Long Term Incentive Alternatives

Page 2 Disclaimer The general accounting treatment as described is based on FAS 123(R). This is a general summary of the accounting rules and must not be construed as accounting advice relative to your specific situation. For specific accounting advice, please consult with your auditor. Certain exceptions and special rules, if any, are beyond the scope of this summary. Any US tax advice contained herein was not intended or written to be used, and cannot be used, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

Page 3 Incentive Stock Options (ISO’s) General DescriptionAccounting Treatment (FAS 123R) Federal Income Taxation – Employee Federal Income Taxation – Employer Miscellaneous ► Right to purchase employer stock at a specified price for a specified period of time (must be designed in accordance with numerous requirements under IRC §422), with the spread on the date of the sale of the stock taxed at capital gain rates, provided the stock is sold at least two years from date of grant and one year from date of exercise (“Qualifying Disposition”). If these holding periods are not met, the disposition of the stock is considered a “Disqualifying Disposition. Provides actual share ownership. ► Compensation cost must be recognized over the “requisite service period” (generally, the explicit vesting period with certain exceptions) based on the fair value of the option measured at grant (for awards classified as equity instruments) using an option-pricing model (e.g., the Black-Scholes- Merton, binomial, etc.). Compensation cost is recognized only for those awards that are expected to (and eventually do) vest. ► Deferred tax asset is not recognized even if a Company has a history of disqualifying dispositions. The income tax benefits, if any, will be recognized upon a disqualifying disposition. The full income tax accounting implications of these awards is beyond the scope of this summary. ► No income recognition upon grant or exercise. ► Qualifying Disposition: At time of sale, spread between exercise price and stock price taxed at capital gains rate, assuming holding period requirements are met. ► Disqualifying Disposition: Upon sale, spread at exercise (or the difference between the sales price and exercise price, if lower) is taxed as ordinary income, with capital gains treatment for the difference between Fair Market Value (“FMV”) at sale and FMV at exercise. ► The spread at exercise is an Alternative Minimum Tax (AMT) adjustment that may result in AMT in year of exercise. ► No FICA liability, regardless of whether a Qualifying Disposition or Disqualifying Disposition occurs. ► No compensation deduction allowed, absent a Disqualifying Disposition. ► A Disqualifying Disposition by employee results in compensation deduction equal to income recognized by employee. ► FICA and FUTA taxes do not apply upon the exercise of an ISO and thus are not required to be withheld. Furthermore, no federal income tax withholding is required on a Disqualifying Disposition. ► Generally, the employer must report the spread at exercise in a Disqualifying Disposition on a Form W-2. ► Company receives positive cash flow equal to employee payment for exercise of ISO’s plus any tax benefits resulting from Disqualifying Dispositions. ► Company also saves on employer FICA/Medicare tax. ► Shareholder approval required within twelve months before or after adoption of the plan for both stock exchange and tax purposes. May be required for state corporate law purposes. ► Aggregate FMV (determined at grant) of option stock first exercisable in any year may not exceed $100,000. ► Term can be no longer than ten years. Advantages ► Risk-free investment in Company during option term ► Actual share ownership ► Capital gain for employee ► No FICA taxation Disadvantages ► No deduction absent Disqualifying Disposition resulting in potential negative impact to effective tax rate ► Potential AMT implications ► Valuation for accounting purposes ► Deferred tax asset implications ► Only value upon appreciation of stock

Page 4 Non-Qualified Stock Options (NQSO’s) General DescriptionAccounting Treatment (FAS 123R) Federal Income Taxation – Employee Federal Income Taxation – Employer Miscellaneous ► Right to purchase employer stock at a specified price for a specified period of time. Not limited by the IRC requirements imposed on ISOs. Provides actual share ownership. ► Compensation cost must be recognized over the “requisite service period” (generally, the explicit vesting period, with certain exceptions) based on the fair value of the option measured at grant (for awards classified as equity instruments) using an option-pricing model (e.g., the Black-Scholes-Merton, binomial, etc.). Compensation cost is recognized only for those awards that are expected to (and eventually do) vest. ► Deferred tax asset is recognized based on compensation cost recognized over the service period. The full income tax accounting implications of these awards is beyond the scope of this summary. ► No income recognition at grant. Spread between exercise price and stock price taxed at ordinary income rates at time of exercise. ► Subsequent appreciation post-exercise taxed at capital gain rates. ► Basis equals value at date of exercise. ► FICA tax liability. ► Tax deduction in the amount of spread upon exercise. ► Ordinary income upon exercise of NQSO’s will be considered wages for federal income tax and employment tax purposes. The amount included in the employee’s income will be subject to ordinary federal income tax withholding and FICA/Medicare tax withholding. ► Employees will report income on Form W-2 in the year of exercise. Non-employee directors who exercise NQSO’s will report compensation on Form 1099-MISC. ► Company receives positive cash flow equal to employee payments for exercise of NQSO and from tax deduction for compensation offset by employer FICA/Medicare cost. ► Shareholder approval is required for stock exchange purposes, may be required for state corporate law purposes, and for tax purposes (e.g., preserve the deduction under IRC §162(m) for performance- based awards). ► Discounted NQSO’s are subject to IRC §409A and taxed at vesting unless all of the requirements of IRC §409A are met. Advantages ► Actual share ownership ► Tax deduction at exercise ► Risk-free investment in company during option term Disadvantages ► Valuation for accounting purposes ► Ordinary income to employee ► Value results only upon appreciation in stock ► Potential cash flow concerns at exercise for employee’s tax liability

