D a v i s P o l k & W a r d w e l l 450 Lexington Avenue New York, N.Y. 10017

212 450 4000

Re:

Memorandum for:

July 3, 2003

General Counsel and Senior Lawyers of U.S. Public Companies

SEC Standards of Professional Conduct for Attorneys—Suggested Framework for Designing Policies for In-House Attorneys

This memorandum is designed to assist the General Counsel and other senior attorneys at our U.S. public company clients in developing a framework for compliance by in-house lawyers with the SEC’s new standards of professional conduct for attorneys, i.e., Part 205 of the Code of Federal Regulations (“Part 205”), which implements Section 307 of the Sarbanes-Oxley Act of 2002.1

Part 205, which becomes effective on August 5, 2003, requires lawyers for public companies to report internally material violations of law by their company.2

Part 205.4(b) requires that “supervisory attorneys” make reasonable efforts to ensure that “subordinate attorneys” conform to Part 205. In response to this provision, we strongly suggest that companies adopt a professional conduct policy for their in-house attorneys. In designing such a policy, companies should consider the option of designating a committee of their board of directors as a Qualified Legal Compliance Committee (“QLCC”).3 On balance, we believe that the advantages of a QLCC outweigh its disadvantages and that companies should seriously consider establishing a QLCC.

This memorandum is organized into two parts. Part I deals with the adoption of a professional conduct policy by the company and discusses related protocols and procedures, including the obligations of a General Counsel (referred to in Part 205 as the

1 68 Fed. Reg. 6296 (Feb. 6, 2003) or Release Nos. 33-8185 and 34-47276 (Jan. 29, 2003). A copy of the final rules may be obtained from the SEC’s website at www.sec.gov/rules/final/33-8185.htm.

2 In addition, the SEC has issued a proposed rule release containing two alternative disclosure regimes that would each require, inter alia, “noisy withdrawal” and “disaffirmance of SEC submissions” by attorneys when a company fails to take action to cure a reported violation. If the SEC adopts all or part of this proposed rule, we will provide a supplement to this memorandum to address its provisions. A copy of the proposed rule release may be obtained from the SEC’s website at www.sec.gov/rules/proposed/33-8186.htm.

3 Part 205.3(c) gives a company the option of designating a committee of its board of directors as a QLCC.

This memorandum is a summary for general information only. It is not a full analysis of the matters presented and may not be relied upon as legal advice.

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Part I: Professional Conduct Policy

Chief Legal Officer or the CLO). Part II discusses the advisability of establishing a QLCC.

Annex A to this memorandum is a sample of a policy governing standards of professional conduct for in-house attorneys. A Q&A style summary of the relevant provisions of Part 205 together with the text of Part 205 itself, may be a useful accompaniment to the Policy and is attached as Annex B to this memorandum. We note that the obligations of the CLO are discussed below in Part I of this memorandum and are not addressed in our sample policy. Our sample policy also does not address policies and arrangements the CLO may wish to have in place with respect to outside counsel.

We recognize that there can be no one-size-fits-all solution and therefore propose that companies view our suggestions as a resource for designing their own policies and procedures, building upon existing practices and tailoring their approach to the legal department’s structure, staffing levels and other practical and cultural considerations.

The premise that guides our sample policy is to focus less on technical compliance with Part 205, which can be complicated and unclear and create internal confusion, and instead to adopt a broad policy with the objective of encouraging the reporting of possible material violations of law by subordinates to their supervisors. The identification of these issues through clear reporting chains serves the dual purpose of compliance with Part 205 and making senior lawyers aware of potential violations of law.

Covered Attorneys

We believe most companies would find it advisable for their professional conduct policy to cover all attorneys who have an attorney-client relationship with the company. Although Part 205 only applies to attorneys who “appear and practice before the Commission”4 in the representation of an issuer, and excludes “non-appearing foreign attorneys,”5 these definitions are highly technical in nature, and whether an attorney comes within their ambit can change from matter to matter. Exempting certain attorneys from the company’s policy would carry a risk of unintentional non-compliance, because an attorney whose work does not typically involve “appearing and practicing before the Commission” or who typically qualifies as a “non-appearing foreign attorney” may be required to comply with Part 205 in connection with a given matter.

Further, having all in-house attorneys covered by the policy would be consistent with the objective of encouraging the reporting of possible material violations of law.

4 See Part 205.2(a).

5 See Part 205.2(j).

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Reporting Trigger

Part 205’s reporting obligations are triggered when a covered attorney becomes aware of “evidence of material violation”6 by the company or its subsidiaries. The SEC has defined “evidence of a material violation” as credible evidence from which it would be unreasonable, under the circumstances, for a prudent and competent attorney not to conclude that it is reasonably likely that a “material violation”7 has occurred, is occurring or is about to occur. Part 205 limits the definition of “material violations” to material violations of U.S. law.

As the reporting standard set by the rule is complicated, we believe that most companies will find it advisable to set a simpler standard for when attorneys are required to raise concerns with their supervisors. Our sample policy accordingly adopts a more straightforward reporting standard, requiring a report whenever an attorney “has reason to believe that there may be a possible violation of law… .” Also, as companies would presumably want to be informed about any violation of law, including foreign law, our sample professional conduct policy does not distinguish between violations of U.S. law and the laws of other jurisdictions.

Reporting Chains

The general scheme of Part 205 requires attorneys to report “evidence of a material violation” to the CLO and, absent an “appropriate response,”8 to report “up the ladder” to the audit committee or to another committee of independent directors or to the full board.9 Part 205 further provides that “subordinate attorneys” are not required (but are permitted) to make a report directly to the CLO (or further “up the ladder”), but instead can satisfy their reporting obligations under Part 205 by making reports to their “supervisory attorney.” We expect that most companies will find it advisable to encourage reporting through the reporting structures existing within the organization. In certain instances, companies may wish to require that reports be elevated beyond the immediate “supervisory attorney,” notwithstanding the absence of any obligation for further reporting under Part 205. For example, the CLO may find it advisable to be promptly informed whenever the reporting attorney elects to make a written report.

6 See Part 205.2(e).

7 See Part 205.2(i).

8 See Part 205.2(b).

9 See Part 205.3(b).

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Documentation of Reports

Part 205 does not require an attorney to document either the report or the response, nor does Part 205 specify any particular format or formalities for the report or response.10 We believe that most companies would not find it advisable to mandate documentation of reports or responses and would leave the matter to the discretion of the attorneys involved.

Certifications

In order to ensure that in-house attorneys have familiarized themselves with Part 205 and the company’s professional conduct policy, a company may consider requiring a one-time or annual certification from its attorneys. While we recommend that the professional conduct policy apply generally to all in-house attorneys, it may be appropriate, depending on the circumstances, to excuse non-U.S. attorneys or attorneys who do not speak English from familiarizing themselves with Part 205 (as opposed to the company’s policy), where they are unlikely to be “appearing and practicing before the Commission.” A suggested form of certification is attached to this memorandum as Annex C.

Training Programs and In-House Resources

Given Part 205’s requirement that “supervisory attorneys” make reasonable efforts to ensure that “subordinate attorneys” conform to Part 205, we suggest that companies arrange for training programs for in-house attorneys to familiarize them with Part 205 and with the company’s professional conduct policy.

Companies may also find it advisable, especially in the period immediately following adoption of a new policy, to designate one or more in-house lawyers as a resource to whom in-house attorneys can direct questions about the company’s professional conduct policy and Part 205.

CLO’s Obligations

Depending on the structure of the legal department, many matters are likely to be reported to supervisory attorneys other than the CLO, and resolved at that level. However, a CLO may become aware of possible material violations of law, including through reports from lawyers who work directly for him or her (generally or on a particular matter) or when other lawyers choose to report a matter to the CLO. The CLO has particular responsibilities with respect to such reports.

