that may never materialize, there can behesitancy to taking additional steps. Times have changed. The latest studies ofglobalwarming indicate that proactive efforts are required. Guests may welcome what isproposed. Hotel profitability will increase. Well performing maximum l.75 gpmshowerheads (or lower) are on the market. In some fluid mechanics effects are utilized toimprove the shower experience. Shower quality, effectiveness and experience may be nodifferent than that ofa higher flow rate showerhead. An on to mostly offshowerheadswitch will significantly contribute to lowered energy consumption and is a possibleoption. Installation will take minutes.I have a Ph.D. degree in Mechanical Engineering. I have followed the globalwarming discussion for years, have worked in the energy field and am aware ofpertinentengineering and other trade-offs. What is being proposed is not a total solution, but isone ofthe simplest and most cost effective contributors to a solution. I urge stockholdersto vote in favor ofthis resolution to have Choice Hotels International write a reportaddressing the subject and issues.
  22. 22. October 1o, 2012Stephen SacksHinda F. SacksDear Mr. and Mrs. Sacks:Thank you for contacting Fidelity Investments for account infonnation. We appreciatethe opportunity to assist you. Please accept this letter in reference to your FidelityAccount ending inBelow is the financial event summary ofthe security Choice Hotellntl.lnc. New (CHH)held in the aforementioned account.I can confinn that you currently hold this security, and have not bought or sold CHHsince your original purchase on October 19, 2011.Please note that the enclosed letter contains information as ofOctober 10, 2012, and maybe subjectto change pending any new and subsequent transactions in the same security.I hope you find this information helpful. For any other issues or general inquiriesregarding your account, please contact your Private Client Group team at 800-544-5704for assistance.Lauren MassicotteHigh Net Worth OperationsFi<.ldiLy Brokerage Setvices LLC. Our File: W688357-1OOCT12Mombcr NYSE. SIPCFidelity Brokerage Services LLCFidelity Personal InvestmentsMailing Address:18611ntemationai Drive, Suite 100Mclean. VA 22102Office Address:18611ntemational Drive, Suite 100Mclean, VA 22102Phone: 800 543-8736, Ext. 52013703 893-1008*** FISMA & OMB Memorandum M-07-16 ****** FISMA & OMB Memorandum M-07-16 ***
  23. 23. November 6, 2012Jrm FeiiExStephen and Hinda SacksDearMr. and Mrs. Sacks:CHOICE HOTELSI N T B R N A T I 0 N A Le~We are inreceipt ofyom letter dated October 19, 2012, to which you attachedasbareh9lderproposal as well as a letterftom Fidelity Investments. Yom conespondencewasreceived mour offices on October 25, 2012. ·.AByouknow, Rule 14a..8(b) under the Securities Exchange Act of1934provides that, tobe eligible to submit a shareholderproposal, a proponentmust have continuously held aminimum of$2,000 in market value, or 1o/o, ofthe companys securities entitledto be voted onthe proposal for at least one year priorto the datethe proposal is submitted. Because you are nota record holder ofChoice Hotels International, Inc. common stock, you may substantiate yourownership in either oftwo ways:1. you may provide a written statement from the record holder ofthe shares ofChoiceHotels Intemational, Inc. common stock beneficially owned by you, verifying that, onOctober 19, 2012, whenyou submittedthe Proposal, you had ~uously held, for atleast one year, the requisite number orvalue ofshares ofChoice Hotels International, Inc.common stock; or2. you may provide a copy ofa filed Schedule 130, Schedule 13G, Form 3, Form 4 orFormS, or any amendment to any ofthose documents or updated forms, reflecting yourownership ofthe requisite number or value ofshares ofChoice Hotels International, Inc.common stockas oforbefore the date on which the one-year eligibility period began,together with your written statement that you continuously held the shares for the one­yearperiod as ofthe date ofthe statement.The staffofthe Division ofCorporation Finance ofthe U.S. Securities and ExchangeCommissionrecently provided guidanceto assist companies and investors with complying withRule 14a-8(b)s eligtoility criteria. This guidance, contained in StaffLegal BulletinNos. 14F(CF) (October 19, 2011) and 140 (October.16, 2012), clarifies that proofofownership for Rulet4a..8(b) purposes must be providedby the record holder" ofthe secmitie~ which is eithertheperson or entity listed onthe Companys stock records as the OWiler ofthe securities or a DTCparticipant (or an affiUate ofa DTC participant).10750Columbia Pike • Sih1er Spring, Maryland 20901 • Plume 301..592.5188 • Fll% 301.592.6783 • sinttme...JDU@choice1wtels.com*** FISMA & OMB Memorandum M-07-16 ***
