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The Corporate Executive, Vol. XXIII, No. 1
January-February 2009

Best Practice Disclosure:

Our Hold-Through-Retirement Policy

We have long recognized the importance of stock ownership as an important means of closely aligning the interests of our senior executive officers with the interests of the company's shareholders. As discussed on page __ of this Compensation Discussion and Analysis under the heading "Stock Ownership Requirements" we have required that our senior executives maintain "skin in the game" with the substantial stock ownership guideline ratios of 12 times salary for our CEO and six times salary for our other named executive officers.

This substantial stock ownership guideline alone, however, does not ensure that the interests of our senior executives are fully aligned with our shareholders’ interests. While stock ownership—through both compliance with the stock ownership guidelines and through accumulation of equity awards under our compensation programs—encourages a focus on returns to shareholders through the company's stock price, that focus may, in some instances, overemphasize short-term rather than long-term returns. Without a countervailing influence, the larger proportion of stock ownership—coupled with the potential for a short-term focus— could lead senior executive officers to pursue strategies that involve unnecessary or excessive risks for the company as a whole, and for the other shareholders who have a long-term investment focus. The risks attendant to a short-term focus on stock price may be particularly acute in times when share prices are substantially depressed, such as we have experienced in recent months.

In 2008, the Compensation Committee considered alternatives for addressing these concerns, in particular focusing on ways to better align our executives’ interests with the interests of shareholders while at the same time emphasizing to the markets in these difficult economic times that our executive team is committed to a long term focus. At the same time, the Compensation Committee has considered ways to address the concern that our compensation programs—including our equity grants and our stock ownership guidelines—may encourage unnecessary or excessive risk-taking by the executive team.

The Compensation Committee considered implementing a policy to require that our senior executive officers (including the CEO and all of the named executive officers) hold a substantial portion of their earned equity awards until the executives retire from service with the company. The Compensation Committee recognized that this policy would address many of the concerns discussed above, however a requirement to hold a substantial portion of the equity awards only until retirement could result in executives losing their long term focus in the critical period immediately prior to retirement, when the executive is likely to have the most influence and would likely be in a position to make significant decisions for the company. In this regard, implementing a policy requiring that a portion of the equity awards be held only until retirement could have the potential to cause an executive close to retirement to promote unnecessary or excessive risk taking, as the executive seeks to maximize short-term stock price returns to the detriment of long-term value. This potential risk may be particularly acute in periods such as we are facing today, where stock prices are depressed and executives may feel pressure to maximize the value of their retirement holdings by seeking to offset losses on broader market investments.

After performing the foregoing analysis and recognizing the potential limitations of a hold until-retirement policy, the Compensation Committee has decided to implement a mandatory "hold-through-retirement" policy for the senior executive officers. Under this policy, the company will require that these executives hold 75% of the net after-tax portion of the option shares acquired through our executive compensation program for a period of two years following their retirement or other termination of employment from the company, or until age 65, whichever is later. In addition, we require that 50% of our restricted stock awards do not vest until ten years from grant or two years after retirement, whichever is later. We believe that this policy most effectively addresses the possibility that our executives will unduly focus on short term, unsustainable stock price increases that could lead to executives prematurely "cashing out" of a significant portion of their equity holdings. Under this policy, equity compensation for the subject executives will remain a motivational force throughout their careers to promote the long term value of the company.

We are pleased to announce that our CEO and our named executive officers have also agreed to subject their already-owned, previously granted option stock and restricted stock to this new hold-through-retirement policy, thereby demonstrating their long-term commitment to the company and its shareholders.

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