10 Other than requiring that the report be made directly, either in person, by telephone, by e-mail, electronically or in writing. See Part 205.2(n).

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Part II: Establishing a QLCC

Part 205 requires the CLO who becomes aware of “evidence of a material violation” to make sure that an appropriate inquiry is conducted. If, after the inquiry, the CLO determines that there is no “material violation,” the CLO is required to notify the reporting attorney and advise the reporting attorney of the basis of such determination. If the CLO determines that there is a “material violation,” Part 205 requires the CLO to take all reasonable steps to cause the company to respond appropriately; it also requires the CLO to advise the reporting attorney of the determination and the company’s response.

If the company has already established a QLCC, then the CLO, in lieu of causing an inquiry into “evidence of a material violation,” may refer the matter to the QLCC. Upon doing so, the CLO is required to inform the reporting attorney that the report has been referred to a QLCC. If the CLO wants both to refer a report to the QLCC and to excuse the reporting attorney from having to determine whether an “appropriate response” is received, the CLO should have the reporting attorney report directly to the QLCC. Alternatively, we think the same result should be obtained if the CLO and reporting attorney make a joint report to the QLCC. Once a direct or joint report is made to the QLCC, the QLCC is responsible for responding to the “evidence of a material violation,” and both the CLO and the reporting attorney have no further obligations under Part 205.

We believe companies may find it advisable to establish a QLCC for the following reasons:

• the SEC encourages companies to establish a QLCC as a good corporate governance practice; and

• under Part 205, an attorney who reports “evidence of a material violation” to a QLCC is excused from having to assess the appropriateness of the company’s response and has no further reporting obligation.

The latter consideration will have greater significance if the SEC adopts some form of the “noisy withdrawal” requirement presently proposed, because an attorney who reports to the QLCC has no further obligations under Part 205 and thus no obligation to make a “noisy withdrawal.”

Where an existing Board committee satisfies the Board member independence criteria11 required for a QLCC, a company may designate and empower such committee to act as a QLCC, rather than form a new Board committee. Indeed, a review of proxy filings

11 In the adopting release for Part 205, the SEC indicated its intent to require that QLCC members meet the independence requirements for audit committee members specified in Section 301 of the Sarbanes-Oxley Act and the related SEC rules (Rule 10A-3 under the Exchange Act).

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indicates that companies establishing a QLCC to date have mostly opted to designate their audit committee as the QLCC.

The SEC has expressed the view that service on the QLCC does not increase the liability of the board members under state law and that it would be inconsistent with public interest for a court to conclude otherwise.

We recognize that the existence of a QLCC may create the potential for issues to be elevated prematurely or may diffuse the involvement of the CLO. We believe that these concerns can be mitigated, however, by an appropriately designed professional conduct policy that would encourage in-house attorneys to fulfill their reporting obligations within the organization’s existing reporting structures.

Designation of the audit committee as a QLCC may add to the duties of the audit committee, whose responsibilities have already been significantly expanded. However, the NYSE’s proposed corporate governance standards12 already make the audit committee responsible for oversight of a company’s compliance with legal and regulatory requirements. Moreover, under Part 205, an attorney who has reported to the CLO but has not received an “appropriate response” is required to report “up the ladder” to the audit committee. Accordingly, unless another committee of the Board consisting of independent directors can be designated as the QLCC, in the absence of a QLCC, reports that are made “up the ladder” will in any event arrive at the audit committee’s doorstep.

Annex D is a sample charter for assistance in establishing a QLCC.

* * *

We encourage you to contact your Davis Polk contact to discuss any aspect of Part 205 or the suggestions made in this memorandum in further detail.

Davis Polk & Wardwell

12 NYSE 303A 7(b)(i)(A)(2).

Mission Statement

Obligations of Attorneys

[Certification

Classification of Attorneys

ANNEX A

[Company Name] A [jurisdiction] corporation

Professional Conduct Policy1

Adopted _________, 20__

Pursuant to Section 307 of the Sarbanes-Oxley Act of 2002, the SEC has adopted Part 205 of the Code of Federal Regulations (“Part 205”), which imposes standards of professional conduct for attorneys. These professional responsibilities imposed by Part 205 are in addition to the attorney’s professional responsibilities under state ethics rules and any applicable foreign laws.

[Company] views Part 205 as reinforcing our core values and considers compliance with Part 205 a serious matter of professional responsibility for all attorneys employed by [Company].

We are adopting the following policy (“Professional Conduct Policy”) to codify the responsibilities of attorneys employed by [Company] and to ensure compliance with the letter and spirit of Part 205.

All attorneys employed by [Company] who work as lawyers are required to comply with this Policy.

All attorneys employed by [Company] are required to familiarize themselves with this Policy and Part 205. [Exhibit A attached to this Policy includes a summary of Part 205, as well as the text of Part 205 itself.]

All2 attorneys are required to certify to the Chief Legal Officer (“CLO”) that they have read this Policy and Part 205. The form of certification is attached to this Policy as Exhibit B.]

The obligations of attorneys under our Policy and Rule 205 vary depending on whether or not an attorney is a “subordinate attorney.” The classification is matter-specific and may change depending on the matter on which the attorney is working. All attorneys should be

1 This is a sample form of Policy Statement designed to assist a U.S. public company in framing its own “Professional Conduct Policy” that encourages compliance with 17 CFR Part 205 consistent with the company’s existing practices, corporate culture and core values.

2 A company may find it appropriate, depending on the circumstances, to excuse non-U.S. attorneys or attorneys who do not speak English from familiarizing themselves with Part 205 (as opposed to this Policy) where they are unlikely to be “appearing and practicing before the Commission.”

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Reporting Obligations Of

Subordinate Attorneys

Reporting Obligations Of

Those Who Are Not Subordinate

Attorneys

aware of their classification when working on a matter in order to determine their reporting obligations under this Policy.

Any attorney who works on a matter under the direction or supervision of another attorney (other than the CLO) is, for purposes of issues arising in the course of that matter, a “subordinate attorney.”

Any attorney, even a senior attorney who supervises or directs others, may be a subordinate attorney if he or she is supervised by another attorney (other than the CLO) on a matter.

A subordinate attorney may have more than one directing or supervising attorney — e.g., a supervisory attorney on a given matter and that attorney’s regular supervisor.

Any attorney who works on a matter either independently or under the direction or supervision of the CLO is, for purposes of issues arising in the course of that matter, not a subordinate attorney.

Any attorney, even a junior attorney who ordinarily works under the direction or supervision of another attorney, is not a subordinate attorney for purposes of a matter if he or she is directed or supervised by the CLO on that matter.

If any subordinate attorney has reason to believe (as a result of receiving a report from another subordinate attorney or otherwise) that a possible violation of law by [Company] or its subsidiaries or by any of their officers, directors, employees or agents may have occurred, may be occurring or may be about to occur, then such subordinate attorney is required promptly to notify the supervising attorney on the matter or his or her regular supervisor, whoever has the most knowledge about the matter.

This report need not be written or conform to any particular format.

Making this report fully satisfies a subordinate attorney’s obligations under this Policy and under Part 205. The subordinate attorney is not required to await any response or, if any response is given, to assess whether it is appropriate.

If for any reason the subordinate attorney feels uncomfortable reporting to the relevant supervising attorney or, after reporting the matter to the supervising attorney, still has concerns, the subordinate attorney is always free to report to the CLO.

