10b5-1 Trading Plans:

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1 10b5-1 Trading Plans: Are You Up to Imagine this: Your company s CEO would like to sell some of his or her company stock in order to purchase a new home. After advice from you, his company s trusted legal counsel, regarding company policies surrounding trading by insiders, the shares are sold in the open market pursuant to a Rule 10b5-1 trading plan an automatic sales plan where share price targets and other sale parameters are written into the plan. The company then releases a very disappointing earnings report and the stock price takes a nosedive. The SEC and plaintiff s attorneys come calling, inquiring whether the CEO sold based upon inside information. Worse yet, the local paper releases a story about the fortuitous timing of the CEO s sales. Your CEO is now beginning to wonder whether the company has the right counsel. Does your company have the proper policies in place to allow you to confidently respond to such inquiries? Short of not allowing the CEO to sell shares (and not purchasing the new home), could this scenario have been prevented altogether? ACC Docket 36 October 2008

2 Speed? By David Y. Gan ACC Docket 37 October 2008

3 Rule 10b5-1 trading plans, once considered a safe harbor for insider (director and officer) sales of company securities, have come under increased scrutiny. CEOs Angelo Mozilo of Countrywide and Joseph Nacchio of Qwest have been in the news for their potential abuses of 10b5-1 plans and the SEC, shareholders, and analysts have heightened their focus in this area. Adopted by the SEC in 2000, Rule 10b5-1 provides an affirmative defense against insider trading liability for purchases and sales of securities made pursuant to trading plans adopted in accordance with the rule. These automatic sales plans were intended by the SEC to allow for orderly sales by corporate executives by: creating a trading plan at a time when they are not in possession of inside information, and making sales under predetermined plan parameters. In this manner, the SEC recognized the difficulty company insiders face when they wish to sell company stock, given they may often be in possession of material nonpublic information, and the rule was intended to give executives regular opportunities to sell their shares without facing an insider trading inquiry. Since the adoption of the rule, 10b5-1 plans have become an increasingly popular device to facilitate the sale of shares by company insiders: $8.6 billion in stock of S&P 500 companies were sold pursuant to these plans during and according to Equilar, Inc., in 2007 almost one-third of Fortune 500 companies had at least one Section 16 officer make a sale under a 10b5-1 plan. David Y. Gan is vice president and assistant general counsel at AECOM Technology Corporation, a design and engineering firm with over 35,000 employees worldwide. There, he is responsible for corporate governance, mergers and acquisitions, and other general corporate matters. Formerly, he was a corporate attorney at the law firms of Mayer Brown and Wilson Sonsini Goodrich & Rosati. He can be contacted at david. gan@aecom.com. However, with increased regulatory and shareholder focus on these plans, companies and their counsel must ensure that they are up to speed with current developments. Rule 10b5-1 Rule 10b5-1 prohibits trading in a company s securities when a person is aware of material nonpublic information about such company. The SEC refers to this as a knowing possession standard. Prior to the adoption of the rule in 2000, some courts had enforced a use standard, under which the insider could be aware of material nonpublic information at the time of a sale of shares but the sale could still be legal if the insider could show that he or she did not rely on the inside information in making the trade (for example, demonstrating a need for liquidity, such as to pay for child s college tuition). In adopting Rule 10b5-1, the SEC rejected the use standard, finding it doubtful that an insider could ever completely disregard the inside information that was material to the pricing of the stock and that even if that he or she were able to do so, the perception in the marketplace would be that an unfair transaction had taken place. 2 However, in adopting the rule and clarifying that for insider trading liability to apply a person simply had to possess material nonpublic information at the time of a trade, the SEC recognized that such a standard might be broad enough to inadvertently capture innocent conduct, such as when a decision to trade is made when a person Standard 10b5-1 Plan Parameters Each major brokerage firm experienced in handling 10b5-1 plans will have its own standard form of plan. Basic parameters for such plans will include: 1. Securities Covered. The securities to be sold under the plan: Shares held in the insider s name, shares held in family trusts or otherwise indirectly held, stock options, etc. 2. Amount of Securities. This is generally expressed in number of shares or dollar amount of securities to be sold. 3. Term. The period of time during which the plan is effective. 