Internal Revenue Service Releases Private Ruling that Compensation Payable on Termination Without Cause or For Good Reason Is Not Performance-Based Under Section 162(m)

February 6, 2008

On January 25, 2008, the Internal Revenue Service released a private letter ruling (“PLR”) to the effect that compensation awards that may be payable upon termination without cause by the employer or resignation for good reason by the employee without regard to the achievement of performance goals would not be considered “qualified performance-based compensation” under Section 162(m) of the Internal Revenue Code of 1986. The new PLR, dated September 21, 2007 and numbered 200804004, is attached hereto. The conclusion in PLR 200804004 is inconsistent with conclusions reached in prior PLRs in 1999 and 2005. PLR 200804004 potentially affects the awards to be made in 2008, as well as the proxy disclosure. You should review PLR 200804004 prior to making awards for 2008 and take it into account when reviewing proxy statements.

Attached please find a copy of our memorandum concerning PLR 200804004.