If any non-subordinate attorney (i.e., an attorney who is working either independently or under the direction or supervision of the CLO) has reason to believe (as a result of receiving a report from a subordinate attorney or otherwise) that a possible violation of law by [Company] or its subsidiaries or by any of their officers, directors, employees or agents may have occurred, may be occurring or may be about to occur, then such non-subordinate attorney is required promptly to notify the CLO.

This report need not be written or conform to any particular format.

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The non-subordinate attorney must then await and assess the Company’s response to the report, which will be related by the CLO, to determine whether the response is “appropriate.” For a response to be “appropriate,” the non-subordinate attorney must reasonably believe (i.e., based upon reliable factual representations and reasonable legal determinations) that:

• no “material violation” has occurred, is ongoing or is about to occur; or

• [Company] has adopted appropriate measures to remedy a past or existing violation or to avoid a future violation; or

• [Company], with the consent of the [Audit Committee] [Qualified Legal Compliance Committee or “QLCC”], has retained and directed counsel to review the reported “material violation” and either:

• has substantially implemented any remedial recommendations made by such counsel after a reasonable investigation and evaluation of the reported violation; or

• has been advised that such counsel may assert a “colorable defense” in any investigation or proceeding related to the reported violation.

If the non-subordinate attorney does not receive an “appropriate response” to the report within a reasonable time, the attorney is required to report such evidence further “up the ladder” within [Company] to the [Audit Committee] [QLCC].

If the non-subordinate attorney reasonably believes that it would be futile to report to the CLO or to the CLO and CEO, such attorney may instead make the report directly to the [Audit Committee][QLCC]. [If the attorney does not believe he or she has received an “appropriate response” from the Audit Committee, then the attorney is required to explain his or her reasons to the CLO, CEO and the Audit Committee.]3

[Instead of reporting to the CLO, the non-subordinate attorney may report directly to the QLCC. If a report is made to the QLCC, the attorney has fully satisfied his or her reporting obligations under this Policy and Part 205 and is not required to await or to assess the Company’s response.]

3 Delete if company has established a QLCC.

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[Reports to the Qualified Legal

Compliance Committee

Other Obligations

Prohibition on Retaliation or

Retribution

Documentation of Reports

[Company] has established a QLCC that has adopted procedures for the confidential receipt, retention and consideration of reports made under this Policy and Part 205. Any attorney who has made a report to a supervisor or the CLO in accordance with this Policy and continues to have concerns is free to make a report to the QLCC as well. Any attorney who wishes to make a direct report to the QLCC, instead of to a supervisory attorney or to the CLO, may do so by writing to the Chairman or any member of the QLCC at [address] or sending an email to the QLCC at [address] or calling [toll-free number].]

Neither this Policy nor Part 205 requires any report or response to be documented or to be made in any particular format.

Any attorney employed by [Company] who directs or supervises another attorney is required to ensure that attorneys whom he or she supervises comply with this Policy [and Part 205].

All attorneys to whom another attorney makes a report under this Policy are required to treat the report as a serious matter and to carefully consider and fully discuss such matter with the reporting attorney.

[Company] strictly forbids any retaliation, retribution or other adverse action against an attorney who makes a report required or permitted by this Policy or by Part 205.

EXHIBIT A

[Attach Summary of Part 205]

EXHIBIT B

[Attach Certification]

ANNEX B

Summary of Sec Rule Imposing Standards of Professional Conduct for Attorneys (As of [date], 2003)1

The following questions and answers are designed to assist in-house attorneys of [Company] and its subsidiaries in understanding Part 205 of the Code of Federal Regulations (“Part 205”) which imposes standards of professional conduct for attorneys. A copy of Part 205 is attached at the end of this Summary. However, attorneys employed by [Company] are required to comply with our Professional Conduct Policy which in many respects is broader than the provisions of Part 205.

Part 205 will become effective on August 5, 2003.

What is Part 205?

Part 205 was adopted by the U.S. Securities and Exchange Commission (“SEC” or the “Commission”) pursuant to Section 307 of the Sarbanes-Oxley Act of 2002, which required the SEC to prescribe minimum standards of professional conduct for attorneys appearing and practicing before the Commission in any way in the representation of issuers.

The philosophical keystone of Part 205 is the principle that the “company,” and not corporate management, is the attorney’s true client. Part 205 underscores that the attorney owes his or her professional and ethical duties to the company as an organization, and must report un-remedied violations of law by the company “up the ladder” to its independent directors or to the full board when corporate management does not respond appropriately.

Specifically, Part 205 requires attorneys who “appear and practice before the Commission” in the representation of an issuer to report within the company “evidence of a material violation” of U.S. federal or state securities law, a material breach of fiduciary duty arising under U.S. federal or state law or a similar material violation of any U.S. federal or state law by the company, its subsidiaries or any of their officers, directors, employees or agents that has occurred, is occurring or is about to occur.

The purpose of Part 205 is to deter corporate misconduct and fraud and to increase the confidence of investors in public companies. By requiring attorneys to report “up the ladder” as part of their professional obligations, Part 205 seeks to ensure that the highest

1 This summary is specifically addressed to attorneys employed by the company. It does not cover provisions of Part 205 that relate to outside attorneys retained by the company.

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levels within a public company will be informed of material violations and that such violations will be promptly addressed and remedied.

The professional responsibilities imposed by Part 205 on attorneys who “appear and practice before the Commission” are in addition to the attorneys’ professional responsibilities under state ethics rules and any applicable foreign rules.

Part 205 preempts state ethics rules to the extent they conflict with its provisions. A foreign attorney who is subject to Part 205 is not required to comply with Part 205 to the extent that applicable foreign law prohibits such compliance.

Does Part 205 apply to all attorneys?

Part 205 potentially applies to all U.S. and foreign attorneys employed by a public company who have an attorney-client relationship2 with such company or one of its subsidiaries, excepting only attorneys who are not “appearing and practicing before the Commission” in the representation of an issuer. The phrase “appearing and practicing before the Commission” includes:

• transacting business with the SEC, including communications with the SEC in any form (oral or written);

• representing a company in an SEC administrative proceeding or in connection with an SEC investigation, inquiry, information request or subpoena;

• providing advice in respect of the U.S. securities laws or the SEC’s rules and regulations regarding any document that the attorney has notice will be filed with the SEC, either directly or by incorporation into another document;3 or

• advising a company as to whether information or a statement, opinion or other writing is required to be filed with or submitted to the SEC.

2 Whether such a relationship exists will depend on the expectations and understandings between the attorney and the company. An attorney need not serve in the legal department of the company to be covered by Part 205. However, attorneys who act in a non-legal capacity for the company, for example “corporate executives” and “board members,” will not be covered by Part 205 if there is no attorney-client relationship.

3 An attorney who prepares a contract or other document that will be filed with or submitted to the SEC (whether directly or by incorporation into another document) is “appearing or practicing before the Commission” unless he or she has not provided U.S. securities law advice regarding such document or has no notice that the document will be filed with or submitted to the SEC.

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Does Part 205 apply to “foreign attorneys”?

Part 205 covers “foreign attorneys” if they are “appearing and practicing before the Commission,” unless they fall within the safe harbor for a “non-appearing foreign attorney.” To fall within the safe harbor, the attorney must:

• be admitted to practice law in a jurisdiction outside the United States;

• not hold himself or herself out as practicing or give legal advice regarding U.S. securities or other laws; and

• either (i) appear and practice before the Commission only in consultation with U.S. counsel or (ii) conduct activities that only incidentally involve appearing and practicing before the Commission in the ordinary course of his or her foreign law practice.

A foreign attorney is not required to comply with Part 205 to the extent that applicable foreign law prohibits such compliance.

Does Part 205 apply to attorneys working for non-public subsidiaries of a public company?

