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					Outlook 2009
   Legal and Business Insights
 for Today’s Challenging Times
                                                             March 2009



    Dear Clients and Friends:

    In these times of unprecedented economic uncertainty, a variety of significant business and legal issues present
    near and long-term challenges. The credit logjam has forced capital markets to the brink of collapse, changing
    governmental priorities impact every facet of business, increasing unemployment impacts the demand for
    products, and tightened lending standards make foreclosure a new reality. To say that there is uncertainty in the
    business environment is an understatement of huge dimension.

    Restoring consumer confidence tops the list of priorities for both borrowers and lenders, but achieving sustained
    confidence remains a challenge. Each week brings new headlines of political solutions to financial problems, such
    as the government’s March 2009 plan to increase the flow of credit into the system by partnering with private
    investors to remove toxic assets off the books of financial institutions. These major moves, which usually provide
    temporary boosts in confidence, are almost always tempered by the sobering realities of dealing with the staggering
    task ahead.

    All of this uncertainty is fueled by newly developing legal theories. Many of us are seeing old issues resurface that
    we haven’t had to deal with for a few years.

    As we review new legislative and regulatory developments, consult with clients and colleagues and analyze emerging
    trends and opportunities, we receive various analyses, projections, legal memoranda and the thoughts and ideas of
    a variety of sources whose collective wisdom informs the information we decided to pass along to you. Some of this
    reflects commonly held views and conventional wisdom and some of it represents the best guesses of those whom
    we consider experts. To the extent these materials include predictions of future events, we cannot be certain those
    events will occur, or if they do, that they will occur in precisely the way they are predicted. Nonetheless, we hope
    this information will be useful and interesting to you.

    We’ve attempted to highlight some current legal issues. On the bright side, there are significant opportunities out
    there. Careful planning will enable you to create a blueprint for appropriate responses to the current situation.
    While not all of the material we’ve addressed will interest you, we hope the discussion will provide you with timely
    and pertinent information.

    More than being interesting and informative, we hope these materials will cause you to think about how the
    economic crisis affects your business or personal affairs. We are happy to discuss these and other relevant subjects
    with you. If you have particular interest in any of these topics, please call your usual McAfee & Taft contact.

    Best wishes for peace and economic recovery in 2009 and beyond.




Oklahoma City                                     Tulsa
10th FLOOR • twO LeadeRship squaRe                500 OneOk pLaZa
211 nORth RObinsOn • OkLahOma city, Ok 73102      100 west 5th stReet • tuLsa, Ok 74103
(405) 235-9621 • Fax (405) 235-0439               (918) 587-0000 • Fax (918) 599-9317              www.mcafeetaft.com
Bank and Corporate Finance
   The current bank and corporate finance landscape is strewn with challenges arising from the uncertainty
   permeating the credit markets. Although Oklahoma has been somewhat insulated from the national
   liquidity crisis, we are now experiencing a significant tightening of credit and an overall increase in
   lending standards and borrowing requirements. Existing loans with terms that were fairly standard a
   year ago are now only renewed or extended with major modifications to the existing financial terms and
   covenants. Typical modifications include additional collateral, shorter terms, “floors” on floating interest
   rates, limiting availability of funds, and more restrictive financial covenants.

   Due to this uncertainty, we are advising clients to be proactive in forecasting their financial needs and
   begin the loan application, extension or renewal process as early as possible. Borrowers can expect the
   entire process to take longer and to expend greater resources and time maintaining current banking and
   credit relationships. Many borrowers are drawing down on revolving lines of credit to assure availability
   of funds and attempting to renegotiate financial covenants to reflect the new economic realities of their
   business or industry. In some instances, borrowers have purchased or paid-off loans at a discount. This
   strategy has gained merit with the passage of the American Recovery and Reinvestment Act of 2009
   (the “Act”). For tax purposes, the Act modifies the treatment of cancellation of debt income, deferring
   recognition of income until 2014 and then allowing it to be spread over five years in equal installments.