4. Trading Date(s). When the trades would occur at any time during the term of the plan, on pre-set dates, at the discretion of the broker, or otherwise determined without the discretion of the insider (one CEO draws a date out of a hat each month!). 5. Price Parameters. Often a limit price is used, for example, Sell 100 shares at or above $40 per share. It is not unusual for plans to have several limit prices; for example, a plan covering a total of 300 shares may specify selling 100 shares at or above $20,100 shares at or above $30, and 100 shares at or above $ Termination Provisions. Typically there is a set outside termination date with early termination allowed under certain circumstances, including for regulatory compliance. As discussed later in this article, voluntary terminations by the insider should be limited if possible since they may weaken the defense against liability. ACC Docket 38 October 2008

4 is not aware of material nonpublic information but the trader comes into possession of such information before the trade actually takes place. Therefore, the SEC included provisions allowing for 10b5-1 plan sales, as set forth in 10b5-1(c). 10b5-1 Plans 10b5-1 plans are created to allow trades by insiders under 10b5-1(c), which provides a defense to SEC insider trading liability if, before a person becomes aware of material nonpublic information, he or she: entered into a binding contract to purchase or sell securities, instructed another person to purchase or sell the securities, or adopted a written plan for trading securities. A plan must be entered into in good faith and not as part of a scheme to evade the prohibitions of the rule. After adoption, the insider must not influence the operation of the plan in accordance with its terms. The plan must either specify or include a written formula for determining the price, amount, and date for sales of securities, or give discretion to a third party (generally a broker) to determine these parameters. Most insiders choose to adopt a written plan with a written formula rather than delegate discretion to a broker since this will, among other things, ensure there is a clear record of the instructions and avoid the need to analyze whether the broker had material nonpublic information at the time of the sale. Example of a 10b5-1 Plan: An executive holding 120,000 shares determines to liquidate 12,000 shares, or 10 percent of his holdings, over a 12-month period. The executive enters into a plan that authorizes a broker to sell 1,000 shares per month for 12 months at a limit price of $20 (therefore, if the company stock price during a month is at or higher than $20, the broker shall attempt to sell up to 1,000 shares). The first sale under the plan may take place after a 30- day cooling-off period following adoption of the plan, but after the cooling-off period, sales may take place regardless of whether the company s trading window for insiders is open or closed. The plan automatically terminates at the end of the 12-month period. Recent Scrutiny In 2006, an assistant professor at Stanford University s Graduate School of Business published a study that found insiders who used 10b5-1 plans to sell shares received better than expected returns, not only beating the market average but also their peers who did not use 10b5-1 plans to sell. 3 The study also found that insiders sales under plans tended to precede price declines. The obvious question both asserted in the study and in resulting media Adva n ta g e s When implemented correctly, the plans allow for sales while providing protection against insider trading liability. The trades are made according to the plan parameters and can be executed even during a company s closed trading window periods, allowing for more time during the year when an insider can trade. Quarterly trading blackout periods often start 30 days or earlier before the end of a quarter and end after quarterly earnings are announced, leaving limited open window periods during a year when insiders may trade. By establishing the plan in advance, an insider may make sales at future times when the insider would otherwise be prevented from selling because he or she has since obtained material nonpublic information. Corporate counsel s burden to determine when an executive can trade is reduced. Generally, each trade made by senior Section 16 insiders outside of 10b5-1 plans must be separately pre-cleared by counsel. Dis a d va n ta g e s By setting and committing to a sales plan in advance, the insider loses some control and flexibility over trading. Since the trades under a plan occur independently by the terms of the plan, may run into optics issues of sales at inopportune times, such as prior to a major unexpected corporate announcement. Some companies have reserved the right to terminate 10b5-1 trades to avoid the pain of having to deal with the potential fallout from such inopportune timing. Others have determined that they would rather not have the company exercise discretion to cancel insiders trades due to fairness and other concerns. Insiders who are not properly educated regarding the plans may trip up over improper amendments, terminations, attempts to influence broker, and the operation of the plan, etc. Rule 10b5-1 is still relatively untested in courts. ACC Docket 40 October 2008

