Memorandum (“Shark Repellants”)

IPO Database Sample: Antitakeover Defenses Memorandum (“Shark Repellants”)

Memorandum

Confidential Attorney-Client Privilege

TO: Board of Directors FROM: Bingham McCutchen LLP RE: “Shark Repellents” -- Possible Defenses Against Certain Abuses

Introduction

This memorandum considers a variety of measures that, as part of preparation for a possible public offering, [Company] (the “Company”) might implement to enhance the ability of the Board of Directors of the Company (the “Board”) to resist possibly abusive takeover attempts, possibly forestalling a takeover at a time when the Board believes that it is not in the best interest of the stockholders, and in any event enhancing the ability of the Board to assure that stockholders receive a fair price for their shares in the event of a takeover. One of the obvious disadvantages of going public is that it enables a potentially unfriendly third party to accumulate a substantial equity position. We recognize that the Company is not likely to be confronted with a takeover threat in the period immediately following an initial public offering, because the majority or a controlling portion of the Company’s stock would still presumably be in “friendly hands.” It is nevertheless possible that at some point in the future a controlling stake in the Company could be acquired on the public market. Furthermore, because many of the measures described in this memorandum require stockholder approval, or, if only requiring Board approval, may subject the Board to close stockholder scrutiny, it would be much easier for the Company to consider and implement, if desirable, these defensive measures now while it is still private rather than after an initial public offering and in the context of reacting to some future event. Accordingly, in many cases, companies about to go public choose at that time to consider and adopt a program of defensive measures comprising some (though generally not all) of the measures described below prior to the IPO.

On the other hand, the purpose of this memorandum is not to recommend the adoption of any specific defensive measures. Rather, it summarizes types of defensive measures that are employed by various public corporations. The defensive measures described below include certain antitakeover statutory provisions and certain charter and by-law provisions and other corporate actions (so-called “shark ______© 2009 Bingham McCutchen LLP One Federal Street, Boston, MA 02110 Attorney Advertising

This communication is being circulated to Bingham McCutchen LLP’s clients and friends. This document does not constitute legal advice and it is not intended to provide legal advice addressed to a particular situation. The information has not been updated since last use and may be required to be updated and customized for particular facts and circumstances. Prior results do not guarantee a similar outcome.

A/73218225.1 Board of Directors Page 2

repellents”) which may make a hostile takeover more difficult. These measures are generally intended to give the Board more leverage in the event a takeover proposal is made so as to better enable the Board to protect the interests of the Company and its stockholders.

The case law (at least in Delaware where the Company is incorporated) has generally developed in support of the use by management of all reasonable means to thwart an offer which the directors, in the proper exercise of their business judgment, believe is not in the best interest of stockholders.

The Company’s IPO underwriters may have views as to the expected impact of certain defensive measures on the offering. Nonetheless, the decision whether to adopt any of the measures summarized below is ultimately one for the Company and the Board to make.

We should note, however, the “corporate governance ratings,” assigned by a number of organizations such as Institutional Shareholder Services (ISS), which carry some weight with at least some institutional investors. Adoption of virtually any of these “shark-repellant” measures will lower the Company’s rating and could, in any case, cause some institutional shareholders to vote against management proposals, including even director nominations.

Brief Background

The measures described below fall into different categories -- some defenses would be conferred automatically upon the Company by law (unless the Company affirmatively “opted out” of the particular provision before the closing of its IPO); most would require amendments to the Company’s charter and by-laws approved by the present stockholders; while others (particularly adoption of a so-called “poison pill” rights plan or issuance of “blank check” preferred stock) could be implemented even after an IPO by the Board, without stockholder approval (although the taking of such an action by the Board once an unsolicited offer has emerged or appears imminent might be successfully challenged in the courts).

At your request, we can provide you with actual examples of the documentation for any of these measures, as well as summaries from prospectuses of other companies. It would be customary (and we recommend) the adoption of a new Amended and Restated Certificate of Incorporation (a “New Amended and Restated Certificate of Incorporation”), which could be filed and/or take effect just prior to the closing of the IPO, to implement any changes the Company decides to make as well as clean up the record of any prior amendments.

A/73218225.1 Board of Directors Page 3

1. Classified Board of Directors.

Description. The Board would be divided into three classes of approximately equal size with one class being elected each year. Directors can be removed by the stockholders only for “cause” and only the directors can change the size of the Board or fill resulting vacancies. This would require a stockholder-approved New Amended and Restated Certificate of Incorporation, and that amendment itself would be protected by a supermajority requirement against repeal or further amendment.

