Conditions of Participation

An independent “Forum” is being initiated for shareholders of companies in relation to which policies for stock options and similar equity linked compensation may be relevant to investors’ capital commitment and voting decisions.  The Forum’s purpose is to support each company’s fair competition for both management resources and capital, relying on marketplace processes to resolve both general and specific issues:

1. Representatives of key decision-making constituencies, in a publicly open process, will define commonly accepted principles which can be applied broadly to varying enterprise adaptations.
2. For each of a limited number of companies requesting it, separate workshops will be conducted to support an informal exchange of views among the managers, investors and professionals concerned with the resolution of company-specific applications.

The Forum will also continue the efforts of its predecessor programs to develop effective processes for shareholder oversight, focusing particularly on potential adaptations from global models of cooperative practices in which both managers and investors benefit from understanding their shared corporate value objectives.

This Forum program is organized with the support of Hermes Equity Ownership Services, Ltd.  It is the first in an expected series that will be the responsibility of a not-for-profit “Institute” to be established for the purpose of continuing the Forum programs conducted by Gary Lutin.[*]  The arrangements will provide for Mr. Lutin to chair the Forum and conduct its activities on behalf of the Institute (as the Forum’s “Manager”) according to the conditions stated below.

Forum Participants

1.                   Participation, generally:  The Forum will be conducted for the benefit of the shareholders (referred to below, with others, as “Investor Participants”) of companies to be specified (referred to below as “Corporate Participants”).  As stated more fully below, each such “Participant” (of any category) is expected to make independent use of information obtained through the Forum and may choose to express views either anonymously or for attribution, subject to the privacy rights of other Participants.

2.                   Investor Participants:  The Forum will be open, free of charge, to all shareholders, whether institutional or individual, and to anyone with fiduciary or professional responsibilities relating to shareholder decisions (including advisers to investors, regulatory officials, journalists, educators, etc.).  Any member of the CFA Institute or its affiliated societies of security analysts will be considered to have relevant responsibilities and on that basis invited to participate.

3.                   Corporate Participants: A limited number of companies will be invited to participate in the Forum, in each case based on consideration of:

(a)    the commitment of the company’s board of directors to an open, cooperative exchange of views among the managers, investors and professionals concerned with developing economically practical policies suited to their company’s particular circumstances, and

(b)   the apparent significance of corporate value enhancement to be derived from aligning management rewards with the achievement of long-term performance objectives.

4.                  Forum Activities:  Forum activities may involve a variety of communication processes, ranging from publicly distributed reports to private discussions between the Manager and individual Participants, if and as appropriate to (a) define issues relevant to shareholder interests, (b) obtain and provide to Participants the information needed for their independent decisions, (c) assure management awareness of shareholder views, and (d) consider expert commentary on alternatives.  Information of general Forum interest will be distributed to all Participants who provide an email address for that purpose, subject to the Forum privacy commitment.  More specialized subjects may be addressed in separate “workshops” or similar processes, so that Participants can be selective in their attentions to activities and issues.

5.                  Independence of Participant:  Each Participant is expected to act independently.  Participation in the Forum, including any of its components or functions, is not intended either (a) to be or to encourage an agreement among Participants to act in concert, or (b) to restrict in any way the freedom of Participants to enter into independent agreements for any purposes they may wish.  Any such independent agreements of Participants, including separate agreements between Participants, will be considered unrelated to the Forum.  It should of course be understood that no Participant may act for or on behalf of the Forum or its Manager, or represent that it is doing so.

6.                  Privacy:  The communications of a Participant with the Manager or others involved in the Forum will be considered private and anonymous, and the Manager will not disclose a Participant's identity or views without the Participant's specific consent.  Participation in the Forum is subject to the Participant’s agreement to respect the privacy rights of other Participants, including under circumstances in which the Participant may learn the identity or views of another Participant as a result of involvement in the Forum.

7.                  Manager Not Representing Participants:  It should be understood that the Manager (including for these purposes the Forum’s chair, or any employee or agent of the Manager) will have no responsibility or authority to represent or act on behalf of any Participant unless an exception is specifically agreed to in writing by both Participant and the Manager, and that neither the Manager nor any Participant will otherwise be responsible for any acts or conduct of the other.  Specifically, the Manager will neither solicit nor accept proxies.

8.                  Responsibility for Costs:  Participants will have no responsibility for any costs or other liabilities of the Forum or of the Manager, other than as agreed otherwise in writing.  Similarly, the Forum and the Manager will have no responsibility for any costs or other liabilities of a Participant.  However, if costs incurred by a Participant for purposes consistent with shareholder interests addressed by the Forum are approved by the Manager as “Advances,” those Participant costs will be reimbursable from funds which may become available for Forum costs according to the provisions of paragraphs 18 and 19.

Advisory Panel

9.                  Function of Advisory Panel:  An “Advisory Panel” of representative marketplace constituencies will be organized (a) to guide the Forum’s definition of relevant issues and (b) to prepare a statement of commonly accepted principles.  Chaired by the Forum’s chairman, Advisory Panel communications are expected to be informal and adaptive.

10.              Composition of Advisory Panel:   The Advisory Panel will include the following categories of Members to provide effective representation of marketplace constituencies:

(a)    Investor:  Efforts will be made to select Investor Members reflecting the full range of relevant investor views, including managers of different types of funds as well as investors with significant interests in particular Corporate Participants.