   Traditional corporate finance is in turmoil with the demise of major investment banks and the lack of
   confidence in the commercial debt and equity markets. We expect this to continue through 2009 and into
   2010. Most companies are focusing on deleveraging their balance sheets utilizing a variety of strategies
   including debt repurchases, new investment and traditional bank financing.




                OKLaHOMa CITY • TULSa                                                  Outlook 2009          • page 3
Chapter 11: Nothing “Ordinary”
about Difficulties or Opportunities
   Although the Oklahoma and regional economy have not experienced the full brunt of the economic
   crisis, the downturn in the national and international economy is extraordinary. The credit freeze has
   even affected the bankruptcy process itself, normally the last option for distressed companies. In the last
   12 months, companies looking to Chapter 11 to restructure their financial affairs have been unable to
   find either buyers or sufficient liquidity sources to fund a reorganization and instead have been forced
   into Chapter 7 or a liquidating Chapter 11. These companies have also found that their current lenders
   may not have sufficient capital to participate as debtor-in-possession lenders. We believe that this pattern
   is likely to continue in this region. However, we also see these circumstances creating very significant
   opportunities for investors who have liquidity and who are willing to take risks. As with the early 1980’s,
   investors who can seize these opportunities may make once-in-a-lifetime deals.

   The turmoil in bankruptcy affects not only distressed companies and their lenders, but also the customers
   and suppliers of companies who might be seeking to reorganize. Although there have been changes to
   the bankruptcy code which were designed to improve the situation of suppliers, in practice those changes
   have not often proven to be of significant help. In addition, the trend of filing in jurisdictions which are
   perceived to be favorable to debtors and secured lenders has continued or even accelerated. The ability of
   suppliers to participate in these courts is hampered by logistical concerns as well.

   In addition to lack of liquidity and dearth of buyers, the difficulties in successfully emerging from Chapter
   11 include:

     •	 Risks	associated	with	changes	in	lending	relationships	brought	on	by	derivatives	or	other	complex	
        financial instruments which were designed to monetize the risk of default. These changes can make it
        difficult for a company to identify, much less negotiate with, its key constituents to effectuate efficient
        restructurings.

     •	 Equitable	Subordination	Post-Enron.	A	2007	decision	from	the	United	States	District	Court	for	the	
        Southern District of New York affected the ability of a transferee of a claim to predict its rights in
        bankruptcy by holding that equitable subordination and disallowance of a claim could be based solely
        on the conduct of the transferor if the claims were transferred by way of an assignment, but not by
        sale.

     •	 While	the	current	market	environment	makes	it	difficult	(if	not	impossible)	for	companies	to	raise	
        debt and equity capital, Chapter 11 can be a means whereby a company can fill its capital need in
        unconventional ways. For example, secured lenders can be forced to accept new debt securities with
        new maturities, interest rates and financial covenants so long as the plan provides the “indubitable
        equivalent” of the lenders’ claims. In a market where prospects for refinancing are virtually nonexistent,
        this is a powerful tool. In addition, unsecured creditors can be offered equity in place of the existing
        debt.




                OKLaHOMa CITY • TULSa                                                     Outlook 2009          • page 4
Fiduciary Duties
 •	 Officers	 and	 directors	 are	 understandably	 concerned	 about	 how	 to	 perform	 their	 fiduciary	 duties	
    in distressed contexts. While the rules for distressed companies are substantially the same, the
    likelihood that litigation will be filed is far greater as creditors will be looking for any deep pockets
    once bankruptcy has been filed. Insurance coverage can be critical, both examination of existing
    policies for the types of coverage as well as maintenance of coverage as the company’s financial
    condition deteriorates. Recent case law from the Delaware Supreme Court suggests that coverage of
    exculpatory provisions of the typical Delaware and Oklahoma bylaws will be an area of significant
    litigation.

 •	 Recent	decisions	have	rejected	a	common	threat	made	against	directors	and	senior	management	of	
    distressed companies — liability for so-called “deepening insolvency.” However, given the amount of
    litigation which we expect to be filed, creditors are likely to continue to try to advance this theory.