Advantages. Board classification limits the ability of stockholders to effect an immediate change in control of the corporation. Such control would be important in the event of a proxy contest by an insurgent group, especially to maintain any other structural defenses (such as a rights plan) that the Company has in place. As an example, Lotus Development Corp. lacked a staggered board, which meant that the holders of a bare majority of the Lotus common shares could have removed the entire Lotus board without cause in about 60 days (because Lotus had not adopted provisions to limit Delaware’s “consent vote” alternative to stockholder meetings, see below). This structure contributed to Lotus’ quick capitulation to an unsolicited bid from IBM.

Limitations. From an antitakeover point of view, the classified Board may provide less protection than it appears to. If an offeror can obtain the votes of a majority of the target company’s stock actually voting at a meeting, and is thus in a position to elect one-third of a classified Board at the next annual meeting, the offeror theoretically will not be in control because the carryover Directors will remain in two-thirds of the Board positions. However, it is not uncommon for the carryover Directors to resign their positions once it is clear that the battle for control of the majority of the voting stock has been lost. Resignations result both from concerns as to potential liability in continuing to serve on a Board divided against itself and the fact that there may be little of substance to be gained in continuing the fight. To the extent that this fact is perceived by potential offerors, the deterrent effect of the classified Board is weakened. In addition, the delay in achieving control caused by even a stubborn classified Board will not usually be fatal to a well-financed offeror, although in at least one well-known instance it did prove fatal to such an offeror.

A/73218225.1 Board of Directors Page 4

Nevertheless, classified Boards are often established by companies comparable to the Company preceding an IPO.1

2. Limitation on Nominations and Call of Stockholder Meetings; Unanimous Written Consents.

Description. Only the Board of Directors, the Chairman of the Board, Chief Executive Officer, specified other officers and/or a very large percentage of stockholders are authorized to call a special meeting of stockholders. The foregoing provisions can be implemented through stockholder-approved amendments to the by- laws. Another common by-law provision would require stockholder nominations for Board members to be made to the Company a certain period of time prior to the annual meeting (e.g., 90 days in advance), and to be accompanied by certain information called for under the SEC’s proxy rules with respect to each nominee’s stockholdings and background. In addition, nominations by other than the incumbent Board may require a nominating petition signed by holders of a specified minimum number of shares. Also, a stockholder-approved New Amended and Restated Certificate of Incorporation could effectively eliminate the ability of stockholders to act by written consents without a meeting, either directly or indirectly, by requiring that any such action be unanimous (which is effectively impossible for any public company).

Advantages. Limiting the ability of stockholders to force a special stockholder meeting eliminates or reduces the risk of a minority stockholder forcing a disruptive meeting. The avoidance of last minute nominations is particularly important for companies that have substantial institutional or individual stockholders who might have been favorably disposed to the incumbent Board in the past but suddenly seek to elect their own candidates. Moreover, advance notice empowers the directors to consider carefully the qualifications of new nominees, so that all relevant information is communicated to the Company’s stockholders. A unanimous written consent provision also seeks to keep stockholder actions out in the open and limit the risk of an “ambush” by a would-be acquiror.

1 According to the SharkRepellant.net Takeover Defense Trend Analysis 2006 Year-End Snapshot in 2006, 54% of public companies in the SharkRepellant.net database elected to classify their boards. In addition, in 2005, 57% of companies that went public elected to classify their boards according to the SharkRepellant.net 2005 Takeover Defense Year End Summary.

A/73218225.1 Board of Directors Page 5

Provisions similar to these are commonly adopted by companies comparable to the Company preceding an IPO.

3. Postponement, Adjournment and Date of Stockholder Meetings.

Description and Advantages. It would be advisable to add provisions to the Company’s by-laws authorizing the Board to postpone a stockholders meeting even after notice has been given, and authorizing the chairman of a stockholders meeting to adjourn the meeting even if a quorum is present. Absent such provisions, it is doubtful whether such a postponement or adjournment would be lawful. Moreover, rather than specifying a date for the annual meeting of stockholders, the Company’s by-laws should authorize the Board to fix the date each year. These provisions might help to prevent premature consideration of a coercive or inadequate bid. They may be important because proxy contests have become an increasingly popular tactic that can be used to pressure a Board that is attempting to maximize stockholder values.

