MEMORANDUM

As we have discussed, [NAME], [TITLE] of [COMPANY] (the "Company") (the "Employee"), recently filed a formal complaint with the Company's Human Resources department alleging sexual harassment by the CEO. The Human Resources department has escalated the complaint to the Board of Directors (the "Board"), and the Board has decided to commence an internal investigation into the Employee's claims.

The CEO has served in his current role for 12 years and occupied other senior roles within the Company for ten years before serving as CEO. Although several female employees under his direct supervision have left the Company abruptly over the years, the Employee's complaint is the first formal complaint that alleges sexual harassment on his part. The Board has never conducted a sexual harassment investigation, and would like to make sure that the directors are fully aware of their legal obligations and corporate best practices as they prepare to commence an investigation. A few years ago, the Board conducted an investigation into internal reports of financial misreporting. Accordingly, the directors would also like to understand the procedural and legal differences between an investigation into the Employee's complaint and the previous investigation.

As the #MeToo campaign and recent high-profile incidents have demonstrated, sexual harassment allegations can inflict lasting damage on a company's reputation, employee morale, consumer confidence, shareholder value, and long-term growth goals (including value-enhancing M&A). The perception that a board is stalling or ignoring the allegations only makes matters worse. Given the serious nature of the claims and the prior history of employee departures, it is important for the Board to investigate the Employee's complaint promptly and decisively. If the Employee's complaint becomes public, either in isolation or in connection with reports from other parties, the Board's response to the allegations will be heavily scrutinized.

A lack of meaningful board action, whether perceived or actual, can intensify negative publicity, attract shareholder pressure to replace some or all of the directors, and may even expose a company and its directors to legal liability. As directors of a Delaware corporation, each member of the Board owes the Company a duty of loyalty, to act in the best interests of the Company and its shareholders. As a US public company, the Company and its directors could face civil and criminal penalties if the Company's public disclosures contain false or misleading statements, or fail to disclose material facts. Recently, a US public company settled a shareholder derivative lawsuit alleging that its directors and officers breached their state law fiduciary duties by failing to properly oversee the investigation of sexual harassment claims. This company is also reportedly facing governmental investigations into whether it violated federal securities laws by failing to disclose multiple settlements paid out in connection with employee sexual harassment claims.