Spring Training for Investor Relations Executives

1. Spring Training for Investor Relations Executives Avoiding Unforced Errors in Corporate Disclosure National Investor Relations Institute, Northwest Chapter April 17, 2014 Barry M. Kaplan & Gregory L. Watts

2. Barry M. Kaplan, Partner – Securities Litigation Barry Kaplan is the head of the Northwest litigation group of Wilson Sonsini Goodrich & Rosati. Barry has broad experience in securities and corporate governance litigation, class action defense, SEC and internal corporate investigations, and complex commercial litigation, including international disputes. For over 25 years, Barry has represented many public companies and individuals in shareholder class actions and related corporate litigation both in the Northwest and across the country, including The Boeing Company, Micron Technology, Sterling Financial Corporation, Alaska Air, and Starbucks. Barry was lead counsel for the former CEO of Washington Mutual, Inc. in the various shareholder lawsuits that followed the seizure and sale of WaMu to JPMorgan Chase. He has special expertise in representing public biotech companies and, among others, has represented Immunex, Dendreon, Inspire Pharmaceuticals, Pozen, Chelsea Therapeutics and Cell Therapeutics. Barry is a frequent writer and speaker on securities litigation and corporate law and governance topics, and teaches a course on securities litigation at the University of Washington School of Law. He also co-authored the leading treatise on Washington corporate law, published by LexisNexis. Best Lawyers in America named Barry the 2012 Securities Litigator of the Year for Seattle—the first time that this honor has been awarded to a Seattle securities litigator. CONTACT:701 Fifth AvenueSuite 5100Seattle, WA 98104Phone | 206-883-2538Fax | 206-883-2699 bkaplan@wsgr.com

3. Gregory L. Watts, Partner –Securities Litigation Greg Watts is a partner at Wilson Sonsini Goodrich & Rosati, where he focuses on securities and complex commercial litigation, primarily defending companies and their directors and officers in securities class actions, shareholder derivative actions, contested mergers and acquisitions, and SEC investigations and enforcement proceedings. He also advises audit committees, special committees, and boards of directors in internal investigations. For over 15 years, Greg has represented companies and their directors and officers in dozens of securities class action and shareholder derivative lawsuitsin the Northwest and across the country, including Banc of America Securities, The Boeing Company, Fisher Communications, Flow International, Intermec, Isilon Systems, Juniper Networks, Occam Networks, Outerwall, Starbucks, and Sterling Financial Corporation. A frequent writer and speaker on securities litigation and corporate governance, Greg is co-chair of the Northwest Securities Institute, an Advisory Board Member of the National Association of Corporate Directors, Northwest Chapter, and a member of the Washington Bar Association’s Securities Committee. CONTACT:701 Fifth AvenueSuite 5100Seattle, WA 98104Phone | 206-883-2617Fax | 206-883-2699gwatts@wsgr.com

4. Creation of Bad Documents:The Pre-Call Q&A Script • “You knew about this problem six months ago. Why are you just disclosing it now? [?????]” • “Your competitors said it was a problem for them last year. You assured us your company was different. Why are you now saying it’s a problem for you, and in fact a big problem?” • “What are the reasons for the softness you are seeing in your business? [Dodge. We don’t know and won’t know until our key customer meetings next month.]”

5. Pre-Announcements • How does it help? • When should you resist? • Avoiding a changing story

6. Errors in Using the Forward-Looking Statement Safe Harbor • Must communicate Safe Harbor cautionary language orally • “Start off with the Safe Harbor rules. I”ll give you a second to look at those. I’d like to spend about 10 minutes talking about [the Company”] and then we’ll be able to take questions from that point.” CFO at Investor Conference • “Considering the transcripts alone, Defendants’ statements did not contain sufficient cautionary language for the safe harbor provision to apply.” Federal Judge in Order Denying Motion to Dismiss Securities Class Action Complaint

7. Avoid Promises to Update “I think the Company has always taken it very much to heart that we want to keep the investment community up to speed and up to date on the information, so as we learn more from the FDA in our discussions with them, we’ll let you know.” Biotech Company CEO in Analyst Call

8. Social Media and Reg FD • CFO tweets “Board meeting. Good numbers = Happy Board” before earnings call • CEO tweets appear in blog prominently linked to company website • CEO posts on Facebook that company has exceeded 1 billion hours of streamed content that month (first time ever)

9. Disclosure Committee Decisions and “Monday-Morning Quarterbacks” Materiality: Whether a reasonable investor would have viewed the undisclosed information as having significantly altered the total mix of information made available

10. Changing Forecasting Practices • Business reasons for change? • New normal?

11. Inconsistent Use of “No Comment” “Silence, absent a duty to disclose, is not misleading under Rule 10b-5. ‘No comment’ statements are generally the functional equivalent of silence…It has been suggested that, given current market practices, a ‘no comment’ statement is tantamount to an admission that merger discussions are underway…That may well hold true to the extent that issuers adopt a policy of truthfully denying merger rumors when no discussions are underway, and of issuing ‘no comment’ statements when they are in the midst of negotiations.” Basic v. Levinson (U.S. Supreme Court)

12. Avoid Using Rote Language Which Is Not True “We believe this lawsuit is without merit and intend to vigorously defend it.” M&A context (frequently there is an early decision to settle)

13. Do Not Deny the Merit of a Shareholder Derivative Lawsuit “The company and its directors have been named in a shareholder derivative lawsuit. We believe the lawsuit is without merit and intend to vigorously defend.”

14. Being Too Sensitive or Reacting to Rumors • “I’ve never settled a lawsuit before and I don’t plan to start with this work of fiction.” CEO quoted in local newspaper • “I’m the CEO of [the Company] and you all have it wrong. Our Phase II trial does not . . . . Seriously, you should do your homework before getting on these boards. If you keep defaming me and my business, you will find yourself a defendant in a lawsuit. I’ll be watching.” CEO post in investor chat room • There is an “Al-Qaeda-like conspiracy” of naked short-sellers in our stock “headed by a Sith Lord” who “was one of the master criminals in the 1980s.” This conspiracy includes hedge funds, journalists, investigators, trial lawyers, the SEC and Eliot Spitzer. CEO on analyst call ret short-selling of company stock

15. Handling Litigation-Related Inbound Communications • Section 16(b) “short-swing” trading letters • Shareholder demands upon the board to commence litigation • Shareholder inspection demands

16. Special Issues for Biotechs: Materiality BIG PHARMA Small Biotech Collaboration MATERIALITY Materiality

17. Document Retention • Final slides for each conference • Final call scripts • Final Q&A, if any • Final Disclosure Committee minutes, if any • Analyst reports Drafts are rarely, if ever, our friends in litigation