Page 5 Restricted Stock General DescriptionAccounting Treatment (FAS 123R) Federal Income Taxation – Employee Federal Income Taxation – Employer Miscellaneous ► Shares of stock granted to employee at reduced or no cost but which are subject to restrictions on transferability and are subject to a substantial risk of forfeiture. Sometimes linked with a cash bonus to offset employee tax liability. Provides actual share ownership at the time of grant. ► Compensation cost must be recognized over the “requisite service period” (generally, the explicit vesting period, with certain exceptions) based on the fair value of the stock measured at grant (for awards classified as equity instruments) without regard to restrictions. Compensation cost is recognized only for those awards that are expected to (and eventually do) vest. ► Deferred tax asset is recognized based on compensation cost recognized over the service period. The full income tax accounting implications of these awards is beyond the scope of this summary. ► Absent an IRC §83(b) election, no taxable income at grant if stock is not transferable and subject to a substantial risk of forfeiture. ► FMV of stock at vesting is taxed as ordinary income. ► Dividends paid prior to vesting considered compensation. ► If participant elects to be taxed at grant (IRC §83(b) election), then FMV of stock at grant will be subject to ordinary income taxation. No taxation at vesting. ► Subsequent sale of stock results in capital gain. ► FICA tax liability. ► Tax deduction in the amount (including dividends), and at the time, the employee realizes ordinary income. ► Deduction at time of IRC §83(b) election, if made. ► The amount included in the employee’s income will be subject to ordinary federal income tax withholding and FICA/Medicare tax withholding. ► If participant makes IRC §83(b) election, the amount included in employee’s income will be subject to federal income tax and FICA/Medicare tax withholding. ► Ordinary income upon vesting is reported on Form W-2 for employees and Form 1099-MISC for non-employee directors. ► Company receives tax deduction equal to employee income recognition offset by employer FICA/Medicare liability. ► Shareholder approval is required for stock exchange purposes, may be required for state corporate law purposes, and for tax purposes (e.g., preserve the deduction under IRC §162(m) for performance- based awards). ► IRC§409A does not by its terms apply to restricted stock. ► Vesting restrictions may be based on completion of a continuous period of employment or performance- related measures. Advantages ► Actual share ownership ► Less shares needed compared to options ► Value even if share price declines Disadvantages ► Less upside potential relative to options ► IRC §83(b) election complex ► International limitations ► Potential cash flow concerns at vesting for employee’s tax liability

Page 6 Restricted Stock Units (RSU’s) General DescriptionAccounting Treatment (FAS 123R) Federal Income Taxation – Employee Federal Income Taxation – Employer Miscellaneous ► Employees are provided with a right to receive future delivery of actual stock or cash subject to vesting restrictions. ► The employee generally does not receive dividend and voting rights until actual shares are issued, although dividend equivalents may be provided. ► For RSU’s that must be settled in stock, compensation cost is equal to the aggregate fair market value of the stock on the date of grant (adjusted for the lack of dividends during the vesting period, if applicable), which is recognized over the “requisite service period”. Compensation cost is recognized only for those awards that are expected to (and eventually do) vest. ► If settled in cash under the terms of the Plan then liability (i.e., variable) accounting is required. Compensation cost must be re-measured each reporting period (i.e., quarterly) based on changes in stock price. Compensation cost is recognized over requisite service period based on the fair market value of the stock on the balance sheet date. ► No taxable income at grant. ► No taxable income at vesting if the design/operation complies with the provisions of IRC §409A. ► FMV is taxed at ordinary income tax rates when stock or cash is delivered. ► IRC §83(b) election is not available. ► FICA tax liability. ► Tax deduction in the amount (including dividends), and at the time the executive realizes ordinary income. ► The amount included in the employee’s income will be subject to ordinary federal income tax withholding and FICA/Medicare tax withholding at payment. However, if RSU’s are deferred beyond vesting, FICA/Medicare tax is due at vesting with federal income tax due at payment. ► Ordinary income upon distribution is reported on Form W-2 for employees and Form 1099-MISC for non-employee directors. ► Company receives tax deduction equal to employee income recognition offset by employer FICA/Medicare liability. ► Shareholder approval is required for stock exchange purposes, possibly for state corporate law purposes, or for tax purposes (e.g., preserve the deduction under IRC §162(m) for performance-based awards). ► RSU’s will be treated as deferred compensation subject to requirements of IRC §409A unless paid within 2½ months following the close of the later of the employer’s or participant’s tax year following vesting. Advantages ► Actual share ownership if paid in stock ► Provide value even if share price declines – value not limited to post-grant appreciation ► Eliminates IRC §83(b) election completely ► Effective Internationally Disadvantages ► Less upside potential relative to options ► IRC §83(b) election not available ► No voting rights or actual share ownership until delivery of stock, if any ► Provides employee with leverage since they pay no tax until vesting (assuming the employee would otherwise sell stock to pay tax)