5 coverage from BusinessWeek 4 and other outlets is whether insiders who had knowledge of future negative news about the company implemented 10b5-1 plans to sell in advance of public disclosure of such news. Adding fuel to the fire were news reports that executives such as Angelo Mozilo of Countrywide, Joseph Nacchio of Qwest, and the two founders of now-bankrupt New Century Financial sold hundreds of millions of dollars worth of shares prior to negative announcements that sent share prices of these companies tumbling, and that such sales were made pursuant to 10b5-1 plans. Prompted by these findings, the SEC has determined to examine whether abuses have in fact occurred. The Director of the Commission s Division of Enforcement, ACC Extras on Stock Trading Program Materials What Can You Say and When Guidance to Give to Your CEO and CFO. Public company communications are complex and fraught with risk. There s recent regulation FD and similar legislation in Canada, and now the EU precludes selective disclosure of material information. What guidance should you give your CEO and CFO in their dealings with the press, analysts, rating agencies, and investors while protecting your corporate officers and directors? Experienced general counsel share how to ethically, legally, and proactively manage public company communications by identifying and resolving disclosure issues before they cost the company time and money. Sample Forms and Policies Organizational Resolutions. This document contains clauses related to miscellaneous organizational matters including independence of certain directors, audit committee requirements, director nominations, personnel committee duties, internal codes of business conduct and ethics, insider trading policies, and designations of officers and executive officers. Sample Insider Trading and Disclosure Policy. Need to draft an insider trading and disclosure compliance policy? Use these sample insider-trading policies presented at the 2007 ACC Annual Meeting to get started. in a 2007 speech, stated that [the research] raises the possibility that plans are being abused in various ways to facilitate trading based on inside information. We re looking at this hard. We want to make sure that people are not doing here what they were doing with stock options. 5 Current Environment We know that corporate insiders will continue to sell shares and often have strong legitimate needs for portfolio diversification or to pay for life s important events (along with less important ones). Unless there are new adverse developments or rule changes, conservatively designed 10b5-1 plans remain a very useful way for insiders to trade company securities and minimize legal exposure. A reduction in trading liability for insiders also means a reduction in potential liability for the company and its board of directors. A reduction in trading liability for insiders also means a reduction in potential liability for the company and its board of directors. Ten Things You Should Know About 10b5-1 Plans Company counsel are almost always asked to approve such plans and the following are 10 items to keep in mind with respect to 10b5-1 plans. 1. Adopt Plans During Open Window Periods. A core requirement for 10b5-1 plans is that they must be adopted at a time when the insider possesses no material nonpublic information. To help facilitate this, company policy should require insiders to adopt 10b5-1 plans only during open trading window periods. This will help ensure plans are adopted after public release of material information about the company and not during a time when the company has shut down the trading window due to material unannounced events. Ideally, the plans would be adopted early in the window period shortly after earnings and other disclosures have been released. 2. Provide a Cooling-Off Period Before First Trade. The company s policies should provide for a cooling-off period of at least 30 days prior to the first trade after adoption of a plan or after material amendments (see #3 below regarding plan amendments). To the extent there is a sufficient time lag, the cooling-off period assists in rebutting the argument that the insider was aware of future adverse events at the time he or she ACC Docket 42 October 2008