  24. 24. We have reviewed the letteryou provided from Fidelity Investments and have concludedthat the letter does not provide adequate proofofyour ownership ofChoice Hotels International,Inc. common stock for purposes ofRule 14a-8(b). Neither Fidelity Investments, nor any oftheother entitieswhose names appear onthe letter (Fidelity Brokerage Services LLC and FidelityPersonal Investments), are DTC participants. Moreover, the letter does not identify any DTCparticipantor state that Fidelity Investments is an affiliate ofany identified DTC participantAccordingly, we do not believe thatthe letter from Fidelity Investments provides adequateverification ofyour ownership ofChoice Hotels International, Inc. common stockunder Rule14a-8(b).Moreover, the letter from Fidelity Investments states that you held 80 shares ofChoiceHotels International, IDe. commonstock from October 19, 2011 tbrough October 10, 2012.Becausethe letterfrom Fidel4Y speaks as ofOctober 10, 201.2~ and yourproposal was submittedon October 19, 2012, you have notdemonstrated that you held the requisite amount ofChoiceHotels International, Inc. commonstock for a one-yearperiod up to, and including the date yourproposal was submitted, as required by Rule 14a-8(b).To correctthese deficiencies, please provide a written statementfrom a record owner(whichmay be a DTC participantor an affiliate ofan identifiedDTCparticipant) through whichyour shares are held, verifyingthat on October 19,2012, you had continuouslyheld at least$2,000 inmarket value, or 1%, ofChoice Hotels International, Inc. common stock for at leastone yearup to, and including, such date. Pursuantto Rule 14a-8(f), you must correctthisdeficiency with a response that is postmarlced, or transmitted electronically, no laterthan 14calendardays after youreceive this notice.In accordance with SEC StaffLegal BulletinNos. 14 and 14B, a copy ofRule 14a-8,includingRule 14a-8(b), is enclosed for your reference.Please do not hesitateto call me at 301-592-5188 ifyou have any questions.SimoneWuEnclosures
  25. 25. II§ 240.14a..S Shareholder proposals.This section addresses when a company must include a shareholders proposal In Its proxystatementand identify the proposal In its form of proxy when the company holds an annual or specialmeeting ofshareholders. In summary, in order to have your shareholderproposal included on acompany-s proxy card, and Included along with any supporting statement in its proxy statement, you mustbe eHgible and follow certain procedures. Under a few specific circumstances, the company is permittedto exclude your proposal, but only after submitting its reasons to ttJe Commission. We structured thissection ln a question-ancJ..answerformat so that it is easier to understand. The references to •yoli are toa shareholder seeking to submit the proposal.(a) Question 1:What is a proposal? A shareholderproposal is your recommendation or requirementthat the company and/or its board of directors take action, which you Intend to present ata meeting ofthecompanys shareholders. Your proposal should state as clearly as possible the course ofaction thatyoubelieve the co~pany should follow. Ifyour proposal Is placed on the companys proxy card, the companymustalso provide In the form of proxy means for shareholders to specify by boxes a choice betweenapproval or disapproval, or abstention. Un!ess otherwise incfacated, the word •proposal" as used In thissection refers both to your proposa~ and to your corresponding statementIn support of your proposal (ifany).(b) Question 2:Who is eligible to submit a proposal. and hoWdo I demonstrate to the company that Iam er~gtble? (1) In orderto be eDgible to submita proposal, you must have continuously held at least .