Intercreditor Issues
 •	 We	 will	 see	 many	 more	 bankruptcy	 cases	 with	 second-lien	 and	 multi-lien	 financings.	 Disputes	
    between creditors at different levels will turn on specific contract language of intercreditor and
    subordination agreements and the collateral of the company in question. It will be interesting to see
    how these agreements are actually tested in court after many years of largely hypothetical debate on
    their provisions.


Trustees and Examiners
 •	 The	 possibility	 of	 liquidation	 instead	 of	 reorganization	 increases	 the	 likelihood	 of	 appointment	
    of more trustees and examiners in 2009. The media climate in which some party must be found
    on which to blame any company failure will contribute to this trend. Given some of the more
    questionable financial transactions in which companies have engaged (such as the recent SemGroup
    case), there may be some basis for more thorough independent investigations.




            OKLaHOMa CITY • TULSa                                                     Outlook 2009           • page 5
Financial Industry Changes and Reform
   At each financial crisis, the common theme from regulators is that, if only they are given more authority,
   they	can	prevent	such	occurrences	in	the	future.	Past	efforts	during	the	good	times	to	reform	the	banking	
   and financial regulatory regime have encountered strong resistance from many different stakeholders.
   The market meltdown during 2008, Democratic control of the executive and congressional branches,
   and widespread calls for financial regulatory reform open the door for the implementation of potentially
   far-reaching measures that could have significant implications for the domestic and global economies
   beyond the financial sector. The Obama administration and Congress are obviously challenged to find
   the right combination of responses for implementing the terms under which additional Troubled Asset
   Relief	Program	(TARP)	funding	authorized	by	the	Emergency	Economic	Stabilization	Act	of	2008	(EESA)	
   will be released. Deteriorating economic conditions and continuing losses and volatility in financial assets
   will drive the need for financial institutions to raise additional capital and will result in more institution
   failures. Friday afternoon bank closings have become commonplace in the first quarter of 2009.


   Industry Reforms
     •	 Advocates	for	reform	contend	that	deregulation	and	lax	regulatory	oversight	helped	contribute	to	the	
        current	financial	crisis.	President	Obama	and	key	congressional	leaders	have	expressed	support	for	
        revamping the regulation of financial services. Given the number of stakeholders involved, we expect
        a vigorous debate over the form and content of any regulatory reform package, but it is fair to assume
        that we will see substantial new regulation of the banking and financial markets.

     •	 Low	interest	rates	and	contracting	loan	volumes	are	reducing	gross	revenue	at	a	time	when	financial	
        institutions are seeing losses and other uncontrollable expenses increase. Downgrading of asset
        value is occurring through deterioration of the value of the asset itself, from changing perceptions
        of asset value on the part of regulators and from the application of mark to market accounting. To
        adjust for the closing or supported acquisition of failing institutions, the FDIC has raised insurance
        rates to replenish the insurance fund and has increased deposit insurance, and consequently the
        total premium payable, to maintain institution liquidity. This environment is causing an increase in
        applications for new charters because newly formed institutions do not suffer the burden of troubled
        assets and can be more selective in credit criteria.


   Continued Government Intervention in the Housing Markets
     •	 Legislation	has	been	introduced	in	both	the	House	and	the	Senate	that	will	permit	bankruptcy	judges	
        to modify home mortgages in much the same way that other loans may be modified or, in some
        cases, cancelled. No doubt significant litigation will result shortly after a final bill is signed into law.
        Further, efforts are underway to assist, or in some respects to require, lenders to renegotiate loans
        with	 troubled	 borrowers.	 Lastly,	 opportunities	 are	 starting	 to	 emerge	 for	 lenders	 to	 sell	 troubled	
        housing debt to, or with the guaranty of, federal governmental agencies.




                 OKLaHOMa CITY • TULSa                                                        Outlook 2009           • page 6
Mergers & Acquisitions on the Rise
 •	 The	mergers	and	acquisitions	market	in	financial	institutions	likely	will	continue	to	be	dominated	by	
    acquisitions of, and investments in, troubled or failed institutions or their assets, as asset quality and
    valuation issues persist and market participants await further developments from Congress and the
    new administration.