6 However, the termination of a plan can jeopardize prior trades made under the plan and potentially weakens the liability protections of the rule. Terminations should be made sparingly and only with legal advice and approval. adopted the plan. The norm appears to be 30 to 60 days, with some companies implementing cooling-off periods as long as six months. 3. Plan Amendments. Material amendments to plans potentially call into question whether the original plans were adopted in good faith or whether the insider is acting on new inside information. For example, the news reports (and subsequent class action litigation pleadings) have treated with suspicion amendments made by Angelo Mozilo to increase the number of shares sold under his plans prior to the release of negative news by Countrywide. The temptation may be to prohibit amendments altogether, but perhaps the more reasonable alternative is to require pre-approval of company counsel and treat a material amendment as the termination of the existing plan and an adoption of a new plan requiring a new cooling-off period and adoption in an open window without inside information. 4. Plan Terminations. There are no express limitations against terminating 10b5-1 plans. There is also generally no liability for not trading based on inside information, i.e. liability does not attach unless there is a purchase or sale of a security. 6 However, the termination of a plan can jeopardize prior trades made under the plan and potentially weakens the liability protections of the rule. Terminations should be made sparingly and only with legal advice and approval. 5. Sales Outside of Plan. Once an insider has entered into a plan, may he/she make sales during the same period outside of the plan during an open window period? Assuming the 10b5-1 plan allows the insider to do so, you must once again consider the effects on the plan and whether the sales call into question the good faith entry into that plan. If not, and the insider can assert that he or she does not hold material nonpublic information about the company, the sales outside of the plan may be made, but those sales will of course not have the protections of Rule 10b Use an Experienced Brokerage Firm/Captive Broker. The brokerage firm(s) that implement and execute 10b5-1 plans are critical in a number of respects. One, you will rely on the firm for timely notifications of trades in order to meet the company s Section 16 filing obligations (a report on Form 4 is due for Section 16 officers within two business days of the trade). Two, a firm experienced with 10b5-1 plans can provide invaluable advice everything from how to structure the trading formulas to ensuring Rule 144 paperwork is timely filed. Three, the firm will have safeguards to ensure that 10b5-1 plans are faithfully executed without subsequent influence by the insider. Consider requiring a captive broker, meaning requiring that all 10b5-1 plans be executed through one experienced broker, using an agreed-upon plan template that the company and the broker are comfortable with and with clear predetermined procedures for who will have responsibility for required notifications and filings. This will substantially decrease the probability of mistakes either caused by unfamiliarity with applicable requirements or execution inexperience. 7. Determine Disclosure Strategy Upfront. In revising Form 8-K disclosure requirements in 2002, the SEC proposed a requirement that 10b5-1 plan adoptions, amendments, and terminations be disclosed on Form 8-K. However, the final rules did not include this proposal and Additional Background Material from Non-ACC Resources 1. Text of Rule 10b5-1. Available at CCL/34ActRls/rule10b5-1.html. 2. SEC Final Adopting Release. Provides background to SEC s rationale behind Rule 10b5-1. Available at 3. Do Insiders Trade Strategically within the SEC Rule 10b5-1 Safe Harbor? Study by Alan D. Jagolinzer, Stanford Business School professor that in part prompted media and SEC scrutiny of 10b5-1 plans. Available at TheCorporateCounsel.Net. Excellent resource for securities law and corporate governance matters, including Rule 10b5-1 (paid subscription required for content other than blog). Available at 5. Sample 10b5-1 Trading Plan Template. ACC Docket 44 October 2008

7 actual practices vary widely regarding public disclosure of 10b5-1 plans. Even among companies that do disclose the adoption of plans, practices vary as to whether plan amendments and terminations are disclosed. The benefits to disclosure include that the market is fully aware of the plans well in advance and in theory there should be no surprise when sales are reported under such plans. Disadvantages to disclosure include misinterpretation by investors and dealing with disclosure of amendments and terminations. 