Page 7 Performance Shares/Units General DescriptionAccounting Treatment (FAS 123R) Federal Income Taxation – Employee Federal Income Taxation – Employer Miscellaneous ► Awards of contingent shares/units are granted to the employee, at the beginning of a specified period. Awards are earned during the period if certain specified company performance goals are attained. ► Value of units at the end of the performance period (based upon specific valuation criteria) determines the value of the payout. ► Paid in stock or cash. ► For Performance shares/units that must be settled in stock, the compensation cost is equal to the aggregate fair market value of the stock on the date of grant (adjusted for the lack of dividends during the vesting period, if applicable), which is recognized over the “requisite service period” (which may be the explicit vesting period or may be implied by the performance conditions or other terms). Compensation cost is recognized only for those awards that are expected to (and eventually do) vest based on the achievement of any service and performance conditions. ► If settled in cash under the terms of the Plan, at the employee’s election, or where there is a pattern or practice of paying cash, then liability (i.e., variable) accounting is required. Compensation cost must be re-measured each reporting period (i.e., quarterly) based on changes in stock price. Compensation cost is recognized over requisite service period only for those awards that are expected to (and eventually do) vest based on the achievement of any service and performance conditions. ► Subject to ordinary income tax rates on the date of payment. ► Capital gains tax treatment not available except on subsequent sale of shares, if any. ► FICA tax liability. ► Tax deduction equal to the amount recognized as compensation by the employee when the award is paid. ► FICA/FUTA tax liability. ► The amount included in the employee’s income will be subject to ordinary federal income tax withholding and FICA/Medicare tax withholding. ► Ordinary income is reported on Form W-2 for employees and Form 1099-MISC for non-employee directors. ► Company cash outflow, if paid in cash, equal to value of units. Company receives tax deduction equal to employee income recognition offset by employer FICA/Medicare liability. ► Shareholder approval is required for stock exchange purposes, may be required for state corporate law purposes, and for tax purposes (e.g., preserve the deduction under IRC §162(m) for performance- based awards). ► Performance Shares/units will be treated as deferred compensation under §409A unless paid within 2½ months of the later of the close of the employer’s or participant’s tax year following vesting. Advantages ► Can provide awards based on specific economic performance measures not related to share price ► Can pay in cash or stock ► Effective internationally ► Ability for deferral post-vesting Disadvantages ► Payouts can occur even when the share value of the company declines ► Performance goals are not related to share price ► Can be complex to communicate and administer

Page 8 Stock Appreciation Rights (Settled in Cash) General DescriptionAccounting Treatment (FAS 123R) Federal Income Taxation – Employee Federal Income Taxation – Employer Miscellaneous ► Stock Appreciation Rights (SAR’s) settled in cash grant an employee the right to receive an amount equal to the appreciation in value of stock from the date of grant to the date of exercise. No executive investment required. Does not result in actual share ownership. ► For SAR’s settled in cash, liability (i.e., variable) accounting is required. Compensation cost is measured based on the fair value of the SAR using an option- pricing model (e.g., the Black-Scholes- Merton, binomial, etc.) at the balance sheet date, and must be re-measured each reporting period (i.e., quarterly) based on changes in stock price. Compensation cost is recognized over requisite service period only for those awards that are expected to (and eventually do) vest based on the achievement of any service and performance conditions. ► Deferred tax asset is recognized based on compensation cost recognized over the service period. The full income tax accounting implications of these awards is beyond the scope of this summary. ► No income recognition at grant or vesting. ► Payment taxed at ordinary income rates. ► FICA tax liability at time of payment. ► Tax deduction in the amount, and at the time, employee realizes ordinary income. ► FICA/FUTA liability. ► The amount included in the employee’s income will be subject to ordinary federal income tax withholding and FICA/Medicare tax withholding. ► Ordinary income upon exercise is reported on Form W-2 for employees and Form MISC for non-employee directors. ► Company receives tax deduction equal to employee income recognition offset by employer FICA/Medicare liability. ► Shareholder approval is required for stock exchange purposes, may be required for state corporate law purposes, and for tax purposes (e.g., preserve the deduction under IRC §162(m) for performance-based awards). ► Discounted SAR’s are subject to §409A. Advantages ► Flexibility ► No money required to exercise from employee Disadvantages ► Exposure to cash outflows ► Variable accounting ► IRC §409A impact

