How we care
Statement of Significant Differences

We have certified to Nasdaq that our corporate governance practices are in compliance with, and are not prohibited by, the laws of the Republic of the Marshall Islands. Therefore, we are exempt from many of Nasdaq's corporate governance practices.

Exemptions from Certain Corporate Governance Requirements of Nasdaq.

We have certified to Nasdaq that our corporate governance practices are in compliance with, and are not prohibited by, the laws of the Republic of the Marshall Islands. Therefore, we are exempt from many of Nasdaq's corporate governance practices other than the requirements regarding the disclosure of a going concern audit opinion, submission of a listing agreement, notification to Nasdaq of non-compliance with Nasdaq corporate governance practices, prohibition on disparate reduction or restriction of shareholder voting rights, and the establishment of an audit committee satisfying Nasdaq Listing Rule 5605(c)(3) and ensuring that such audit committee's members meet the independence requirement of Listing Rule 5605(c)(2)(A)(ii). The practices we follow in lieu of Nasdaq's corporate governance rules applicable to U.S. domestic issuers are as follows:

  • As a foreign private issuer, we are not required to have an audit committee comprised of at least three members. Our audit committee is comprised of two members.

  • As a foreign private issuer, we are not required to adopt a formal written charter or board resolution addressing the nominations process. We do not have a nominations committee, nor have we adopted a board resolution addressing the nominations process.

  • As a foreign private issuer, we are not required to hold regularly scheduled board meetings at which only independent directors are present.

  • In lieu of obtaining shareholder approval prior to the issuance of designated securities, we will comply with provisions of the Marshall Islands Business Corporations Act, which allows the Board of Directors to approve share issuances.

  • As a foreign private issuer, we are not required to solicit proxies or provide proxy statements to Nasdaq pursuant to Nasdaq corporate governance rules or Marshall Islands law. Consistent with Marshall Islands law and as provided in our bylaws, we will notify our shareholders of meetings between 15 and 60 days before the meeting. This notification will contain, among other things, information regarding business to be transacted at the meeting. In addition, our bylaws provide that shareholders must give us between 150 and 180 days advance notice to properly introduce any business at a meeting of shareholders.

Other than as noted above, we are in compliance with all other Nasdaq corporate governance standards applicable to U.S. domestic issuers.

Code of Ethics

The Board of Directors of Performance Shipping Inc. (the "Company") has adopted this Code of Ethics (the "Code") for all of the Company's employees, directors, officers and agents ("Employees").

The Board of Directors of Performance Shipping Inc. (the "Company") has adopted this Code of Ethics (the "Code") for all of the Company's employees, directors, officers and agents ("Employees"). All Employees are required to be familiar with the Code, comply with its provisions and report any suspected violations as described below in the section entitled "Internal Reporting".


I. Conflicts of Interest

A conflict of interest occurs when an Employee's private interests interfere, or even appears to interfere, with the interests of the Company as a whole.  While it is not possible to describe every situation in which a conflict of interest may arise, Employees must never use or attempt to use their position with the Company to obtain improper personal benefits. Any Employee who is aware of a conflict of interest, or is concerned that a conflict might develop, should discuss the matter with the Audit Committee or counsel to the Company immediately.


II. Corporate Opportunities

Employees owe a duty to advance the legitimate interests of the Company when the opportunities to do so arise. Employees may not take for themselves personally opportunities that are discovered through the use of corporate property, information or position.


III. Confidentiality and Privacy

It is important that Employees protect the confidentiality of Company information. Employees may have access to proprietary and confidential information concerning the Company's business, clients and suppliers.  Confidential information includes such items as non-public information concerning the Company's business, financial results and prospects and potential corporate transactions. Employees are required to keep such information confidential during employment as well as thereafter, and not to use, disclose, or communicate that confidential information other than in the course of employment.  The consequences to the Company and the Employee concerned can be severe where there is unauthorized disclosure of any non-public, privileged or proprietary information.
To ensure the confidentiality of any personal information collected and to comply with applicable laws, any Employee in possession of non-public, personal information about the Company's customers, potential customers, or Employees, must maintain the highest degree of confidentiality and must not disclose any personal information unless authorization is obtained.