8. Plan Parameters. Consider whether it is appropriate under the circumstances to require any or all of the following: a. Limit volume of share sales for example, a maxi- mum percentage of the insider s holdings that may be sold in a given period. Remember, as with all insider trading allegations, the propriety of 10b5-1 plan activity will be viewed by others with the benefit of hindsight. b. Requiring shares sold in smaller bunches rather than large blocks a regular predictable pattern of selling would likely be easier to defend. c. Minimum or maximum terms (e.g., maximum term of two years) ensure that terms are neither (i) so short that multiple plans are likely to be adopted in succession because shares are not sold in the original time frame, nor (ii) so long such that there is a good probability that the insider may wish to cancel or amend the plan during that time. 9. Consider All Forms of Shareholding. Although brokerage firms may not be willing to handle 10b5-1 transactions for shares held in 401(k) and other ERISAqualified plans, consider whether a 10b5-1 plan would be useful not just for shares directly held but all forms of shareholdings. For example, you can include an automatic exercise and sale of expiring stock options in a 10b5-1 plan so that if the shares underlying the option are not sold because the plan price targets are not met, the option will be automatically exercised and the underlying shares sold immediately prior to expiration at market price (so long as the option is in the money). 10. Education and Training Go a Long Way. If they are going to be selling securities and attempting to avail themselves of the protections of Rule 10b5-1, it is imperative that your company s insiders understand the landscape and potential pitfalls. They should also be aware of the parameters of the company s policies and the company s expectations of them (for example, in the area of plan amendments). Information sessions for senior executives prior to their adoption of a 10b5-1 plan would be helpful to ensure that they fully understand the parameters and required procedures. A Useful Tool, but Proceed with Caution Counsel should review the company s policies, procedures, and training programs surrounding insider trading to ensure that they are properly updated to allow for execution of 10b5-1 plans by well-informed insiders within appropriate parameters. Further, the audit committee of the board of directors should be fully apprised of any material developments with respect to insiders 10b5-1 plans. Remember, as with all insider trading allegations, the propriety of 10b5-1 plan activity will be viewed by others with the benefit of hindsight. Rule 10b5-1(c) is an affirmative defense against insider trading liability, but does not prevent the SEC from suing upon viewing suspicious activity. A conservative policy regarding adoption and use of 10b5-1 plans along with careful thought regarding the selling parameters within the plan can go far in ensuring that there is not even a perception of wrongdoing with respect to selling by your company insiders. For our CEO in the hypothetical at the beginning of this article, implementing these procedures may well mean that rather than staying up at night discussing (with new counsel) how to handle a legal and PR nightmare created by ill-conceived 10b5-1 sales, she is sleeping soundly in the new home. Have a comment on this article? editorinchief@acc.com. NoteS 1. Searcey, Dionne and Kara Scannell, SEC Now Takes a Hard Look At Insiders Regular Sales, The Wall Street Journal (April 4, 2007), p. C1. 2. Proposed Rule: Selective Disclosure and Insider Trading, Release Nos , , IC-24209, File No. S Available at 3. Alan D. Jagolinzer, Do Insiders Trade Strategically within the SEC Rule 10b5-1 Safe Harbor? (December 6, 2006). Available at Sasseen, Zegel, and Cady, Not As Random As It Looks? Some executives seem to be making big gains in automatic trading plans, BusinessWeek (November 6, 2006). 5. Remarks at the 2007 Corporate Counsel Institute by Linda Chatman Thomsen, director, Division of Enforcement, US Securities and Exchange Commission, Washington, DC, March 8, Available at 6. See US Supreme Court decision Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (1975). ACC Docket 46 October 2008

8 Sales Plan Sample Form [Name] [Company Name] Max. No. of [Shares/Options] to sell under the plan: [No. of Shares/Options] Rule 10b5-1 Sales Plan and Client Representations I, [Name], as of the date below, establish this Sales Plan (the Plan") in order to sell shares of the common stock (the "Shares") of [Company Name] (the "Issuer") pursuant to the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the Exchange Act ). I request that [Broker Name] execute the Plan as follows: 1. Sales Instructions Starting on [, 20 ], and ending on [, 20 ], sell shares and/or exercise options to purchase shares of [Company Name] and sell shares pursuant to Annex A; provided, however, that a. [Broker Name] will exercise no stock option, unless they are fully vested, and its exercise price is less than the market price of the underlying share; and [Broker Name] first will exercise those options with earliest expiration date and then lowest exercise price. b. [Broker Name] may deduct from the proceeds of each stock option exercised and the underlying shares sold the sum of (a) the exercise price and (b) any withholding tax and then remit that sum to the Issuer. 