Provisions similar to these are commonly adopted by companies preceding an IPO, and it is not uncommon for public companies to have these provisions in their by-laws.

Limitations. Notwithstanding the inclusion of such provisions in the Company’s by-laws, any specific action taken by the Company’s Board in the heat of a proxy contest would have to pass muster under very strict principles of fiduciary duty, and might be successfully attacked on “entrenchment” grounds even if in compliance with the by-laws. The Delaware courts have been increasingly willing to void any action by a corporation’s board that could have the effect of “tilting the playing field” in a proxy contest.

4. Adequate Reserve of Unissued Common Stock.

Description and Advantages. In control battles, it may be important for the Board to be able to issue, without stockholder approval, additional common stock to support a rights plan of the type described in Item 10 below (although it is more common and efficient to use blank check preferred stock, as discussed in Items 5 and 9 below). In order to permit such uses, there must be available for issue an adequate reserve of authorized but unissued shares. An analysis to determine how many authorized shares will be sufficient for defensive purposes will depend upon (i) the number of shares likely to be needed for future financings or acquisitions, (ii) the number of shares desired to be reserved for employee option and stock plans and (iii) the number of shares planned for other issuances. State tax law considerations are also a factor -- a larger number of authorized but unissued shares will increase the annual franchise tax payment.

A/73218225.1 Board of Directors Page 6

Limitations. The NYSE rules generally prohibit a new issue exceeding 20% of outstanding shares without stockholder approval of the issue, which is not likely to be feasible in the context of a takeover struggle. Moreover, if any of the purchasers include directors, officers or other 5% stockholders, or would result in a “change of control” (as defined in these rules), they require stockholder approval if the new issue exceeds 1% of the outstanding shares or is part of an equity compensation plan (which is part of the reason why public companies obtain stockholder approval for new stock option and other stock plans in which officers or directors may participate). Issuance of stock to a “friendly” party in the course of a control contest attracts close judicial scrutiny and may be overturned, particularly if the court finds that the effect of the option is to limit the price to be paid to stockholders.

Despite the limitations of issuance, it is not uncommon for public companies to have authorized and unissued common stock in excess of two to three times their issued common stock.

5. Blank Check Preferred Stock.

Description and Advantages. “Blank check preferred stock” refers to shares of a class of preferred stock authorized by the charter to be issued by the Board in series, with terms and rights determined in each case by the Board, without further stockholder action. Stockholder approval is initially required to authorize a class of blank check preferred or to increase the number of blank check preferred shares authorized in the Company’s Certificate of Incorporation. The Board thereafter has broad discretion to fix the terms of the issue. The preferred shares could be given special voting rights and/or be convertible to common stock. An amendment to authorize or increase blank check preferred would require stockholder approval.

Blank check preferred stock, of course, has advantages outside of the hostile takeover area, both as a means of raising capital and as a possible form of consideration to be used by the company in making acquisitions.

Limitations. All of the principal U.S. stock exchanges and NYSE have adopted a uniform policy on “disparate voting rights.” This uniform policy limits the ability of a public company to issue a new class or series of super-voting stock, although there are fairly broad exceptions that could permit the creation and issuance of a series of super-voting preferred stock under particular circumstances. (See Item 6 below).

Blank check preferred stock authorization provisions are commonly adopted by companies comparable to the Company preceding an IPO.

A/73218225.1 Board of Directors Page 7

6. Dual Class Stock.

Description. The uniform policy against “disparate voting rights” adopted by NYSE and the stock exchanges in essence limits only actions taken by companies that are already public that impair the voting rights of the public stockholders. The policy places no limits on the voting rights structure implemented by a company making its IPO. Thus, without violating this policy, the Company could go public with a dual-class structure, e.g., Class A common stock with “ordinary” voting rights to be sold to the public, and Class B common stock with super-voting rights (e.g., identical with the Class A stock except that it carries ten votes per share) that would be issued only to pre-IPO common stockholders and would not publicly trade. Moreover, the uniform policy permits even post-IPO issuances of additional shares of a super-voting class created before the effective date of the IPO.

Implementing a dual-class structure, like many of the other measures discussed herein that would require an amendment to the Company’s current Certificate of Incorporation, which would require the approval of a majority of the presently outstanding voting shares (putting aside for now whether it might also trigger any separate class voting rights on the part of holders of the Company’s outstanding preferred shares, which we would need to consider).