IV. Honest and Fair Dealing

Employees must endeavor to deal honestly, ethically and fairly with the Company's customers, suppliers, competitors and employees.  No Employee should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other unfair-dealing practice. Honest conduct is considered to be conduct that is free from fraud or deception.  Ethical conduct is considered to be conduct conforming to accepted professional standards of conduct.


V. Protection and Proper Use of Company Assets

The Company's assets are only to be used for legitimate business purposes and only by authorized Employees or their designees. This applies to tangible assets (such as office equipment, telephone, copy machines, etc.) and intangible assets (such as trade secrets and confidential information). Employees have a responsibility to protect the Company's assets from theft and loss and to ensure their efficient use.  Theft, carelessness and waste have a direct impact on the Company's profitability. If you become aware of theft, waste or misuse of the Company's assets you should report this to your manager.


VI. Compliance with Laws, Rules and Regulations

It is the Company's policy to comply with all applicable laws, rules and regulations.  It is the personal responsibility of each Employee to adhere to the standards and restrictions imposed by those laws, rules and regulations, and in particular, those relating to accounting and auditing matters.
Any Employee who is unsure whether a situation violates any applicable law, rule, regulation or Company policy should contact the Company's outside legal counsel.
 

VII. Securities Trading

Because we are a public company we are subject to a number of laws concerning the purchase of our shares and other publicly traded securities. Company policy prohibits Employees and their family members from trading securities while in possession of material, non-public information relating to the Company or any other Company, including a customer or supplier that has a significant relationship with the Company.
Information is "material" when there is a substantial likelihood that a reasonable investor would consider the information important in deciding whether to buy, hold or sell securities.  In short, any information that could reasonably affect the price of securities is material. Information is considered to be "public" only when it has been released to the public through appropriate channels and enough time has elapsed to permit the investment market to absorb and evaluate the information.  If you have any doubt as to whether you possess material nonpublic information, you should contact a manager and the advice of legal counsel may be sought.


VIII. Disclosure

Employees are responsible for ensuring that the disclosure in the Company's periodic reports is full, fair, accurate, timely and understandable.  In doing so, Employees shall take such action as is reasonably appropriate to (i) establish and comply with disclosure controls and procedures and accounting and financial controls that are designed to ensure that material information relating to the Company is made known to them; (ii) confirm that the Company's periodic reports comply with applicable law, rules and regulations; and (iii) ensure that information contained in the Company's periodic reports fairly presents in all material respects the financial condition and results of operations of the Company.
Employees will not knowingly (i) make, or permit or direct another to make, materially false or misleading entries in the Company's, or any of its subsidiary's, financial statements or records; (ii) fail to correct materially false and misleading financial statements or records; (iii) sign, or permit another to sign, a document containing materially false and misleading information; or (iv) falsely respond, or fail to respond, to specific inquiries of the Company's independent auditor or outside legal counsel.


IX. Procedures Regarding Waivers

Because of the importance of the matters involved in this Code, waivers will be granted only in limited circumstances and where such circumstances would support a waiver.  Waivers of the Code may only be made by the Audit Committee and will be disclosed by the Company.

 
X. Internal Reporting

Employees shall take all appropriate action to stop any known misconduct by fellow Employees or other Company personnel that violate this Code.  Employees shall report any known or suspected misconduct to the Chairman of the Audit Committee or the Company's outside legal counsel.  The Company will not retaliate or allow retaliation for reports made in good faith.


XI. Ethics Hotline and Whistleblower Program

Employees may call the following number +30-216-6002594 and leave a voice message with our whistleblower hotline answering service if they wish to ask questions, seek guidance on specific situations or report violations of this Code, including but not limited to accounting, internal controls and auditing matters. Employees may choose to remain anonymous but even if they identify themselves, their contact with the whistleblower hotline will remain strictly confidential.
 
