On January 27, 2006, the SEC issued proposed rules amending the disclosure requirements for executive and director compensation, related party transactions, director independence, and other corporate governance matters. The public comment period on the proposed rules ends on April 10, 2006. The SEC is not expected to issue final rules until the summer of 2006 at the earliest.

The following discussion highlights some of the major aspects of the proposed rules:

Compensation Discussion and Analysis

A new section would be added to a company’s proxy statement, titled Compensation Discussion and Analysis (“CD&A”). This section would replace the current Compensation Committee Report and stock performance graph requirements and would be analogous to the Management’s Discussion and Analysis section contained in Form 10-Ks and Form 10-Qs for financial reporting purposes. The CD&A section would be a narrative discussion regarding the compensation of the company’s Named Executive Officers (see the discussion below under the heading “Named Executive Officers” for changes in how the Named Executive Officers are determined under the proposed rules), including the objectives of the company’s compensation program, each element of compensation, and the role of each element of compensation and how the amount is determined. The CD&A section would be considered filed, rather than furnished as the Compensation Committee Report is currently, and therefore would be subject the disclosure and liability provisions of the securities laws.

Summary Compensation Table

The current Summary Compensation Table would be reorganized and new columns added. Additional narrative disclosure would also be required. A new Total Compensation column would be added as the first column in the table and would show the total compensation received by each Named Executive Officer during the year. The Total Compensation column would also represent the sum of the columns that follow it in the table, which would represent different types of compensation. The Salary and Bonus columns in the table would remain essentially the same as in the current table. A revised column would show the dollar value of all stock options and stock appreciation rights granted during the year (instead of the number of shares), and the value of stock awards such as restricted stock, restricted stock units, and phantom stock would be shown in a stock awards column. The values for these columns would be calculated at the grant date fair value pursuant to FAS 123(R) using the same valuation model and assumptions as used in the company’s financial statements, but without regard to vesting conditions. A new non-stock incentive plan compensation column would be added, which would report the dollar value of amounts earned during the year under incentive plans (plans under which the performance measure is not based on the price of the company’s stock or payment will not be made in stock). A new column for all other compensation would expand and combine the current “other annual compensation” and the “all other compensation” columns. The types of compensation that would be included in this column are:

• Perquisites. The current threshold for disclosure of perquisites and other personal benefits would be reduced from an aggregate value of $50,000 to $10,000 and each perquisite or other personal benefit would be identified by footnote. If a perquisite or personal benefit exceeded $25,000 or 10% of the total amount of perquisites and personal benefits, it must be quantified in the footnote.

• Pension Plan Accrual and Deferred Compensation Earnings. The aggregate increase in the actuarial value of all defined benefit pension plan benefits accrued during the year would be included in the All Other Compensation column, along with earnings on non-qualified deferred compensation. If either item exceeded $10,000, separate identification and quantification would be required in a footnote.

• Other Items. Severance payments, the dollar value of insurance premiums paid by the Company, and tax reimbursements and other “gross-ups” would be included in the All Other Compensation column. Amounts in excess of $10,000 would be required to be separately identified and quantified.

Supplemental Tables

Two supplemental tables would follow the Summary Compensation Table. The Grants of Performance-Based Awards Table would include details of incentive plan awards of non-stock and stock-based compensation that were performance based. The Grants of All Other Equity Awards Table would show equity–based compensation awards under which future value or payment is based on the price of the company’s stock and not performance criteria.

Other New Tables

The current tables related to stock options and SARs would be replaced by two new equity award tables, which would include non-option awards such as restricted stock and performance awards. The first table would show the outstanding equity awards held by the Named Executive Officers at the end of the year, the intrinsic value of in-the-money stock options and SARs, and the number of unvested shares of stock and restricted stock units and their market value. The second table would show the amounts realized by executive officers during the year from the exercise of stock options and the vesting of restricted stock and other equity awards, along with the grant date fair value of that portion of the award as previously reported in the summary compensation table.

A new table would replace the current pension plan table, showing the annual retirement benefits of Named Executive Officers under both tax-qualified and non-qualified defined benefit retirement plans. The table would show for each Named Executive Officer, the name of the plan in which the Named Executive Officer participates, the years of credited service, the plan’s normal retirement age and early retirement age and the estimated annual retirement benefit payable at normal retirement age and early retirement age.

A new table would also disclose information relating to non-qualified defined contribution retirement plans and other deferred compensation plans, showing contributions during the year by the Named Executive Officers and the company, earnings and withdrawals, and the aggregate balance credited to each Named Executive Officer at the end of the year.

Named Executive Officers

The Company’s principal executive officer and principal financial officer would be Named Executive Officers, along with the three other highest-paid executive officers based on total compensation as reported in the summary compensation table for the year. Currently, the determination of Named Executive Officers based on compensation only includes salary and bonus. Narrative disclosure of total compensation for the last year and a description of the job positions, but not names, would be required for up to three employees who were not executive officers during the year but whose compensation was higher than any of the Named Executive Officers.

Termination and Change in Control Payments

Narrative disclosure of each contract, plan, or arrangement providing for payment to a Named Executive Officer upon termination of employment, change in responsibilities, or a change in control of the company would be required.

Director Compensation

A new director compensation table would be required. The table, which would be similar to the Summary Compensation Table, would include a column total compensation, and columns for all director fees earned or paid in cash, stock awards, option awards, non-stock incentive plan compensation, and all other compensation. The table would show information about each director’s compensation for the prior year only, not the prior three years as in the Summary Compensation Table.

Related Party Disclosure

The threshold for interests in related party transactions that must be disclosed would be raised from $60,000 to $120,000 and the definition of related party would be expanded to include any person (other than an employee or tenant) who shares the household of a director, executive officer or significant shareholder. In addition, a description of the board’s policies and procedures for approving related party transactions would be required.

Director Independence

Disclosure would be required in the proxy statement of any transactions, relationships, or arrangements that the board considered under the company’s applicable independence definition in determining each director’s or nominee’s independence.

Compensation Committee Disclosure

Additional disclosure about the compensation committee and its members would be required. A narrative description of the compensation committee’s processes and procedures for determining executive and director compensation, including the scope of authority of the compensation committee, the power to delegate and a description of any delegation that has been made, the role of any executive officer in determining or recommending the compensation of any executive officer or director, and the role of any compensation consultant in connection with the compensation of executive officers and directors (including specifying who retained the compensation consultant, describing the instructions, information and assistance given to the compensation consultant and the names of any executive officers who were contacted by the consultant in the performance of its role).

© 2006 Newcomb, Sabin, Schwartz & Landsverk, LLP.

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