Attorneys who provide legal services to any person controlled by a public company are required to comply with Part 205 if they provide legal services to such controlled person on behalf of, or at the behest, or for the benefit of the public company.4

What is the trigger for an attorney’s reporting obligation under Part 205?

An attorney who is “appearing and practicing before the Commission” is required to make a report under Part 205 if he or she become aware of “evidence of material violation” by the company or its subsidiaries or by any of their officers, directors, employees or agents that has occurred, is occurring or is about to occur.

Under Part 205, “material violation” means:

• a material violation of U.S. federal or state laws;

• a material breach of fiduciary duty under U.S. federal or state law; or

• a similar material violation of U.S. federal or state law.

Part 205 does not require reports of violations of foreign laws.

4 For example, an attorney working for a non-public subsidiary is required to comply with Part 205 if he or she works on a portion of an SEC filing which the public company parent is submitting to the SEC.

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The word “material” is not defined in Part 205. The SEC has indicated that the well-established meaning under the federal securities laws is intended to apply. Under the leading court decisions, information is “material” when there is a substantial likelihood that it would be viewed by a reasonable investor as significantly altering the “total mix” of information available.

A “breach of fiduciary duty” refers to any breach of fiduciary or “similar” duty imposed by federal or state statute or at common law, including but not limited to misfeasance, nonfeasance, abdication of duty, abuse of trust and approval of unlawful transactions. The SEC’s adopting release gives an example of a breach of fiduciary duty to a pension fund under ERISA as being a potential “breach of fiduciary duty.”

Part 205 does not define “similar violations,” but the term extends beyond securities law violations and breaches of fiduciary duty.

The obligation to make a report under Part 205 is triggered when an attorney has “credible evidence” of a material violation. “Credible evidence” exists when it would be unreasonable, under the circumstances,5 for a prudent and competent attorney not to conclude that it is reasonably likely (more than a mere possibility but need not be “more likely than not”) that a “material violation” has occurred, is occurring or is about to occur. An attorney’s decision not to make a report will be judged objectively, and a good faith belief that no report was necessary is not a defense.

Under Part 205, the procedure that an in-house attorney is required to follow in reporting “evidence of a material violation” depends upon whether or not such attorney is a “subordinate attorney” on the matter in question.

Who is a “subordinate attorney” under Part 205?

Part 205 classifies an attorney as a “subordinate attorney” if the attorney appears and practices before the Commission on a matter under the supervision or direction of another attorney (other than the company’s Chief Legal Officer (“CLO”)).

An attorney who appears and practices before the Commission on a matter under the supervision or direction of the CLO is not a subordinate attorney (e.g., the company’s Deputy General Counsel who reports to the CLO or even a junior lawyer who works on a matter directly under the CLO is not a subordinate attorney).

5 The phrase “under the circumstances” refers to circumstances existing at the time the attorney decides whether he or she is obligated to report the information. These circumstances may include, among others, the attorney’s professional skills, background and experience, the time constraints under which the attorney is acting, the attorney’s prior experience and familiarity with the client, and the availability of other attorneys with whom the attorney may consult.

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The classification of an attorney as a “subordinate attorney” under Part 205 is matter-specific and may change depending upon the matter on which the attorney is working. For example, an attorney who works on a matter under the direction and supervision of another attorney (other than the CLO) is a subordinate attorney on such matter, whereas the same attorney working on another matter, either independently or directly under the CLO, would not be a subordinate attorney on that matter.

Under Part 205, an attorney who supervises or directs another attorney on a matter can also be a “subordinate attorney” if such attorney is himself or herself directed or supervised on that matter by another attorney other than the CLO.

Finally, under Part 205, to the extent that a subordinate attorney appears and practices before the Commission on a matter, the subordinate attorney’s supervisor on the matter is also deemed to appear and practice before the Commission.

How does a “subordinate attorney” comply with his or her reporting obligations under Part 205?

“Subordinate attorneys” fully satisfy their reporting obligations under Part 205 by making a report to their supervisory attorney. Once this report has been made, the subordinate attorney has no obligation to report further “up the ladder,” and he or she is not required to await a response or, if a response is made, to determine whether the company has made an “appropriate response” to the report.

A subordinate attorney may have more than one supervisory attorney — e.g., the supervisory attorney on the matter and a regular supervisory attorney. The SEC staff has advised that a report to either supervisor satisfies the subordinate attorney’s reporting obligation, so long as the choice is not capricious.

Under Part 205, a subordinate is not required, but is permitted, to follow the reporting procedure applicable to non-subordinate attorneys.

How does an attorney, who is not a subordinate attorney, comply with Part 205?

An attorney is not a subordinate attorney if he or she works on a matter either independently or under the direction or supervision of the CLO.

In the first instance, an attorney who is not a subordinate attorney is required to report the “evidence of a material violation” to the CLO (or the CLO and the CEO).

If a report is made to the CLO and the reporting attorney does not receive an “appropriate response” within a reasonable time, the reporting attorney is then required to report such

B-6

evidence further “up the ladder” within the company to the Audit Committee.6 Thereafter, if the reporting attorney does not reasonably believe that the company has made an appropriate and timely response to the report, then the reporting attorney is required to explain his or her reasons to the CLO, CEO and the Audit Committee.

If the reporting attorney reasonably believes that it would be futile to report to the CLO or to the CLO and CEO (e.g., when it appears they are involved in the “material violation”), the reporting attorney may instead make the report directly to the Audit Committee.

If the company has established a Qualified Legal Compliance Committee (“QLCC”)7 prior to the report being made, the reporting attorney has an option of directly reporting to the QLCC instead of reporting first to the CLO. In addition, where the attorney has made a report to the CLO but has not received an “appropriate response,” the reporting attorney is required to report further “up the ladder” to the QLCC instead of the Audit Committee. A report to the QLCC fully satisfies the attorney’s reporting obligations under Part 205 and he or she is not required to await a response or, if a response is made, determine whether the company has made an “appropriate response” to the report.

What is an “appropriate response”?

Part 205 defines an “appropriate response” as a response to the attorney who made a report under Part 205 that leads the attorney to reasonably believe that:

• no “material violation” has occurred, is ongoing or is about to occur; or

• the company has adopted appropriate measures to remedy a past or existing violation or to avoid a future violation; or

• the company, with the consent of the Audit Committee/QLCC, has retained and directed counsel to review the reported “evidence of material violation” and either:

• has substantially implemented any remedial recommendations made by such counsel after a reasonable investigation and evaluation of the reported evidence; or

6 In the absence of an Audit Committee, the report is required to be made to another committee of the board consisting solely of independent directors and if there is no such committee, to the full board.

7 A QLCC is a committee of the board (which may be the audit committee or another committee), consisting of at least one member of the audit committee and two or more independent directors, established by the board of directors and authorized to investigate any report of “evidence of a material violation.”

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• has been advised that such counsel may assert a “colorable defense” in any investigation or proceeding related to the reported “evidence of a material violation.”

Part 205 requires the attorney to have a basis on which to form a “reasonable belief” in making the assessment that he or she has received an “appropriate response,” and does not permit the attorney merely to rely on the assurance of a CLO that there was no “material violation” or that the company is undertaking an “appropriate response.” Nevertheless, an attorney may rely on reasonable and appropriate factual representations and legal determinations by others.

Does an attorney who is asked by the CLO or the QLCC to investigate a Part 205 report or to assert a “colorable defense” on behalf of the company also have reporting obligations under Part 205?

An attorney directed by the CLO to investigate “evidence of a material violation” is required to report the results of the investigation to the CLO and (unless the attorney and the CLO each reasonably believes that no “material violation” has occurred, is ongoing or is about to occur) the CLO must report the results of the investigation to the Audit Committee or the QLCC, as appropriate. Absent such an upward report by the CLO, the investigating attorney is himself or herself required to make a further report “up the ladder.”

