RECON 2009 Corporate & Securities Update December 10, 2008

1. RECON 2009 Corporate & Securities Update December 10, 2008 Deborah Gunny Ramsey Hanna Allen Sussman

2. Agenda • SEC Guidance on Corporate Website Disclosures • Changes in Rule 144/145 Rules for Resale of Restricted Securities • Current Corporate Governance and Shareholder Activism Trends • SEC Proposes Transition to IFRS

3. SEC Guidance on Corporate Website Disclosures

4. Website Disclosure • Interpretive Release No. 34-58288, August 7, 2008: Guidance on the Use of Company Websites in relation to Securities Laws • Issues of focus: (1) Public Information under Regulation FD (2) Anti-Fraud Provisions (3) Disclosure Controls and Procedures (4) Printer-friendly format

5. Website Disclosure • Issue 1: Interaction of Reg FD and Company Websites • General rule: Tell one, Tell all • The standard: Disclosure must be “reasonably designed to provide broad, non-exclusionary distribution of information to the public” • When will information posted on a Company’s website be deemed “public” for Reg FD purposes? (1) Recognized channel of communication (2) Posted in a manner that makes it generally available (3) Reasonable waiting period to allow investors and the market to react to the information

6. Website Disclosure • Satisfying the Standard • (1) “Recognized channel of communication” and (2) “Available to the general securities marketplace” depends on: • Design/Intent of website • Degree of use • Market and investors awareness • Accessibility • Current and accurate information • Prominence of use of website vs. other methods • Nature of information

7. Website Disclosure • Satisfying the Standard • (3) Reasonable waiting period • Size and market following the Company • Extensiveness of website use by investors • Company encouragement/publicity of website • Prior use by Company • Nature and complexity of information disseminated

8. Website Disclosure • No bright line rule; facts and circumstances test • A company that wishes to use its website to assist in compliance with Reg FD should consider the following, among other measures: • Publicize website • Prominently feature Investor Relations section • Advise media and newswires of use of website • Steer traffic into website • Reasonable passage of time before relying on posting • Press releases and Form 8-Ks still good stand-bys

9. Website Disclosure • Issue 2: Anti-fraud Provisions • General Rule: All information on a company’s website is deemed a public statement by the company • Specific Issues: • Previously Posted Materials or Statements • Separately identify as historical/previously released • Separate section • Hyperlinks to Third-Party Info • Does the context/linked info create a reasonable inference that the company has approved or endorsed the info? • Third party links – explain the reason for link/context • Links to press releases • “Exit” screens • Specific disclaims as “Recent News Articles” to anti-fraud are contrary to securities laws

10. Website Disclosure • Specific Issues (cont.) • Summary Information • Alert investors to location of more detailed information • Identify as such • Interactive Website Features • Statements on blogs/chat rooms subject to anti-fraud if made by the Company or on its behalf • No waiver as pre-condition to participation

11. Website Disclosure • Issue 3: Disclosure Controls and Procedures: • If website is utilized as alternative to Exchange Act disclosure, the disclosure controls and procedures are applicable and certifications will apply equally to that extent • Issue 4: Readable versus Printer-Friendly Format • Not essential unless SEC rules explicitly require (e.g., notice and access rules for proxies)

12. Website Disclosure • Conclusion • Develop and adhere to a strategy on how the company plans to utilize its website • Date all posted documents • Provide context for all linked information and include an exit page

13. Changes in Rule 144/145 Rules for Resale of Restricted Securities

14. Rule 144/145 Update • Background • General registration requirement in federal securities laws • Section 4 – Provides transactional exemptions from the general registration requirement. • Section 4(1) – Provides an exemption for sales by a person other than an “issuer, underwriter or dealer” • “Underwriter” – A person who acquires securities with a view to distribution • Avoidance of “underwriter” status is the key

15. Rule 144/145 • Introduction to Rule 144 Safe Harbor • Governs unregistered public resales of: • “Restricted” securities • “Control” securities

16. Rule 144/145 Update • Rule 144 Changes -- Reduce restrictions on unregistered resales into public markets • Relax impediments to reselling both restricted and control securities • Codify SEC Staff interpretive positions related to tacking, other miscellaneous issues

