WEIL, GOTSHAL & MANGES LLP
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March 3, 2004

Mr. Alan L. Beller
Director, Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549

Dear Alan:

I am submitting herewith a proposal for discussion at the March 10th Roundtable. It would change the way in which directors are elected, giving shareholders a stronger voice in the election process. This discussion proposal is solely that of the signatories of the enclosed memo, and is not necessarily the view of our partners, nor of any clients of the firm. It was prepared to stimulate thought and perhaps consensus. We have not been retained by anyone for this purpose.

We, of course, are aware of the strongly held opposing views of significant portions of the business and investor communities regarding the SEC's proposed access rules and believe that in most cases these views are expressed in the best of faith. But they are so strongly held that we think finding some "in between" solution would be beneficial to help avoid confrontation and counterproductive resistance to the development of corporate governance practices. We believe it important, at this time of significant change in boardroom behavior, that we encourage only such changes as will not disrupt the good faith momentum for improvement which has already developed.

Our proposal is, as you will see, quite simple and would take the form of a listing requirement, generally to be complied with through adoption of a by-law amendment by listed companies. The listing requirement would, in effect, give meaning to "withhold" votes, so that, where there are no opposing nominees, each director to be elected must receive a majority vote of those voting. If one or more directors did not receive a majority vote, the board would have the duty of replacing those directors by any of a variety of means or negotiating another solution with shareholders and, if the board does not do so appropriately, would risk stockholder objection, possibly a proxy contest, or perhaps even de-listing.

This suggestion would make it possible for shareholder disfavor with a nominee, expressed as a withhold vote, to immediately affect the election of directors, if the nominee does not receive a majority vote. This has not been possible up to now (absent a proxy contest), as a plurality vote has been sufficient to cause election notwithstanding a lack of majority support. It is a serious change which, in our opinion, would cause boards to be more careful, thoughtful and attuned to shareholders in selecting directors for nomination.

Obviously companies and boards would need time to adjust.

This, together with the new requirements and expectations placed on boards and the nominating process through the Sarbanes-Oxley Act, new SEC rules and the new listing requirements, should be given a chance to operate, before taking the dramatic and complex step of providing "access" as proposed by the SEC, which is causing such a furor.

I believe that, were it possible to interview a fair sampling of board members, you would find that most have spent the last year studying the new requirements and expectations and adapting their board processes to them, often going beyond the black letter of the requirements. My personal experience has been that this has been a year of intense introspection and adjustment by board members. Indeed, the 2003-2004 Public Company Survey, published by the National Association of Corporate Directors, demonstrates that boards understand quite well what is expected of them and what they may not be doing as well as they should, and that boards are resolved to fix their failings.

Our proposal is in keeping with the new reforms and is in line with our consistent view that shareholders, directors and managers all have an important role to play. Our proposal strengthens the role of shareholders in electing directors to monitor managers on their behalf, and places further and greater responsibilities on the board to be responsive to shareholder concerns.

Certainly, our proposal is not written in stone, and we hope it prompts a discussion and ultimately something around which consensus can develop.

March 3, 2004

Discussion Draft

Both the New York Stock Exchange and the Nasdaq Stock Market (and, perhaps, other exchanges as appropriate) would adopt a new corporate governance listing standard that would require in order for a director to qualify to take office in connection with the election of directors by the listed company's public shareholders, the following:

In any uncontested election of directors of a listed company that is required to have a majority of independent directors under the existing corporate governance listing standards, no nominee of the board of directors shall be considered elected who has not received votes in favor of his or her election representing at least a majority of the votes of all the shares voted in respect of his or her election (and assuming satisfaction of any applicable quorum requirement). Shares as to which proxy instructions were provided to the effect that their votes be withheld from a nominee of the board of directors would be considered shares voted for this purpose.

If after giving effect to the foregoing requirement a majority of the members of the company's board of directors are individuals who were nominated for election by the board of directors and not elected in such election, the listed company would be required within 120 days after such vote (or such longer period as permitted by the listing body) to convene a meeting of shareholders for the election of directors (or solicit consents for an election of directors in lieu of a meeting).

The same requirement for election of directors would apply (a majority of the votes cast in favor would be required for a nominee of the board of directors, if the election is uncontested) in any such additional election.

