Stock Ownership Guidelines

Directors. The board has adopted stock ownership guidelines for directors. Under these guidelines, nonemployee directors are expected to own a number of shares of the company’s common stock having a value of $250,000 within five years after joining the board. In addition, when exercising stock options, directors who have not satisfied the ownership guidelines must retain shares having a value of at least 50% of the value derived from the option exercise after payment of the exercise price and taxes.

Executive Officers. The board of directors also has adopted stock ownership guidelines for executive officers to ensure that the interests of executives are aligned with those of shareholders. Executives are expected to comply with the share ownership guidelines within five years after their date of hire or promotion to executive officer. Under these guidelines, the company’s chief executive officer is expected to hold shares of common stock having an aggregate value equal to or greater than three times his or her annual base salary, the chief financial officer and senior vice presidents (if any) are expected to hold shares of common stock having an aggregate value equal to or greater than two times their annual base salaries, and other executive officers are expected to hold shares having an aggregate value equal to or greater than one times their annual base salaries. The compensation committee believes that the higher multiples applicable to the chief executive officer, chief financial officer and other senior vice presidents (if any) are appropriate given the greater relative scope of responsibilities and greater compensation associated with those positions. In addition, when exercising stock options, executive officers who have not satisfied the ownership guidelines must retain shares having a value of at least 50% of the value derived from an option exercise after payment of the exercise price and taxes.