2. Execution, Average Pricing and Pro Rata Allocation of Sales I agree and acknowledge that: a. If my order to sell Shares pursuant to the Plan, whether market or limit, is handled by a [Broker Name] trading desk, it shall be handled as ''not held." A "not held" or "working order" permits a [Broker Name] trader to use reasonable brokerage judgment, exercising price and time discretion, as to when to execute the order, provided, however, that no order may be executed other than in accordance with this Plan; and b. [Broker Name] may execute my order: (1) in a single transaction or multiple transactions during the course of the trading day, or (2) it may aggregate my order with other orders for other sellers of the Issuer's securities that may or may not have been accepted pursuant to a Rule 10b5-l sales plan, execute them as a block or in multiple smaller transactions, and allocate an average price to each seller. When orders are aggregated, [Broker Name] shall allocate the proceeds of shares sold pro rata among the sellers, based on the ratio of (x) the shares to be sold and (y) the sum of the proceeds of all shares sold, and [Broker Name] will provide each seller an "average price confirmation" that identifies the amount of securities sold for the applicable seller together with an average price for sales. 3. Stock Splits In the event of a stock split or reverse stock split of Shares, the quantity and price at which the Shares are to be sold will be automatically adjusted proportionately. 4. Reincorporation/Reorganization Unless the Plan is terminated pursuant to Section 9d(ii) of the Plan, in the event of a reincorporation or other corporate reorganization or reclassification resulting in an automatic share-for-share exchange of new shares for the Shares subject to the Plan, new shares will automatically replace the Shares originally specified in the Plan. 5. Account Credit In the event any scheduled sale of Shares or exercise of stock options and sale of the underlying Shares is not executed as provided in Section 1 (or Section 8, if applicable) of the Plan, my account will be credited as if such sale or exercise had taken place as scheduled or provided in Section Compliance with Rule 144 and Rule 145 a. The parties understand and agree that if I am an affiliate or control person for purposes of Rule 144 under the Securities Act of as amended (the ''Securities Act"), or if the Shares subject to the Plan are restricted securities subject to limitations under Rule 144 or eligible for resale under Rule 145, then all sales of Shares under the Plan will be made in accordance with the applicable provisions of Rule 144. [Broker Name] will complete and file on my behalf any Forms 144 (pre-signed by me) necessary to effect sales under the Plan. b. If appropriate, I understand and agree that, upon my prompt signature and delivery to [Broker Name] of a Form 144, [Broker Name] will either (a) make one Form ACC Docket 48 October 2008

9 144 filing at the beginning of each three-month period commencing with the date of the first sale made in connection with the Plan or (b) file a Form 144 for each sale made in connection with the Plan. Each such Form 144 shall state the following: "This proposed sale is made pursuant to a plan intended to comply with Rule 10b5- l(c), previously entered into [Date], and the representation below regarding the seller's knowledge of material information speaks as of that plan adoption date." c. [Broker Name] will conduct sales pursuant to Rule 144 or Rule 145 if appropriate, including applying Rule 144 volume limitations as if the sales under the Plan were the only sales subject to the volume limitations (unless I notify [Broker Name] that another number of shares sold should be used for purposes of calculating the volume limitations). d. I agree not to take any action or to cause any other person or entity to take any action that would require me to aggregate sales of Shares pursuant to Rule 144 without informing [Broker Name]; and not to take any action that would cause the sales of Shares under the Plan not to comply with Rule 144 or Rule 145 without informing [Broker Name]. 