Employees may also report known or suspected violations of the Code to the Company at the email address whistleblower@pshipping.com” Employees may choose to be anonymous; however, it will not be possible to obtain follow-up details necessary to investigate the matter. In either case, employee information will be kept strictly confidential, thus there should be no fear of any form of retaliation. The whistleblower hotline answering service and email will be accessible only to the Chairman of the Audit Committee and the Company’s Internal Auditor.

Anti-Fraud Policy and Fraud Response Plan

This policy outlines the Company's principles with respect to maintaining a fraud free environment, details procedures for employees to report suspected fraud and describes actions to be taken by the company.

This policy outlines the Company's principles with respect to maintaining a fraud free environment, details procedures for employees to report suspected fraud and describes actions to be taken by the company.

1. Introduction

1.1 The Company is committed to the highest possible standards of openness, probity and accountability in all its affairs through the creation of the appropriate “tone at the top”. It is determined to maintain a culture of honesty and opposition to fraud and corruption, reinforced through the establishment and maintenance of an effective system of Internal Controls.
 

1.2 In line with that commitment, the Company’s Anti-Fraud Policy outlines the principles it is committed to in relation to preventing, reporting and managing fraud and corruption, including, but not limited to, violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and the anti-corruption laws of the other countries where the Company does business.

 

1.3 This Anti-fraud Policy reinforces the Company’s approach by setting out the ways in which employees can voice their concerns about suspected fraud or corruption. It also outlines how the Company will deal with such complaints.


2. Implementation

2.1 This plan is to be implemented where suspicions of fraud or corruption have been raised.

Fraud is defined as:

"The intentional distortion of financial statements or other records by persons internal or external to the company which is carried out to conceal the misappropriation of assets or otherwise for gain".

Corruption is defined as:

"The offering, giving, soliciting or acceptance of an inducement or reward, which may improperly influence the action of any person".

2.2 Fraudulent or corrupt acts may include, but are not limited to:

     •   Misappropriation of funds, securities, equipment, supplies, or other assets;

     •   Impropriety in the handling or reporting of money or financial transactions;

     •   Altering or incorrectly reporting information for personal gain or the advantage of another;

     •   Profiteering as a result of insider knowledge of Company activities;

     •   Disclosing confidential and proprietary information to outside parties; 

     •   Disclosing to other persons securities activities engaged in or contemplated by the Company;

     •   Accepting or offering a bribe or kickback, or accepting gifts or other favors under circumstances that might lead to the inference that the gift or favor was intended  to induce a decision;

      •  Corruptly offering or giving money or anything of value, directly or indirectly through agents or intermediaries, to foreign officials to assist the Company in obtaining or retaining business; and

      •  Undertaking any activities which are unlawful, against the Company’s policies, fall below established standards or practices, or amount to improper conduct.

2.3 This is not an exhaustive list. If a person is in any doubt about the seriousness and nature of his/her concern, advice and guidance can be obtained from the Internal Auditor/Audit Committee Chairman.


3. Safeguards

3.1 Harassment or Victimization - The Company recognizes that the decision to report a concern can be a difficult one to make, not least because of the fear of reprisal from those responsible for the malpractice. The Company will not tolerate harassment or victimization and will take action to protect those who raise a concern in good faith.

3.2 Confidentiality - The Company will do its best to protect an individual’s identity when he or she raises a concern and does not want their name to be disclosed. It must be appreciated, however, that the investigation process may reveal the source of the information and a statement by the individual may be required as part of the evidence.

3.3 Anonymous Allegations - This policy encourages individuals to put their names to allegations. Concerns expressed anonymously are much less powerful, but they will be considered at the discretion of the Company. In exercising this discretion, the factors to be taken into account would include: the seriousness of the issues raised; the credibility of the concern; and the likelihood of confirming the allegation from attributable sources.