$2,000 in marketvalue, or 1%, of the companys securftles entitled to be voted on the proposal at themeeting for atleast one year by the date you submit the proposal. You must continue to hold thosesecurities through the date of the meeting.(2) If you are the registered holder ofyour securities, which means that your name appears In thecompanys records as a shareholder, the company can verify your eDgibHity on its own, although you willstm have to provide the company with a written statement that you intend to continue to hold thesecurities through the date ofthe meeting of shareholders. However, if Hke many shareholders you arenota registered holder, the company Ukely does not know that you are a shareholder, or how manyshares you own. In this case, atthe time you submit your proposa~ you must prove youreligibHity to thecompany fn one oftwoways:(i) The first way is to submitto the company a written statement from the •recortr holder of yoursecurities (usually a brokeror bank) verifying that, at th~ time you submitted your proposal, youcontinuously held the securities for at least one year. You must also include your own written statementthat you intend to continue tohold the securities through the date ofthe me~ng of shareholders; or(ii) The second wayto prove ownership applies only ifyou have filed a Schedule 130 (§ 240.13<1­101), Schedule 13G (§ 240.13d-102), Fonn 3 (§ 249.103 ofthis chapter), Form 4 (§249.104 ofthischapter) and/or Form 5 (§ 249.105 ofthis chapter), or amendmen1s to those documents or updatedforms, reflecting your ownership of the shares as ofor before the date on which the one-year eligibiUtyperiod begins. Ifyou have filed one ofthese documents with the SEC, you may demonstrate youref~gibility by submitting tothe company:(A)A copy of the schedule and/orfonn, and any subsequent amendments reporting a change Inyour ownership level;(B) Your written statement that you continuously held the required number ofshares for the one­year period as ofthe date ofthe statement; and
  26. 26. (C) Your written statement that you Intend to continue ownership ofthe shares through the date of the companys annual or special meeting. (c) Question 3: How many proposals may I submit? Each shareholder may submit no more than oneproposal to a company for a particular shareholders meeting.(d) Question 4: How long can my proposal be? The proposal, including any accompanying supporting statement, may not exceed 500 words. (e) Question 5: What Is the deadDne for submitting a proposal? (1) Ifyou are submitting yourproposal for the companys annual meeting, you can in mostcases find the deadline In last years proxystatement However, ifthe company did not hold an annual meeting last year, orhas changed the date ofits meeting for this yearmore than 30 days from lastyears meeting, you can usually find the deadline inone ofthe companys quarterly reports on Form 10-Q (§ 249.3088 ofthis chapter), or In shareholderreports ofinvesbnent companies under§ 270.30d-1 ofthis chapter ofthe lnvesbnent Company Act of1940.. In orderto avoid controversy, shareholders should submit their proposals by means, Includingelectronic means, that permit them to prove the date ofdelivery.(2) The deadHne Is calculated in the following manner ifthe proposal is submitted for a regularlyscheduled annual meeting. The proposal must be received at the companys principal executive officesnot Jess than 120calendar days before the date of the companys proxy statement released toshareholders In connection with the previous years annual meeting. However, Ifthe company did not holdan annual meeting the previous year, or ifthe date ofthis years annual meeting has been changed bymore than 30 days from the dale ofthe previous years meeting, then the deadllne is a reasonable timebefore the company begins to print and send Its proxy materials.(3) If you are submitting your proposal for a meeting ofshareholders other than a regularlyscheduled annual meeting, the deadline Is a reasonable time before the company begins to print andsehd Its proxy materials.