An attorney directed by the CLO to assert a “colorable defense”8 in a judicial or administrative proceeding is relieved of the “up-the-ladder” reporting requirements only if the CLO provides reasonable and timely reports on the progress and outcome of such proceeding to the Audit Committee/QLCC.

An attorney directed by the QLCC to investigate “evidence of a material violation” or to assert a “colorable defense” in any investigation or judicial or administrative proceeding relating to the “material violation” is not subject to any “up-the-ladder” reporting requirements.

Is documentation of reports required under Part 205?

Part 205 does not require an attorney to document either the report or the response thereto, nor does Part 205 specify or require any particular format or formalities for the report or

8 While Part 205 does not define what constitutes a “colorable defense,” the adopting release indicates that the term incorporates standards governing the positions that an attorney appropriately may take before the tribunal before whom he or she is practicing (i.e., a position which is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification or reversal of existing law).

B-8

response. A report may be made in person, by telephone, by e-mail, electronically or in writing. The only requirement of Part 205 in this regard is that the report be made directly.

Is there a loss of privilege or confidentiality in making “up-the-ladder” reports?

An attorney who reports “up the ladder” to the company’s officers and directors in compliance with Part 205 does not waive privilege or improperly reveal client confidences and secrets.

Under what circumstances does Part 205 permit an attorney to disclose confidential information relating to the company?

Part 205 permits (but does not require) attorneys to disclose client confidences to persons outside the company without the company’s consent under limited circumstances.

Part 205 provides that attorneys may use any report or any response thereto in connection with any proceeding in which the attorney’s compliance with Part 205 is in issue. This permissive disclosure is non-controversial, and state ethics rules have a corresponding “self-defense” exception to client confidentiality rules.

Part 205 also permits attorneys to reveal confidential information to the SEC to the extent the attorney reasonably believes it necessary:

• to prevent the company from committing a “material violation” that is likely to cause substantial injury to the company or its investors;

• to prevent the company from perpetrating or committing fraud or perjury in an SEC investigation or administrative proceeding; or

• to rectify a “material violation” by the company that caused or could cause substantial injury to the company or its investors when the violation has been advanced by the attorney’s services for the company.

Are attorneys required to make a “noisy withdrawal” or “disaffirm” SEC submissions under Part 205?

Part 205 currently does not require an attorney to make a “noisy withdrawal” or to “disaffirm” submissions to the SEC. However, the SEC has proposed a rule requiring such action. If the SEC adopts this proposed rule, we will provide an update to this summary to explain its provisions.

B-9

Can a company discharge a reporting attorney for reporting “evidence of a material violation”?

Retaliation under certain circumstances is prohibited by federal law. Moreover, Part 205 provides that an attorney who reasonably believes that he or she has been discharged for reporting “evidence of a material violation” may notify the company’s board of directors that he or she believes that he or she has been discharged for making a report. This provision is designed to ensure that a CLO is not permitted to block a report to the company’s board of directors by discharging a reporting attorney.

What sanctions apply for violation of Part 205?

The SEC can enforce Part 205 against individual attorneys through civil actions under the securities laws (seeking injunctive relief, civil monetary penalties and/or cease-and-desist orders) or through disciplinary proceedings (seeking censure or suspension or debarment from appearing and practicing before the Commission).

Is an attorney subject to sanctions by state bar or other authorities if the attorney complies with Part 205?

Attorneys cannot be disciplined by state bar or other U.S. authorities as a result of actions taken to comply with Part 205 in good faith. The state or other jurisdiction may, however, impose additional requirements on the attorney that are consistent with Part 205.

A foreign attorney who is subject to Part 205 is not required to comply with Part 205 to the extent that applicable foreign law prohibits such compliance.

Is there potential exposure to private suits for violation of Part 205?

The SEC has exclusive authority to enforce the provisions of Part 205. There is no private right of action against any attorney or the company based on compliance or noncompliance with Part 205.

§205.1 Purpose and scope.

§205.2 Definitions.

Text of Rule (17 CFR Part 205)

For the reasons set out in the preamble, the Commission amends Title 17, Chapter II, of the Code of Federal Regulations by adding Part 205 to read as follows:

PART 205 - STANDARDS OF PROFESSIONAL CONDUCT FOR ATTORNEYS APPEARING AND PRACTICING BEFORE THE COMMISSION IN THE REPRESENTATION OF AN ISSUER

Sec.

205.1 Purpose and scope.

205.2 Definitions.

205.3 Issuer as client.

205.4 Responsibilities of supervisory attorneys.

205.5 Responsibilities of a subordinate attorney.

205.6 Sanctions and discipline.

205.7 No private right of action.

Authority: 15 U.S.C. 77s, 78d-3, 78w, 80a-37, 80a-38, 80b-11, 7202, 7245, and 7262.

This part sets forth minimum standards of professional conduct for attorneys appearing and practicing before the Commission in the representation of an issuer. These standards supplement applicable standards of any jurisdiction where an attorney is admitted or practices and are not intended to limit the ability of any jurisdiction to impose additional obligations on an attorney not inconsistent with the application of this part. Where the standards of a state or other United States jurisdiction where an attorney is admitted or practices conflict with this part, this part shall govern.

For purposes of this part, the following definitions apply:

(a) Appearing and practicing before the Commission:

(1) Means: (i) Transacting any business with the Commission, including communications in any form;

(ii) Representing an issuer in a Commission administrative proceeding or in connection with any Commission investigation, inquiry, information request, or subpoena;

Text of Rule (17 CFR Part 205)

2

(iii) Providing advice in respect of the United States securities laws or the Commission's rules or regulations thereunder regarding any document that the attorney has notice will be filed with or submitted to, or incorporated into any document that will be filed with or submitted to, the Commission, including the provision of such advice in the context of preparing, or participating in the preparation of, any such document; or

(iv) Advising an issuer as to whether information or a statement, opinion, or other writing is required under the United States securities laws or the Commission's rules or regulations thereunder to be filed with or submitted to, or incorporated into any document that will be filed with or submitted to, the Commission; but

(2) Does not include an attorney who:

(i) Conducts the activities in paragraphs (a)(1)(i) through (a)(1)(iv) of this section other than in the context of providing legal services to an issuer with whom the attorney has an attorney-client relationship; or

(ii) Is a non-appearing foreign attorney.

(b) Appropriate response means a response to an attorney regarding reported evidence of a material violation as a result of which the attorney reasonably believes:

(1) That no material violation, as defined in paragraph (i) of this section, has occurred, is ongoing, or is about to occur;

(2) That the issuer has, as necessary, adopted appropriate remedial measures, including appropriate steps or sanctions to stop any material violations that are ongoing, to prevent any material violation that has yet to occur, and to remedy or otherwise appropriately address any material violation that has already occurred and to minimize the likelihood of its recurrence; or

(3) That the issuer, with the consent of the issuer's board of directors, a committee thereof to whom a report could be made pursuant to §205.3(b)(3), or a qualified legal compliance committee, has retained or directed an attorney to review the reported evidence of a material violation and either:

(i) Has substantially implemented any remedial recommendations made by such attorney after a reasonable investigation and evaluation of the reported evidence; or

(ii) Has been advised that such attorney may, consistent with his or her professional obligations, assert a colorable defense on behalf of the issuer (or the issuer's officer, director, employee, or agent, as the case may be) in any investigation or judicial or administrative proceeding relating to the reported evidence of a material violation.