3.4 Untrue Allegations - If an allegation is made in good faith, but it is not confirmed by the investigation, no action will be taken against the originator. If, however, individuals make malicious or vexatious allegations, action may be considered against the individual making the allegation.


4. Roles and responsibilities

4.1 Managers are the first line of defense against fraud. They should be alert to the possibility that unusual events may be symptoms of fraud or attempted fraud. Management is responsible for ensuring that an adequate system of internal control exists within their area of responsibility, and that those controls are properly operated and complied with.

4.2 Employees must have, and be seen to have, the highest standards of honesty, propriety and integrity in the exercise of their duties. They are responsible for reporting any suspected fraud, impropriety or other dishonest activity immediately to their manager or through the whistleblower program, and to assist in the investigation of any suspected fraud.

4.3 The internal audit activity evaluates and contributes to the improvement of the organization’s risk management, control, and governance processes through consulting and assurance activities. Towards this end, the Internal Auditor will prepare and execute annual audit plans, based on an evidenced risk assessment procedure, through identifying potential risk areas and qualifying risks as high, medium and low. The respective risk assessment will determine the frequency and volume of testing to be carried out during each year.


5. Facilitation

5.1 The Company’s Whistle-blowing Program is intended to encourage and enable staff to raise serious concerns within the Company rather than overlooking a problem due to fear of harassment and victimization.

5.2 The Whistle-blowing Program is outlined in the Company’s Code of Ethics, which is available on the Company website.

5.3 Incidents will be logged in the Fraud Register, which is maintained by the Internal Auditor and the Chairman of the Audit Committee. The Fraud Register records details of the allegations made, investigations carried out and the respective conclusions made.


6. How Will Allegations of Fraud or Corruption Be Dealt With By the Company?

6.1 For issues raised by employees or members of management, the action taken by the Company will depend on the nature of the concern. The matters raised may:

     • be investigated internally or

     • be referred to the Company’s lawyers

6.2 When a concern is received, it shall be properly communicated to the Audit Committee and the Internal Auditor. An action plan and line of reporting of the incident will be determined on a case by case basis, and will directly depend on the significance and potential impact of the suspected fraud activity.

The respective complaint, the actions taken and the respective conclusions will be outlined in the Fraud Register mentioned above, for recording and audit trail purposes.
 

Audit Committee Charter

This Audit Committee Charter (“Charter”) has been adopted by the Board of Directors (the “Board”) of Performance Shipping Inc. (the “Company”). 

This Audit Committee Charter (“Charter”) has been adopted by the Board of Directors (the “Board”) of Performance Shipping Inc. (the “Company”). 

Statement of Purpose

The Audit Committee of the Board of the Company (the “Committee”) shall assist the Board in its oversight of (i) the quality and integrity of the Company’s financial statements and its accounting, auditing and financial reporting practices, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the independent auditor’s qualifications and independence and (iv) the performance of the Company’s independent auditors and the Company’s internal audit function.  It may also have such other duties as may from time to time be assigned to it by the Board and are required by the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) and the Nasdaq Stock Market (the “NASDAQ”) or any other securities exchange on which the Company’s securities are traded.  In carrying out its responsibilities, the Board believes that the policies and procedures set forth in this Charter should remain flexible and be interpreted to allow the Committee to best adapt and react to changing business and regulatory requirements.

The Committee shall maintain free and open communication with the independent auditors, internal auditors, and Company management.  In discharging its oversight role, the Committee shall have full access to all Company books, records, facilities, personnel and outside professionals.  The Committee shall have the authority and shall receive necessary funding from the Company to retain special legal, accounting or other consultants or advisors employed by the Committee and shall obtain such advice and assistance from such special legal, accounting or other consultants or advisors as the Committee deems necessary.  The Committee shall have sole authority to approve related fees and retention terms.  Each member of the Committee shall be entitled to rely on (i) the integrity of those persons and organizations within and outside the Company from which it receives information, (ii) the accuracy of the financial and other information provided by such persons or organizations absent actual knowledge to the contrary (which shall be promptly reported to the Board) and (iii) representations made by management as to all audit and non-audit services provided by the independent auditors to the Company.