 •	 Acquisitions	of	failed	institutions	generally	are	completed	quickly	and	with	substantial	deal	certainty,	
    especially when the transaction involves a purchase of a banking business from receivership.
    Depending on the size and character of the asset portfolio being acquired, the FDIC may provide
    loss-sharing arrangements for the benefit of the acquirer. Government assistance, guarantees or loss
    sharing is also available for some investments and asset purchases.


The Upcoming Credit Card Credit Crisis
 •	 A	dramatic	increase	in	credit	card	delinquencies	will	occur	just	as	federal	bank	regulatory	agencies’	
    new regulations limit the ability to reprice credit based on risk. As a result, federal bank regulators
    and state attorneys general will focus examination and investigative efforts on credit card marketing
    and disclosures.


Increased Criminal Investigations and Prosecutions
 •	 The	 Department	 of	 Justice	 will	 focus	 criminal	 investigations	 on	 failures	 of	 major	 hedge	 funds,	
    mortgage finance com¬panies, investment banks and commercial banks, and, in particular, will
    prosecute individuals deemed responsible for criminal conduct that led to the failures.




            OKLaHOMa CITY • TULSa                                                     Outlook 2009           • page 7
Merger & Acquisition Activity
   The historically high levels of mergers and acquisitions activity of the early and mid-2000’s took a
   dramatic plunge in 2008. Accordingly, with the deepening economic downturn and credit crisis, we
   expect this negative trend to continue in 2009.

   However, we anticipate that industry or strategic players will continue to seek merger and acquisition
   candidates within their own or related industries. Buyers will seek new combinations to enable them
   to survive the current economic crisis and better position their company to take advantage of a future
   turnaround in their industry. This type of consolidation is already occurring in the oil and gas industry,
   particularly with service and drilling companies. We expect consolidations to extend to the independent
   producers if there is not a significant improvement in oil and gas prices. We also anticipate acceleration
   of mergers and acquisitions in the financial institutions industry. This consolidation is being be driven
   by shrinking margins and higher operating costs for small institutions, as well as acquisitions of troubled
   institutions or their assets.

   The current economic crisis will also provide opportunities for well capitalized buyers. New equity
   investments will be made in distressed companies or to acquire their assets under favorable terms for the
   buyer. The investment in distressed companies will increase as historically profitable and well managed
   companies are forced to seek new equity capital or sell assets to address immediate financial and liquidity
   issues.




                OKLaHOMa CITY • TULSa                                                 Outlook 2009          • page 8
Antitrust: The New Administration
   With	 every	 change	 in	 Presidential	 administrations	 comes	 a	 fresh	 look	 at	 antitrust	 enforcement	 and	
   specifically	merger	review.	This	year	is	no	exception.	President	Obama	is	in	the	process	of	putting	together	
   new	senior	antitrust	leadership	at	the	Department	of	Justice.	In	recent	years,	the	Department	of	Justice	
   Antitrust Division has been criticized for lack of merger enforcement. The Federal Trade Commission
   has been a little more vigorous in its enforcement both with regard to anti-competitive conduct as well
   as mergers and acquisitions.

   President	 Obama	 has	 nominated	 Christine	 Varney,	 a	 former	 Federal	 Trade	 Commission	 member,	 to	
   be	the	new	antitrust	chief	at	the	Department	of	Justice.	Varney	has	a	reputation	for	favoring	aggressive	
   enforcement of the antitrust laws. With regard to the FTC, it appears that there will be less change due
   to the fact that the four commissioners presently serving do not change with the new administration but
   there	is	one	spot	left	open	for	President	Obama	to	fill	an	existing	vacancy.	Also,	it	appears	likely	that	a	new	
   chairman will be designated and of course there will be significant change in senior managers to reflect
   the	 fact	 that	 President	 Obama	 has	 stated	 that	 he	 favors	 a	 return	 to	 vigorous	 enforcement	 of	 antitrust	
   policies.

   With these developments, it would appear prudent for clients to be vigilant in their conduct of matters
   involving competition and competitors as well as scrutiny of any proposed mergers and acquisitions.