Text of Rule (17 CFR Part 205)

3

(c) Attorney means any person who is admitted, licensed, or otherwise qualified to practice law in any jurisdiction, domestic or foreign, or who holds himself or herself out as admitted, licensed, or otherwise qualified to practice law.

(d) Breach of fiduciary duty refers to any breach of fiduciary or similar duty to the issuer recognized under an applicable federal or state statute or at common law, including but not limited to misfeasance, nonfeasance, abdication of duty, abuse of trust, and approval of unlawful transactions.

(e) Evidence of a material violation means credible evidence, based upon which it would be unreasonable, under the circumstances, for a prudent and competent attorney not to conclude that it is reasonably likely that a material violation has occurred, is ongoing, or is about to occur.

(f) Foreign government issuer means a foreign issuer as defined in 17 CFR 230.405 eligible to register securities on Schedule B of the Securities Act of 1933 (15 U.S.C. 77a et seq., Schedule B).

(g) In the representation of an issuer means providing legal services as an attorney for an issuer, regardless of whether the attorney is employed or retained by the issuer.

(h) Issuer means an issuer (as defined in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c)), the securities of which are registered under section 12 of that Act (15 U.S.C. 78l), or that is required to file reports under section 15(d) of that Act (15 U.S.C. 78o(d)), or that files or has filed a registration statement that has not yet become effective under the Securities Act of 1933 (15 U.S.C. 77a et seq.), and that it has not withdrawn, but does not include a foreign government issuer. For purposes of paragraphs (a) and (g) of this section, the term "issuer" includes any person controlled by an issuer, where an attorney provides legal services to such person on behalf of, or at the behest, or for the benefit of the issuer, regardless of whether the attorney is employed or retained by the issuer.

(i) Material violation means a material violation of an applicable United States federal or state securities law, a material breach of fiduciary duty arising under United States federal or state law, or a similar material violation of any United States federal or state law.

(j) Non-appearing foreign attorney means an attorney:

(1) Who is admitted to practice law in a jurisdiction outside the United States;

(2) Who does not hold himself or herself out as practicing, and does not give legal advice regarding, United States federal or state securities or other laws (except as provided in paragraph (j)(3)(ii) of this section); and

(3) Who:

Text of Rule (17 CFR Part 205)

4

(i) Conducts activities that would constitute appearing and practicing before the Commission only incidentally to, and in the ordinary course of, the practice of law in a jurisdiction outside the United States; or

(ii) Is appearing and practicing before the Commission only in consultation with counsel, other than a non-appearing foreign attorney, admitted or licensed to practice in a state or other United States jurisdiction.

(k) Qualified legal compliance committee means a committee of an issuer (which also may be an audit or other committee of the issuer) that:

(1) Consists of at least one member of the issuer's audit committee (or, if the issuer has no audit committee, one member from an equivalent committee of independent directors) and two or more members of the issuer's board of directors who are not employed, directly or indirectly, by the issuer and who are not, in the case of a registered investment company, "interested persons" as defined in section 2(a)(19) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(19));

(2) Has adopted written procedures for the confidential receipt, retention, and consideration of any report of evidence of a material violation under §205.3;

(3) Has been duly established by the issuer's board of directors, with the authority and responsibility:

(i) To inform the issuer's chief legal officer and chief executive officer (or the equivalents thereof) of any report of evidence of a material violation (except in the circumstances described in §205.3(b)(4));

(ii) To determine whether an investigation is necessary regarding any report of evidence of a material violation by the issuer, its officers, directors, employees or agents and, if it determines an investigation is necessary or appropriate, to:

(A) Notify the audit committee or the full board of directors;

(B) Initiate an investigation, which may be conducted either by the chief legal officer (or the equivalent thereof) or by outside attorneys; and

(C) Retain such additional expert personnel as the committee deems necessary; and

(iii) At the conclusion of any such investigation, to:

(A) Recommend, by majority vote, that the issuer implement an appropriate response to evidence of a material violation; and

(B) Inform the chief legal officer and the chief executive officer (or the equivalents thereof) and the board of directors of the results of any such investigation under this section and the appropriate remedial measures to be adopted; and

Text of Rule (17 CFR Part 205)

5

§205.3 Issuer as client.

(4) Has the authority and responsibility, acting by majority vote, to take all other appropriate action, including the authority to notify the Commission in the event that the issuer fails in any material respect to implement an appropriate response that the qualified legal compliance committee has recommended the issuer to take.

(l) Reasonable or reasonably denotes, with respect to the actions of an attorney, conduct that would not be unreasonable for a prudent and competent attorney.

(m) Reasonably believes means that an attorney believes the matter in question and that the circumstances are such that the belief is not unreasonable.

(n) Report means to make known to directly, either in person, by telephone, by e-mail, electronically, or in writing.

(a) Representing an issuer. An attorney appearing and practicing before the Commission in the representation of an issuer owes his or her professional and ethical duties to the issuer as an organization. That the attorney may work with and advise the issuer's officers, directors, or employees in the course of representing the issuer does not make such individuals the attorney's clients.

(b) Duty to report evidence of a material violation. (1) If an attorney, appearing and practicing before the Commission in the representation of an issuer, becomes aware of evidence of a material violation by the issuer or by any officer, director, employee, or agent of the issuer, the attorney shall report such evidence to the issuer's chief legal officer (or the equivalent thereof) or to both the issuer's chief legal officer and its chief executive officer (or the equivalents thereof) forthwith. By communicating such information to the issuer's officers or directors, an attorney does not reveal client confidences or secrets or privileged or otherwise protected information related to the attorney's representation of an issuer.

(2) The chief legal officer (or the equivalent thereof) shall cause such inquiry into the evidence of a material violation as he or she reasonably believes is appropriate to determine whether the material violation described in the report has occurred, is ongoing, or is about to occur. If the chief legal officer (or the equivalent thereof) determines no material violation has occurred, is ongoing, or is about to occur, he or she shall notify the reporting attorney and advise the reporting attorney of the basis for such determination. Unless the chief legal officer (or the equivalent thereof) reasonably believes that no material violation has occurred, is ongoing, or is about to occur, he or she shall take all reasonable steps to cause the issuer to adopt an appropriate response, and shall advise the reporting attorney thereof. In lieu of causing an inquiry under this paragraph (b), a chief legal officer (or the equivalent thereof) may refer a report of evidence of a material violation to a qualified legal compliance committee under paragraph (c)(2) of this section if the issuer has duly established a qualified legal compliance committee prior to the report of evidence of a material violation.

Text of Rule (17 CFR Part 205)

6

(3) Unless an attorney who has made a report under paragraph (b)(1) of this section reasonably believes that the chief legal officer or the chief executive officer of the issuer (or the equivalent thereof) has provided an appropriate response within a reasonable time, the attorney shall report the evidence of a material violation to:

(i) The audit committee of the issuer's board of directors;

(ii) Another committee of the issuer's board of directors consisting solely of directors who are not employed, directly or indirectly, by the issuer and are not, in the case of a registered investment company, "interested persons" as defined in section 2(a)(19) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(19)) (if the issuer's board of directors has no audit committee); or

(iii) The issuer's board of directors (if the issuer's board of directors has no committee consisting solely of directors who are not employed, directly or indirectly, by the issuer and are not, in the case of a registered investment company, "interested persons" as defined in section 2(a)(19) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(19))).

(4) If an attorney reasonably believes that it would be futile to report evidence of a material violation to the issuer's chief legal officer and chief executive officer (or the equivalents thereof) under paragraph (b)(1) of this section, the attorney may report such evidence as provided under paragraph (b)(3) of this section.