17. Rule 144/145 Update • Preliminary Considerations • Seller: “Affiliate” or “Non-Affiliate” • Issuer: “Reporting Company” or “Non-Reporting Company”

18. Rule 144/145 • Non-Affiliates • Issuer is a Reporting Company • First six months – no resales • After six months – unlimited resales (if issuer is current in reporting) • After one year – unlimited resales (regardless whether issuer is current in reporting) • Issuer is a Non-Reporting Company • First year – no resales • After one year – unlimited resales

19. Rule 144/145 • Affiliates • Issuer is a Reporting Company • First six months – no resales • After six months – resales in accordance with Rule 144 current public information, volume limitation and manner of sale requirements, filing of Form 144 for sales in excess of $50,000 or 5,000 shares • Issuer is a Non-Reporting Company • First year – no resales • After one year –resales in accordance with Rule 144 requirements

20. Rule 144 - Summary Chart

21. Rule 144/145 • Rule 145 • Old Rule: • Imposes restrictions on “affiliates” of both the Acquiror and target for resales of securities received in a business combination. • Applies even where such securities were registered under the Securities Act. • New Rule: • Removes resale restrictions on affiliates of the Target (so long as such person does not become an affiliate of Acquiror) • If the issuer is a shell company, different requirements apply

22. Rule 144/Rule 145 • Shell Companies • Rule 144 - Cannot rely on Rule 144 unless the issuer: • Ceases to be a shell company; • becomes a reporting company (and is current); and • has filed current “Form 10 information,” including financial information, with the SEC. • No resales until one year after filing of Form 10 information • Rule 145 • For shell companies, public resales by affiliates of both the Acquiror and Target will continue to be governed by Rule 145 • If the business combination was registered under the Securities Act -> affiliates may resell securities subject to the requirements of Rule 145 for shell companies • If the business combination was not registered under the Securities Act -> affiliates and nonaffiliates must rely on Rule 144

23. Rule 144/145 • Miscellaneous • The SEC codified certain staff interpretations previously issued. • Most significant: Tacking, under Rule 144. Clarifies that tacking is permitted in connection with: • holding company reorganizations • conversion or exchange of securities by the same issuer • cashless exercise of options or warrants that have been purchased for cash or property

24. Trends in Corporate Governance

25. I. Advance Notice Bylaws Provisions • Two recent Delaware cases require careful review of advance notice bylaws provisions • Jana Master Fund, Ltd. v. CNET Networks • 2008 WL 660556 (Del. Ch. Mar. 13, 2008), aff’d, 2008 WL 2031337 (Del. S. Ct. May 13, 2008) • Levitt Corp. v. Office Depot • 2008 WL 1724244 (Del. Ch. April 14, 2008)

26. Two Areas to Review in Bylaws • Do bylaws actually require advance notice of director nominations? • If so, do bylaws clearly differentiate between nominations and other business to be considered at stockholders’ meeting?

27. Other Requirements of Advance Notice Bylaws • Director nominees must disclose all outside interests and qualifications via questionnaire • Shareholder making proposal must disclose any interest in new business • Bylaws should clearly distinguish shareholder proposals from 14a-8 proposals

28. Example of Advance Notice Bylaw Annual Meetings of Stockholders. (1) Nominations of persons for election to the Board of Directors and the proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders: (a) pursuant to the Corporation’s notice of meeting, (b) by or at the direction of the Board of Directors or (c) by any stockholder of the Corporation who (i) was a stockholder of record at the time of giving of notice provided for in this By-Law and at the time of the annual meeting, (ii) is entitled to vote at the meeting and (iii) complies with the notice procedures set forth in this By-Law as to such business or nomination. Clause (c) shall be the exclusive means for a stockholder to make nominations or submit other business (other than matters properly brought under Rule 14a-8 under the Exchange Act and included in the Corporation’s notice of meeting) before an annual meeting of stockholders.

29. II. Trend towards Requiring Majority Vote to Elect Directors • 66% of S&P 500 and 57% of Fortune 500 have adopted majority voting at beginning of 2008 proxy season (compared to 16% of S&P 500 in February 2006). • Within S&P 500: • 19% adopted majority vote policy • 25% adopted majority vote bylaw or charter provision (of which 2% consists of Plurality-Plus Bylaws) • 22% adopted a majority vote policy and bylaw (or charter) provision (of which 1% consists of policies and Plurality-Plus Bylaws).