Limitations and Disadvantages. The Company should consult its investment bankers to determine whether they believe a dual-class structure would make it more difficult to sell the IPO or, on an ongoing basis, have a depressing effect on the stock price. (In our experience, underwriters strongly disfavor a dual-class structure and this has been infrequent in recent IPOs, with Google being a noteworthy exception.)

7. Delaware Business Combination Statute.

Description. The Delaware business combination statute (Section 203 of the Delaware General Corporation Law) provides that if a prospective acquiror buys 15% or more of the target’s stock without prior Board approval, the acquiror may not complete the acquisition through a merger, may not sell or pledge assets of the target, and may not engage in other self-dealing transactions, in each case, for three years. There are a number of exceptions, apart from which, a bidder who does not have prior Board approval for its acquisition of more than 15% of the stock may escape the business combination statute’s strictures only if, in the transaction in which the bidder crosses the 15% threshold, it buys at least 85% of the target’s stock (other than stock owned by inside directors and by certain employee stock plans), or if the bidder secures the approval of the target’s Board and of the holders of at least two-thirds of the stock held by persons other than the bidder.

A/73218225.1 Board of Directors Page 8

Coverage under this statute would be automatic for the Company as of the date its common stock becomes listed on the NYSE or another exchange (or in any event if it ever has 2,000 or more record holders), unless the Company first “opts out” through a stockholder-approved amendment to the Certificate of Incorporation.

Advantages. Because the restrictions of the Delaware business combination statute are most easily avoided if a bidder gets prior Board approval of its acquisition, an interested bidder may feel more inclined to negotiate with the Board and attempt a friendly transaction. Even if no such friendly transaction can be negotiated, the statute may give the Board advance warning of a potentially hostile offer. In effect, this type of statute tends to perform a function similar to that of rights plans.

Limitations and Disadvantages. A potentially significant disadvantage of the statute is that it may interfere with the sale by major stockholders of all or a portion of their interest in the Company. For example, some third parties would be unwilling to purchase more than 15% of the stock in a negotiated transaction directly from large stockholders unless the Board exempts such purchase from the terms of the statute. Thus, the 15% stockholders may be forced in effect to get Board approval before selling their shares in the Company.

In addition, bidders can structure tender offers in ways that can successfully avoid this statute. For example, a bidder can launch a proxy fight to gain Board control at the same time it launches a tender offer. If the proxy contest is successful, the bidder can make the statute inapplicable to its tender offer. (The success of such a strategy, however, may be limited by having a classified board. See Item 1 above.)

8. Super-Majority Provisions.

Description. These provisions require a “super-majority” stockholder vote, in excess of the minimum vote required by state law (in Delaware, generally a majority of total voting shares outstanding), for mergers and similar business combinations with substantial stockholders (e.g., holders of 5% or more of the Company’s stock, other than preexisting holders who are grandfathered). The vote required is either a fixed percentage (e.g., 85%) or a floating percentage that varies with the amount of stock held by a stockholder (or group of stockholders) proposing to acquire the Company. For example, the floating provision could require a vote equal to the number of shares held by the acquiring stockholder plus one-half of the balance.

In some cases, the Company may create an exception to the super-majority requirement if the acquisition meets certain criteria as to price. A “fair price” provision seeks to ensure that minority stockholders are paid no less than a certain price in the second step of an acquisition. The provision usually requires an

A/73218225.1 Board of Directors Page 9

extremely high vote (e.g., 90% or 95%) for the second-step merger unless the acquiror pays a “fair” price. The fair price is often based upon a multifactor formula (e.g., market price plus premium, or a multiple of earnings, but not less than the highest price otherwise paid by the acquiror for any shares), and is designed to ensure that the bidder pay at least the highest price paid in a first-step tender offer or other purchases of shares.

Adoption of super-majority voting provisions in the Company’s New Amended and Restated Certificate of Incorporation would require stockholder approval. The New Amended and Restated Certificate of Incorporation should also state that the super-majority provision may only be amended by a specified super-majority vote.

Advantages. A merger is usually necessary to complete the acquisition of a public company, since even a successful tender offer will not attract all shares. Super-majority provisions give nontendering stockholders more bargaining power with respect to a second-step merger and may discourage hostile front-end loaded tender offers.

Limitations and Disadvantages. It is important to provide exceptions (“escape” clauses) to super-majority provisions for internal corporate reorganizations to prevent the provisions from impeding friendly transactions and other corporate activities. These exceptions present some of the same issues as redemptions of “poison pills” discussed in Item 9 below.