(5) An attorney retained or directed by an issuer to investigate evidence of a material violation reported under paragraph (b)(1), (b)(3), or (b)(4) of this section shall be deemed to be appearing and practicing before the Commission. Directing or retaining an attorney to investigate reported evidence of a material violation does not relieve an officer or director of the issuer to whom such evidence has been reported under paragraph (b)(1), (b)(3), or (b)(4) of this section from a duty to respond to the reporting attorney.

(6) An attorney shall not have any obligation to report evidence of a material violation under this paragraph (b) if:

(i) The attorney was retained or directed by the issuer's chief legal officer (or the equivalent thereof) to investigate such evidence of a material violation and:

(A) The attorney reports the results of such investigation to the chief legal officer (or the equivalent thereof); and

(B) Except where the attorney and the chief legal officer (or the equivalent thereof) each reasonably believes that no material violation has occurred, is ongoing, or is about to occur, the chief legal officer (or the equivalent thereof) reports the results of the investigation to the issuer's board of directors, a committee thereof to whom a report could be made pursuant to paragraph (b)(3) of this section, or a qualified legal compliance committee; or

Text of Rule (17 CFR Part 205)

7

(ii) The attorney was retained or directed by the chief legal officer (or the equivalent thereof) to assert, consistent with his or her professional obligations, a colorable defense on behalf of the issuer (or the issuer's officer, director, employee, or agent, as the case may be) in any investigation or judicial or administrative proceeding relating to such evidence of a material violation, and the chief legal officer (or the equivalent thereof) provides reasonable and timely reports on the progress and outcome of such proceeding to the issuer's board of directors, a committee thereof to whom a report could be made pursuant to paragraph (b)(3) of this section, or a qualified legal compliance committee.

(7) An attorney shall not have any obligation to report evidence of a material violation under this paragraph (b) if such attorney was retained or directed by a qualified legal compliance committee:

(i) To investigate such evidence of a material violation; or

(ii) To assert, consistent with his or her professional obligations, a colorable defense on behalf of the issuer (or the issuer's officer, director, employee, or agent, as the case may be) in any investigation or judicial or administrative proceeding relating to such evidence of a material violation.

(8) An attorney who receives what he or she reasonably believes is an appropriate and timely response to a report he or she has made pursuant to paragraph (b)(1), (b)(3), or (b)(4) of this section need do nothing more under this section with respect to his or her report.

(9) An attorney who does not reasonably believe that the issuer has made an appropriate response within a reasonable time to the report or reports made pursuant to paragraph (b)(1), (b)(3), or (b)(4) of this section shall explain his or her reasons therefor to the chief legal officer (or the equivalent thereof), the chief executive officer (or the equivalent thereof), and directors to whom the attorney reported the evidence of a material violation pursuant to paragraph (b)(1), (b)(3), or (b)(4) of this section.

(10) An attorney formerly employed or retained by an issuer who has reported evidence of a material violation under this part and reasonably believes that he or she has been discharged for so doing may notify the issuer's board of directors or any committee thereof that he or she believes that he or she has been discharged for reporting evidence of a material violation under this section.

(c) Alternative reporting procedures for attorneys retained or employed by an issuer that has established a qualified legal compliance committee. (1) If an attorney, appearing and practicing before the Commission in the representation of an issuer, becomes aware of evidence of a material violation by the issuer or by any officer, director, employee, or agent of the issuer, the attorney may, as an alternative to the reporting requirements of paragraph (b) of this section, report such evidence to a qualified legal compliance

Text of Rule (17 CFR Part 205)

8

§205.4 Responsibilities of

supervisory attorneys.

committee, if the issuer has previously formed such a committee. An attorney who reports evidence of a material violation to such a qualified legal compliance committee has satisfied his or her obligation to report such evidence and is not required to assess the issuer's response to the reported evidence of a material violation.

(2) A chief legal officer (or the equivalent thereof) may refer a report of evidence of a material violation to a previously established qualified legal compliance committee in lieu of causing an inquiry to be conducted under paragraph (b)(2) of this section. The chief legal officer (or the equivalent thereof) shall inform the reporting attorney that the report has been referred to a qualified legal compliance committee. Thereafter, pursuant to the requirements under §205.2(k), the qualified legal compliance committee shall be responsible for responding to the evidence of a material violation reported to it under this paragraph (c).

(d) Issuer confidences. (1) Any report under this section (or the contemporaneous record thereof) or any response thereto (or the contemporaneous record thereof) may be used by an attorney in connection with any investigation, proceeding, or litigation in which the attorney's compliance with this part is in issue.

(2) An attorney appearing and practicing before the Commission in the representation of an issuer may reveal to the Commission, without the issuer's consent, confidential information related to the representation to the extent the attorney reasonably believes necessary:

(i) To prevent the issuer from committing a material violation that is likely to cause substantial injury to the financial interest or property of the issuer or investors;

(ii) To prevent the issuer, in a Commission investigation or administrative proceeding from committing perjury, proscribed in 18 U.S.C. 1621; suborning perjury, proscribed in 18 U.S.C. 1622; or committing any act proscribed in 18 U.S.C. 1001 that is likely to perpetrate a fraud upon the Commission; or

(iii) To rectify the consequences of a material violation by the issuer that caused, or may cause, substantial injury to the financial interest or property of the issuer or investors in the furtherance of which the attorney's services were used.

(a) An attorney supervising or directing another attorney who is appearing and practicing before the Commission in the representation of an issuer is a supervisory attorney. An issuer's chief legal officer (or the equivalent thereof) is a supervisory attorney under this section.

(b) A supervisory attorney shall make reasonable efforts to ensure that a subordinate attorney, as defined in §205.5(a), that he or she supervises or directs conforms to this part. To the extent a subordinate attorney appears and practices before the Commission in the

Text of Rule (17 CFR Part 205)

9

§205.5 Responsibilities of a

subordinate attorney.

§205.6 Sanctions and discipline.

representation of an issuer, that subordinate attorney's supervisory attorneys also appear and practice before the Commission.

(c) A supervisory attorney is responsible for complying with the reporting requirements in §205.3 when a subordinate attorney has reported to the supervisory attorney evidence of a material violation.

(d) A supervisory attorney who has received a report of evidence of a material violation from a subordinate attorney under §205.3 may report such evidence to the issuer's qualified legal compliance committee if the issuer has duly formed such a committee.

(a) An attorney who appears and practices before the Commission in the representation of an issuer on a matter under the supervision or direction of another attorney (other than under the direct supervision or direction of the issuer's chief legal officer (or the equivalent thereof)) is a subordinate attorney.

(b) A subordinate attorney shall comply with this part notwithstanding that the subordinate attorney acted at the direction of or under the supervision of another person.

(c) A subordinate attorney complies with §205.3 if the subordinate attorney reports to his or her supervising attorney under §205.3(b) evidence of a material violation of which the subordinate attorney has become aware in appearing and practicing before the Commission.

(d) A subordinate attorney may take the steps permitted or required by §205.3(b) or (c) if the subordinate attorney reasonably believes that a supervisory attorney to whom he or she has reported evidence of a material violation under §205.3(b) has failed to comply with §205.3.

(a) A violation of this part by any attorney appearing and practicing before the Commission in the representation of an issuer shall subject such attorney to the civil penalties and remedies for a violation of the federal securities laws available to the Commission in an action brought by the Commission thereunder.

(b) An attorney appearing and practicing before the Commission who violates any provision of this part is subject to the disciplinary authority of the Commission, regardless of whether the attorney may also be subject to discipline for the same conduct in a jurisdiction where the attorney is admitted or practices. An administrative disciplinary proceeding initiated by the Commission for violation of this part may result in an attorney being censured, or being temporarily or permanently denied the privilege of appearing or practicing before the Commission.