7. Representations, Warranties and Covenants In consideration of [Broker Name] accepting orders to sell securities under this Plan, I make the following representations, warranties and covenants: a. I understand that, in order to claim the benefits of Rule 10b5-l I must not on the date of this Plan be aware of any material nonpublic information about the Shares or the Issuer. b. I have consulted with legal counsel and other advisors in connection with my decision to enter into the Plan. I have not received or relied on any representations by [Broker Name] regarding the Plan's compliance with Rule 10b5-1. c. I own all Shares that are subject to the Plan free and clear of liens or encumbrances of any kind. d. While the Plan is in effect, except as provided in (i) the Plan and (ii) my elections with respect to purchases of Shares and Share units through bonus and regular payroll deductions under the Issuer s 401(k), stock purchase and similar plans, I will notify [Broker Name] in advance of any sales or purchases of, or derivative transactions on, any of the Issuer's securities. e. While the Plan is in effect, I will not disclose to any employee of [Broker Name] any material nonpublic information concerning the Shares or the Issuer. f. While the Plan is in effect, I will not attempt to exercise any influence over how, when or whether to effect sales of Shares. g. I understand that I am responsible for making or causing to make all filings required under Sections 13(d) and 16 of the Exchange Act, and Rule 144 under the Securities Act. For avoidance of doubt, [Broker Name] shall file each required Form 144 that may be required as a result of the sales under the Plan, pursuant to Section 6 of the Plan. h. Delivery requirements (i) With respect to securities other than employee stock options, prior to the date of execution of any sales specified under the Plan, I agree to have delivered into the custody of [Broker Name] certificates representing that number of Shares that may be sold pursuant to the Plan (or other appropriate evidence thereof), together with all transfer documents and other authorizations required for [Broker Name] to effect settlement of sales of such Shares on my behalf. (ii) I agree that [Broker Name]'s obligation to execute sales under the Plan is conditioned on the satisfaction of the foregoing delivery requirements. i. I agree to inform [Broker Name] as soon as possible of: (i) any subsequent restrictions that are, to my knowledge, imposed on me due to changes in the securities (or other) laws or of any contractual restrictions imposed on the Issuer that would prevent [Broker Name] or me from complying with the Plan, and (ii) the occurrence, to my knowledge, of any event as set forth in the Plan that would cause the Plan to be suspended or terminated under Section 8 or Section 9 of the Plan, respectively. 8.Suspension Sales pursuant to Section 1 above shall be suspended where: a. trading of the Shares on the [New York Stock Exchange] is suspended for any reason; b. there is insufficient demand for any or all of the Shares at or above the specified price (e.g., the specified price is met but all Shares could not be sold at or above the specified price); (Continued on page 50) ACC Docket 49 October 2008

10 c. [Broker Name] or the Issuer, in either of their sole discretion, determines that there is a legal, regulatory or contractual reason why it cannot effect a sale of Shares; d. [Broker Name] is notified in writing by the Issuer that a sale of Shares should not be effected due to legal, regulatory or contractual restrictions applicable to the Issuer or to me (including without limitation, Regulation M); e. [Broker Name] is notified in writing by the Issuer that: (i) in the case of Shares being sold pursuant to a registration statement filed under the Securities Act, the registration statement has terminated, been suspended, expired or is otherwise unavailable; or (ii) a public announcement of a public offering of securities by the Issuer has been made. As promptly as practicable after (i) (in the case of the occurrence of an Event described in Sections 8(d) or 8(e) above) [Broker Name] receives notice in writing from the Issuer that it may resume sales in accordance with of the Plan, or (ii) (in the case of the occurrence of an Event described in Sections 8(a), or 8(e) above) [Broker Name] determines, in its sole discretion, that it may resume sales in accordance with the Plan, [Broker Name] will resume sales in accordance with the Plan. Shares allocated under the Plan for sale during the period that sales under the Plan were suspended will be carried forward to be sold with the next amount of shares to be sold in accordance with Section 1 of the Plan. [Broker Name] is released from all liability in connection with any reasonable suspension of sales, including, but not limited to, liability for the expiration of options or loss of market value. 