(f) Question 6:What if I faD to foDow one ofthe elfgibiTdy or procedural requirements explained inanswers to Questions 1through 4 ofthis section? (1) The company may exclude your proposal, but onlyafter It has notified you ofthe problem, and you have failed adequately to correctIt Within 14 calendardays of receMng your proposal, the company must notify you in writing ofany procedural or ef~gibilitydeficiencies, as well as ofthe time frame for your response. Your response must be postmarked. ortransmitted electronically, no laterthan 14 days from the date you received the companys notification. Acompany need notprovide you such notiCe ofa deficiency ifthe deficiency cannot be remedied, such as ifyou faD to submit a proposal by the companys property determined deadline. Ifthe company intends toexclude the proposa~ It wiD later have to make a submission under§ 240.148-8 and provide you with acopy under Question 10 below, § 240.14&-80). ·(2) Ifyou fail in your promise to hold the required numberof securities through the date ofthemeeting ofshareholders, then the company will be permitted to exclude an ofyour proposals from itsproxy materials for any meeting held in the following two calendar years.(g) Question 7: Who has the burden of persuading the Commission or its staffthat my proposal canbe excluded? Exceptas otherwise noted, the burden is on the company to demonstrate that it is entitledto exclude a proposal.(h) Question 8: Must I appear personally at the shareholders meeting to present the proposal? (1)Either you, oryour representative who is qualified under state law to present the proposal on your behalf,mustattend the meeting to present the proposal. Whether you attend the meeting yourselfor send aqualified representative to the meeting in your place. you should make su~ that you. or your
  27. 27. •representative, follow the properstate law procedures for attending the meeting and/or presenting yourproposal.(2) Ifthe company holds its shareholder meeting In whole or in partvia electronic media, and thecompany pennfts you or your representative to present your proposal via such media, then you mayappearthrough electronic media rather than traveling to the meeting to appearin person.(3) Ifyou or yourqualified representative fail to appear and present the proposal, without goodcause, the companywr1J be permitted to exclude aD ofyour proposals from ils proxy materials for anymeetings held in the following two calendaryears.(i) Question 9: IfI have complied with the procedural requirements, on whatother bases may acompanyrely to exclude my proposal? (1) Improper under state Jaw: Ifthe proposal is not a propersubjectfor action by shareholders underthe laws of the jurisdiction ofthe companys organization;NOTETO PARAGRAPH (I)(1): Depending On the subject matter, some ~ arenot considered proper understate lawIfthey would be binding on the company Ifapproved by shareholders. In ourexperience, mOst proposalsthat ara castas recommendations or requests that1he board ofdirectors take specified action are proper understateraw.Accordingly, we will assume lhat a proposal drafted as a recommendation orsuggestion is proper unless thecompanydemonstrates otherwise.(2) VIOlation oflaw: Ifthe proposal would, if implemented, cause the company to violate any state,federal, or foreign law to which itis subject;NoTETO PARAGRAPH (I )(2); We will notapply this basisfor exclusion to permit exclusion ofa proposal ongroundsthat itwould violate foreign lawIfcompliance with the foreign lawwould result in a violation ofany state orfederal law.(3} VIOlation ofproxyrules: Ifthe proposal or supporting statement is contrary to any oftheCommissions proxy rules, including § 240.148-9, which prohibits materially false or misleadingstatements in proxy soliciting materJals;(4) Personalgrievance; specialinterest Ifthe proposal relates to the redress of a personal claim orgrievance against the company orany other person, or ifit is designed to result in a benefit to you, or tofurther a personal interest. which is not shared by the other shareholders at large;(5) Relevance: Ifthe proposal relates to operations which account for less than 5 percentofthecompanys total assets atthe end of its most recent fiscal year, and for less than 5 percent of Its netearnings and gross sales for Its most recent fiscal year,·and is not otherwise significantly related to·thecompanys business;(6) Absence ofpower/authority: Ifthe company would lack the powerorauthority to Implement theproposa~(7) Management functions: Ifthe proposal deals with a matterrelating to the companys ordinarybusiness operations;(8) Dlrecforelections: Ifthe proposat(i) Would disqualify a nominee who Is standing for election;(iJ) Would remove a directorfrom office before his or her term expired;