(b)   Corporate:  Each Corporate Participant will be invited to delegate a board member or executive to serve as a Member of the Panel.

(c)    Professional:  Recognized authorities on pertinent issues or practices will be invited to offer their general views as Members of the Advisory Panel, to the extent permitted by professional standards.

11.              Public Meetings:  Although the Advisory Panel is expected to conduct most of its activities through informal communications, its Members will be encouraged to attend two publicly open meetings:

(a)    December 2006:  An open meeting will be scheduled in early December 2006 to invite comment on the definition of issues to be considered, suggestions of possible additional Corporate Participant candidates, and other matters relevant to the Forum’s progress.

(b)   Early 2007:  Another open meeting will be scheduled in late January or February 2007 to invite comment on the Advisory Panel’s preliminary draft of principles.

12.              Report:  A report will be prepared by March 2007 to present a statement of commonly accepted principles approved by a majority of the Advisory Panel’s Investor Members, with the appended comments of any Investor, Corporate and Professional Members wishing to submit their individual views.

13.              Expectations of Advice:  Members of the Panel will be expected only to provide views, if and to the extent that a subject interests the Member, and no Member will have any obligation to offer views.  Under no circumstances will an Advisory Panel Member be expected to recommend or endorse actions, or to encourage others to do so.  It is understood that any views expressed by a Member will be intended only for private, informal consideration by other Members of the Advisory Panel and the Manager, unless a Member presents the view explicitly in response to a written request stating some other intended purpose, such as a survey for a statistical report of anonymous Advisory Panel opinions.  Responses to Advisory Panel inquiries will be strictly voluntary and not a requirement of standing as a Member.

14.              Private Information:  Members of the Advisory Panel may be presented with research, views and other information that has not been distributed generally to other Forum Participants or otherwise publicly reported.  Recognizing that the purpose of the Forum is to provide Participants with information relevant to independent investment decisions, the Manager will generally obtain and report information only under conditions that would not impose any restrictions on Participants’ intended use of the information.  However, if any information which may be presented for Advisory Panel consideration is subject to confidentiality agreements, or if the Manager believes that any other conditions relating to the provision of certain Advisory Panel information might require a Member’s disclosure or impose restrictions on a Member’s investment decisions, the Manager will inform each Member of the relevant conditions prior to providing that information and allow each Member to decide whether to receive it.  Generally, aside from any specific agreements that may be established for such exceptional circumstances, it is understood that each Member will respect the private nature of the Manager’s reports and other information, including particularly the identities or views of other Members or Participants which may be disclosed in the course of Advisory Panel communications.

Costs and Reimbursements

15.              Corporate Contributions:  To the extent that the Forum activities are intended to benefit all of a Corporate Participant’s shareholders according to their interests, payments of “Contributions” should be made by each of the Corporate Participants as a practical means of distributing the costs of the Forum ratably by those who would profit from it. The amount of each Corporate Participant’s Contribution for general Forum activities (excluding costs associated with any separate, company-specific “workshop” activities) will be suggested according to a scale based on size of market capitalization or other factors considered reasonable by the Advisory Panel. The additional costs of any company-specific workshop will be borne independently by the Corporate Participant requesting it, based on estimates for that separate workshop’s particular activities. Corporate Participants will not be responsible for any costs other than the Contributions they agree to make, either for the suggested amount in relation to the general Forum activities or for what may be proposed in relation to a company-specific workshop. The Forum’s Manager will remain ultimately responsible for the funding of all Forum costs, including any expenses incurred by the Manager for advisors and administrative requirements. All Contribution amounts of Corporate Participants will be publicly posted or available upon request from the Forum’s Manager.  [section revised January 8, 2007]

16.              Sponsorship Support:  The Manager may accept financial support of the Forum from Participants or others with interests in the Forum’s purposes, subject to conventional publishing and academic standards of sponsorship respecting independent integrity.  Any such sponsorship payments from Investor Participants may be considered approved “Advances” for purposes of reimbursement as provided below in paragraphs 18 and 19.  The identities of Forum sponsors will be provided to Participants upon request.

17.              Allocations to Educational Institutions:  The Manager may allocate portions of Corporate Participant Contributions and Sponsorship payments to the financial support of educational institutions which provide guidance to the Forum or its Institute.   If requested by the source of a Contribution or Sponsorship payment, the source will be credited for the allocated funding to a recipient educational institution.

18.              Approved Advances:  Any costs other than Contributions incurred by a Participant, whether independently or in support of the Forum, may be considered reimbursable “Advances” if the Manager determines that they are reasonable and for purposes relating to shareholder interests addressed by the Forum.  Although the reimbursable status as an Advance may be considered after costs are incurred under exceptional circumstances, a Participant should seek written Manager approval of costs prior to making commitments.

19.              Reimbursement of Participant Advances:  Participants will be reimbursed for Advances if and as sufficient funds become available from Corporate Participant Contributions or Sponsorship support.  After satisfying allocation obligations and paying or reimbursing the direct expenses reasonably incurred by the Manager in the organization and conduct of the Forum, half of the remaining balance of all such funds received in relation to the Forum will be available for application to the reimbursement of Advances.  Rights to reimbursement of Advances will survive the completion or termination of the Forum.

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October 27, 2006 [updated January 8, 2007]

Forum chairman:

Gary Lutin

Lutin & Company, 575 Madison Avenue, New York, New York 10022

Telephone: 212-605-0335

Email: gl@shareholderforum.com