United States: 10-Q Requirements for Arthur Andersen Client

In light of the United States Department of Justice’s indictment of Arthur Andersen, LLP, the SEC has issued rules and guidance for issuers for whom Andersen acts as their accountant.

1. An issuer who continues to retain Andersen as its accountant does not need to receive any assurances from Andersen in connection with their review of unaudited financial statements to be filed with a Form 10-Q and should file its 10-Q on time as required.

2. An issuer with a fiscal quarter ending between and including January 26, 2002 and June 15, 2002 who wishes to retain an accountant other than Andersen and who has not done so by the 10-Q filing deadline:

(a) Must file its 10-Q on or before the existing filing deadline (May 15, 2002 for calendar quarters), which 10-Q may contain financial statements that have not been reviewed by an accountant pursuant to Rule 10-01(d) of Regulation S-X or Item 310(b) of Regulation S-B:

(b) On the cover page of the 10-Q, an issuer must prominently state that the 10-Q includes financial statements that were not reviewed in accordance with Rule 10-01(d) of Regulation S-X or Item 310(b) of Regulation S-B and provide a cross-reference to additional information in the 10-Q.

(c) The statement required to be included in paragraph 2(b) above shall also be included immediately before the financial statements and shall also state when and how the issuer intends to provide reviewed financial statements.

(d) Upon review by an accountant other than Andersen, if there is a change in those financial statements, an issuer must file a 10-Q/A to present the reviewed financial statements, a discussion of any material changes from the unreviewed financial statements and any other section of the 10-Q, including, without limitation, MD&A, that should be amended to reflect any changes in the financial statements.

(e) If, upon review of the financial statements by an accountant other than Andersen, there is no change in the financial statements, an issuer must state in its next 10-Q that the financial statements for the previous quarterly period were subsequently reviewed by an accountant other than Andersen. A statement regarding the review of unaudited financial statements by an accountant pursuant to Rule 10-01(d) of Regulation S-X or Item 310(b) of Regulation S-B would normally trigger a requirement to file the review report of the accountant as an exhibit to the 10-Q. The SEC has waived the requirement to file such review report under these circumstances.

(f) In addition, if a 10-Q/A is not required, the SEC encourages issuers to make public that there were no material changes as a result of the review of the financial statements prior to the filing of the issuer’s next required periodic report.

3. An issuer who, on or after March 14, 2002, has dismissed Andersen or for whom Andersen has resigned as its independent public accountant triggers the disclosure of any disagreements with accountants regarding financial and accounting disclosure required by Item 304 of Regulation S-K and Regulation S-B. Normally, subject to various conditions, Andersen would be required to furnish a letter, addressed to and filed with the SEC, stating whether it agreed with the statements made by the issuer and if not, the matters on which it disagreed. Under the SEC’s temporary rules, if an issuer has not yet obtained such a letter from Andersen or is unable to obtain such a letter after reasonable efforts, compliance with the requirement to obtain and file the letter is not required. If, however, an issuer has already obtained the letter in response to the requirement and the letter sets forth any disagreements with the statements made by the issuer, the letter must be filed with the SEC as required.

4. For purposes of S-3 eligibility, if an issuer complies with the requirements contained in paragraph 2 above, an issuer will be deemed in compliance with the timely filing requirement and an issuer’s S-3 eligibility will not be negatively impacted.

The SEC emphasized that issuers should make their own decisions with respect to these issues and that these rules are intended to minimize any disruption to the capital markets.

The SEC also recognizes that the rules and guidance provided in its release cannot address each organization’s specific situation. Any company should freely seek the assistance of the appropriate SEC staff with respect to its specific situation. The SEC’s release can be found on its website at http://www.sec.gov.

We continue to monitor the situation and will promptly advise you as to further developments.

Deborah S Frohling - (703) 648 8547

Jan M Davidson (404) 815 6483 - Jdavidson@kilpatrickstockton.com