(c) An attorney who complies in good faith with the provisions of this part shall not be subject to discipline or otherwise liable under inconsistent standards imposed by any state or other United States jurisdiction where the attorney is admitted or practices.

Text of Rule (17 CFR Part 205)

10

§205.7 No private right of action.

(d) An attorney practicing outside the United States shall not be required to comply with the requirements of this part to the extent that such compliance is prohibited by applicable foreign law.

(a) Nothing in this part is intended to, or does, create a private right of action against any attorney, law firm, or issuer based upon compliance or noncompliance with its provisions.

(b) Authority to enforce compliance with this part is vested exclusively in the Commission.

By the Commission.

ANNEX C

Certification1

I __________________________, have read Part 205 of the Code of Federal Regulations (“Part 205”) adopted by the SEC in its January 29, 2003 Release on Implementation of Standards of Professional Conduct for Attorneys (Release Nos. 33-8185 and 34-47276) and [Company]’s Professional Conduct Policy adopted to ensure compliance with Part 205.

____________________________ Signature Date:_________________

1 A company may find it appropriate, depending on the circumstances, to excuse non-U.S. attorneys or attorneys who do not speak English from familiarizing themselves with Part 205 (as opposed to the Policy) where they are unlikely to be “appearing and practicing before the Commission.”

Purpose

Membership

[Designation

ANNEX D

[Company Name] A [Delaware] corporation

(the “Company”)

Qualified Legal Compliance Committee Charter1 Adopted _________, 20__

The Audit Committee of the Company is hereby designated by the Board of Directors as a “qualified legal compliance committee” within the meaning of 17 CFR Part 205.2]

The Qualified Legal Compliance Committee (“QLCC”) is created by the Board of Directors of the Company to review any report made directly, or otherwise made known, to the QLCC by attorneys employed or retained by the Company or its subsidiaries of a material violation of U.S. federal or state securities law, a material breach of fiduciary duty arising under U.S. federal or state law or a similar material violation of any U.S. federal or state law (a “material violation”), all in accordance with the provisions of 17 CFR Part 205, as amended from time to time (“Part 205”).

[The QLCC shall also review and consider reports made in accordance with the Company’s Professional Conduct Policy.]

The QLCC shall consist of at least one member of the Company’s audit committee3 and two or more members of the Company’s Board of Directors who are not employed, directly or indirectly, by the Company.4 The Nominating and Corporate Governance Committee shall recommend nominees for appointment to the QLCC annually and as vacancies or newly created positions occur. QLCC members shall be appointed by the Board and may be removed by the Board at any time. The Nominating and Corporate

1 This charter is designed to meet the requirements of 17 CFR Part 205 (“Part 205”) for a “qualified legal compliance committee.” Part 205.2(k)(3) requires that this charter be adopted by the Board of Directors.

2 If the Company decides that the audit committee shall be the QLCC, the provisions of this charter should be incorporated into the audit committee charter.

3 If the Company has no audit committee, then the QLCC must have one member from an equivalent committee of independent directors. See Part 205.2(k)(1).

4 In the adopting release for Part 205, the SEC indicated its intent to require that QLCC members meet the independence requirements for audit committee members specified in Section 301 of the Sarbanes-Oxley Act and the related SEC rules (Rule 10A-3 of the Exchange Act). Listed U.S. companies must comply with these requirements by the earlier of their first annual shareholder meetings after January 31, 2004 and October 31, 2004.

D-2

Authority and Responsibilities5

Governance Committee shall recommend to the Board, and the Board shall designate, the Chairman of the QLCC.

In addition to any other responsibilities which may be assigned from time to time by the Board, the QLCC has the authority and responsibility for the following matters.

Receipt, Retention and Consideration of Reports

• The QLCC shall adopt written procedures for the confidential receipt, retention and consideration of any report of evidence of a material violation under Part 205 or any report under the Company’s Professional Conduct Policy of a possible violation of law (a “report”).

Investigation of Reports

• Upon receipt of a report, the QLCC shall:

• inform the Company’s chief legal officer (“CLO”) and chief executive officer (“CEO”) (or the equivalents thereof) of such report unless such notification would be futile; and

• determine whether an investigation is necessary regarding any report of evidence of a material violation by the Company, its subsidiaries or any of their officers, directors, employees or agents.

• If the QLCC determines an investigation is necessary or appropriate, the QLCC shall:

• notify the audit committee or the full board of directors;

• initiate an investigation, which may be conducted either by the CLO or by outside attorneys; and

• retain such expert personnel as the committee deems necessary.

Making Recommendations for Adoption of Appropriate Response

• At the conclusion of any such investigation, the QLCC shall:

5 These provisions are specified in Part 205.2(k)(2), (3) and (4).

D-3

• recommend that the Company implement an appropriate response to the evidence of a material violation, which appropriate response may include:6

• a finding that no material violation has occurred, is ongoing or is about to occur;

• the adoption of appropriate remedial measures, including appropriate steps or sanctions to stop any material violations that are ongoing, to prevent any material violation that has yet to occur, and to remedy or otherwise appropriately address any material violation that has already occurred and to minimize the likelihood of its recurrence; or

• the retention or direction of an attorney to review the reported evidence of a material violation and either (i) the Company has substantially implemented any remedial recommendations made by such attorney after a reasonable investigation and evaluation of the reported evidence or (ii) the attorney advises the Company that such attorney may, consistent with his or her professional obligations, assert a colorable defense on behalf of the Company or its officers, directors, employees or agents, in any investigation or judicial or administrative proceeding relating to the reported evidence of a material violation; and

• inform the CLO, the CEO and the Board of the results of any such investigation initiated by the QLCC and the appropriate remedial measures to be adopted.

Authority to Notify the SEC7

• The QLCC may take all other appropriate action, including the authority to notify the Securities and Exchange Commission, if the Company fails in any material respect to implement an appropriate response that the QLCC has recommended for adoption by the Company.

Reporting to the Board

• [The QLCC shall report to the Board periodically, but no less frequently than once a year. This report will include a review of the report(s) received, the investigations conducted, conclusions reached and responses recommended by the QLCC and any

6 These options are included in the definition of “appropriate response” set forth in Part 205.2(b).

7 This provision is required by Part 205.2(k)(4).

D-4

Procedures

other matters that the QLCC deems appropriate or is requested to be included by the Board.]8

• [At least annually, the QLCC shall evaluate its own performance and report to the Board on such evaluation.]9

• [At least annually, the QLCC shall review and assess the adequacy of this charter and recommend any proposed changes to the Nominating and Corporate Governance Committee.]10

The QLCC may act only by majority vote.11

The QLCC shall meet as often as it determines is appropriate to carry out its responsibilities under this charter. The Chairman of the QLCC, in consultation with the other committee members, shall determine the frequency and length of the committee meetings and shall set meeting agendas consistent with this charter.

The QLCC is authorized (without seeking Board approval) to retain outside attorneys and other expert personnel to assist the QLCC as it deems necessary.12 [The QLCC is authorized to obtain appropriate funding, as determined by the QLCC, for payment of compensation to such attorneys and other expert personnel and for ordinary administrative expenses of the QLCC that are necessary or appropriate for carrying out its duties.]13

The QLCC is authorized (without seeking Board approval) to access all books, records, facilities, personnel, agents and advisors of the Company as it deems necessary or appropriate to discharge its responsibilities under this charter.14

8 Reports to the Board are not required by the SEC.

9 Evaluation is not required by the SEC.

10 Review of the charter is not required by the SEC.

11 This provision is required by Part 205.2(k)(3)(iii)(A) and 205.2(k)(4).

12 This provision is required by Part 205.2(k)(3)(ii)(B) and (C).

13 This provision is not required by the SEC.

14 This provision is not required by the SEC.