  28. 28. •(iii) Questions the competence, business judgment, or character ofone or more nominees or directors; (iv) Seeks to include a specific individual In the companys proxy materials for election to the boardof directors; or(v) otherwise could affect the outcome ofthe upcoming election ofdlrectors.(9) Conflicts with companys proposal: Ifthe proposal directly conflicts with one ofthe companysown proposals to be submitted to shareholders at the same meeting;NOTETO PARAGRAPH (I)(9): A companys submission to the Comrnlssfon underthis section should specify thepoints ofconfUct with the companys proposal.(10) Substantially imp/e~nted: Ifthe company has ~lready substantially implemented the proposal;. NoTETO PARAGRAPH ( 1)(10): Acompany may exclude a shareholder proposaJ thatwould provide an advisoryvote orseekfuture advisoryvotes tD approve.the compensation ofexecutives as disclosed pursuantto Item 402 ofRegulaUon S-K (§ 229.402 ofthis chapter) orany successorto Hem 402 (a •say-on-pay vote,orthat relatesto thefrequency ofsay-on-pay votes, provided that in the most recent shareholder vote required by§ 240.14a-21(b) ofthJschapter a single year (i.e., one, two, orthree years) received approval ofa majority ofvotes caston the matterandthe companyhas adopted a poDcy on the frequency ofsay-on-payvotes thatIs consistentwith the choice ofthemajority ofvotes cast In the most recent shareholdervote required by§ 240.148-21(b) ofthis chapter.(11) Duplication: Hthe proposal substantially dupfacates another proposal previously submitted tothe company by another proponentthat will be included in the companys proxy materials for the samemeeting;(12) Resubmlsslons: Ifthe proposal deals with substantiaUy the same subject matter as anotherproposal or proposalsthat has orhave been previously included In the cornpanfs proxy materials withinthe preceding 5 calendaryears, a company may exclude it from its proxy materials for any meeting heldwithin 3 calendaryears ofthe lasttime it was Included Ifthe proposal received:(i) Less than 3% of the vote if proposed once within the preceding 5 calendar years;(D) Less than 6% ofthe vote on its lastsubmission to shareholders ifproposed twice previously within.the ~ng 5 calendar years; or(iii) less than 10% ofthe vote on its last submission to shareholders ifproposed three times ormorepreviously within the preceding 5 calendar years; and(13) Specific amount ofdMdends: Ifthe proposal relates to specific amounts ofcash or stock cflVidends. (i) Question 10: What procedures mustthe companyfoOow Ifit intends to exclude my proposal? (1)Ifthe company Intends to exclude a proposal from its proxy materials, it mustfile its reasons with theCommission no laterthan 80 calendar days before ft files its definitive proxy statement and fonn of proxywith the Commission. The company must simultaneously provide you with a copy ofits submission. TheCommission staffmay permit the company to make Its submission laterthan 80 days before the companyfiles Its definitive proxy statementand form of proxy, ifthe company demonsbates good cause for missingthe deadline.(2) The company mustfile six papercopies ofthe following:
  29. 29. • •(i) The proposal;(ii) An explanation ofwhy the company believes that it may exclude the proposal, which should, ifposstbre, refer to the most recent apprrcable authority, such as prior Division letters issued underthe rule;and(iii) A supporting opinion ofcounsel when such reasons are based on matters ofstate or foreign law.(k) Question 11: May I submit my own Statementto the Commission responding to the companysarguments?Yes, you may submit a response, but it is not required. You should try to submit any response to us,with a copy to the company, as soon as possible after the company makes Its submission. This way, theCommission staffwill have time to considerfully yoursubmission before It Issues its response. Youshould submit six papercopies ofyour response.