Page 9 Stock Appreciation Rights (Settled in Stock) General DescriptionAccounting Treatment (FAS 123R) Federal Income Taxation – Employee Federal Income Taxation – Employer Miscellaneous ► SAR’s settled in stock grant the employee the right to receive the employer’s stock in an amount equal to the appreciation in the stock from the date of grant to the date of exercise. No executive investment is required. ► Compensation cost must be recognized over the “requisite service period” (generally, the explicit vesting period, with certain exceptions) based on the fair value of the option measured at grant (for awards classified as equity instruments) using an option-pricing model (e.g., the Black-Scholes-Merton, binomial, etc.). Compensation cost is recognized only for those awards that are expected to (and eventually do) vest. ► Deferred tax asset is recognized based on compensation cost recognized over the service period. The full income tax accounting implications of these awards is beyond the scope of this summary. ► No income recognition at grant or vesting. ► Payment taxed at ordinary income. ► FICA tax liability at time of exercise. ► Tax deduction in the amount, and at the time, employee realizes ordinary income. ► FICA/FUTA liability. ► The amount included in the employee’s income will be subject to ordinary federal income tax withholding and FICA/Medicare tax withholding. ► Ordinary income upon exercise is reported on Form W-2 for employees and Form MISC for non employee directors. ► Company receives tax deduction equal to employee income recognition offset by employer FICA/Medicare liability. ► Shareholder approval is required for stock exchange purposes, may be required for state corporate law purposes, and for tax purposes (e.g., preserve the deduction under IRC §162(m) for performance-based awards). ► Discounted SAR’s are subject to §409A. Advantages ► No exercise price ► IRC §409A treatment ► “Fixed” accounting treatment Disadvantages ► Less share ownership opportunities for participant

Page 10 Phantom Stock Plans General Description Accounting Treatment (FAS 123R) Federal Income Taxation – Employee Federal Income Taxation – Employer Miscellaneous ► Employee is awarded phantom stock (not representing any actual ownership interest) corresponding in number and value to a specified number of shares of stock. ► Assuming required to be paid in stock at distribution, compensation cost is equal to the aggregate fair market value of the stock on the date of grant (adjusted for the lack of dividends during the vesting period, if applicable), which is recognized over the “requisite service period” (generally, the explicit vesting period, with certain exceptions). Compensation cost is recognized only for those awards that are expected to (and eventually do) vest. ► If paid in cash or allowed to diversify to other investments, liability (i.e., variable) accounting is required. Compensation cost is measured based on the fair value of the underlying stock at the balance sheet date, and must be re-measured each reporting period (i.e., quarterly) based on changes in stock price. Compensation cost is recognized over requisite service period only for those awards that are expected to (and eventually do) vest based on the achievement of any service and performance conditions. ► Deferred tax asset is recognized based on amount of compensation cost recognized over the service period. The full income tax accounting implications of these awards is beyond the scope of this summary. ► No taxable income at the time the phantom units are awarded. ► The value of the award when paid is taxable as ordinary income. ► Any dividend equivalents received are taxable as ordinary income. ► FICA liability at payment. ► Tax deduction in the amount, and at the time, the employee realizes ordinary income. ► FICA/FUTA tax liability. ► The amount included in the employee’s income will be subject to ordinary federal income tax withholding and FICA/Medicare tax withholding. ► Ordinary income is reported on Form W-2 for employees and Form 1099-MISC for non- employee directors. ► Company receives tax deduction equal to employee income recognition offset by employer FICA/Medicare liability. ► Shareholder approval required for stock exchange purposes if distributing stock and may be required for state corporate law purposes. ► Considered deferred compensation subject to IRC §409A. Advantages ► Retention incentive ► Provide value even if share price declines – value generally not limited to post-grant appreciation Disadvantages ► Accounting implications if payment in cash ► Tax deduction delayed until award is paid