Super-majority provisions are also fairly cumbersome and have become relatively uncommon in recent years.

9. Stockholder Rights Plans.

Description. Various stockholder rights plans, popularly but inaccurately called “poison pills,” have been developed to enable the Board to have greater control of the process following an unsolicited offer. A key difference between stockholder rights plans and certain of the other structural defenses discussed in this memorandum is that a rights plan may be established by Board action without stockholder approval.

A/73218225.1 Board of Directors Page 10

It is therefore less important for the Company to consider adoption of such a plan at this point.2

A significant number of public companies have adopted some form of rights plan. It is important to point out that, notwithstanding the publicity surrounding rights plans, these plans are not intended to, and will not, block a well-financed bidder from seeking to acquire 100% of the outstanding stock of a target company at a premium over market. However, the existence of a rights plan may afford the target company a period of time after an unsuitable bid is announced to explore other alternatives.

The most common type of stockholder rights plan is the flip-over/flip-in plan. A flip-over/flip-in plan may either (i) deter hostile takeovers by making it extremely expensive to acquire a target company without the approval of the target’s board of directors or (ii) enable the target’s board to negotiate on behalf of the target’s stockholders and maximize stockholder value.

The general structure of a flip-over/flip-in plan involves the distribution to common stockholders of rights or warrants that initially entitle the stockholder to acquire, for each share owned at the time of distribution, one additional share of the Company’s common stock (or, more commonly, a fractional share of preferred stock that is intended to be the economic equivalent of one common share) at an “exercise price” substantially in excess of the stock’s market price at the time of distribution of the rights. The rights are not exercisable until a triggering event occurs, which is generally the acquisition of a predetermined minimum percentage (e.g., 15%) of the Company’s stock or the commencement of a tender offer to acquire a minimum specified percentage of a Company’s stock (e.g., 20%). (Existing holdings by larger stockholders could be exempted from the rights plan under a grandfather clause.)

The key feature of rights plans (the so-called flip-in/flip-over feature) is that after the occurrence of a further triggering event (such as an acquisition by a person or group of, e.g., 15% of the voting stock), each right entitles the holder (other than the

2 According to the SharkRepellant.net 2005 Takeover Defense Year End Summary, in 2005, only 5.5% of companies that went public had a poison pill in place. However, although there is a trend in declining use of poison pill plans, smaller companies (an average market capitalization of $554 million) are more likely to have a poison pill plans than larger companies (an average market capitalization of $8.7 billion).

A/73218225.1 Board of Directors Page 11

bidder) to purchase, at the exercise price, that number of shares of the target or the surviving company that have a market value of twice the exercise price. For example, if the exercise price of a right is $50, after the flip-in triggering event occurs the holder of a right can purchase $100 worth of stock for $50. When exercised, the result is the immediate dilution of the acquiror’s interest in the company, making the target a substantially less attractive takeover candidate.

Many plans also include “exchange” provisions, which authorize the target’s board simply to issue one new common share (or its equivalent) for each share owned by stockholders other than the acquiror, thus eliminating the need for those stockholders to fund a cash exercise of their rights at a time of volatility and uncertainty in the target’s stock price. Some rights plans have fair price elements so that if a hostile bid meets certain minimum price and other criteria, the rights are extinguished.

Rights plans frequently provide that prior to a triggering event, the rights are redeemable by a company, upon approval by its board of directors, at a nominal amount, such as $.001 per right. In the past, many plans provided that after a triggering event, the company’s “continuing directors” (those who were members of the board on the date of issuance of the rights, or their designated successors) could cause the company to redeem unexercised rights at the same minimal price for a specified period after the triggering event. However, Delaware cases have held that such a “deadhand provision” is invalid.

Some rights plans in the past have not permitted redemption at all after a triggering event. While such inflexibility may enhance the plan’s deterrence value against a potential acquiror who does not want to trigger an irreversible process, by permitting post-trigger redemption the plan would allow either a transaction with a white knight or acceptance of a reasonable offer from the initial triggering entity, while also preventing a possibly embarrassing situation if an institution or other non- hostile party inadvertently crosses the triggering threshold. Moreover, the Delaware cases referred to above suggest that such a “no-hand” provision may be invalid.