9. Termination The Plan shall terminate on the earliest to occur of: a. [Date] b. the completion of all sales contemplated in Section I of the Plan; c. my or [Broker Name]'s reasonable determination that: (i) the Plan does not comply with Rule 10b5-1 or other applicable securities laws; (ii) I have not complied with the Plan, Rule 10b5-l or other applicable securities laws; or (iii) I have made misstatements in my representations or warranties in Section 7, above; d. receipt by [Broker Name] of written notice from the Issuer or me of, or public announcement by the Issuer of: (i) the filing of a bankruptcy petition by the Issuer; (ii) the public announcement of a merger, recapitalization, acquisition, tender or exchange offer, or other business combination or reorganization resulting in the exchange or conversion of the Shares of the Issuer into shares of a company other than the Issuer; or (iii) the conversion of the Shares into rights to receive fixed amounts of cash or into debt securities and/or preferred stock (whether in whole or in part); e. receipt by [Broker Name] of written notice of my death; f. receipt by [Broker Name] of written notice of termination from me; g. receipt by [Broker Name] of written notice that I have filed a petition for bankruptcy or the adjustment of my debts, or a petition for bankruptcy has been filed against me and has not been dismissed within 30 calendar days of its filing; h. as to sales relating to option exercises, receipt by [Broker Name] of written notice from the Issuer that the options specified have expired or been terminated or forfeited; i. my severance or retirement from the Issuer. 10. Modification and Amendment The Plan may be modified or amended only upon: a. the written agreement of me and [Broker Name]; b. the receipt by [Broker Name] of a certificate signed by me to the effect that the representations. warranties and covenants contained in Section 7. above dated the date hereof, are true as of the date of such certificate; and 11. Counterparts The Plan may be signed in counterparts, each of which will be an original. This Plan may be executed by facsimile signature. 12. Entire Agreement The Plan, including the representations, warranties and covenants in Section 7. constitutes the entire agreement between [Broker Name] and me regarding the Plan and supersedes any prior agreements or understandings regarding the Plan. 13. Notices All notices given by the parties under the Plan will be as follows: (Continued on page 52) ACC Docket 50 October 2008

11 a. If to [Broker Name]: [Broker Name] [Address] If to me: [Name] [Address] 14. I authorize [Broker Name] to transmit transaction information via facsimile and/or regarding open market transactions under the Plan to: a. Name: Title: Organization: Fax: Tel: Reasonable efforts will be made to transmit transaction information for open market transactions under the Plan (purchase or sale) by the close of business on the day of the purchase or sale, but no later than the close of business on the first trading day following the purchase or sale. I acknowledge that [Broker Name] (1) has no obligation to confirm receipt of any or faxed information by the designated contact and (2) has no responsibility or liability for filing a Form 4 with the SEC or for compliance with Section 16 of the Exchange Act. If any of the above contact information changes, or I would like to terminate the authorization contained in this paragraph, I will promptly notify [Broker Name] in writing. I further authorize [Broker Name] to transmit transaction information to a third party service provider who will make the information available to my designated representative(s) listed above. 15. Confidentiality [Broker Name] will maintain the confidentiality of the Plan and will not disclose the existence or specific terms of the Plan to any person or entity, except; (i) to employees, affiliates and agents of [Broker Name] who have a legitimate business need to know such information, (ii) to any governmental agency having jurisdiction over [Broker Name] or any self-regulatory organization of which it is a member (iii) to any other person or entity to the extent such disclosure is required by law or by a subpoena issued by a court of competent jurisdiction, (iv) to specified employees of the Issuer or its outside counsel for purposes of making securities law filings. I, however, have no obligation to maintain the confidentiality of the Plan. 16. Other Agreements The Plan reflects the entire agreement between the parties hereto concerning the sale of Shares pursuant to Rule 10b5-1, and supersedes any previous or contemporaneous agreements or promises concerning such transactions, whether written or oral. The Plan shall not supersede any customer account between [Broker Name] and me, except that if the Plan directly conflicts with the terms of any such agreement, the terms and conditions of the Plan shall govern. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of any other agreement between [Broker Name] and me concerning sales of Shares pursuant to Rule 10b5-1, the terms and conditions of this Plan shall govern. 17. Additional Sales and Exercises [Broker Name] acknowledges that I may, from time to time, effect sales of Shares or convert or exercise securities convertible into or exercisable for Shares, other than pursuant to the Plan. 18. Governing Law This Plan will be governed by and construed in accordance with the laws of the State of New York. By: Name: [Name] Date: Acknowledged and Agreed this day of, 200 : [Broker Name] By: Name: Title: Start Date Annex A 10b5-1 Schedule [Name] End Date [Share/Option] Quantity Sale Price ACC Docket 52 October 2008