                 OKLaHOMa CITY • TULSa                                                        Outlook 2009            • page 9
Labor and Employment:
Mounting Pressures in the Workplace
   Besieged by mounting legislative, regulatory and economic pressures, employers are facing some of their
   toughest	challenges	and	decisions	yet.	Layoffs,	furloughs,	salary	reductions	and	company	reorganizations	
   are commonplace – the unfortunate consequence of a declining economy – and employee protections
   are on the rise. The result: increased responsibilities for employers, and an increased propensity to file
   lawsuits by employees.


   New Leadership Signals More Changes for Employers
     •	 The	confirmation	of	Hilda	Solis	as	the	president’s	new	Secretary	of	Labor	—	a	selection	which	was	
        strongly	supported	by	Big	Labor	—	signals	decidedly	more	protections	and	rights	for	employees	and,	
        conversely, more aggressive regulations for management and employers.

     •	 Employers	should	be	prepared	for	a	shift	in	direction	and	policies	at	the	National	Labor	Relations	
        Board	with	the	recent	appointment	of	Wilma	Liebman	as	its	new	chair.	Liebman	is	widely	considered	
        strongly	pro-union	and	has	criticized	recent	NLRB	decisions	that	promote	a	worker’s	ability	to	reject	
        unionization.


   Increased Employee Protections Mean Increased Employer Responsibilities
     •	 The	broader	definition	of	“disability”	under	the	ADA	Amendments	Act	of	2008	will	most	assuredly	
        mean more employees and job applicants will be eligible for protection under the Americans with
        Disabilities Act. As a result, employers will be expected to make more workplace accommodations or
        face the possibility of increased litigation.

     •	 New	Department	of	Labor	regulations	related	to	the	Family	&	Medical	Leave	Act	impose	new,	and	
        in some cases more stringent, requirements on covered employees. Employers should expected
        increased requests for leave.

     •	 In	recently	ruling	that	employees	who	participate	in	company	investigations	into	another	worker’s	
        alleged	 claim	 of	 discrimination	 constitutes	 a	 legally	 protected	 activity	 under	 Title	 VII,	 the	 U.S.	
        Supreme Court now makes it easier for employees to file retaliation lawsuits. Employers need to
        approach company investigations with even greater vigilance.


   Greater Scrutiny of Employee Terminations
     •	 Since	December	2008,	the	Oklahoma	Supreme	Court	has	handed	down	two	major	decisions	which	
        will make it easier for employees to file wrongful discharge lawsuits against Oklahoma employers.
        Furthermore, with employees now able to file “public policy” tort claims in Oklahoma state court,
        employers now face unlimited financial exposure in more hostile courtrooms.




                 OKLaHOMa CITY • TULSa                                                      Outlook 2009           • page 10
 •	 Expect	all	termination	decisions	to	be	closely	scrutinized.	Involuntary	terminations	brought	on	by	a	
    troubled economy, such as large layoffs, are especially likely to lead to increased discrimination and
    ERISA lawsuits.


Labor Union Organizing, Collective Bargaining, and Union Relations
 •	 Introduced	in	both	houses	of	Congress	in	mid-March,	the	Employee	Free	Choice	Act	is	regarded	as	
    organized	labor’s	top	legislative	priority	for	2009.	If	passed,	President	Obama	has	pledged	to	sign	the	
    bill into law, paving the way for increased unionization of businesses without employee secret ballots,
    government-imposed “fast track” union contracts, and punitive damages for companies, but not
    unions.

 •	 Employers	with	collective	bargaining	agreements	expiring	in	2009	will	push	for	concessions	during	
    negotiations, to include consideration of re-openers when the economic situation becomes clearer,
    or	continues	to	deteriorate.	Likewise,	companies	that	recently	completed	negotiations	may	seek	mid-
    term modifications to those agreements.




            OKLaHOMa CITY • TULSa                                                 Outlook 2009          • page 11
Employee Benefits
   The downturn in the economy has forced many employers to cut expenses at every corner, including
   laying off employees, reducing employee schedules, and altering compensation and benefits for both
   executives and employees. If that wasn’t enough, the backlash over the AIG debacle has caused Congress
   to carefully scrutinize executive bonuses. As a result, employers need to be aware of the ramifications
   these decisions have on employee benefit plans and their fiduciary obligations.