Explanation

This proposal grants all shareholders (regardless of size) the opportunity to evidence their dissatisfaction with an incumbent board by casting a "withhold" vote that, effectively, will be a vote against one or more nominees. It is similar to a system long in effect in the United Kingdom which has not been disruptive of corporate governance.

Under this proposal, a director nominee could be elected only after receiving the affirmative vote of a majority of the votes cast. Votes that are "withheld" would effectively be treated as votes against a nominee, in contrast to the currently prevailing plurality voting system, under which the nominee who obtains the most affirmative votes is elected, regardless of the number of votes "withheld."

A nominee who is already a director, but who is rejected as a result of this rule, would remain a director until s/he resigned or, if s/he does not resign, until his/her successor is elected. A nominee who is not already a director and who is rejected would not become a director.

If, as a result of the election, one or more nominees are rejected, but a majority of the board consists of directors who have not been rejected, the board could proceed to address the situation however it deems appropriate. Under this circumstance, there would be no additional regulatory requirements imposed. We would expect that a responsible board would seek to negotiate a solution which the shareholders would support. It might seek the resignation of some or all rejected nominees who are directors and fill the resulting vacancies either by holding an additional election or by appointing new directors, all as the company's organizational documents may provide. While a board could choose to ignore the shareholders' rejection of its slate of nominees, doing so could leave a board open to severe public criticism, and a possible proxy contest.

If, as a result of the election, a majority of the board consists of directors who were rejected as a result of this rule, the company would have 120 days to hold another shareholders meeting to elect directors. A responsible board would presumably pursue a dialogue with relevant shareholders regarding the nominees it would present in the subsequent election.

• In the case of a contested election of directors (one where there are more nominees for whom proxies are distributed in accordance with the SEC's proxy rules than there are directors to be elected), the customary plurality voting requirement would apply for the election of directors (except as otherwise provided by applicable law or the company's charter or bylaws).
   
• If a nominee of the board of directors is not elected by reason of the foregoing requirement, the incumbent director (whether or not the nominee) would continue in office until the election of his or her successor or his or her earlier death, incapacity, resignation or removal, except as may be otherwise provided by applicable law or the listed company's charter or bylaws.
  
  
      An alternative listing requirement would provide, in addition, that, after a grace period (e.g., 30 days), if such individual remained on the board, the listed company would be subject to de-listing.
   
• If after giving effect to this election requirement, less than a majority of the members of the company's board of directors are individuals who were nominated for election by the board of directors and not elected at such election, it would be the responsibility of the incumbent board to determine how to proceed. Subject to any contrary provision of law or the company's charter and bylaws, the board could decide to convene another shareholders meeting (or solicit consent in lieu of a meeting) for the election by the shareholders of individuals it nominates or could, if a vacancy resulted, fill the vacancy with an individual it selected. Shareholders in such circumstances would have whatever rights to call a meeting for the election of directors as are provided to them by applicable law and the corporation's charter and bylaws.
   
• Brokers would be permitted to vote shares on behalf of their clients without client direction in accordance with existing NYSE Rule 452 in an election to which the foregoing election requirement would apply, as the requirement would not apply to a contested election (i.e., a campaign to withhold votes where no nominees other the board's nominees would not be considered a "contest" for this purpose).
   
• The requirements of this listing standard would not apply to any election of directors by the holders of a class of common stock that is not listed or by a class of preferred stock.
   
• This requirement would be proposed by the NYSE and NASDAQ as an additional standard for listing and be subject to approval by the SEC pursuant to Section 19(b) of the Exchange Act.
   
• Effective Date; Transition Provision: Listed companies would be expected to adopt appropriate provisions (including, if necessary, an amendment to their charter or bylaws) to implement the foregoing director election requirement by the time they distribute their proxy statement for their 2005 annual meeting of shareholders or, if adoption of such provisions requires a vote of shareholders, within five business days after their 2005 annual meeting of shareholders. If under applicable law a listed company is not permitted to adopt such provisions or if such provisions require a vote of shareholders and are presented to a vote of but not approved by the shareholders, the listed company may be excused by the listing body from complying with the requirement but must explain annually in its proxy statement or annual report the differing provisions that apply to the election of its directors.