(I) Question 12: Ifthe company includes my shareholder proposal in Its proxy materials, whatinfonnatfon about me must It Include along with the proposalltse!f1(1) The companys proxy statement mustinclude your name and address, as weD as the numberofthe companys voting securities that you hold. However, Instead ofproviding that infonnation, thecompany may instead include a statement that itwill provide the infonnation to shareholders prompUyupon receiving an oral orwritten request(2) The company is not responsible for the contents ofyour proposal or supporting statement(m) Question 13:What can I do ifthe company includes in its proxy statementreasons why itbelieves shareholders should not vote Jn favor of my proposal, and I disagree with some of itsstatements?{1) The company may elect to include in ils proxystatement reasons why it beUeves shareholdersshould vote against your proposal The company is allowed to make arguments reflecting its own point ofview, just as you may express yourown pointofview In your proposals supporting statement(2) However, ifyou befteve that the companys opposition to your proposal contains materially falseor misleading statementsthat may violate our anti-fraud rule, § 240.14a-9, you should prompUy sem,t tothe Commission staffand the QOmpany a letterexplaining the reasons for your~. along with a copy ofthe companys statements opposing your proposal. To the extent possible, your lettershould Includespecific factual information demonstrating the inaccuracy ofthe companys claims. Tame pennltting, youmay wish to try to work outyour differenceswith the company by yourself before contacting theCommission staff.(3) We require the company to send you a copy of its statements opposing your proposal before itsends its proxy materials, so that you may bring to our attention any materially false or misleadingstatements, underthe following timeframes:(i) Ifour no-action response requires that you make revisions to your proposal or supportingstatementas a condition to requiring the company to include ItIn its proxy materials, then the companymust provide you with a copy of its opposition statements no laterthan 5 calendar days after the companyreceives a copy ofyour revised proposal; or
  30. 30. • 0(il) In all othercases, the company must provide you with a copy of its opposition statements nolaterthan 30 calendar days before its files definitive copies ofits proxy statement and fonn of proxy under§ 240.148-6.[63 FR 29119, May 28. 1998;63 FR 50622, 50623, Sept 22, 1998, as amended at 72 FR4168, Jan. 29, 2007: 72 FR70456, Dec. 11. 2007; 73 FR 977, Jan. 4, 2008; 76 FR 6045, Feb. 2, 2011; 75 FR 56782, Sept 16. 2010]
  31. 31. 11/20/2012 11: IU r~AFid~ IMt•tul.iomlfMud- PO tsox 110001. CU1Cinnat1, OH 4:>21/·0045OlfJCt>: ~ Sillem ~trHr, Sinrthfu!old. Rl 02917November 20, 2012Stephen SacksHinda F. SacksDear Mr. and Mrs. Stephen Sacks,Thank you for choosing Fidelity Investments. We appreciate y.(4ur business.National Financial Setvices LLC is a Fidelity Investments sub~diary responsible for theexecution, reporting, and clearing oflisted equity, option, and ton-Fidelity mutual fundorders that are sent from the central phone sites, investor cente-sS, and correspondentbanks.Our records indieate thatyou purchased 80.000 shares ofChoi~te Hotel Inti Ine (CCH) onOctober 19,2011, in your Fidelity Joint account ending inI can confirm that you have not bought orsold CCH since yoW!original purchase date of~tober 19,2011, up until the elose ofbusiness on November ·9, 2012.Pleas<: note that the history provided contains information as of the closeofbusiness on. November 19,2012, and may be subject to change pending an.! new and subsequenttransactions in the same security.Mr. and M~ Stephen Sacks, 1hope you find this information belpful. Ifyou have anyq~tions regarding tbis issue or general inquiries regarding y$r account, please contactyour Private ClientGroup team at 8()()..544-5704 for assistance·Sincerely,t.25 2;?42-Brad LaFleurHigh Net Worth OperationsOur File: W477707..19NOV12~1/20/12 04:59 PM Page 2*** FISMA & OMB Memorandum M-07-16 ****** FISMA & OMB Memorandum M-07-16 ***

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