   The Impact of Layoffs and Other Cost-Cutting Measures on Benefit Plans
     •	 When	 implementing	 a	 reduction	 in	 force	 or	 reorganization	 –	 including	 layoffs,	 reduced	 hours,	
        and shorter workweeks – employers need to consider the impact such decisions will have on their
        retirement plans, medical plans and cafeteria plans. Issues to be considered include the potential
        partial termination of qualified retirement plans, plan eligibility considerations, the potential to lose a
        medical policy due to insufficient covered lives, the ability of employees to change elections to health
        flexible spending accounts, and COBRA considerations.

     •	 Included	in	the	American	Recovery	and	Reinvestment	Act	of	2009	(ARRA)	which	President	Obama	
        signed into law on February 17, 2009, was a provision for a nine-month subsidy of COBRA premiums
        for employees who are involuntarily terminated. The law also imposes additional administrative and
        notice requirements on employers that require immediate attention.

     •	 As	an	alternative	to	layoffs,	some	employers	may	seek	to	cut	costs	by	reducing	the	benefits	offered	
        to existing employees. These tactics could take the form of reducing or suspending employer
        contributions to qualified retirement plans or modifying medical plan coverage.

     •	 To	 the	 extent	 an	 employer	 provides	 new	 benefits	 to	 laid-off	 or	 terminated	 employees,	 such	 as	
        severance pay, the regulatory obligations associated with such benefits should be considered.


   Increased Fiduciary Risks
     •	 Given	the	impact	the	declining	market	has	had	on	individual	and	family	wealth,	retirement	plans,	
        executive compensation plans and other employee benefit programs have become subject to
        heightened scrutiny by plan participants, governmental agencies and other affected parties. As such,
        plan fiduciaries should carefully and periodically consider their obligations to review, evaluate and
        monitor their plans, including their investments, investment advisors and plan expenses.

     •	 In	 these	 uncertain	 times,	 it’s	 more	 important	 than	 ever	 that	 employers	 review	 their	 directors’	 and	
        officers’, fiduciary, and other insurance policies to ensure all plan fiduciaries have the necessary
        coverage.

     •	 Medical	 plan	 sponsors	 have	 a	 fiduciary	 obligation	 to	 monitor	 the	 expenses	 of	 administering	 their	
        health plans. In that regard, employers should consider benchmarking health/welfare plan expenses,
        understand the internal underwriting factors of how health plans are underwritten to help hold




                 OKLaHOMa CITY • TULSa                                                       Outlook 2009           • page 12
  market underwriters accountable, and support their buying decisions with adequate due diligence
  documentation.

•	 Providing	 medical	 coverage	 to	 ineligible	 dependents	 unnecessarily	 contributes	 to	 rising	 medical	
   costs.	Plan	sponsors	have	both	the	opportunity	and	responsibility	to	verify	dependent	eligibility	as	a	
   way to further reduce medical plan expenses.

•	 The	 decline	 of	 the	 investment	 market	 has	 battered	 many	 pension	 plans.	 Employers	 who	 provide	
   defined benefit plans need to carefully monitor their plans to ensure they are adequately funded so as
   to fulfill their fiduciary obligations to their retired workers.




           OKLaHOMa CITY • TULSa                                                   Outlook 2009          • page 13
Tax Developments:
Importance of Careful Tax Planning
   In today’s changing economic environment, it has become increasingly important to monitor the constant
   legislative and regulatory changes on the tax front. Numerous tax proposals have been introduced in
   Congress, ranging from changes in individual tax rates, taxation of service providers in partnerships, and
   changes to cancellation of indebtedness income recognition requirements, among others. These various
   proposals are likely to be revisited, and possibly enacted in some form over the course of the next few
   years. The Treasury Department will continue to work in tandem with the IRS to formulate responses
   to the current credit crisis by releasing guidance on many key issues relating to liquidity concerns, the
   use of losses in acquired banks and other businesses, and the government’s investment in key business
   sectors. The current environment requires careful planning to preserve the benefits of net operating losses
   and other valuable tax attributes and to avoid unintended adverse tax consequences arising from debt
   restructurings and modifications.