Composition; Independence

The membership of the Committee shall consist of at least two directors that are appointed to the Committee by the Board, each of whom the Board has determined is free of any material relationship with the Company, either directly or as a partner, shareholder or officer of an organization with a relationship to the company, and who satisfy the independence requirements of Rule 10A-3 under the Securities Exchange Act of 1934 and the NASDAQ or any other securities exchange on which the Company’s securities are traded.  The Board shall appoint a member as a chairman of the Committee, who shall be responsible for leadership of the Committee, including scheduling and presiding over meetings, preparing agendas, making regular reports to the Board, and maintaining regular liaison with the Company’s Chief Executive Officer, Chief Financial Officer, lead independent audit partner and director of internal audit.  In the absence of the appointed chairman from any meeting of the Committee, the Committee may select another member to act as chairman for such meeting.  Additionally, each director appointed to the Committee shall serve on the Audit Committees of no more than two public companies other than the Company, unless the Board determines that such simultaneous service would not impair the ability of the member to effectively serve the Committee.  The Board shall every two years review the Committee’s and its members’ compliance with such requirements and the Board may remove any director from the Committee at any time for any reason with or without cause.


Meetings; Quorum

The Committee shall meet as often as it deems necessary in order to perform its responsibilities, but not less than three times annually.  The Committee may act by unanimous written consent in lieu of a meeting.  The Committee shall also periodically meet with the Company’s management, internal auditors and independent auditors separately from the Board.  The presence of a majority, but no fewer than two, of the then-appointed members of the Committee shall constitute a quorum.  In every case where a quorum is present, action of the Committee may be taken by the Committee upon the affirmative vote of a majority of the members present.

Responsibilities

The Committee’s job is one of oversight.  Management is responsible for the preparation, presentation and integrity of the Company’s financial statements.  Management and the internal auditing department are responsible for maintaining appropriate accounting and financial reporting principles and practices and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations.  The independent auditors are responsible for auditing the annual financial statements.
The Committee and the Board recognize that management and the independent auditors have more resources and time and more detailed knowledge and information regarding the Company’s accounting, financial and auditing practices than do Committee members; accordingly, the Committee’s oversight role does not provide any expert or special assurance as to the Company’s financial statements or any certification as to the work of the independent auditors.  Nor is it the duty of the Committee to conduct investigations, to resolve disagreements, if any, between management and the independent auditors, or to assure compliance with laws and regulations.

Although the Board and the Committee may wish to consider other duties from time to time, the general recurring activities of the Committee in carrying out its oversight role are described below.  The Committee shall be responsible for:

Oversight of Independent Auditor and the Audit Process

  • The appointment, replacement, compensation, evaluation and oversight of the work of the independent auditors to be retained to audit the annual financial statements of the Company and review the quarterly financial statements of the Company.
  • Annually obtaining and reviewing the independent auditors’ formal written statement describing: the firm’s internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues.
  • Annually obtaining from the independent auditors a formal written statement describing all relationships between the independent auditors and the Company and actively engaging in a dialogue with the independent auditors with respect to any disclosed relationships that may impact the objectivity and independence of the auditors, and shall consider whether the independent auditors’ provision of non-audit services to the Company, if any, is compatible with the auditors’ independence.  The Committee shall recommend that the Board take appropriate actions to satisfy itself as to the independent auditors’ independence.
  • Monitoring the regular rotation of the audit partners of the independent auditors as required by applicable law.
  • Overseeing the relationship with the independent auditors, including discussing with the auditors the planning and staffing of the audit and the nature and rigor of the audit process, receiving and reviewing audit reports, reviewing with the auditors any problems or difficulties the auditors may have encountered in carrying out their responsibilities and any management letters provided by the auditors and the Company’s response to such letters, and providing the auditors full access to the Committee and the Board to report on all appropriate matters.
  • Pre-approving or approving all audit and non-audit services provided by the independent auditor to the Company and obtaining from the independent auditors at least annually a formal written statement of the fees billed for all audit services (including any comfort letters) and all permitted non-audit services provided by the independent auditors for the most recent fiscal year.  The Chairman of the Committee must provide prior approval of all non-audit services to be provided by the independent auditor, subject to the de-minimus exception set forth in Section 10A of the Securities Exchange Act of 1934.
  • Reviewing the annual audited financial statements and quarterly financial statements, as applicable, and discussing them with management and the independent auditors.  These discussions shall include the matters required to be discussed under the Statement of Auditing Standards adopted by the American Institute of Certified Public Accountants, consideration of the quality of the Company’s accounting principles as applied in its financial reporting, and the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  Such discussions may include a review of particularly sensitive accounting estimates, reserves and accruals, review of judgmental areas, review of critical accounting policies and alternative treatments of financial information, review of audit adjustments, review of risk exposures that may have a material impact on the Company’s financial statements and the policies and steps management has taken to monitor and control such exposures, and other such inquiries as the Committee or the independent auditors shall deem appropriate.  Based on its review, and its confirmation that management believes the financial statements to be included in the Company’s annual report contain no material misstatements, the Committee shall make its recommendation to the Board as to the inclusion of the Company’s audited financial statements in the Company’s Annual Report on Form 20-F (or the Annual Report to Shareholders, if distributed prior to the filing of the Form 20-F).
  • Keeping the independent auditors informed of the Committee's understanding of the Company's relationships and transactions with related parties that are significant to the company; and reviewing and discussing with the independent auditors the auditors' evaluation of the Company's identification of, accounting for, and disclosure of its relationships and transactions with related parties, including any significant matters arising from the audit regarding the Company's relationships and transactions with related parties.
  • To review and discuss with the Company's independent auditors any other matters required to be discussed by PCAOB Auditing Standards No, 16, Communications with Audit Committees, including, without limitation, the auditors' evaluation of the quality of the company's financial reporting, information relating to significant unusual transactions and the business rationale for such transactions and the auditors' evaluation of the company's ability to continue as a going concern.

Oversight of Internal Audit

  • Preparing annually a report of the Committee and the submission of such report to the full Board for approval and, to the extent required by the rules of the U.S. Securities and Exchange Commission then applicable to the Company, to cause such report to be included in the Company’s annual proxy statement.
  • Discussing with management the financial statements proposed to be included in the Company’s Annual Report on Form 20-F and obtaining assurances from management that such financial statements contain no material misstatements or omissions and obtaining from the independent auditors confirmation that, in the course of their audit, they learned of no material misstatements.
  • Providing oversight of the Company’s auditing, accounting and financial reporting principles, policies, controls, procedures and practices, and reviewing significant changes to the foregoing as suggested by the independent auditors, internal auditors or management.
  • Discussing with management and/or the Company’s general or outside legal counsel any legal matters (including the status of pending litigation) that may have a material impact on the Company’s financial statements, and any material reports or inquiries from regulatory or governmental agencies.
  • Receiving from the Chief Executive Officer and Chief Financial Officer of the Company a report of all significant deficiencies and material weaknesses in the design or operation of internal controls, and any fraud that involves management or other employees who have a material role in the Company’s internal controls and procedures.
  • Discussing with management and the independent auditors the quality and adequacy of the Company’s internal audit controls and procedures and the internal audit function’s organization, responsibilities, plans, results, budget and staffing, as well as providing oversight to any internal audit activities, including review of significant reports prepared by the internal auditors, and management’s response.

