NYSE Proposes Governance Rule Changes

December 5, 2005

The NYSE has proposed various refinements to its governance standards set out in Listed Company Manual Section 303A. The proposal, a copy of which is attached, is subject to public comment and to SEC approval. The main changes would be as follows:

· Disclosure About Director Independence. The NYSE was dissatisfied with disclosures about director independence determinations, which in its view did not provide a sufficient basis to assess the quality of those determinations. The changes would clarify that, for each independent director, a company must disclose that the director either has no relationships with the company (except as a director or shareholder) or has only immaterial relationships. If the latter, the company must provide a “specific description” of the relationship and disclose the basis for the board’s independence determination.

The NYSE noted in particular the confusion about “categorical standards” under Section 303A.02. This alternative permits a company to adopt and disclose a rule (i.e., a categorical standard) that a type of relationship is per se immaterial. By doing so, the company need not disclose the details of a relationship within the rule or the basis of the board’s independence determination for the affected director. The changes clarify that a company cannot adopt a rule that all relationships not specifically identified in Section 303A.02(b) (per se bars to independence) are immaterial. In addition, any relationship with a director required to be disclosed under Item 404 of Regulation S-K (Certain Relationships and Related Transactions) cannot be treated as per se immaterial and, in that case, the company must address the basis for the board’s independence determination.

· Disclosure by Foreign Private Issuers About Governance Practices. The changes would require that FPIs disclose on their website significant differences between their home-country governance practices and those applicable to domestic companies under the NYSE’s rules. This disclosure may now be made on the company’s website or in its annual report.

· Transition Periods. To alleviate director liability concerns, the changes would relax the requirement that IPO companies have one independent director on key board committees on listing. That requirement would not apply until the earlier of the IPO closing date and five business days after NYSE trading commences. IPO companies must have a majority of independent directors on such committees within 90 days of listing and fully independent committees and a majority of independent directors on the board 12 months after listing. The 12-month transition period would also apply to the three-director minimum applicable to audit committees. The changes clarify the application of the IPO transition period to “voluntary filers” (e.g., companies that file to satisfy debt covenants) and would apply similar transition periods to spin-offs, carve-outs and companies that cease to be “controlled” or list out of bankruptcy.

An FPI that ceases to qualify as such would be required to have one independent director on key board committees on the date its status changes, a majority of independent directors on such committees within 90 days and fully independent board committees and a majority of independent directors on the board within 12 months.

· Other Changes. Among other matters, the changes would also:

· Require written notification to the NYSE of any (rather than material) non-compliance with NYSE governance standards;

· Require that companies, including FPIs, maintain publicly-accessible websites;

· Require that mandated disclosures about director independence, presiding directors, communication with independent directors and service by audit committee members on other public company audit committees be made in the proxy statement (or, if none, the annual report) and that those disclosures may not be incorporated by reference from any other document;

· Require that “printable” versions of U.S. company governance documents (governance guidelines, committee charters and code of ethics) be available on company websites;

· Eliminate disclosure about the fact that companies have filed the officer certifications mandated under NYSE and SEC rules, although the filings themselves are still required; and

· Permit companies to limit regular meetings of non-management directors only to independent directors.

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