   Debt Restructurings
     •	 Debt	 restructurings,	 exchanges,	 and	 acquisitions	 of	 indebtedness	 at	 a	 discount	 may	 give	 rise	 to	 a	
        number of tax issues and could require an issuer to recognize cancellation of indebtedness income
        if the issuer is unable to use certain statutory exceptions (such as the bankruptcy or insolvency
        exceptions).

     •	 Even	 relatively	 minor	 modifications	 to	 credit	 or	 other	 loan	 agreements	 such	 as	 changes	 in	 yield,	
        timing of payments, substitution of a new obligor, or altering collateral or guarantees securing a note
        may result in unexpected gain or loss to a holder, if not properly structured.

     •	 Debt-for-equity	 exchanges	 and	 certain	 other	 restructurings	 may	 result	 in	 deferral	 of	 gain	 or	 loss	
        recognition by a holder in certain circumstances.

     •	 The	 tax	 rules	 regarding	 distressed	 debt	 provide	 planning	 opportunities	 and	 can	 often	 be	 used	 to	
        maximize tax benefits to both holders and issuers if considered prior to structuring transactions.
        For example, the recently enacted Recovery and Reinvestment Act provides that a debtor may defer
        recognition of cancellation of indebtedness income incurred in 2009 or 2010 in connection with
        business debt for up to 5 years, with the resulting cancellation of indebtedness income included in 5
        subsequent equal annual installments beginning in 2014.


   Use of Net Operating Losses and Other Tax Attributes
     •	 Corporations	with	net	operating	losses	or	other	tax	attributes	(including	unrealized	losses	inherent	in	
        their assets) must consider the impact of shareholder purchases and sales of the corporation’s stock
        when analyzing its continued ability to use such tax attributes. Corporations may want to consider
        restricting purchases and sales of stock by significant shareholders in order to preserve valuable tax
        attributes.




                 OKLaHOMa CITY • TULSa                                                      Outlook 2009           • page 14
 •	 Corporations	should	consider	the	impact	of	new	consolidated	return	regulations	when	contemplating	
    the disposition or acquisition a subsidiary. Without appropriate tax planning, the acquiring
    corporation may discover the newly acquired subsidiary has lost key tax attributes that could have
    been retained by the acquiring corporation or used by the subsidiary.

 •	 Congress	 and	 the	 IRS	 are	 continually	 tweaking	 and	 modifying	 existing	 law	 to	 navigate	 its	 way	
    through these tough economic times. The Recovery and Reinvestment Act included a provision
    allowing	corporations	to	carry	back	NOLs	for	five	years	instead	of	two	years,	which	could	allow	some	
    corporations to request and obtain refunds of prior year taxes. Another example of how rapidly the
    tax laws are changing is Notice 2008-83, which was published by the IRS in October 2008 to permit
    certain built-in losses of target banks to be used by an acquirer without limitation but was statutorily
    repealed by the Recovery and Reinvestment Act. After February 17, 2009, Notice 2008-83 no longer
    applies	to	ownership	changes	after	January	16,	2009	unless	made	pursuant	to	certain	obligations	that	
    existed on that date.


Taxation of Carried Interests
 •	 A	 number	 of	 legislative	 proposals	 have	 been	 introduced	 to	 treat	 income	 from	 certain	 partnership	
    interests granted to service providers, often referred to as “carried interests,” as compensation income
    taxed at ordinary marginal rates rather than as long-term capital gain, which is currently taxed at a
    favorable 15% federal rate. These proposals could affect both issuing entities and the recipient service
    providers.




             OKLaHOMa CITY • TULSa                                                    Outlook 2009          • page 15
Real Estate
   Real estate projects are stalling because of difficulties in raising equity, obtaining new debt financing,
   and refinancing existing debt. Increasing business failures are raising vacancy rates, which results in
   reduced	project	operating	cash	flow.	Legislative	and	regulatory	responses	to	the	downturn,	including	the	
   Emergency Economic Stabilization Act of 2008 (EESA), have further complicated the landscape.