Other Responsibilities

  • Discussing with management and independent auditors earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies.
  • Establishing clear hiring policies for employees or former employees of the external auditors.
  • Discussing with management policies with respect to risk assessment and risk management.
  • Establishing and reviewing procedures for the receipt, retention and treatment of complaints from the Company’s employees on accounting, internal accounting controls or auditing matters, as well as for confidential, anonymous submissions by the Company’s employees of concerns regarding questionable accounting or auditing matters.
  • Unless otherwise determined by the Board, reviewing all material related-party transactions, including transactions between the Company and its officers or directors or affiliates or members of the immediate families of such directors or officers.
  • Regularly reporting the Committee’s activities to the Board and making such recommendations with respect to the above and to any other matters as the Committee may deem necessary or appropriate.
  • Engaging in an annual self-assessment of the Committee with the goal of continuing improvement. The Committee shall review this Charter every two years and recommend any proposed changes to the Board for approval.
Policies and Procedures to Detect and Prevent Insider Trading

This policy (the "Policy") will be administered and supervised by the Company’s Chief Accounting Officer. Please pay special attention to the "Blackout" and "Trading Window" policies discussed in this memorandum.

PERFORMANCE SHIPPING INC.
(formerly named DIANA CONTAINERSHIPS INC.)

SECOND AMENDED AND RESTATED

POLICIES AND PROCEDURES TO DETECT AND

PREVENT INSIDER TRADING

REVISED AS OF NOVEMBER 13, 2014

GENERAL

The Securities Exchange Act of 1934 prohibits the misuse of material, non-public information. In order to avoid even the appearance of impropriety, the Company has instituted procedures to prevent the misuse of non-public information.

Although "insider trading" is not defined in the securities laws, it is generally thought to be described as trading either personally or on behalf of others on the basis of material non-public information or communicating material non-public information to others in violation of the law.

This policy (the "Policy") will be administered and supervised by the Company’s Chief Accounting Officer. Please pay special attention to the "Blackout" and "Trading Window" policies discussed in this memorandum.

WHOM DOES THE POLICY COVER?

The Policy covers all of the Company’s officers, directors and employees ("insiders"), as well as any transactions in any securities participated in by family members, trusts or corporations directly or indirectly controlled by insiders. In addition, the Policy applies to transactions engaged in by corporations in which the insider is an officer, director or 10% or greater stockholder and a partnership of which the insider is a partner, unless the insider has no direct or indirect control over the partnership.

The Company forbids any insider from trading, either for his or her personal account or on behalf of others, while in possession of material non-public information, or communicating material non-public information to others in violation of the law. This prohibited conduct is often referred to as "insider trading".

  • The Policy extends to each insider’s activities within and outside his/her duties at the Company. Each insider must read and retain this statement.
  • Failure to comply with the Policy may cause an employee to be subject to disciplinary action.

WHAT IS INSIDER TRADING?

The term "insider trading" generally is used to refer to trading while in possession of material non-public information (whether or not one is an "insider") and/or to communications of material non-public information to others. The law in this area is generally understood to prohibit, among other things:

  • trading by an insider while in possession of material non-public information;
  • trading by a non-insider while in possession of material non-public information, where the information either was disclosed to the non-insider in violation of an insider’s duty to keep it confidential or the information was misappropriated;
  • trading while in possession of material non-public information concerning a tender offer; and
  • wrongfully communicating, or "tipping", material non-public information to others.

THE INSIDER CONCEPT

As a general guide for our directors, officers and employees, components of what amounts to "insider trading" are described below:

Who is an insider?

The concept of "insider" is broad. It includes officers, directors, trustees, and employees of a company. In addition, a person can be a "temporary insider" if he or she enters into a special confidential relationship in the conduct of a company’s affairs and as a result is given access to information solely for the company’s purposes. A temporary insider can include, among others, a company’s attorneys, accountants, consultants, bank lending officers, and the employees of those organizations.

What information is material?

Trading on information that is "material" is prohibited. Information generally is considered "material" if:

  • there is a substantial likelihood that a reasonable investor would consider the information important in making an investment decision, or
  • the information is reasonably certain to have a substantial effect on the price of a company’s securities.

Information that should be considered material includes: dividend changes, earnings estimates not previously disseminated, material changes in previously-released earnings estimates, significant merger or acquisition proposals or agreements, major litigation, liquidity problems, and extraordinary management developments.