30. Types of Policies • Plurality voting (the norm) • Director resignation policy (Pfizer) • Majority vote bylaws provision in uncontested election (Intel example) • Must achieve majority to be elected. • Incumbent director must tender resignation. • State law amendments; Model Business Corporation Act

31. III. Trends in Shareholder Activism • Emergence of “Hedge Fund Activism”– shareholder activism through minority position • Acquire minority investment (5%-10%) in public company • Very short investment horizon (i.e., less than one year) • Acquisition of entire company is often not ultimate goal • Sophisticated review of target’s strength and vulnerabilities

32. “Financial” Activists • Short term increase in shareholder value • Optimize balance sheet: cash payouts • Improve business plan • Significant share buybacks or extraordinary dividend • Sale or spin-off of an underperforming or non-strategic business • Corporate governance changes (e.g., management changes, Board seats, eliminate rights plan) • Sale of company to activist or highest bidder • Challenging announced transactions • Attempts to sway press, research analysts, ISS and other proxy voting organizations

33. “Socially Responsible” Activists • Limits on executive pay • Nondiscrimination policies • Restrictions on political contributions • Reduction of greenhouse gas emissions • Increased disclosure of impact on global warming • Address social issues such as abortion (drug companies)

34. Activists’ Tools and Tactics • Letters sent to management and board • Shareholder proposals/resolutions • Press releases • Withhold or “no vote” campaigns • Equity swaps/derivatives • Survival of this tactic is uncertain

35. Hostile Tactics • Hedge funds most willing to use, but rarely seek takeover • Negative press releases • Shareholder proposals stating hostile intention • Initiate litigation • Proxy contest (most salient tactic)

36. Defenses • Optimize balance sheet • remit excess cash to shareholders • Implement advance notification bylaws • Consult investment bankers • Obtain shareholder feedback • Increase management presence among shareholder base • Improve corporate governance

37. Success Rates • Hedge funds achieved successful outcomes in 84% of 130 activist campaigns from 2002-2006 • Success defined as garnering a board seat, obtaining concessions, or reaching a settlement • Activists with a specific agenda achieved their main stated goals in 41% of 329 activist endeavors from 2001-2005, and achieved significant concessions in 26% of those cases

38. Successful Outcomes

39. SEC Proposes Transition to IFRS

40. SEC Road Map for Transition to IFRS • SEC will decide in 2011 whether to proceed with rulemaking to require that U.S. issuers use IFRS beginning in 2014 • Mandatory - Several milestones that, if achieved, could lead to the required use of IFRS by US companies in 2014 • Voluntary - Only companies whose industry uses IFRS as the basis of financial reporting more than another set of standards would be eligible to voluntarily elect to use IFRS beginning in 2010

41. SEC Milestones for Mandatory Adoption of IFRS • Improvements in accounting standards • Accountability and funding of International Accounting Standards Committee Foundation • Improvement in the ability to use interactive data for IFRS reporting • Education and training in the U.S. relating to IFRS • Limited early use of IFRS, beginning with filings in 2010, where this would enhance comparability for U.S. investors. Eligibility would be based on prevalence of the use of IFRS and significance of the issuer in a given industry. The SEC estimates that a minimum of 110 companies could be eligible. • The anticipated timing of future rulemaking by the Commission • Implementation of the mandatory use of IFRS, including considerations relating to whether any mandatory use of IFRS should be staged or sequenced among groups of companies based on their market capitalization.

42. How does IFRS differ from GAAP • Specific differences • General difference: • IFRS uses “principle-based” standards (less attention to specific application guidance) • GAAP uses more “rule-based” standards accompanied by specific guidance

43. Disclaimer:  This presentation should not be construed or relied upon as legal advice or a legal opinion on any specific facts or circumstances.  Also, it is not intended to create a lawyer-client relationship.  The contents contained herein are intended for general informational purposes only.  Readers of this presentation and attendees at live or recorded presentations of material covered in this presentation are urged to consult with their own lawyers or other professional counsel concerning any specific questions of legal consequence.