   Compared to prior downturns, workouts of distressed real estate projects in the current environment are
   more complex, in part because of financing structures that have become increasingly prevalent in recent
   years.

     •	 Parties	to	repurchase	agreements	that	are	at	risk	of	default	or	in	default	face	the	prospect	of	immediate	
        loss	 of	 their	 collateral	 without	 the	 safeguards	 common	 to	 a	 UCC	 foreclosure	 process	 that	 are	
        applicable to financings structured as secured credit facilities.

     •	 In	complex	debt	structures,	parties	whose	interests	were	not	originally	expected	to	be	in	conflict	may	
        find themselves in this situation as a result of abrupt, steep declines in asset value that wipe out junior
        positions and shifting control of the foreclosure and workout process.

   The implementation of EESA is materially different from what was contemplated originally, and the
   ultimate effects on distressed real estate assets remain uncertain.

     •	 The	purchase	of	troubled	assets	contemplated	to	take	place	under	the	Troubled	Asset	Relief	Program	
        (TARP)	 authorized	 by	 EESA	 has	 created	 tremendous	 uncertainty	 regarding	 the	 pricing	 of	 debt	
        instruments, causing wild fluctuations.

     •	 Similarly,	the	guaranty	program	mandated	by	EESA,	pursuant	to	which	the	treasury	would	guarantee	
        payment on certain distressed assets, has not yet been created, causing further uncertainty.

   Bankruptcies involving real estate assets are generating novel questions and results.

   The downturn has decreased the occupancy needs of many companies, which has forced landlords and
   tenants into negotiations over surrenders of surplus space and lease amendments and landlords and
   lenders into negotiations over amendments of loan covenants.




                OKLaHOMa CITY • TULSa                                                   Outlook 2009           • page 16
The Bottom Line
   The credit crunch has constrained borrowing by both large and small businesses and consumers.
   Weakening fundamentals present a wide ranging and deep problem of uncertain duration. One might see
   a liquidity crisis, declining operating cash flow, fixed or increasing costs and limited availability of credit
   as the perfect capital and liquidity storm. What is your company’s risk profile?

   Whether you are the director of a public company or the owner of a privately held family business, you
   must be adept at monitoring the business and informed about the material risks. At a minimum, you must
   exercise, informed, disinterested and good faith business judgments. You should consider risk reviews
   appropriate to your own company and circumstances. We recommend the following:

     •	 Initiate	a	prompt	review	of	your	current	business	plan	for	the	next	12	-24	months.

     •	 Identify	and	implement	cost	reduction	and	cash	conservation	measures.

     •	 Pay	particular	attention	to	assumptions	regarding	the	key	contributors	to	your	operating	cash	flow,	
        such as holiday sales (for a retail business), oil prices (for an independent oil producer), etc.

     •	 Identify	 and	 evaluate	 risk	 issues	 related	 to	 globally	 interconnected	 businesses,	 such	 as	 demand	 in	
        foreign markets for your products.

     •	 Determine	what	capital	expenditures	are	essential	and	whether	any	of	them	can	be	deferred.

     •	 Reexamine	your	sources	of	liquidity	and	determine	whether	they	are	reliable	going	forward.

     •	 Evaluate	the	stability	of	your	major	vendors,	customers	and	hedge	or	swap	counterparties	and	their	
        ability to perform their contractual commitments.

     •	 Review	all	affirmative	and	negative	covenants	in	debt	instruments	and	your	other	material	agreements	
        and evaluate potential compliance issues far in advance.

     •	 Undertake	a	corporate	governance	review,	including	indemnification	provisions,	insurance	coverages,	
        and the financial strength of the carriers.

     •	 Evaluate	all	employee	benefit	plans	and	programs	and	determine	the	relative	costs	and	benefits	of	
        such programs.




                 OKLaHOMa CITY • TULSa                                                      Outlook 2009           • page 17

				
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