What information is non-public?

Information is non-public until it has been effectively communicated to the market place. For example, information found in a report filed with the SEC, or appearing in Dow Jones, Reuters, The Wall Street Journal, on Bloomberg or in other publications of general circulation ordinarily would be considered public. In addition, in certain circumstances, information disseminated to certain segments of the investment community may be deemed "public", for example, research communicated through institutional information dissemination services such as First Call. (However, the fact that research has been disseminated through such a service does not automatically mean that it is public.) Remember, it takes time for information to become public. The amount of time since the information was first disseminated ordinarily is a factor regarding whether the information is considered "public".

PENALTIES FOR INSIDER TRADING

Penalties for insider trading are severe both for the individuals involved as well as for their employers. A person can be subject to some or all of the penalties listed below, even if he or she does not personally benefit from the violation. Penalties may include:

  • Jail sentences;
  • Civil injunctions;
  • Civil treble (3x) damages;
  • Disgorgement of profits;
  • Criminal fines of up to three times the profit gained or loss avoided, whether or not the person actually benefited; and
  • Fines for the employers or other controlling person of up to the greater of $1 million or three times the amount of the profit gained or loss avoided.

Clearly, it is in the Company’s and your best interests for the Company to put into place procedures to prevent improper trading by its insiders.

PROCEDURES TO PREVENT INSIDER TRADING

The following procedures have been established to aid in the prevention of insider trading. Every insider must follow these procedures or risk sanctions, including: dismissal, substantial personal liability and criminal penalties.

Questions to Ask

Prior to trading in the Company’s shares, and if you think you may have material non-public information, ask yourself the following questions:

  • Is the information material? - Is this information that an investor would consider important in making an investment decision? Would you take it into account in deciding whether to buy or sell? Is this information that would affect the market price of the securities if generally disclosed?
  • Is the information non-public - To whom has this information been provided? Has it been effectively communicated to the marketplace? Has enough time gone by?

Action Required

If you are at all uncertain as to whether any information you have is "inside information", you must:

  • Immediately report the matter to the Chief Accounting Officer;
  • Refrain from purchasing or selling the shares; and
  • Not communicate the information inside or outside the Company.

After the employee and the Chief Accounting Officer have reviewed the issue and consulted with outside counsel to the extent appropriate, the insider will be instructed as to whether he/she may trade and/or communicate that information.

Blackout Policy and Trading Window

To assure compliance with the Policy and applicable securities laws, the Company requires that all insiders refrain from conducting transactions involving the purchase or sale of Company's shares other than during the period commencing at the open of market on the second business day following the date of public disclosure of the financial results for a particular fiscal quarter or year and continuing until the close of market on the fourteenth (14th) day after the last day of the current fiscal quarter (the "Trading Window"). In addition, from time to time material non-public information regarding the Company may be pending. While such information is pending, the Company may impose a special "blackout" period during which the same prohibitions and recommendations shall apply.

Remember: Even during the Trading Window, any person possessing material non-public information concerning the Company, should not engage in any transactions in Company's shares until such information has been made public and absorbed by the market.

Pre-Clearance of Trades

All insiders must refrain from trading in Company's shares, even during the Trading Window, without first complying with the Company's "pre-clearance" process. Each such person should contact the Company's Chief Accounting Officer prior to commencing any trade. The Chief Accounting Officer will consult as necessary with senior management and/or counsel to the Company before clearing any proposed trade.

Coverage

The Policy applies not only to Company's shares, but also any other securities issued by the Company.

QUESTIONS OR CONCERNS

Any questions or concerns regarding the Company’s Policies and Procedures to detect and prevent insider trading should be directed to the Chief Accounting Officer, or, if such questions or concerns involve the Chief Accounting Officer, to the Chief Financial Officer. The Chief Accounting Officer’s personal trading activity will be reviewed by the Chief Financial Officer.