Advantages. The advantages of stockholder rights plans relate to the positive effect they can have on obtaining a fair price for the stock of all stockholders. Serious bidders should be less likely to attempt to bypass negotiations with the board of the target company if the target company has a rights plan in place. The redemption feature found in most rights plans grants flexibility that permits the Board to seek alternatives to a hostile bid or to adopt other defensive measures that may be appropriate in the face of a specific takeover bid. Finally, adoption of a rights plan may put potential bidders on notice that the Board intends to act vigorously to protect the value of the Company’s stock for all stockholders.

A/73218225.1 Board of Directors Page 12

Limitations. While Delaware case law supports the basic validity of rights plans, certain Delaware cases suggest that, at least in certain takeover scenarios, the board of the target may have an obligation to consider redemption of the rights plan. Delaware case law, however, suggests that an unsolicited tender offer, even if all cash, adequately financed, for all shares and at a substantial premium, would not obligate the board of the target to consider redeeming its rights plan, if the target has not initiated a bidding contest or otherwise put itself up for sale. In addition, Institutional Shareholder Services, which makes voting recommendations to many institutional shareholders, has a policy of recommending a “withhold” vote from any director who approves a rights plan without putting it up for a shareholder vote within 12 months of its adoption.

It would of course be possible for the Company to adopt a rights plan before closing its IPO and doing so would eliminate any risk that later adoption of the plan could be successfully attacked as an impermissible management entrenchment device. On the other hand, so long as the Board has the tools (in particular blank check preferred stock), it could implement a rights plan at a later date. In the past, many underwriters have discouraged implementation of a rights plan prior to the IPO; and the Company should raise the issue with its managing underwriters before undertaking to do so.

10. “Golden Parachutes.”

Description. Employment agreements with management may include provisions that provide substantial compensation for a given period of time after the employee is terminated as a result of a change in control.

Advantages. Such agreements may foster management continuity and thus the interests of the Company and its stockholders by providing some measure of assurance to senior officers and key employees in times of turmoil.

Limitations and Disadvantages. The golden parachutes may carry negative tax consequences to both the Company and the recipients, although these can be minimized through careful planning. They are also disfavored by institutional and other stockholders. As with rights plans, agreements of this sort can be adopted after the IPO by the Board, without stockholder approval, and perhaps for that reason, we believe it is relatively uncommon for such agreements to be in place prior to the IPO.

11. Director Discretion in Considering Offers.

Description. The Board may be expressly authorized by the New Amended and Restated Certificate of Incorporation to take into account, when considering a tender

A/73218225.1 Board of Directors Page 13

offer or merger or acquisition proposal, factors other than the short-term economic benefits to the Company’s stockholders, such as (i) the Board’s view of the long-term future value of the Company as an independent entity and (ii) the impact of such a transaction on employees, suppliers, customers, and communities in which the Company operates. A stockholder-approved New Amended and Restated Certificate of Incorporation would be required in order to allow this kind of discretion.

Advantages. Such a provision may bolster the Board’s ability to consider factors other than stockholders’ short-term economic interests (i.e., the size of the proposed premium), in deciding whether to accept or reject an unsolicited offer.

Disadvantages. Some worry that a court might expand such a provision to require a board of directors to consider the interests of the “other constituencies,” such as organized labor. There is little suggestion in the case law to date, however, that this risk will materialize.

12. Anti-Greenmail Provisions.

Description. Such charter provisions usually prohibit the Company from repurchasing its shares at a premium from persons or groups holding in excess of a specified percentage of its shares, absent stockholder approval. Stockholder approval would be required to include these provisions in a New Amended and Restated Certificate of Incorporation.

Advantages. These provisions discourage greenmail attempts.

Limitations and Disadvantages. These provisions significantly reduce flexibility and may force a discouraged bidder (including one which was not planning on greenmail at the outset) to sell to another potential bidder. In addition, the federal excise tax on greenmail profits has limited the use of greenmail as a tactic of hostile bidders.

Presently, it is not common practice for companies to adopt anti-greenmail provisions prior to an IPO.

* * *

This memorandum is intended only as a preliminary introduction to a complex area. We suggest that we arrange a conference call in order to review these issues with you .

A/73218225.1 Board of Directors Page 14

Bingham McCutchen LLP Circular 230 Notice: To ensure compliance with IRS requirements, we inform you that any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding tax penalties. Any legal advice expressed in this message is being delivered to you solely for your use in connection with the matters addressed herein and may not be made available to or relied upon by any other person or entity or used for any other purpose without our prior written consent.

A/73218225.1